P

package loan: A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings and major appliances.

par: The face value of a bond or security. (See security)

parol evidence rule: A rule of evidence providing that a written agreement is the final expression of the agreement of the parties, not to be modified by oral or written negotiations.

partial release clause: A mortgage provision under which the mortgagee agrees to release certain parcels from the lien of the blanket mortgage upon payment of a certain sum of money by the mortgagor. The clause is frequently found in tract development construction loans.

partial zoning: Zoning that does not consider its effect on other areas. (See zoning)

participation financing: Where a lender becomes a partner in a development.

participation certificates: Certificates issued by Freddie Mac backed by pools of mortgages.

participation mortgage: A mortgage loan wherein the lender has a partial equity interest in the property or receives a portion of the income from the property.

partition: Co-tenants who wish to terminate their co-ownership may file an action in court to partition the property. Partition is a legal way to dissolve the relationship when the parties do not voluntarily agree to its termination. If the court determines that the land cannot be divided physically into separate parcels without destroying its value, the court will order the real estate to be sold. The proceeds of the sale will then be divided among the co-owners according to their fractional interests. (See co-ownership)

partnership: An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law a partnership is regarded as a group of individuals rather than as a single entity. (See general partnership, limited partnership, joint venture) Uniform Partnership Act—Full Text

parts per billion (ppb): Units commonly used to express contamination ratios, as in establishing the maximum permissible amount of a contaminant in water, land, or air. These ratios can also be expressed in "parts per million (ppm)."

parts per million (ppm): Units commonly used to express contamination ratios, as in establishing the maximum permissible amount of a contaminant in water, land, or air. These ratios can also be expressed in "parts per billion (ppb)."

party wall: A wall that is located on or at a boundary line between two adjoining parcels of land and is used or is intended to be used by the owners of both properties.

party wall easement: A party wall can be an exterior wall on a building that straddles the boundary line between two lots, or it can be a commonly shared partition wall between two connected properties. Each lot owner owns the half of the wall on his or her lot, and each has an appurtenant easement in the other half of the wall. A written party wall agreement must be used to create the easement rights. Expenses to build and maintain the wall are usually shared. A party driveway shared by and partly on the land of adjoining owners must also be created by written agreement, specifying responsibility for expenses. (See easement, appurtenant easement)

passive income: Income generated when a person is not active in a business or occupation. Examples of situations where passive income is generated include limited partnerships or rental income remaining after allowable deductions. (See limited partnerships)

passive losses: Losses left over when deductions for annual operating expenses, loan interest, and depreciation exceed annual rents. For tax purposes, passive losses can only be used to offset passive income. (See annual operating expenses, depreciation, passive income)

pass-throughs: Payments on securities sold in the secondary market that are sent directly to investors. (See secondary market)

pass-through security: A security issued by the Government National Mortgage Association (Ginnie Mae) to mortgage investors. Cash flows from the underlying block individual mortgage loans are "passed through" to the holders of the securities in pro rata share, including loan prepayments. With a mortgage-backed security, the timely payment of principal and interest is guaranteed by Ginnie Mae. In 1982, the Federal National Mortgage Association (Fannie Mae) instituted its own mortgage-backed securities program designed to attract billions of dollars into the conventional mortgage market from pension funds and other investors. (See FHA, Fannie Mae, Freddie Mac, Ginnie Mae, mortgage-backed securities, VA loan)

patent: The instrument that conveys real property from the state or federal government to an individual.

patent defect: A defect that is obvious from a reasonable inspection of a property.

payee: The person to whom a debt instrument, such as a check or promissory note, is made payable; obligee, the "receiver." (See maker, receiver)

payment cap: The limit on the amount the monthly payment can be increased on an adjustable-rate mortgage when the interest rate is adjusted.

payoff statement: See reduction certificate.

payor: The debtor on a promissory note or the party who makes payment to another. (See obligor)

percentage fee: A property management fee expressed as a percentage of the gross collectable income from a property. (See flat fees)

percentage lease: A lease, commonly used for commercial property, whose rental is based on the tenant's gross sales at the premises. It usually stipulates a base monthly rental plus a percentage of any gross sales above a certain amount. (See lease)

pension funds: Pension funds usually have large amounts of money available for investment. Because of the comparatively high yields and low risks offered by mortgages, pension funds have begun to participate actively in financing real estate projects. Most real estate activity for pension funds is handled through mortgage bankers and mortgage brokers. (See noninstitutional lenders)

percolation: 1) The movement of water downward in a circular direction through subsurface soil layers, usually continuing downward to ground water. Can also involve upward movement of water. 2) Slow seepage of water through a filter.

percolation test: A test of the soil to determine if it will absorb and drain water adequately to use a septic system for sewage disposal.

periodic tenancy: A leasehold interest from period to period that renews automatically unless a notice of termination is given.

personal income: A person's gross income from wages, salaries, commissions, interest and profits from businesses or investments.

personal property: Things that are tangible and movable; property that is not classified as real property, such as chattels. Title to personal property is transferred by way of a bill of sale, as contrasted with a deed for real property.

