FSBO Precautions to Take When Showing your Home

When your home goes on the market you have to realize that it is open to the public. Whether it is a showing or an open house people will be there that you don’t know. Safety should always come first. Remove jewelry and other valuables from the home. Make sure someone knows where you are and when the showing/open house is taking place. In the event something does go wrong give the person(s) what they want so they will leave.

Having your home open to the public means that you lose some privacy, and you will have to deal with some inconveniences. Even be prepared for people to come and knock on your door at any time.  All jewelry and other valuables should be put in a safe location. Good examples would be to keep them in a safe, at a friend or family member’s house, or in storage. You want to focus on portable objects such as cameras, tablets, laptops, etc.; most people will not try to steal your grand piano even though it is valuable.

If you are showing your home or holding an open house, let someone know what time the showing/open begins and ends. Let them know you will call them right after it is over to let them know how it went. This way they will know exactly what you are doing and what time to expect your call. You can also set up an “emergency word” or phrase with that person so you can contact them if you are able to without being obvious.

One of the best ways is to be observant and pay attention to details. By doing this you can often recognize signs that are unusual and discourage the possible robbing attempt, or at least get your emergency word to your contact. In the unfortunate event that someone tries to rob you don’t be a hero. Give the person(s) what they want so they will go away. Your safety is more important than anything in the house or even the house itself. I would recommend carrying a non-lethal self-defense weapon such as pepper spray, or a Taser.

These types of things don’t normally happen, but you want to be prepared for them just in case. Don’t think it can’t happen to you. Being prepared and paying attention to detail will keep you safe.

FSBO Establishing Price

Establishing price can be difficult for an owner because of emotional attachment to the property. Try to be as objective as you can. Your list price should be determined by what similar homes have sold for recently (comps), and the price of comps that are currently on the market. Make sure the comps you use have been listed within the year and are as much like your house as possible. Don’t compare apples to oranges.

After you have compared your home to the comps you should be able to determine an amount you want to sell for. It’s not only the home but the amount and quality of the land it is on. You can try to figure out what your land is worth by comparing it to the similar properties you found. Try to determine a price per acre, and then multiply by the number of acres your home is on. Add that to what your home is worth without the land to get the amount your property is worth. Take that number and increase it 5% or so. This will give you wiggle room when you are negotiating. A Realtor will have easy access to tax data which makes this much easier.

Your property must appraise for the amount of the loan, or more, if one is involved. This means a bank won’t give you more money than what a property is worth. The bank will send out its own appraiser to decide whether or not to give the loan to the buyers.

Don’t use round numbers. A home listed for 199,900 could be rounded to 200,000 and you wouldn’t think it makes that big of a difference, but it does. A home buyer in this price range would be much more comfortable seeing a 1 at the front of the price than a 2. Having your price below a round number will also make you show up on the internet more often. If your price is right, your home will be more likely to sell faster.

FSBO Advertising your Home

Advertising your home is the most important part of the process of selling your home. You could have the best deal in town, but if nobody knows about it, it will not sell. There are many different avenues through which you can advertise. Online advertising is probably the most effective, but having a rounded advertising plan is best.

There are many different ways to market your property online. You can pay to have your home listed on various websites. You can post to free online classified areas. Social media can be used to promote your property to people you may already know, or people they know. A Realtor can put your property in the Multiple Listing Service (Broker Listing Cooperation {BLC}) for a fee. If you list your home with them this service will be included in the work they do to sell your home for a commission. Having your home listed in the BLC is very important because it makes your home easy for realtors to find. If realtors can’t find your home to show to their clients you are counting on the clients finding it themselves, which is obviously not giving your house the best exposure.

You can also advertise your home in print. The classified section in your newspaper is one way. Local free publications are a great way to get exposure for your home. You can take advantage of the free posting boards often found in grocery stores. Creating flyers for your home to place in a box for potential buyers is important, and so is having a for sale sign in your yard. You can put together a mailing campaign to get more exposure for your home. Send this to apartments and other places buyers are likely to be.

Word of mouth is one of the most powerful ways to market your home. Tell all your friends, family, and neighbors. Anybody you get the chance to talk to about your home will only increase your exposure. If they are not interested, ask them if they know anybody who might be. Marketing your home on your own can be difficult, but it can be done.

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Ways to Lower your Energy Consumption Go Green and Save Green

I thought this might be agonizing in paragraph form so I’m just going to make it a list of things you can do to reduce your energy consumption. Hopefully these tips will help you save some money, and it’s a great thing to conserve energy.

·         Change the lights in your home to CFL (Compact Fluorescent Lights), or even LEDs. The LEDs are still pricey but they are really the best choice for saving energy on lighting.

·         Put outside lights on a motion sensor

·         Turn off all electronics when not in use; lights, TVs, computers, etc.

·         Energy Star appliances are much more efficient than traditional appliances

·         Have appliances serviced regularly so they stay at top efficiency

·         Lower the temperature on your water heater and try to take shorter showers

·         Install a low-flow shower head

·         Install a wrap on your water heater

·         Insulate hot water lines

·         Wash clothes in cold water whenever possible

·         Only do full loads of laundry

·         Clean your dryers lint trap before or after each load

·         Make sure the dryers hose is connected to the wall fitting, that the hose in not kinked, and that the outside vent closes when the dryer is not running

·         Drying consecutive loads will use the residual heat from the previous load

·         If your refrigerator has a power-saver function, use that. Make sure all seals are intact.

