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  D

damages:
The indemnity recoverable by a person who has sustained an injury, either in his/her person, property, or relative rights, through the act or default of another. (See liquidated damages)

datum:
A horizontal plane from which heights and depths are measured.

debenture:
A type of long-term bond or note given as evidence of debt. Unlike a mortgage note, a debenture is not secured by a specific property. Fannie Mae issues debentures to finance the acquisition of mortgages in the secondary mortgage market. If a borrower defaults on an FHA loan, the government gives interest-bearing debentures to the mortgagee after the title is transferred to FHA. (See Fannie Mae, FHA)

debit:
A charge on an accounting statement or balance sheet (appearing on the left-hand column); the opposite of a credit. Used in bookkeeping and in preparing the closing statement in a real estate transaction.

debtor:
One who owes money; a borrower, a maker of a note; a mortgagor.

debt ratio:
The relationship between a person's long term debt payments and their monthly income.

debt-to-income ratio:
A borrower's monthly long term debt payments divided by the borrower's gross monthly income and expressed as a percentage. This ratio is used by lenders to determine if a loan applicant is qualified for the amount of the loan.

decedent:
A deceased person, especially one who has died recently.

declaration of condominium:
The declaration includes: 1. A legal description of the condominium units and the common elements (including limited common elements-those that serve only one particular unit); 2. A copy of the condominium's bylaws, drafted to govern the operation of the owners' association; 3. A survey of the property; 4. An architect's drawings, illustrating both the vertical and horizontal boundaries of each unit; and 5. Any restrictive covenants controlling the rights of ownership.

declaration of restrictions:
A statement of all the covenants, conditions and restrictions (CC&Rs) that affect a parcel of land. A subdivider may note the restrictions on the map or plan when recording the subdivision plat. If the restrictions are numerous, the subdivider may also prepare a separate document called a declaration, listing all the restrictions, and then record this declaration. (See CC&Rs)

declaratory relief action:
An action to have a court determine the rights of parties before a violation of rights has occurred.

dedication:
The voluntary transfer of private property by its owner to the public for some public use, such as for streets or schools. deed A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

declining-balance method:
An accounting method of depreciation for income-tax purposes designed to provide larger-than-straight-line deductions in the early years of a property's life, and applicable to property placed in service before 1981.

The declining-balance method of calculation is applied in the IRS percentage tables for determining ACRS depreciation deductions applicable to personal property. The 3-, 5-, 7- and 10-year classes use the 200 percent declining-balance method, switching to straight-line at the appropriate time, and the 15- and 20-year classes use the 150 percent declining-balance method, also switching to straight-line. (See depreciation, straight-line method)

deed:
A written instrument, when executed and delivered, conveys title to or an interest in real estate. (See title)

deed executed pursuant to court order:
Executors' and administrator' deeds, masters' deeds, sheriffs' deeds and many other types are all deeds executed pursuant to a court order. These deeds are established by state.

deed in lieu of foreclosure:
Voluntarily signing over to a lender the property pledged as collateral on a defaulted loan. It is an alternative to a foreclosure action. Its main disadvantage to a lender is that the deed does not wipe out junior liens, as a foreclosure action would. (See junior liens)

deed in trust:
An instrument that grants a trustee under a land trust full power to sell, mortgage and subdivide a parcel of real estate. The beneficiary controls the trustee's use of these powers under the provisions of the trust agreement.

Deed of Trust and Assignment of Rents:
The first page of a lending instrument; identifies the parties to the agreement, conveys title to the trustee, describes the collateral, states the terms and conditions of the note, and refers to previously recorded "fictitious deeds of trust."

deed of reconveyance:
A document used to transfer legal title from the trustee back to the borrower (trustor) after a debt secured by a deed of trust has been paid to the lender (beneficiary). (See trust deed (deed of trust))

deed restrictions:
Provisions placed in deeds to control future uses of the property. (See covenants, conditions & restrictions, restrictive covenants)

default:
The nonperformance of a duty or obligation that is part of a contract. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money when due. A default is normally a breach of contract, and the nondefaulting party can seek legal remedies to recover any loss. Defaults in long-term leases or contracts for deed other than nonpayment might be failure to pay real estate taxes, damage to the property and so forth.

defeasance clause:
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.

defeasible fee estate:
An estate in which the holder has a fee simple title that may be divested upon the occurrence or nonoccurrence of a specified event. There are two categories of defeasible fee estates: fee simple on condition precedent (fee simple determinable) and fee simple on condition subsequent.

defect:
A condition that materially affects the value or use of residential property in an adverse manner.

