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naked title:
Bare title to the property, lacking the usual rights and privileges of ownership. A trustee in a deed of trust securing instrument may hold the title to a secured property, but only such title as is needed to carry out the terms of the lien document. (See deed of trust)

National Association of Independent Fee Appraisers (NAIFA):
A professional association of appraisers with more than 2,000 members nationally. NAIFA offers the specialty designations IFA (member), IFAS (senior member) and IFAC (appraiser-counselor).
  NAIFA Website

National Association of REALTORS® (NAR):
Formerly known as the National Association of Real Estate Boards (NAREB), NAR is the largest and most prestigious real estate organization in the world. Its members include REALTORS® and REALTOR-ASSOCIATES® representing all branches of the real estate industry. The national organization functions through local boards and state associations. Active brokers who have been admitted to membership in state and local NAR boards are allowed to use the trademark REALTOR®. Salespeople are admitted on a REALTOR-ASSOCIATE® active status. NAR members subscribe to a strict Code of Ethics.
  NAR Website

National Bank Act of 1863:
In 1863, President Abraham Lincoln, at the urging of Salmon Chase, the Secretary of the Treasury, signed the National Bank Act. The Act established a national banking system and a uniform national currency to be issued by new "national" banks. The banks were required to purchase U.S. government securities as backing for their National Bank notes. In 1865, a 10-percent tax levied against State Bank notes essentially taxed those notes out of existence. From 1863 to 1877, National Bank notes were printed privately by the issuing banks. After 1877, the Bureau of Engraving and Printing, a division of the U.S. Department of the Treasury, assumed responsibility for printing all notes.

National Environmental Policy Act:
The Act requires an environmental impact statement for federal actions that significantly affect the quality of the environment. (See environmental impact statement)
  NEPAnet Website

negative amortization:
A financing arrangement in which the monthly payments are less than the true amortized amounts and the loan balance increases over the term of the loan rather than decreases; an interest shortage that is added to unpaid principal.

negative declaration:
A declaration by a developer that a project will not have a negative impact on the environment.

negative easement:
An easement where the owner of a servient estate is prohibited from doing something on his or her estate that is otherwise lawful, because it will affect the dominant estate. (See easement)

The failure to use ordinary or reasonable care under the circumstances.

negligent misrepresentation:
A negligent misrepresentation occurs when the broker should have known that a statement about a material fact was false. The fact that the broker may actually be ignorant about the issue is no excuse.

negotiable instrument:
A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee's right to payment.

neighborhood information request:
A questionnaire used by brokers to obtain information about the neighborhood where a listed property is located. The questionnaire is completed by the homeowner and can provide valuable information that will aid in the sale of the property. The questionnaire should include questions about neighborhood schools, recreational facilities, churches, shopping centers, medical facilities, and other features that may be important to prospective buyers.

net income approach:
A method of pricing multiple unit rental properties where the desire to buy is driven by the property's ability to generate cash flow and profit. Most often used to price rental properties of 2 or more units. When pricing single-family rental homes and condos, the market approach is preferable. (See market approach, net operating income)

net lease:
A lease requiring the tenant to pay not only rent but also costs incurred in maintaining the property, including taxes, insurance, utilities and repairs.

net listing:
An employment contract in which the broker receives as commission all excess monies over and above the minimum sales price agreed on by broker and seller. Because of the danger of unethical practices in such a listing, its use is discouraged in most states. (See listing agreement)

net operating income (NOI):
The income projected for an income-producing property after deducting losses for vacancy, collection and operating expenses.

net proceeds:
The cash received after paying all liens and expenses.

Generating prospects through a real estate professional's communications with friends and professional associates. (See prospecting)

net worth:
Assets less liabilities (See asset, liability)

no-choice rule:
If a real estate transaction qualifies as an exchange, it must be treated as an exchange. An exchanger who qualifies for the 1031 tax-deferred exchange has "no choice," they cannot recognize the gain or loss. (See exchange)

no loan, no commission:
A listing agreement requiring that escrow be closed and title transferred before an agent is entitled to a commission. (See listing agreement)

no-loss rule:
If a real estate transaction qualifiies as an exchange, "no loss" can be recognized. (See exchange)

nominal damages:
Monetary damages of a token amount awarded for a wrongful act where no loss occurred. (See compensatory damages, exemplary damages)

nominal interest rate:
The stated interest rate in a note or contract, which may differ from the true or effective interest rate, especially if the lender discounts the loan and advances less than the full amount. (See effective interest rate)