·         Let hot food cool before storing in refrigerator/freezer

·         Microwave things instead of using the stove if possible

·         Only run the dishwasher when it’s full and use the air dry function, or you could do them by hand

·         Change HVAC filters regularly to reduce strain on furnace

·         Keep windows locked

·         Insulate switch plates

·         Use curtains to let in light during winter, and keep cold out during the night

·         Make sure attic is well insulated, including the access door

·         Check to ensure your return air is not blocked

·         Use window insulating film

Real Estate Terms

Courtesy of F.C. Tucker

·         Abstract of Title- A written summary or history of all past conveyances regarding a property, includes a listing of recorded liens and judicial proceedings. Used to establish the “chain of title” in an effort to determine the quality of title

·         Acceleration Clause- Clause contained in a mortgage loan agreement, triggered by loan default that requires repayment of the entire debt immediately

·         Acceptance- Complete agreement with all the terms of an offer or counter offer. Must be communicated to the offering party (offeror)

·         Accretion- The gradual depositing of soil naturally eroded by wind and water from elsewhere

·         Accrued Item- An expense that has not yet been paid

·         Acknowledgment- Formal statement that a signature is voluntary and not forged. (i.e. Deeds are typically acknowledged by a Notary Public.)

·         Acre- 43,560 square feet

·         Actual Notice- Actual knowledge

·         Adjustable-rate mortgage (ARM)- Mortgage loan with a variable interest rate that periodically adjusts. ( Note rate= index + margin)

·         Adverse Possession- AKA squatter’s rights. Process by which a claimant in possession of another’s land may acquire title if their possession continues for the statutory period in an open, notorious way without permission of the owner

·         Affidavit of Title or Vendor’s Affidavit- Sworn statement of the seller assuring there are no new liens, judgments or other defects to title

·         Agent- Person authorized by the principal to act on their behalf. The agent works for the principal

·         Air Lot- A legal description referring to a specific block of air such as a condominium

·         Alienation Clause- AKA “Due on Sale.” Clause in a mortgage loan agreement that requires repayment of the entire debt if the property is sold

·         Amendment- A change in zoning from one classification to another

·         Americans with Disabilities Act (ADA)- Federal laws protecting the rights of the disabled in areas as employment and housing

·         Amortized Loan- Mortgage loan with payments that include both interest and principal which amortizes (kills off) the principal balance over time. (i.e. A fully amortized loan would pay off the loan with the last regular payment. A partially amortized loan would be only partially paid off and would require a “balloon” payment to fully retire the debt)

·         Annexation- Process by which personal property becomes real property (i.e. Taking building materials (personal property) and building a house (real property)

·         Anticipation- Principal applied in an appraisal that the value of a property includes some “anticipation” or expectation of future events, good or bad

·         Antitrust Laws-Body of federal law prohibiting many anti-competitive business practices such as price fixing and market allocation

·         Appraiser- Licensed professional that applies accepted and approved principals and methodology to estimate the market value or replacement cost of real property and improvements

·         Appurtenance- Right associated with ownership of a property, usually pertains to using another property, (i.e. right to a parking space by owning a condo)

·         Appurtenant Easement- Owner of property “A’s” right to use or cross “B’s” property (These rights are a part of the ownership of property “A” and transfer if sold)

·         Asbestos- Potentially hazardous substance used in many building materials. When broken into air borne particles it can be inhaled and dangerous. Primary method of remediation is encapsulation

·         Assemblage- The act of assembling or combining multiple parcels under one ownership and control

·         Assessment- Official valuation of real property for tax purposes

·         Assignment- The transfer of rights and or obligations in a contract from one party to another

·         Assumption- Agreement to become personally responsible of another’s contractual obligations. Original party is not automatically released from obligation

·         Attorney’s Opinion of Title- Following an inspection of the chain of title and public records, and attorney’s opinion as to the title’s quality or condition

·         Avulsion- Sudden loss of land from earthquake or mudslide

·         Balloon Payment- Final payment in a partially amortized loan. Borrowers would make smaller periodic payments with one final “balloon payment” that pays off the debt.

·         Base Line- Primary East/West line used in the governmental or rectangular survey method of legal description

·         Beneficiary- Party who benefits from a trust

·         Bilateral Contract- A contract in which each party promises the other something in return. Enforceable against both sides. (i.e. “I’ll buy if you will well”)

·         Blanket Loan- Mortgage loan covering multiple parcels that anticipates the sale of individual parcels. (Enables developers to have one “master loan” over the entire development and sell individual lots without refinancing the entire loan)

·         Blockbusting AKA Panic Selling- The illegal practice of inducing home sales by referencing the movement of persons of a certain race, religion or national origin into or away from an area

·         Breach of Contract- Where one or both parties gail to perform some obligation without legal cause. Could be cause for damages

·         Broker- Real estate licensee that can contract directly with clients to provide services for a fee. May also supervise other licensees if designated as the Principal Broker

·         Buffer Zone- Area of land between two parcels of different uses or zoning. Designed to create a more peaceful transition between the two uses

·         Building Code- Municipal regulations that set minimum standards of construction, design and material to protect public health and safety. Usually incorporate ADA guidelines