defect of record:
Any encumbrance on a title that is made a part of the public record. Recorded defects include judgments, deeds of trust, mortgages, other liens and easements. (See encumbrance)

deferred capital gain:
The part of the realized gain that is tax deferred. (See capital gains, excluded capital gain, realized capital gain (loss), recognized capital gain)

deferred maintenance:
Physical deterioration of a building resulting from postponed maintenance.

deficiency judgment:
A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.

delayed exchange:
A three way exchange in which the properties close at different times.

delinquent:
The status of a financial obligation, such as a mortgage loan, when it is past-due.

demand:
The amount of goods people are willing and able to buy at a given price; often coupled with supply. (See supply)

density zoning:
Zoning ordinances that restrict the maximum average number of houses per acre that may be built within a particular area, generally a subdivision. (See zoning)

Department of Real Estate (California):
The California agency that administers the Real Estate Law, including the licensing of real estate brokers and agents; headed by the Real Estate Commissioner, who is appointed by the Governor and presides over the Real Estate Advisory Commission whose ten members are appointed by and serve at the Commissioner's discretion.

deposit:
Money offered by a prospective buyer as an indication of good faith in entering into a contract to purchase; earnest money; security for the buyer's performance of a contract. An earnest money deposit is not necessary to create a valid purchase contract because the mutual promises of the parties to buy and to sell are sufficient consideration to enforce the contract. If the buyer completes the purchase, the deposit money is applied toward the purchase price.

depreciation:
The decrease in the value of an asset allowed when computing property value for tax purposes. It can also be a loss in the appraised value of a property due to physical deterioration. This latter type of depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or ecomomic remedy. (See appreciation)

depreciable basis:
In investment real estate only structures can be depreciated. The depreciable basis is the original basis less the value of the land. (See basis)

descent:
Acquisition of an estate by inheritance in which an heir succeeds to the property by operation of law.

designated agent:
A licensee authorized by a broker to act as the agent for a specific principal in a particular transaction. A designated agent is the only agent in the company who has a fiduciary responsibility toward the principal.

destruction of premises:
In many states, once the sales contract is signed by both parties, the buyer bears the risk of any damage to the property that may occur before closing. Of course, the contract may provide otherwise.

detached garage:
A garage that is not attached to a home. Usually found in older homes.

deviation:
The measure of how widely the individual varies from the general population.

devisible contract:
A contract that consists of separate agreements that are not dependent on each other. The illegality of one part will not void the balance of the contract.

devise:
A transfer of real property under a will. The donor is the devisor, and the recipient is the devisee.

direct management costs:
Expenses that can be attributed to the operation of a management firm or department. (See indirect management costs)

direct endorsement:
The ability of an FHA-approved lender to secure FHA single- and multifamily mortgage insurance by following FHA guidelines. Under a direct endorsement program, applications for many of FHA's mortgage insurance programs can be underwritten by approved lenders who certify that the mortgage complies with applicable FHA requirements. (See mortgage insurance)

disability:
A physical or mental impairment that substantially limits one or more major life activities, such as walking, seeing, learning and working. Disability includes a record of such impairment or the fact of being regarded as having such impairment. The Americans with Disabilities Act (ADA) protects individuals with disabilities from various forms of discrimination in employment, public services, transportation, public accommodations and telecommunication services. A person abusing illegal drugs or alcohol is not covered, but a person who is rehabilitated in these areas may be protected under ADA. (See handicap)

discharge:
The release of any waste into the environment from a point source. Usually refers to the release of a liquid waste into a body of water through an outlet such as a pipe, but also refers to air emissions.

discharge of contract:
A contract is discharged when the agreement is terminated. Obviously, the most desirable case is when a contract terminates because it has been completely performed, with all its terms carried out. However, a contract may be terminated for other reasons, such as a party's breach or default.

disclaimer:
A statement denying legal responsibility, frequently found in the form of the statement, "There are no promises, representations, oral understandings or agreements except as contained herein." Such a statement, however, would not relieve the maker of any liabilities for fraudulent acts or misrepresentations. (See hold-harmless clause)

disclosed dual agency:
Real estate licensing laws may permit dual agency only if the buyer and seller are informed and consent to the broker's representation of both in the same transaction. Although the possibility of conflict of interest still exists, disclosure is intended to minimize the risk for the broker by ensuring that both principals are aware of the effect of dual agency on their respective interests. The disclosure alerts the principals that they may have to assume greater responsibility for protecting their interests than they would if they had independent representation. The broker must reconcile how, as agent, he or she will discharge the fiduciary duties on behalf of both principals, particularly providing loyalty and protecting confidential information.

disclosure:
It is the agent's duty to keep the principal informed of all facts or information that could affect a transaction. Duty of disclosure includes relevant information or material facts that the agent knows or should have known.