An intermediary between a buyer and seller, or landlord and tenant, who assists both parties with a transaction without representing either. Also known as a facilitator, transaction broker, transaction coordinator and contract broker.

non-conforming loan:
A mortgage loan that does not meet Fannie Mae and Freddie Mac underwriting guidelines. Non-conforming loans are available as both fixed and adjustable rate mortgages. (See Fannie Mae, Freddie Mac)

nonconforming use:
A use of property, legally permitted to continue as such, in spite of the orignial zoning ordinance which prohibited such use for the area.

noncumulative zoning:
Zoning that allows only the stated use and not more restrictive uses. (See zoning)

nondisturbance clause:
An agreement where the mortgagee agrees to honor a tenant's lease in the event that the mortgage is foreclosed.

nongeographic farming:
Farming/prospecting a particular segment of the market such as an ethinic group or nationality, as opposed to a geographic area. (See farming, geographic farming)

A lack of uniformity; dissimilarity. Because no two parcels of land are exactly alike, real estate is said to be nonhomogeneous. (See homogeneous).

noninstitutional lenders:
Credit unions, pension funds, private individuals and real estate investment trusts. (See credit unions, institutional lenders, pension funds, real estate investment trusts).

nonjudicial foreclosure:
The process of selling real property under a power of sale in a mortgage or deed of trust that is in default. One disadvantage is that the lender cannot obtain a deficiency judgment. Also, some title insurance companies are reluctant to issue a policy unless a court has judicially foreclosed the mortgagor's interest. (See judicial foreclosure, strict foreclosure)

notary public:
A person who acknowledges oaths, such as the signing of a grant deed or deed of trust; must be duly appointed by the proper authorities.

note (original note):
A document signed by the borrower of a loan and stating the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note serves as evidence of the debt. When secured by a mortgage, it is called a mortgage note, and the mortgagee is named as the payee. In a trust deed, the note is usually made payable to the bearer or holder. The note may also contain some of the same provisions as in the mortgage or trust deed document, such as prepayment or acceleration.

notice of cessation:
A notice that gives subcontractors 30 days and gives prime contractors 60 days to file liens from the date of cessation of work. (See cessation of work)

notice of completion:
A document recorded to give constructive notice that a building job has been completed. (See constructive notice)

notice of default:
A notice to a defaulting party announcing that a default has occurred. The defaulting party is usually provided a grace period during which to cure the default. Notices of default are frequently provided for in contracts for deeds and mortgages and are sometimes required by operation of law.

notice of deliquency:
In junior financing, where the borrower gives the senior lender permission to notify the junior lender in the event of a default. (See default, junior mortgage, senior loan)

notice of nonresponsibility:
A legal notice designed to relieve a property owner of responsibility for the cost of improvements ordered by another person (such as a tenant). The owner usually gives notice that he or she will not be responsible for the work done by posting notice in some conspicuous place on the property, and by recording a verified copy in the public records.

Substituting a new obligation for an old one or substituting new parties to an existing obligation.

That which annoys and disturbs one in possession of his or her property, rendering its ordinary use physically uncomfortable.

nuncupative will:
An oral will declared by the testator in his or her final illness, made before witnesses and then created in legal written form.


The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. However, that obedience is not absolute. The agent may not obey instructions that are unlawful or unethical. Because illegal acts do not serve the principal's best interests, obeying such instructions violates the broker's duty of loyalty. On the other hand, an agent who exceeds the authority assigned in the contract will be liable for any losses that the principal suffers as a result.

A promisor; one who incurs a lawful obligation to another (the obligee). The maker of a promissory note is an obligor. In a performance bond, the contractor is the obligor. One who guarantees the performance of the obligation is a surety; also called a guarantor. (See payor)

obligatory advance:
Any advance which, under the terms of the credit line deed of trust or other agreement, the secured party has legally obligated itself to make in the absence of a default, breach, or other such event. Obligatory advances include, but are not limited to, advances which the secured party has agreed to make as a term or condition of the credit line deed of trust or other related agreement; obligations arising out of the occurrence of a condition, event or circumstance contemplated by the agreement; obligations arising on a specified date or time; or advances made upon application therefor by the grantor under the credit line deed of trust or by another obligor whose indebtedness is secured by the deed of trust.