·         Bundle of Legal Rights- Legal rights of ownership: possession, control, enjoyment, exclusion, disposition

·         Buydown- when the interest rate of a mortgage loan has been reduced through the payment of discount points or other fees paid at closing

·         Buyer Agency Agreement- Employment agreement where the agent is hired  to represent a buyer

·         Capital Gain- Profit from the sale of an asset

·         Capitalization Rate AKA Cap Rate- Rate of return that a commercial property’s net operating income generates as a percentage of its value

·         Carbon Monoxide- Gas resulting from the burning of fossil fuels such as coal, wood, natural gas. Dangerous or deadly if inhaled

·         Casualty Insurance- Policy usually written to cover specifically stated risks such as burglary, theft, vandalism, equipment damage, accidents and health

·         Categories of Real Property- Residential, Commercial, Industrial, Agricultural, Special Purpose

·         Certificate of Occupancy- Official permit issued by the municipal building inspector certifying that the improvements comply with the building code

·         Certificate of Title- Instrument prepared by an abstractor or attorney stating the condition of the title. Not title insurance, just a professional’s opinion as to the quality of the title

·         Chain of Title- Series of successive conveyances regarding a property from the original land grant up to today

·         Civil Rights Act of 1866- Law enacted following the Civil War prohibiting racial discrimination but not limited to housing. (Upheld in Jones v. Mayer… “Where race is involved no exceptions apply”)

·         Closing Statement or Settlement Statement AKA HUD-1 – The balance sheet of the closing detailing all closing/settlement costs. Required when there is a residential 1^st mortgage loan, but used in most closings. Primary instrument of RESPA compliance

·         Commingling- The combining of earnest or escrow moneys with personal funds. (License Law and business ethics mandate that these funds be kept separate)

·         Commission- Fee or compensation for real estate services paid to Principal Broker

·         Common Elements- Parts of a property, where use and ownership is shared or “in common” among all the owners of individual units. (i.e. Lobby, elevator and pool in a condo complex)

·         Condemnation- Process by which the government exercises its right of eminent domain to acquire title to property for public use or benefit

·         Conditional-Use Permit – A permit granted to a property owner whose use is in conflict with zoning but permitted because it is deemed a public benefit

·         Condominium- Development where individual units are separately owned and ownership of the common areas and the land is shared among all the individual unit owners

·         Conformity- Appraisal theory suggesting that property values, particularly in residential area, are maximized when the size, style and appearance of improvements are within a given range

·         Consideration- Item of legal value, such as money, referenced in a contract as the motivation for one party to enter in to it. Valid contracts must reference consideration

·         Constructive Eviction- Lease status; when a tenant is forced to vacate because the property has become unusable for its intended purpose due to conscious landlord neglect, terminating the lease

·         Constructive Notice- Theory that information regarding a property’s title is available through diligent inquiry of recorded instruments or inspecting for actual possession

·         Contingency- A part of some contracts stating that some event must take place before the agreement is enforceable. (i.e., “the buyer’s offer is contingent upon mortgage approval.”)

·         Contribution- Appraisal concept that no one part or improvement to a property can be accurately valued without considering its effect on the value of the property as a whole. (“It may be a nice pool, but does it add to the property’s overall value?”)

·         Controlled Business Arrangement- The bundling of services such as real estate brokerage, lending and title work. Requires the disclosure of any cross ownership among firms and the availability of other providers

·         Conventional Loan- Mortgage loans not insured by the Federal government, but meeting basic credit and risk criteria (Includes conventional and insured conventional loans)

·         Cooperative- Multi-tenant building owned by a corporation; tenant buys shares of stock and in exchange receives a proprietary lease that allows possession

·         Corrective Maintenance- Actual repairs, part of a property manager’s job

·         Cost Approach- Method of property valuation based upon the lot value, plus cost of new improvements less depreciation. (Most useful for special purpose buildings or historic properties and determining adequate insurance levels

·         Credit- An amount owed to one party and entered in their favor on the closing statement

·         Debit- An amount owed by one party and charged against them on the closing statement

·         Deed in lieu of foreclosure- AKA “Friendly foreclosure.” When a mortgagor deeds the property to the lender (mortgagee) to avoid foreclosure

·         Deed- Instrument by which ownership is conveyed from the grantor to the grantee

·         Deed Restriction- Restrictions created and contained in the deed that limit a property’s use, occupancy, and improvements. (Can apply to one parcel (private deed restriction) or an entire subdivision (restrictive covenants) These restrictions “run with the property” and bind future owners)

·         Defeasance Clause- Mortgage loan provision requiring the lender, upon repayment of the debt, to issue a “satisfaction” or “release” letter removing the lien created by the mortgage

·         Defeasible Fee- Ownership with “strings attached.” Grantor prohibits or limits specific uses of property. Breach could “revert” or return ownership to grantor

·         Deficiency Judgment- Judgment a creditor seeks against a borrow when a foreclosure sale doesn’t satisfy the entire debt

·         Depreciation- A loss in value due to any cause

·         Developer- One who constructs a development’s infrastructure like streets, sewers and common areas. May build actual structures or sell improved lots to builders

·         Development- Building of improvements on land, such as infrastructure, roads, drainage systems and even homes

·         Devise- A gift of real property through a will

·         Disability- A condition that limits one or more of life’s major activities