discount:
To sell at a reduced value; the difference between face value and cash value.

discounted cash flow:
Used in measuring the return from a real estate investment, the present value of a future income stream as determined by a given discount rate. (See present worth, return on investment)

discounting:
To sell at a reduced value; the difference between face value and cash value. Some companies specialize in buying mortgages and real estate contracts (often referred to as paper) at a discount. Often the original lender, wanting to cash out on the loan, will thus sell the mortgage at the current published mortgage discount rate. If the discount rate is 12 percent, for example, the lender could sell a $100,000 mortgage at 88 percent of its worth ($88,000 or 12 percent below par).

discount rate:
1. An annual competitive rate of return on total invested capital necessary to compensate the investor for the risks inherent in a particular investment. 2. The rate at which the Federal Reserve lends money to its eligible banks. These are short-term loans to fulfill immediate cash needs, not supplement the bank's capital. Thus, the discount rate is not a cost of funds indicator but more of a signal to the banking community. (See Federal Reserve System)

discount points:
An added loan fee charged by a lender to make the yield on a lower-than-market-interest VA or FHA loan competitive with higher-interest conventional loans. One discount point is equal to 1 percent of the loan amount.

discretionary income:
Income left over for investment after allocations for bills and savings.

disintermediation:
The process of individuals investing their funds directly instead of placing their savings with banks, savings and loan associations and similar institutions for investment by such institutions. This bypassing of financial institutions occurs when proportionately higher yields are available on secure investments (such as high-grade corporate bonds, money market funds and government securities) than can be obtained on savings deposits.

display ads:
Newspaper and magazine advertisements sold by the column inch. More elaborate than classified ads, display ads often include more extensive text, graphics and photographs. (See classified ads)

disposal:
The discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into the environment (land, surface water, ground water, and air).

divided agency:
Acting for more than one party in a transaction without the knowledge and consent of all parties thereto. This situation is considered unlawful and may be grounds for revocation or suspension of license under Section 10176(d) of the Business and Professions Code. (See dual agency)

doctrine of prior appropriation:
In states where water is scarce, ownership and use of water are often determined by the doctrine of prior appropriation. Under this doctrine, the right to use any water; with the exception of limited domestic use, is controlled by the state rather than by the landowner adjacent to the water.

documentary transfer tax:
Tax applicable to property transfers and affixed to the grant deed; varies from county to county, city to city.

domicile:
From domus, Latin for "house." The state where an individual has his or her true, fixed permanent home and principal business establishment and where that person has the intention of returning whenever he or she is absent from it. Once established a domicile is never lost until there is a concurrence of specific intent to abandon the old domicile, intent to acquire a specific new domicile and actual physical presence in the new domicile.

Though a person may have residences in different states and reside there at different times of the year, it is possible to have only one domicile. Because domicile consists of physical presence plus an intention to make the state one's permanent abode, such factors as local registration of autos, driver's license, voting, paying taxes, membership in local organizations, local bank accounts and local business interest are all important in establishing the requisite intent.

dominant tenement:
The estate that is said to attach to and derive benefit from the servient estate in reference to an easement appurtenant. For example, an easement road passes over an owner's land (the servient tenement) to give access to an adjacent parcel (the dominant tenement). The dominant tenement usually adjoins the servient tenement. (See easement, servient tenement)

double taxation:
One of the main disadvantages of corporate ownership of income property is that the profits are subject to double taxation. As a legal entity, a corporation must file an income tax return and pay tax on its profits. The portion of the remaining profits distributed to shareholders as dividends is taxed again as part of the shareholders' individual incomes.

dower:
The legal right or interest, recognized in some states, that a wife acquires in the property her husband held or acquired during their marriage. During the husband's lifetime the right is only a possibility of an interest; upon his death it can become an interest in land.

down drain:
A drain pipe or similar conduit to allow water to flow from the rain gutter at the edge of the roof to the ground.

downzoning:
A change in zoning from a higher to a lower classification or from a more active to less active classification, such as from residential to conservation, or multifamily to single-family use. In these cases, there is no taking under eminent domain and thus no compensation paid to the affected landowner who helplessly sees the property reduce in value. (See zoning)

draws:
1. An advancement of money against future earnings. 2. Periodic advances of funds under a construction loan agreement.

drywall:
A construction material used as a basis for interior walls in a home. Drywall is composed of an inner core of chalk with a paper facing on each side.