Items of personal property frequently become the object of dispute between buyer and seller, most often due to whether an item is considered a fixture or due to the seller's attempt to substitute a similar item. Some cautious buyers insert a clause in their purchase contracts to the effect that the buyer will get the appliances "as currently installed and used in the premises."

A tree is real property while it is rooted in the ground, but when severed it is transformed into personal property. When lumber is assembled, however, and used as material to construct a house, it once again becomes a fixture or real property. (See fixture)

physical deterioration: A reduction in a property's value resulting from a decline in physical condition; can be caused by action of the elements or by ordinary wear and tear.

piggyback loans: A loan divided into two parts with one lender taking a secondary security position.

PITI: Acronym for Principal, Interest, Taxes & Insurance.

planned unit development (PUD): A relatively modern concept in housing designed to produce a high density of dwellings and maximum use of open spaces. This efficient use of land allows greater flexibility for residential land and development. It also usually results in lower-priced homes and minium maintenance cost. Often, PUDs are specifically provided for in zoning ordinances or are listed as a conditional permitted use, sometimes called planned development housing.

plaintiff: A person who brings an action; the party who complains or sues in a personal action and is so named on the record.

plat map: A map of a town, section or subdivision indicating the location and boundaries of individual properties.

plottage: The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot. (See assemblage).

PMI: Acronym for Private Mortgage Insurance. (See private mortgage insurance).

point of beginning (POB): In a metes-and bounds legal description, the starting point of the survey, situated in one corner of the parcel; all metes-and-bounds descriptions must follow the boundaries of the parcel back to the point of beginning.

points: A percentage of the principal conventional loan amount. A lender often charges a borrower "service-charge" points for making a loan. Points may cover expenses in origination of the loan to increase a lender's yield or to "buy down" the rate. In convensional financing, points may be paid by the buyer or seller.

point source: A stationary location or fixed facility such as an industry or municipality that discharges pollutants into the air or surface water through pipes, ditches, lagoons, wells, or stacks - a single identifiable source such as a ship or a mine.

police power: The inherent right of the state to regulate for the purpose of promoting health, safety, welfare, and morality. Police power gives the state the right to impose certain restraints on human conduct which are reasonably necessary in order to safeguard the public interest. This right is the basis of zoning, the official map, building codes, and subdivision regulations.

pollution: Any substances in water, soil, or air that degrades the natural quality of the environment, offends the senses of sight, taste or smell, or causes a health hazard. The usefulness of the natural resource is usually impaired by the presence of pollutants and contamination.

pollution prevention: Actively identifying equipment, processes, and activities which generate excessive wastes or use toxic chemicals and then making substitutions, alterations, or product improvements. Conserving energy and minimizing wastes are pollution prevention concepts used in manufacturing, sustainable agriculture, recycling, and clean air/clean water technologies.

portfolio loan: A loan originated and maintained by the lender and not sold in the secondary mortgage market. (See secondary mortgage market)

potentially responsible party (PRP): Any individual or company that is potentially responsible for or has contributed to a spill or other contamination at a Superfund site. Whenever possible, EPA requires PRP's to clean up sites they have contaminated. (See Superfund)

power-of-attorney: A written instrument authorizing a person, the attorney-in-fact, to act as the agent on behalf of another to the extent indicated in the instrument. (See attorney-in-fact)

power-of-sale clause: A clause in a mortgage authorizing the holder of the mortgage to sell the property in the event of the borrower's default. The prodeeds from the public sale are used to pay off the mortgage debt first, and any surplus is paid to the mortgagor. A power-of-sale clause is also found in trust deeds, giving the trustee authority to sell the trust property under certain circumstances.

pressure relief valve: A valve used on hot water heating appliances to help keep the pressure in the heated tank or boiler from getting too high by allowing the relief of pressure from the valve.