·         Discount Point- Fee paid to the lender to “buy down” the interest rate. Calculated as a percentage of the loan amount (1 point equals one percent of the loan amount)

·         Dual Agency or Limited Agency- One agent representing both sides of a transaction. (i.e. Buyer and Seller) The agent’s role is limited, they would not “take sides” in negotiations. Must have written informed consent from both principals

·         Earnest Money- Money tendered by the buyer when the offer is accepted to show they are acting in good faith. Common, but not a legal requirement

·         Easement by Prescription- Use right created by a claimant’s uninterrupted use of another’s land for the prescribed period of time (Similar to “squatter’s rights”. Use must be without owner’s approval and not on public land)

·         Easement in Gross- Individual interest or use right in another’s land; usually commercial in nature (i.e. utility lines, and rail roads)

·         Economic characteristics of real property- Scarcity, Improvement, Permenance of investment, Location

·         Economic Life- The expected useful life of an improvement

·         Emblements- Annual crops. Considered to be personal property. The fruit of our labor.

·         Eminent Domain- Government’s right to acquire private property for “public use” through condemnation with just compensation paid to the owner

·         Employee- Person hired by and under the supervision o their employer. (Not and independent contractor. Employer withholds taxes and FICA from wages)

·         Encapsulation- Method of securing or sealing various hazardous materials such as asbestos and lead based paint

·         Encroachment- Improvements illegally placed upon an adjoining property or beyond set back lines

·         Encumbrance- Monetary claim, lien, easement or other restriction attached to real estate decreasing its value

·         Equal Credit Opportunity Act- Prohibits discrimination in lending based on a person’s membership in any of the federally  defined protected classes

·         Equalization Factor- A mechanism to adjust the effective real property tax on a parcel whose assessment has fallen out of line with other properties.

·         Equitable Right of Redemption- The right of a debtor to stop the forced sale of their real property by repaying the entire debt prior to sale

·         Equitable Title- The buyer’s interest in the property upon delivery and acceptance of the purchase agreement prior to closing. Not legal title, just the right to buy the property under the terms of the agreement

·         Equity- Difference between market value and total debt on the property

·         Escheat- Process by which ownership of real property could transfer to the state upon owner’s abandonment or death without will or heirs

·         Escrow- Method of closing where both buyer and seller deposit the required documents and money with a third party to close. The prevailing practice in some states. Not a “face to face” closing typical in Indiana

·         Estate at Sufferance- Lease status; when a tenant remains on the property following the expiration of a lease without landlord permission

·         Estate at Will- Lease of uncertain term or duration, tenant occupies the premises at the “will” of the landlord. Terminates upon death of either party

·         Estate for Years- Lease for a specified period of time, not necessarily for years. Agreement not terminated by either party’s death or sale of the property, no notice required to terminate. Most common form of lease.

·         Estate from Period to Period- AKA Periodic tenancy. Lease that automatically renews until one party gives one period’s notice to terminate (i.e. Month to month lease)

·         Exclusive-Agency Listing Agreement- Listing where one agent is hired to exclusively represent the seller, but the seller retains the right to find a buyer on their own without having to pay a commission

·         Exclusive-Right-to-Sell Listing Agreement- Listing where one agent is hired to exclusively represent the seller. If property sells, a fee is due regardless of the source of the buyer

·         Executed Contract- Point when all promises by all parties to a contract have been fulfilled

·         Express Contract- Contract where the terms have been put into words, either oral or written

·         External Obsolescence AKA Economic Obsolescence- Type of depreciation due to forces outside of or “external” to the subject property (i.e. Properties adjacent to landfills suffer from external obsolescence)

·         Fair Housing Act- Federal laws prohibiting discrimination in housing (sale or rental) based on race, color, religion, national origin, sex, familial status or disability

·         Familial Status- Protected class under the Federal Fair Housing acts prohibiting discrimination against families with children, includes pregnant women

·         Fannie Mae- Secondary mortgage market player, buys a broad range of mortgage loans originated in local markets. Quasi-governmental agency that issues common stock

·         Feduciary Relationship- Specialized relationship of trust and confidence between principal and agent. Agent must place the interests of the principal above all others, including themselves

·         Fee Simple Absolute- Highest form of ownership recognized by law

·         FHA Loan- Mortgage loan insured by the Federal Housing Administration (FHA) and originated through approved local lenders

·         Fixture- Personal property permanently annexed to real property, such as plumbing and light fixtures

·         Foreclosure- A judicial procedure to force the sale of real property pledged as collateral for a loan in which the borrower has defaulted

·         Four Unities of Joint Tenancy- Possession, Interest, Time, Title. All four unities must exist for joint tenancy to be created

·         Fraud- Intentional misrepresentation of a material fact, Failure to make a required disclosure such as a property defect

·         Freddie Mac- Secondary mortgage market player, similar to Fannie Mae, buys primarily conventional loans. Doesn’t guarantee payment of Freddie Mac mortgages

·         Functional Obsolescence- Form of depreciation applied in appraisals. Addresses issues such as poor or outdated floor plans, or lack of improvements expected in today’s market. (i.e. A 5 bedroom home with only 1 bath suffers from functional obsolescence)

·         General Agent- Agent that represents a Principal in broad range of matters related to a specific property. (i.e. A property manager is usually a general agent)