dual agency:
An agency relationship in which the agent acts concurrently for both principals in a real estate transaction. (See agency, agent, fiduciary)

due-on-sale-clause:
A form of acceleration clause found in some mortgages, especially savings and loan mortgages, requiring the mortgagor to pay off the mortgage debt when the property is sold, resulting in automatic maturity of the note as the lender's option. This clause effectively eliminates the possibility of the new buyer's assuming the mortgage unless the mortgagee permits the assumption, in which case the mortgagee might increase the interest rate or charge as assumption fee.

dump:
A land site where wastes are discarded in a disorderly or haphazard fashion without regard to protecting the environment. Uncontrolled dumping is an indiscriminate and illegal form of waste disposal. Problems associated with dumps include multiplication of disease-carrying organisms and pests, fires, air and water pollution, unsightliness, loss of habitat, and personal injury.

duplex:
A structure that provides housing accommodations for two families and supplies each with separate entrances, kitchens, bedrooms, living rooms and bathrooms. A two-family dwelling with the units either side by side or one above the other.

duress:
Unlawful constraint or action exercised upon a person whereby the person is forced to perform an act against his or her will. A contract entered into under duress is voidable.

dwelling:
Any building, structure or part thereof used and occupied for human habitation or intended to be so used, including any appurtenances. Many municipalities have adopted ordinances relating to the repair, closing and demolition of dwellings unfit for human habitation.

  E

earnest money:
Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed. The cash deposit (including initial and additional deposits) paid by the prospective buyer of real property as evidence of good-faith intention to complete the transaction; called bargain money, caution money, hand money, or a binder in some states. (See trust funds)

earthquake safety disclosure:
By California law, real estate agents or owners are required to prepare a "Residential Earthquake Hazards Report" disclosing the earthquake safety preparedness of all houses sold in the state.
  California Seismic Safety Commission

easement:
The right to a specific use of or right to travel over land owned by another. The land being used or traveled over is the servient tenement; the land that is benefited by the use is the dominant tenement. An easement appurtenant is a property interest belonging to the owner of dominant tenement and is transferred with the land; an easement in gross is a personal right that usually is not transferable by its owner. (See affirmative easement, dominant tenement, easement appurtenant, easement in gross, implied easement, negative easement, servient tenement)

easement by condemnation:
An easement created by the government or government agency that has exercised its right under eminent domain. (See eminent domain)

easement by estoppel:
An easement created when a person's words or actions lead another to believe that an easement exists. If, in relying on those words or actions, the easement user acts to his or her detriment, they may not deny the existence of the easement. (See estoppel)

easement by necessity:
An easement allowed by law as necessary for the full enjoyment of a parcel of real estate; for example, a right of ingress and egress over a grantor's land.

easement in gross:
An easement that is not created for the benefit of any land owned by the owner of the easement but that attaches personally to the easement owner. For exam ple, a right granted by Eleanor Franks to Joe Fish to use a portion of her property for the rest of his life would be an easement in gross.

easement by prescription:
An easement acquired by continuous, open and hostile use of property for the period of time prescribed by state law.

Easton v. Strassburger:
The duty of the licensee to make a reasonable investigation of the property evolved from the case of Easton v. Strassburger (1984). As the leading case on this issue, the courts decision sent the message "loud and clear" to all real estate licensees that their responsibility does not stop at a mere disclosure of material facts known to the licensee. Easton filed suit against Strassburger, the real estate agency and others for fraudulent concealment and intentional misrepresentation regarding potential soil problems and a resulting slide on the property.

economic life:
1. The estimated period over which an improved property may be profitably used so that it will yield a return over and above the economic rent attributable to the land itself; the period during which an improvement has value in excess of its salvage value. In the case of an older structure or improvement, economic life refers to the remaining period during which the improvements to the real property (not land) are depreciated for tax purposes. The economic lives of such improvements are normally shorter than their actual physical lives. Also called service life. 2. As applied to a structure, the years or age indicated by the condition and utility of the structure, as opposed to its actual or chronological age.

economic rent:
Currently referred to as market rent, it is the rental income that real estate can command in an open, competitive market at any given time, as contrasted with contract rent, or the income actually received under a lease agreement.

effective interest rate:
The actual rate or yield of a loan, regardless of the amount stated on the debt instrument. (See nominal interest rate)

egress:
A way to exit from a property; the opposite of ingress.

electromagnetic fields (EMFs):
Fields generated by the movement of electrical currents.

elevations:
Just as surface rights must be identified, surveyed and described, so must rights to the property above the earth's surface. In the same way land may be measured and divided into parcels, the air itself may be divided. An owner may subdivide the air above his or her land into air lots. Air lots are composed of the airspace within specific boundaries located over a parcel of land.