The loss of value due to factors that are outmoded or less useful. Obsolescence may be functional or economic.

occupancy permit:
A permit issued by the appropriate local governing body to establish that the property is suitable for habitation by meeting certain safety and health standards.

Occupational Safety and Health Act (OSHA):
Congress created OSHA under the Occupational Safety and Health Act, which was signed by President Richard M. Nixon on December 29, 1970. OSHA's mission is to prevent work-related injuries, illnesses and deaths.
  OSHA Website

An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree.

offer and acceptance:
Two essential components of a valid contract; a "meeting of the minds." (See acceptance, offer)

The person to whom an offer is made - usually the owner.

Office of Thrift Supervision (OTS):
Monitors and regulates the savings and loan industry. OTS was created by FIRREA.
  OTS Website

office property:
Income-producing commercial property from which a particular service is rendered.

The party who makes an offer - usually the buyer.

offsite improvements:
Improvements made outside of a property's boundaries, such as sidewalks and streets.

oil and gas lease:
A grant of the sole and exclusive right to extract oil and/or gas from beneath the surface of land. Such a lease is generally for a designated term of years and is subject to a payment of royalties in the event of production, the commencement of drilling operations on or before a specified date and the performance within a specified time of a certain amount of development work. Typically, an express or implied easement is granted to enter the property in order to drill.

one-hundred-percent commission plan:
Some firms have adopted a 100 percent commission plan. Salespersons in these offices pay a monthly service charge to their brokers to cover the costs of office space, telephones and supervision in return for keeping 100 percent of the commissions from the sales they negotiate. The 100 percent commission salesperson pays all of his or her own expenses.

one stop shopping:
An arrangement where settlement and service providers are all available through the broker.

This agreement is a nonexclusive agency contract between a broker and a buyer. It permits the buyer to enter into similar agreements with an unlimited number of brokers. The buyer is obligated to compensate only the broker who locates the property the buyer ultimately purchases.

open-end loan:
A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage.

open-end trust deed:
An expandable loan in which the borrower is given a limit up to which he or she may borrow, with each incremental advance to be secured by the same trust deed.

open house:
The common real estate practice of showing listed homes to the public during established hours.

open listing:
A listing given to any number of brokers who can work simultaneously to sell the owner's property. The first broker to secure a buyer who is ready, willing and able to purchase at the terms of the listing earns the commission. In the case of a sale, the seller is not obligated to notify any of the brokers that the property has been sold.

Unlike an exclusive listing, an open listing need not contain a definite termination date. The listing terminates after a reasonable time, usually whatever is customary in the community. Either party can, in good faith, terminate the agency at will. (See listing agreement)

open-market operations:
The buying and selling of government securities by the Federal Reserve to control the amount of money in circulation.

operating budget:
A projection of income and expenses for the operation of a property over a one year period.

operating expenses:
Those recurring expenses that are essential to the continuous operation and maintenance of a property. Operating expenses are generally divided into the following categories: fixed expenses such as real property taxes and building insurance; variable costs such as utilities, payroll, administration and property management fees; and reserves for replacement. Operating expenses do not include items such as mortgage payments, capital expenditures and depreciation.

opportunity cost:
Earnings that may be available on alternative investments.

An agreement to keep open, for a set period, an offer to sell or lease real property.

opinion of title:
An opinion of the marketability of a title given by an attorney based on the abstract of title. (See abstract of title)

option listing:
A listing in which the broker also retains an option to purchase the property for the broker's own account. In view of the body of litigation involving breach of fiduciary duties by brokers who conceal offers from buyers until after the broker has exercised the option, full and fair disclosure must be given to the seller. (See listing agreement)

A military weapon or item of destruction (e.g. bullets). (See military ordinance location)

original basis:
The sum of the purchase price of a property plus buying expenses on acquisition. (See basis)

ostensible agency:
A form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document. (See implied agency)

other income:
Refers to income other than rent, such as vending and laundry machines, storage or parking space income, and so on.

overriding trust deed:
See wraparound mortgage

A property where the owner physically occupies the property.

The right to use, possess, enjoy, transfer, and dispose of a thing to the exclusion of all others.

owner's title insurance:
An insurance policy protecting the buyer for the amount of the purchase price in the event of a future title dispute. (See mortgagee's title insurance, title insurance)

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