·         General Partnership- Form of business ownership with two or more owners all sharing the risks and returns

·         General Warranty Deed- Deed in which the grantor offers the grantee the greatest assurances that the title conveyed is free and clear of all liens and encumbrances except as noted

·         Ginnie Mae- Secondary mortgage market player that is entirely a governmental agency, Development of Urban Development (HUD)

·         Good Faith Estimate- Disclosure lenders are required to provide borrowers within three days of loan application that details the settlement or closing costs the borrower is likely to incur

·         Grantee- Party that receives title through a deed

·         Grantor- The party who conveys title to the grantee through a deed

·         Gross Lease- Lease where tenant is not separately billed or obligated for operating expenses such as real estate taxes, insurance or common area maintenance

·         Gross Rent Multiplier- Multiple of known sales prices to known monthly rents. Sales price divided by gross monthly rent equals GRM. Investors can apply the average GRM in an area to subject property’s expected rent to determine value

·         Ground Lease- Long term lease of an entire parcel regardless of any improvements. Usually for commercial property, in a very desirable location, where the tenant constructs their own building

·         Group Boycotts- Conspiracy by two or more businesses to withhold patronage from a third in an effort to reduce competition. (i.e. Two brokerages conspire not to show the listings of a third brokerage because they think the third’s fee structure is too low)

·         Habendum Clause- Clause used in deeds where less that fee simple title is conveyed. Defines the limits of the title conveyed. (Begins with the words “to have and to hold”)(Used to convey a time share interest or create a life estate

·         Highest and Best Use- Statement included in appraisals indicating the use that would maximize value. Use must be feasible and legal but not necessarily the properties current use. Appraisers must state the “highest and best use” in each appraisal.

·         Home Inspection- Inspection and or report of a property’s structural, mechanical and site conditions

·         Homestead- Protection of the family homestead from unsecured creditor(s). Could create a life estate

·         Implied Contract- A contract where the parties intent has not been stated in words, only inferred by their actions

·         Improvement- Man made additions or alterations to real estate (i.e. building a house or site work such as drainage lines)

·         Income Approach- Method of property valuation based on the property’s ability to generate income. (Net operating income divided by the desired cap rate equals the property’s indicated value under the income approach)

·         Independent Contractor- Employment arrangement where a person is hired to perform certain acts but is not an employee. Real Estate agents are not usually employed in this manner. Taxes are not withheld. (The broker may dictate what the agent does, but not actually how they do it.)

·         Interstate Land Sales Full Disclosure Act- Federal laws regulating the sale of unimproved lots across state lines. Requires disclosure of pertinent facts such as actual improvements in place, and availability of utilities

·         Intestate- When a person dies without a will. State law would then determine who inherits what

·         Joint Tenancy- Form of co-ownership where the surviving co-owners acquire a deceased co-owners interest through the right of survivorship. (Joint tenancy may give or sell their interest just not will them)

·         Judgment Lien- A general involuntary lien against a person and all their property (real and personal)(i.e. a court judgment)

·         Kickbacks- Unearned and illegal referral fees offered or received when no service has actually been provided as defined by RESPA. (i.e. Real estate agents are prohibited from giving or receiving such fees from service providers such as lenders, title companies or appraisers. Referrals among real estate brokerages are exempt)

·         Land Contract- A type of sale where the vendor (Seller) finances all or part of the vendee’s (Buyer) purchase price, and legal title is not conveyed until debt is paid in full. Initially, the vendee only receives possession and equitable title. If the vendee defaults, they could lose all moneys paid to date.

·         Land- Surface of the earth down to the core and air space above, includes trees and water

·         Latent Defect- Property defects that are “hidden” or not obvious to the eye. Usually structural in nature

·         Lease- Agreement where lessor conveys possession, quiet enjoyment and some control to lessee in exchange for consideration

·         Lease Purchase- Binding agreement to purchase just preceded by a lease

·         Leasehold Estate- Tenants rights during term of lease

·         Lessee- Tenant/ Renter

·         Lessor- Landlord/Owner

·         License- Revocable permission to use another’s land, usually for a specific purpose ( i.e. Someone allowing you to fish in their pond or tickets to a ball game)

·         Lien- Claim or charge attached to real property used to enforce the re-payment of a debt

·         Life Cycle Costing- Comparative analysis of the total life time cost of two alternative capital expenditures. (i.e. A property manager may compare two different air conditioning systems, considering the initial capital investment, operating expenses, as well as the expected useful life of each, then make a recommendation to the owner)

·         Life Estate- Ownership interest, limited by grantor, to the life of the grantee (life tenant) or other named party. (A less that fee simple interest where the grantor effectively controls where the property goes upon grantees death)

·         Limited Partnership- Business structure with two tiers of ownership, General Partner(s) making decisions and bearing personal liability and Limited Partners who only invest and bear no further liability

·         Liquidated Damages- A part of a purchase agreement establishing a pre-determined penalty for breach of contract by either party

·         Lis Pendens-  Recorded notice of pending law suit involving real property. Not a lien, just notice of a possible future lien

·         Littoral Rights- Common law water rights of property owners bordering navigable lakes, seas, and oceans

·         Loan-to-Value (LTV) ratio- The ratio of loan amount to market value. Indicates the percentage of the purchase price that is borrowed