eminent domain:
The right of the government to acquire title to property for public use by condemnation; the property owner receives compensation which is generally fair market value. (See taking)
  FindLaw—eminent domain

embezzlement:
The fraudulent appropriation for one's own use or benefit of property or money, by a clerk, agent, trustee, public officer, or other person acting in a fiduciary capacity for another. (See fiduciary)

emblements:
1. Growing crops producted by the labor of the cultivator. 2. The right to the profits from such crops. (See fructus industriales)

employee:
Someone who works as a direct employee of an employer and has employee status. (See employer, independent contractor)

employer:
An individual or company that pays people to work for them. Employers are obligated to withhold income taxes and social security taxes from the compensation of employees. (See employee)

employment contract:
A document evidencing formal employment between employer and employee or between principal and agent. In the real estate business this generally takes the form of a listing agreement or management agreement. (See listing agreement)

enabling acts:
State legislation that confers zoning powers on municipal governments. (See zoning)

encapsulation:
A method of controlling environmental contamination by sealing off a dangerous substance (such as asbestos). The treatment of asbestos containing material with a liquid that covers the surface with a protective coating or embeds fibers in an adhesive matrix to prevent the release of asbestos fibers into the air. (See asbestos)

encroachment:
An unauthorized invasion or intrusion of an improvement or other real property onto another's property, thus reducing the size and value of the invaded property. Common examples of encroachments are the roof of a building that extends over the property line or the front of a building that extends over the building setback line or extends onto a neighbor's property.

encumbrance:
Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or burden, obstruct or impair the use of a property but not necessarily prevent transfer of title; a right or interest in a property held by one who is not the legal owner of the property.

There are two general classifications of encumbrances: those that affect the title, such as judgments, mortgages, mechanics' liens and other liens, which are charges on property used to secure a debt or obligation; and those that affect the physical condition of the property, such as restrictions, encroachments and easements. (See easement, encroachment, judgment, lien, mechanics' lien, mortgage)

Endangered Species Act:
Passed by the United States Congress in 1973. The Act was originally intended to protect endangered species on federal lands. Since passage, the Act has been used to prohibit development or other land use in habitats of protected species.
  Endangered Species Act of 1973

endless chain:
A method of prospecting where agents asks each prospect to recommend other prospects. (See prospecting)

endorsement:
A method of transferring title to a negotiable instrument, such as a check or promissory note, by signing the owner's name on the reverse side of such instrument. A blank endorsement guarantees payment to subsequent holders. An endorsement that states that it is without recourse does not guarantee payment to subsequent holders. A special endorsement specifies the person to whom or to whose order the instrument is payable.

endowment funds:
Many commercial banks and mortgage bankers handle investments for endowment funds. The endowments of hospitals, universities, colleges, charitable foundations and other institutions provide a good source of financing for low-risk commercial and industrial properties.

energy audit
An inventory and description of all the features and products in a home or building that effect the use of energy.

energy efficient mortgage (EEM)
A home mortgage in which the qualifying debt-to-income and housing expense-to-income ratios have been increased by 2% because the home meets or exceeds model standards for energy efficiency.

energy improvement mortgage (EIM)
A loan secured by real property that is made to an owner for the specific purpose of making energy efficient improvements to a home or building.

Energy Star® Home
A home that has been certified and labeled by the U.S. Environmental Protection Agency as having a 30% higher energy efficiency rating than the national residential standards for energy efficiency. Energy Star® is a registered trademark of the U.S. EPA.

enjoin:
1. to direct or order (someone) to do something. 2. to prescribe (a course of action) with authority or emphasis. 3. to prohibit or restrain by an injunction. (See injunction)

entitlement:
1. to be owed something under the law. 2. The portion of a VA-guaranteed loan that protects a lender from defaults. (See certificate of eligibility)

entity rule:
Three entities can hold property: individuals, partnerships and corporations. In the case of a property exchange, the way an exchanger holds property going into an exchange is the way they must hold the property coming out of the exchange.

environmental hazards disclosure:
By California law (AB 983) a real estate agent or owner is required to inform prospective buyers of environmental hazards located on a residental property.

environmental impact report:
A report required by the California Environmental Quality Act that projects the impact a project may have on the environment. The report includes relavant data and an analysis of its effects on the environment.

environmental impact statement:
Required by the National Environmental Policy Act and applies to federal government actions or legislation, it includes relevant data about an action and an analysis of its effect on the environment.