preliminary notice: Notifies a customer that work to be completed is subject to the lien rights of the contractor. Preliminary notice must be given prior to recording of a mechanic's lien, and should be filed by a contractor at least 20 days prior to the start of work. If notice is given later, liens will cover only the work starting 20 days prior to filing. (See mechanic's lien)

preliminary public report: Under the Subdivided Land Law the preliminary public report can be issued before the public report, and allows a subdivider to take reservations from buyers but not sell parcels. (See public report, Subdivided Land Law)

preliminary report: A title report that is made before a title insurance policy is issued or when escrow is opened. A preliminary report or policy of title insurance reports only on those documents having an affect on the title and should not be relied on as being an abstract. An abstract of title, on the other hand, reflects all instruments affecting title from the time of the original grant and also includes a memorandum of each instrument, and makes no attempt to determine which of the documents currently affects record title. The "preliminary" is not a binder or commitment that the title company will insure the title to the property, although this commitment may be obtained at an added cost. (See abstract of title)

premium: A fee paid to an insurance company.

premium (in excess of par): A price paid for a security in excess of its face value. (See par)

prepaid items: On a closing statement, items that have been paid in advance by the seller, such as insurance premiums and some real estate taxes, for which he or she must be reimbursed by the buyer.

prepayment penalty: The amount set by the creditor as a penalty to the debtor for paying off the debt before it matures; an early-withdrawal charge. The prepayment penalty is charged by the lender to recoup a portion of interest that the lender had planned to earn when the loan was made. It covers the lender for initial costs to set up the loan, to service it and to carry it in the early years of high risk. This punitive device also may represent the loss of income to the lender for the time the mortgage is paid off and the funds remain uncommitted. The reason most lenders are willing to allow prepayment after five years without penalty is that much of the total note's interest has been paid in by that time.

prequalify: Determine the maximum loan amount a prospective buyer qualifies for prior to showing them properties. Failing to prequalify may result in wasted efforts showing the prospect properties they cannot afford to purchase. (See back-end qualification, front-end qualification)

prescription: Acquiring a right in property, usually in the form of an intangible property right such as an easement or right-of-way, by means of adverse use of property that is continuous and uninterrupted for the prescriptive period established by state statute. Use of land is adverse when it is made under a claim or right. Therefore, there is no adverse use if the owner has granted permission, or if the user has paid for the use of the property, or if the user has admitted that the owner has a superior right in the property.

Prescription is often used interchangeably with the term adverse possession, which more strictly refers to the acquiring of title to lands. As in adverse possession, the essential elements are that the prescriptive right be adverse, under claim of right, continuous and uninterrupted, open, notorious and exclusive, with the knowledge and acquiescence of the servient owner, and continuing for the full prescriptive period. By "continuous" is meant that the property is used on a regular basis.

present worth: The discounted present-day value of money to be collected in the future.

pressed wood products: Materials used in building and furniture construction that are made from wood veneers, particles, or fibers bonded together with an adhesive under heat and pressure.

press release: A news announcement written by a property manager or advertising specialist highlighting a property's features. Sent to local newspapers and real estate magazines to promote a property.

preventive maintenance: Includes regularly scheduled activities such as painting and seasonal servicing of appliances and systems. Preventive maintenance preserves the long-range value and physical integrity of the building. This is both the most critical and the most neglected maintenance responsibility. Failure to perform preventive maintenance invariably leads to greater expense in other areas of maintenance.

price fixing: The practice of conspiring to establish fixed fees or prices for services rendered or goods sold. In recent years, the setting of attorney fees by local bar associations and commission percentages and management fees by local realty associations has been successfully attacked as price fixing and thus a violation of the Sherman Antitrust Act.

prima facie: At first sight; on the first appearance; on the face of it; so far as can be judged from the first disclosure; presumably; a fact presumed to be true unless disproved by some evidence to the contrary.

prime rate: The minimum interest rate a commerical bank will charge to its largest clients. Prime rates are determined in part by the rate the bank pays for the money they lend to borrowers. Decisions of the Federal Reserve Bank (The Fed) to increase or decrease the supply of money can cause the prime rate that banks charge to fluctuate. (See Federal Reserve System)

primary lenders: Originators of real estate loans including commercial banks, savings and loan associations and mutual savings banks.

primary mortgage market: The mortgage market in which loans are originated and consisting of lenders such as commercial banks, savings and loan associations and mutual savings banks. (See secondary mortgage market)

primary personal residence: The dwelling in which a taxpayer lives and occupies most of the time.