·         Lot-and-Block (Recorded Plat)- Method of legal description utilizing plat maps that reference subdivisions and specific lots

·         Management Agreement- Employment agreement between owner and property manager. Sets forth the responsibilities of each party as well as compensation. Typically creates an agency relationship

·         Market Value- Estimate of a property’s sale price under normal, open and fair market conditions

·         Marketable Title- Title to real estate that is deemed to be good or clear, and free of any litigation

·         Mechanic’s Lien- A specific involuntary lien on real property designed to protect those who have provided labor or material used to improve it

·         Metes-and-Bounds – Method of legal description. Begins at the POB (Point Of Beginning) and follows the property’s perimeter referencing monuments and markers until returning to the POB

·         Mill- Method of quoting real estate tax rates. One mill = 1/1000 of one dollar. (i.e. 30 mills equals %0.030 and would be multiplied by the assessed value to determine the tax bill

·         Mortgage- Instrument by which a borrower (mortgagor) pledges real property as collateral, creating the lien. Allows the lender to foreclose upon loan default

·         Mortgage Lien- A specific voluntary lien placed on real property that has been pledged as collateral for a loan

·         Mortgagee- The lender in a mortgage loan that receives and holds the pledge of real property (mortgage) as collateral until the debt is repaid

·         Mortgagor- The borrower in a mortgage loan who pledges their real property as collateral

·         Multiperil Policy- Commonly bundled package of insurance typical in apartment complexes and commercial buildings

·         Negligent Misrepresentation- Incorrect statement or information provided to a client or customer when the Broker should have known that the information was false

·         Net Lease- Lease where tenant pays rent, plus their share of operating expenses such as real estate taxes, insurance and common area maintenance

·         Net Listing- Listing where Broker is entitled to any amount of the sales price in excess of the agreed “net” to the seller. Indiana law requires the maximum fee be stated

·         Nonconforming Use- Existing property use that conflicts with new zoning. Frequently occurs when cities “annex” unincorporated areas

·         Novation- Substitution of a new contract replacing the original. One or more of the parties may change, but the intent remains the same

·         Offer- The presentation of contractual terms, that if accepted, creates a binding agreement

·         Open Listing- Listing where the seller may hire one or many agents on a “non-exclusive” basis, reserving the right to find a buyer themselves. Agents earn a fee only if they procure the buyer

·         Operating Budget- Detailed statement of a property’s operating income and expenses. Used by property managers and landlords to determine the net operating income (NOI) and cash flow

·         Option- A unilateral right held by one party to a contract

·         Option Listing- Listing where the Broker has the right or option to purchase the property (Could raise conflict of interest issues)

·         Package Loan- Mortgage loan where the collateral includes both the real property as well as the persona property such as appliances and window treatments

·         Partition- Judicial action to divide a property or its sale proceeds among the co-owners

·         Percentage Lease- Lease commonly used in retail establishments and malls. Tenant pays rent, usually on a net basis, plus a “percentage” of the business’s gross sales.

·         Personal Property- All that is not real property or human beings. Generally can be picked up and moved

·         Physical Characteristics of Real Property- Immobility, indestructibility, uniqueness

·         Physical Deterioration- Type of depreciation to real property due to wear and tear, time and the elements, or deferred maintenance

·         Plottage- Profit, or increase in value due to assemblage of multiple parcels

·         Police Power- Government’s authority to make and enforce laws or regulations

·         Prepaid Item- An expense paid in advance

·         Prepayment Penalty- Fee charged by a lender for the early repayment of debt. (Prohibited on Federally related loans)

·         Preventive Maintenance- Maintenance efforts to prevent actual damage or need for corrective maintenance

·         Price Fixing- Conspiracy by Brokers to set fees in a market place, thus eliminating competition. It is the conspiracy that violates anti-trust laws

·         Primary Mortgage Market- Marketplace where mortgage loans are originate by local lenders like banks and mortgage brokers

·         Principal Broker- One with a Broker’s license who has designated themselves to the Real Estate Commission as the party primarily responsible for all acts performed under that license. May “hold” the licenses of Salespersons and other Brokers

·         Principal- Client. One who authorizes an agent to work on their behalf

·         Principal Meridian- The primary North/South survey line utilized in the rectangular or governmental survey system of legal description

·         Priority- Rights in time. i.e. The 1^st mortgage ha priority over the 2^nd mortgage

·         Private Mortgage Insurance- AKA PMI Insurance policy that protects the lender in case of borrower default underwritten by private carriers, not the government. (Often associated with insured conventional loans when down payments are less than 20%)

·         Probate- Judicial process to determine the validity of the will, identify heirs, and reconcile all of the decedent’s assets and liabilities

·         Procuring Cause- One who initiates and completes the series of events that cause a sale

·         Progression- The positive effect that better properties have on the market value of lesser properties

·         Promissory Note- Loan agreement detailing the specific terms and the borrower’s promise to repay

·         Property Management- Business of managing another’s property for consideration

·         Property Manager- Party hired by a property owner to manage all or various aspects of the property. Considered an agent or fiduciary of the owner (Responsibilities could include leasing, repairs, maintenance, risk management, budgeting and record keeping)

·         Proprietary Lease (in cooperative)- Document, used in cooperatives, that gives a shareholder the exclusive right to occupy a particular unit