Environmental Protection Agency (EPA):
A federal agency created in 1970 by bringing together various federal pollution control activities that had been scattered among a number of federal departments and agencies. The EPA is involved with environmental problems of air and water pollution, solid-waste management, pesticides, radiation and noise. The EPA sets standards, determines how much pollution is tolerable, establishes timetables to bring polluters into line with its standards and enforces environmental laws. The EPA conducts an extensive environmental research program; provides technical, financial, and managerial help to state, regional and municipal pollution control agencies; and allocates funds for sewage-treatment facilities. The original authority of the EPA was broadened by passage of the Clean Air Amendments and the Resource Recovery Act in 1970; the Federal Water Pollution Control Act Amendments, the Federal Environmental Pesticide Control Act, the Noise Control Act and the Marine Protection Research and Sanctuaries Act in 1972; the Safe Drinking Water Act in 1974; and the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) in 1980. (See CERCLA, hazardous waste)
  Environmental Protection Agency Website

environmental site assessment:
An independent investigation and assessment of a property to determine if any existing or potential environmental problems or hazards exist on property. It is usually done to determine if any environmental problems exist on a property that might effect the use or market value of the property. It is sometimes referred to as the "due diligence" audit since it can be done to establish the "innocent landowner" defense in a Superfund suit. Usually done by an outside environmental engineering firm.

Equal Credit Opportunity Act (ECOA):
Federal legislation passed in 1974 to ensure that the various financial institutions and other firms engaged in the extension of credit exercise their responsibility to make credit available with fairness and impartiality, and without discrimination on the basis of race, color, religion, national origin, sex or marital status, age, receipt of income from public assistance programs (food stamps, social security), and to ensure good-faith exercise of any right under the Consumer Credit Protection Act (creditor must state reasons for denial of credit). The act applies to all who regularly extend or arrange for the extension of credit. A real estate licensee is considered a creditor if the licensee routinely assists sellers in determining whether a proposed buyer in a land contract or purchase-money mortgage is creditworthy.
  Equal Credit Opportunity Act—Full Text

equal dignities rule:
A rule of agency law that stipulates that when a contract is required by law to be in writing, the authority of an agent to enter into such a contract on behalf of the principal must also be in writing.

equalization:
In some jurisdictions, when it is necessary to correct inequalities in state wide tax assessments, an equalization factor is used to achieve uniformity. An equalization factor may be applied to raise or lower assessments in a particular district or county. The assessed value of each property in the area is multiplied by the equalization factor, and the tax rate is then applied to the equalized assessment.

equalization factor:
A factor (number) by which the assessed value of a property is multiplied to arrive at a value for the property that is in line with statewide tax assessments. The ad valorem tax would be based on this adjusted value.

equitable lien:
A lien arising out of common law—in contrast to a statutory lien, which is imposed on property by statute. (See common law, statutory lien)

equitable redemption:
A defaulted property owner recovering his or her property prior to its sale by curing the default. (See statutory redemption)

equitable right of redemption:
The right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges.

equitable title:
The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another's name.

equity:
The interest or value that an owner has in property over and above any indebtedness.

equity loans:
A loan based on a percentage of the equity a borrower holds in a collateral property.

equity trust:
An investment trust dealing with ownership rather than financing. (See investment group financing)

erosion:
The gradual loss of soil due to the operation of currents, tides or winds.

escape clause:
1. A contract provision relieving a party of liability for failure to perform, as where a stated contingency does not occur. If such a clause allows the party to cancel the contract for no reason whatsoever, there really is no enforceable contract, for mutuality of obligation is lacking. 2. A clause in a proprietary lease of a tenant-stockholder that permits the tenant to surrender the stock and lease back to the cooperative association and thereby terminate continuing liability for payments due under the lease.

Essential elements of a valid contract:

  1. Offer and acceptance;
  2. Consideration;
  3. Legally competent parties;
  4. Consent

escheat:
The reversion of property to the state or county, as provided by state law, in cases where a decedent dies intestate and there are no heirs capable of inheriting or when the property is abandoned. In some states, bank accounts that are unused for more than seven years will escheat to the government. (See intestate)

escrow:
The process by which money and/or documents are held by a disinterested third person (a stakeholder) until satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow) have been achieved. Once these terms have been satisfied, delivery and transfer of the escrowed funds and documents takes place. Although is some states a real estate broker is authorized to handle escrow functions, the common practice is to employ the services of a licensed escrow company, title company or lending institution.

escrow agent/officer:
An individual qualified to perform all the steps necessary to prepare and carry out escrow instructions. Tasks include obtaining title insurance; securing payoff demands; prorating taxes, interest, rents, etc.; and distributing the funds held in escrow. (See escrow instructions, prorations, title insurance)

escrow account:
The trust account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction. (See trust fund bank account)

escrow fee:
A fee covering all the usual escrow services except for title insurance. The fee is normally determined by the amount of money involved in the transaction.

escrow instructions:
In a sales transaction, a writing signed by buyer and seller that details the procedures necessary to close a transaction and directs the escrow agent how to proceed. Sometimes the buyer and seller execute separate instructions and sometimes the contract of sale itself serves as the escrow instructions. (See final escrow instructions, lender's escrow instructions, contract of sale, escrow, escrow agent)

essentials of a valid lease:
A lease is a form of contract. To be valid, a lease must meet essentially the same requirements as any other contract:

  • Offer and acceptance—The parties must reach a mutual agreement on all the terms of the contract.

  • Consideration—The lease must be supported by valid consideration. Rent is the normal consideration given for the right to occupy the leased premises. However, the payment of rent is not essential as long as consideration was granted in creating the lease itself, sometimes, for instance, this consideration is labor performed on the property. Because a lease is a contract, it is not subject to subsequent changes in the rent or other terms unless these changes are in writing and executed in the same manner as the original lease.

  • Capacity to contract—The parties must have the legal capacity to contract.

  • Legal objectives—The objectives of the lease must be legal.

estate (tenancy) at sufferance:
The tenancy of a lessee who lawfully comes into possession of a landlord's real estate but who continues to occupy the premises improperly after his or her lease rights have expired. (See tenant)

estate (tenancy) at will:
An estate (or tenancy ) in which a person holds or occupies real estate with the permission of the owner, for a term of unspecified or uncertain duration; i.e., there is no fixed term to the tenancy.

estate (tenancy) for years:
An interest for a certain, exact period of time in property leased for a specified consideration.

estate (tenancy) from period to period:
An interest in leased property that continues from period to period--week to week, month to month or year to year.

estate in land:
The degree, quantity, nature and extent of interest a person has in real property.

estate taxes:
Federal estate taxes and state inheritance taxes (as well as the debts of decedents) are general, statutory, involuntary liens that encumber a deceased person's real and personal property. These are normally paid or cleared in probate court proceedings. (See inheritance taxes, lien)

estimated buyer's costs:
An estimate of the buyer's total cash requirements to purchase real property. A realistic estimate of all costs and payments based on the buyer's offer.

estimated seller's proceeds:
An estimate of the net amount an owner will receive from the sale of his or her property. An "Estimated Seller's Proceeds" form is filled out by the listing broker and calculates the proceeds based on the listing price and seller's costs.

estoppel:
Method of enforcing an agency relationship in which someone stated incorrectly that another person is his or her agent, and a third person relied on that representation.

estoppel certificate:
A document in which a borrower certifies the amount owed on a mortgage loan and the rate of interest.

ethics:
The system of moral principles and rules that become standards for conduct.

evaporative coolers (swamp cooler):
An economical method of cooling a home in a dry climate. An evaporative cooler is a large box-like unit, four sides of which are removable panels with vents that let air flow through. Inside of each panel is a "cooler pad," usually made of wood fibers. The unit contains a large fan and a water pump. At the bottom of the unit is a water reservoir. Water is pumped from the reservoir, continually soaking the cooler pads. The fan draws hot outside air through the pads. As the warm air evaporates water from the pads, heat is carried away, cooling the air by up to 20 degrees-F. The water-cooled air is then pumped into the house through an air duct.

eviction:
1. The legal process of removing a tenant from the premises as a result of a breach of a lease. 2. The distrubance of a tenant's enjoyment of any material part of a leased premises by an act of the landlord, or by a claim of superior title by a third party. (See actual eviction, constructive eviction, lease, retaliatory eviction)

evidence of title:
Proof of ownership of property; commonly a certificate of title, an abstract of title with lawyer's opinion, title insurance or a Torrens registration certificate.

exchange:
A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of "like kind" (i.e., real estate for real estate). (See like kind, realized capital gains)

exchange period:
The period during which the exchanger must acquire replacement property in the exchange. The exchange period starts on the date the exchanger transfers the first relinquished property and ends on the earlier of the 180th day thereafter or the due date (including extensions) of the exchanger's tax return for the year of the transfer of the relinquished property.

exchanger:
The property owner seeking to defer capital gain tax by utilizing an IRS 1031 tax deferred exchange.

exculpatory clause:
A clause in an agreement that relieves a party from all obligation for his or her acts or failure to act.