·         Proration- A method of reconciling prepaid and accrued items at closing through debits and credits

·         Psychologically Affected Property or Stigmatized Property- Property with a “reputation” because of events such as death, murder, or illegal drug manufacture

·         Puffing- Exaggerating the benefits of a property. Usually refers to subjective issues such as beauty or views

·         Purchase-Money Mortgage- A mortgage loan originated at the time of purchase. Not a refinance. (Term typically applies to a note and mortgage from the buyer to the seller as part of the purchase price

·         Quantity-Survey Method – The most detailed method of estimating construction costs in the “cost approach” of appraisal. Considers the exact quantity of all materials a well as historic accuracy. Used primarily to determine the reproduction cost for historic properties

·         Quitclaim Deed- Deed in which the grantor makes no promises or representations regarding quality of the title conveyed or even if the grantor hat title. (But whatever interest the grantor has, would convey)

·         Radon- A naturally occurring radioactive gas that can concentrate in poorly ventilated areas such as basements. Believed by the EPA to be a leading cause of lung cancer

·         Real Estate- Land, plus all things attached to it, whether natural or artificial

·         Real Estate License Law- State laws and regulations designed to protect the public by requiring minimum standards of practice and licensure of professionals in the real estate industry

·         Real Estate Settlement Procedures Act (RESPA)- Federal law requiring disclosure of all settlement charges/fees and prohibits kickbacks. Applies when there is a residential 1^st mortgage loan. The HUD-1 is the primary instrument of compliance

·         Real Property- Land+ Improvements+ Rights of ownership= Bundle of Rights

·         Realtor- Real estate licensee who is a member of National Association of Realtors; adheres to a Code of Ethics

·         Recording- The act of placing documents regarding a specific property in the recorder’s office to give constructive notice of ownership or other interests. (Deeds, liens, restrictive covenants etc. are commonly recorded)

·         Rectangular Survey or Government Survey- Method of legal description aka: governmental survey system that utilizes; a principal meridian, the intersecting base line, and township & range lines to create a grid system

·         Redlining- Discriminatory practice by lenders, insurance companies, real estate firms and other service providers to deny service in targeted or “redlined” areas for reasons other than the economic qualifications of those residents

·         Regression- The negative effect that lesser properties have on the market value of better properties

·         Regulation Z Truth-in-Lending-Act – Federal disclosure law requiring lenders to disclose the true and effective cost of borrowing by using a standardized APR (Annual Percentage Rate) which is a recalculation of the note rate to include other lender revenue such as points, finder’s fees etc. (Allows borrowers to more easily comparison shop)

·         Remainder Interest- Future rights of ownership of the party named by the grantor following the end of a life estate

·         Rent- Payments from lessee to lessor as consideration for the right to occupy the space

·         Replacement Cost- Estimate of current construction cost for like improvements to the subject property but not necessarily an exact duplicate

·         Reproduction Cost- Estimated cost to reproduce an exact duplicate of a subject property’s improvements. (Useful in determining adequate insurance coverage of historical properties)

·         Rescission- Termination of an agreement, returning both parties to their original positions

·         Reverse-Annuity Mortgage (RAM)- Mortgage loan made in periodic payments or draws from the lender to the borrower. Accumulating draws are not to exceed an agreed to LTV. (Allows borrows with substantial equity in their home to create a periodic cash flow to be repaid in one lump sum upon sale or owners death)

·         Reversionary Interest- Rights that will return upon the occurrence of certain events. (i.e. Rights of the grantor during the term of a life estate, or the rights of the lessor during the term of a lease)

·         Right of Survivorship- The right each joint tenant has to automatically acquire a deceased joint tenant’s interest upon death

·         Riparian Rights- Common law water rights of owners bordering streams or rivers. Such rights include access and use

·         Risk Management-Typical fiduciary obligation of a property manager to assess, minimize and avoid risks to the property owner

·         Sale-leaseback – Transaction in which the seller immediately leases back the property from the buyer

·         Sales Comparison Approach AKA Market Data Approach- Appraisal method that adjusts the known market price of “comps” for differences between them and the subject property. Most reliable method for valuating residential property

·         Salesperson- Type of Real Estate license. One who operates under the supervision of a Principal Broker

·         Satisfaction- Instrument provided by a creditor acknowledging the repayment of a debt. (Recording this satisfaction removes the lien created by the mortgage)

·         Secondary Mortgage Market- Market place where mortgage loans originated in local markets are pooled and sold to investors. (Freddie Mac, Fannie Mae, and Ginnie Mae)

·         Section- One square mile area (640 acres) within a township or governmental survey method of legal description)

·         Severalty- Ownership of an entire property by one person or one corporation

·         Severance- Process by which real property becomes personal property (i.e. Cutting down a tree)

·         Special Agent- Agent authorized to perform only specific act(s) for a Principal. Real estate agents are usually special agents

·         Special Assessment- A real estate tax levied against only those properties that will benefit from specific capital improvement projects such as sewers or street lights. (Always a specific lien but could be either voluntary or involuntary)

·         Specific Lien- A lien placed against a specific piece of property. ( i.e. if you borrow money to buy 123 Main St. and pledge that property as collateral, a lien will be created against only 123 Main St.)