excluded capital gain:
The part of the realized gain that is "excluded" from taxes. (See capital gains, deferred capital gain, realized capital gain (loss), recognized capital gain)

exclusionary zoning:
Zoning that excludes stated uses. (See zoning)

exclusive agency listing:
A written listing agreement giving a sole agent the right to sell a property for a specified time, but reserving to the owner the right to sell the property himself without owing a commission. The exclusive agent is entitled to a commission if he or she personally sells the property or if it is sold by anyone other than the seller. It is exclusive in the sense that the property is listed with only one broker. The multiple-listing service must accept exclusive-agency listings submitted by participating brokers. (See listing agreement)

exclusive-agency-buyer-agency-agreement:
Similar to the exclusive buyer agency agreement, this is an exclusive contract between the buyer and the agent. However, this agreement limits the broker's right to payment. The broker is entitled to payment only if he or she locates the property the buyer ultimately purchases. The buyer is free to find a suitable property without obligation to pay the agent.

exclusive-buyer-agency-agreement:
This is a completely exclusive agency agreement. The buyer is legally bound to compensate the agent whenever the buyer purchases a property of the type described in the contract. The broker is entitled to payment regardless of whether he or she locates the property. Even if the buyer finds the property independently, the agent is entitled to payment.

exclusive-authorization-and-right-to-sell listing:
A written listing agreement appointing a broker as the exclusive agent for the sale of property for a specified period of time. The listing broker is entitled to a commission if the property is sold by the owner, by the broker or by anyone else. The phrase "right-to-sell" really means the right to find a buyer; it does not mean that the agent has a power of attorney from the owner to sell the property. (See listing agreement)

exclusive authorization to acquire real property:
A contract providing for the exclusive representation of a buyer by a broker. It authorizes a broker to act as the exclusive agent of the buyer. Similar to an exclusive-authorization-and-right-to-sell listing. (See exclusive-authorization-and-right-to-sell listing)

execute:
The act of making a document legally valid, such as formalizing a contract by signing or acknowledging and delivering a deed. In some cases, execution of a document may refer solely to the act of signing, in other cases it may refer to complete performance of the document's terms.

executor:
A male person appointed by a testator to carry out the directions and requests in his or her last will and testament, and to dispose of his or her property according to the provisions of the will. State probate laws generally refer to this person as a "personal representative of the decedent."

executory contract:
A contract under which something remains to be done by one or more of the parties.

executrix:
A female person appointed by a testator to carry out the directions and requests in his or her last will and testament, and to dispose of his or her property according to the provisions of the will. State probate laws generally refer to this person as a "personal representative of the decedent."

exemplary damages:
Monetary damages that go beyond the actual compensatory damages. They are awarded to punish a wrongdoer for fraudulent, malicious and wrongful conduct. (See compensatory damages, nominal damages)

express agency:
A stated (written or verbal) agency agreement.

express agreement/contract:
An oral or written contract in which the parties state the contract's terms and express their intentions in words.

express authority:
The stated (written or verbal) authority of an agent. (See express agency)

extended coverage policy:
A title insurance policy that covers risks normally excluded by most standard coverage policies. The standard policy normally insures the title only as shown by the public records. It does not cover unrecorded matters that might be discovered during an inspection of the premises. Most lenders require extended coverage mortgage title insurance policies. Extended coverage indemnifies the insured against such things as mechanic's liens, tax liens, miscellaneous liens, encumbrances, easements, rights of parties in possession and encroachments, which may not be disclosed by the public records. (See standard coverage policy, title insurance)

extender clause:
1. A condition, once found in most listing forms, providing that the listing would continue for a set period of time, such as 90 days, and then would be automatically renewable until the parties agreed to terminate it. Use of such clauses in listing contracts is frowned on by the courts and violates many state license laws. The use of such a clause by an organization may be a violation of the antitrust laws. Such clauses, however, do not violate antitrust laws if inserted by individual brokers in their own exclusive listing forms, though the clause must state a final termination date.
2. A "carryover" clause (often referred to as a safety clause) may be contained in a listing. It provides that a broker is still entitled to a commission for a set period of time after the listing has expired if the property is sold to a prospect of the broker introduced to the property during the period of the listing. A clause stating such conditions for payment might read: "If within 90 days after expiration of the listing agreement, the property is sold to or exchanged with any person who physically inspected the property with the broker or any cooperating broker during the listing period and if the broker gave the seller the name of such a person in writing within five days after the stated expiration date of the listing agreement." The owner should disclose to any broker seeking a listing whether there are any expired listings. Unless careful disclosure is made of any extender clauses in such expired listings, the owner could be faced with a claim for commissions from both the former broker who showed the buyer the property and the new broker. In many states the extender clause is revoked once the owner relists the property with another broker.

external depreciation:
Reduction in a property's value caused by outside factors (those that are off the property).

external obsolescence:
A type of incurable depreciation caused by negative factors not on the subject property, such as environmental, social or ecomomic forces. The loss in value can not be reversed by spending money on the property. (See depreciation)

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