·         Square-Foot Method- Method of estimating the cost of new improvements, by taking the known construction cost per square foot of comparable properties and applying it to the subject property. (Used in the cost approach to appraisal)

·         Statute of Frauds- Body of law requiring that some agreements to be put in writing to make them enforceable. (Real estate purchase agreements are subject to this law)

·         Statutory Right of Redemption- Right, created through state statute, to repurchase property within a specified time that has been sold though a forced sale such as a foreclosure or tax sale

·         Steering- Discriminatory practice of directing home buyers or tenants towards or away from specific areas based on their membership in a protected class

·         Straight Loan- AKA term or interest only loan. Mortgage loan where periodic payments are “interest only.” The original principal balance is not reduced or repaid by regular payments, but added to the final interest payment

·         Subdivider- One who cuts or divides a larger parcel into multiple smaller parcels, such as in the creation of a neighborhood or subdivision

·         Subdivision- Separating one larger parcel into multiple smaller parcels or lots

·         Sublease- Agreement where a tenant (sublessor) leases the property or space to a new tenant (sublessee). Original tenant remains liable to the landlord.

·         Subordination- When a lien holder agrees to lower their position allowing another to have priority

·         Subrogation- The substitution of one party for another regarding a lawful claim or right. (i.e. When a title insurance company pays a claim to satisfy a lien that a grantor failed to disclose, they may now sue the grantor through the right of subrogation

·         Substitution- Appraisal principal that recognizes competition. Regardless of the desirability of a subject property, the market will substitute lesser properties when that are perceived to be a better value

·         Subsurface Rights- Rights to the natural resources lying below the earth’s surface

·         Suit to Quiet Title- Court proceeding to settle questions regarding title and other claims regarding a property

·         Surety Bond- Policy or bond intended to protect the landlord from and employee’s criminal acts or negligence while on the job

·         Tenancy by the Entirety- Form of co-ownership reserved for married couples. Each has an equal interest and right of survivorship. Cannot be partitioned by one spouse

·         Tenancy in Common- Form of co-ownership in which each owner has undivided fractional interest in the whole. (Unlike a joint tenancy, owners have the right to will their interest)

·         Tenant Improvement- Construction of improvements or alterations to the leased space to accommodate the tenant’s specific needs

·         Time Share- Ownership interest sold in annual occupancy intervals, typically by the week

·         Title Insurance- Policy insuring against loss due to title defects

·         Title- Ownership of real property

·         Title Search-Systematic review of public records regarding a piece of property to determine ownership and the existence of any liens or claims

·         Township Lines- East/West survey lines located every six miles north and south of the base line in a rectangular survey legal description

·         Township- The six mile by six mile area created by the use of township lines and range lines within a rectangular survey legal description. (Contains 36 one mile square areas called sections)

·         Trade Fixture- Personal property used in trade attached by tenant. Tenant may remove them prior to lease expiration, but if left, landlord acquires them through accession

·         Transfer Tax- Used in some states to make the transfer of real property ownership a taxable event

·         Trust- Fiduciary agreement created by the trustor who conveys property to the trustee to hold and administer for the benefit of the beneficiary

·         Trustee- In a trust, the party who receives legal title to a property and carries out the trustor’s instructions

·         Trustor- Person who creates a trust and places assets into it

·         Unenforceable Contract- A contract where one or both parties could not sue to enforce the terms. (i.e. Contracts that are subject to the Statute of Frauds, such as real estate purchase agreements are legal and valid between the parties, just not enforceable in a court of law if oral)

·         Unilateral Contract- Contract in which only one party can be forced to perform. (i.e. An option agreement where the seller can be forced to sell but the buyer cannot be forced to buy.

·         Unit-in-Place Method – Method of estimating construction costs by line item, used in the “cost approach” of appraisal. Thorough, but not as detailed as the “quantity survey method”

·         Universal Agent- Agent with virtually unlimited authority to act on behalf of the Principal. Can do anything the principal could do personally

·         Usury- Interest rate in excess of maximum legal limits

·         VA Loan- Mortgage loan for qualified veterans originated by local lenders but insured through the Veterans Administration. Key feature is zero money down

·         Variance- Permission from the zoning board to “vary” from some part of the zoning. Not a change in the zoning just permission to vary from it in one or more aspects. (i.e. A business seeking a store front sign three feet taller than allowed may seek a variance)

·         Void- Without legal force. A void contract actually “never was” because it lacked an essential element or was for an illegal purpose

·         Voidable Contract- A valid contract that can be voided by one or both parties. (i.e. Contracts entered under duress, with fraud or significant misrepresentations may be voided b the harmed party, but are valid until they are voided)

·         Will- Instrument by which a person states their wishes as to the disposition of their assets upon their death. Person making the will is known as the testator

·         Worker’s Compensation- Body of laws, or actual insurance policy, protecting employees injured on the job. (Most states have worker’s compensation acts that require workman’s comp insurance policies)

·         Wraparound Loan- AKA Swing loan or Bridge loan. Mortgage loan where borrowers with an existing home and mortgage loan can borrow additional funds to purchase the next home prior to selling the current residence.

·         Writ of Attachment- Judicial intervention where the court takes title to the property until the law suit is concluded. Title cannot be conveyed until the writ is removed

·         Zoning- Municipal regulations that limit the use, density and character of real property. Zoning is the primary method of implementing the city’s “master plan”