principal: 1. One of the main parties to a transaction. For example, the buyer and seller are principals in the purchase of real property. 2. In a fiduciary relationship, the person who hires a real estate broker to represent him or her in the sale of property. The phrase, "principals only," often found in real estate ads, is meant to exclude real estate agents from contacting the owners of the property. (See fiduciary)

principal meridian: The main imaginary line running north and south and crossing a base line at a definite point, used by surveyors for reference in location and describing land under the rectangular (government) survey system of legal description. (See base line, government survey system, legal description, meridian)

prior appropriation: A concept of water ownership in which the landowner's right to use available water is based on a government administered permit system.

priority: The order of position, time or place. The priority of liens is generally determined by the chronological order in which the lien documents are recorded; tax liens, however, have priority even over previously recorded liens. Thus the old adage "prior in time is prior in right" is applicable.

private mortgage insurance (PMI): Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. A special form of insurance designed to permit lenders to increase their loan-to-market-value ratio, often up to 95 percent of the market value of the property. Many lenders are restricted to 80 percent loans by government regulations, special loss reserve requirements or internal management policies related to mortgage portfolio mix. A lender, however, may lend up to 95 percent of the property value if the excess of the loan amount, over 80 percent of value, is unsured by a private mortgage guaranty insurer. (See deficiency, foreclosure) Mortgage Insurance Companies of America

private offering: An offering of securities to no more than 25 persons and sale to no more than 10 persons.

privity of contract: The relationship between contracting parties (mortgagor-mortgagee or assignee-assignor).

probate: The formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes and to determine the persons to whom the remainder of the estate is to pass. (See decedent, will)

procuring cause: That effort which brings about the desired results. Also called predominant efficient cause or the contributing cause.

profit and loss statement: A detailed statement of income and expenses of a business that reveals the operating position of the business over a period of time. Commonly referred to a P&L.

progression: An appraisal principle that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better-quality property. (See appraisal)

promissory note: An unconditional written promise of one person to pay a certain sum of money to another person, order or bearer at a future specified time. A broker who accepts a promissory note as a deposit from a prospective purchaser must generally disclose to the seller that the buyer's deposit is in the form of a promissory note.

property analysis: A study made to familiarize a property manager with the nature and condition of a building, its relative market position, and its estimated income and operating expenses.

property brief: Produced by the listing agent, a property brief is simply a one-page flier about the property pointing out attractive features. It usually contains a drawing or photograph of the home, and is given to people the agent feels are especially interested in the property.

property management: That aspect of the real estate industry devoted to marketing, leasing, managing, and the maintenance of the property of others. Institute of Real Estate Management

property manager: Someone who manages real estate for another person for compensation. Duties include collecting rents, maintaining the property and keeping up all accounting.

property reports: The mandatory federal and state documents compiled by subdividers and developers to provide potential purchasers with facts about a property prior to their purchase.

property taxes: Assessment made by county or city assessor's office for real property taxes. Payment dates may vary according to state regulation.

proprietary lease: A lease given by the corporation, which owns a cooperative apartment building to the shareholder for the shareholder's right as a tenant to an individual apartment.

prorations: Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing.

prospecting: Locating owners of properties who are interested in selling, or buyers who are interested in purchasing property. (See endless chain, farming, networking)

protected class: Any group of people designated as such by the Department of Housing and Urban Development (HUD) in consideration of federal and state civil rights legislation. Currently includes ethnic minorities, women, religious groups, the handicapped and others.

"P" trap: A drainage plumbing pipe in the approximate shape of a "p" laid on its face, providing a trap that prevents sewer gasses from entering the living space.

public records: Records which by law give constructive notice of matters relating to property.

public report: A disclosure statement required by the Subdivided Land Law stating that a buyer is not obligated until he or she has read the report and signed a receipt. (See Subdivided Land Law)

public water system: A system that provides piped water for human consumption to at least 15 service connections or regularly serves 25 individuals.

puffing: Exaggerated or superlative comments or opinions not made as representations of fact and thus are not grounds for misrepresentation, such as, "This property is a real good buy." One test used is whether a reasonable person would have relied on the statement. A statement such as, "The apartment has a fantastic view, " is puffing because the prospective buyer can clearly assess the view for himself or herself, whereas a statement such as "The apartment has a fantastic view of the lake," when in fact all its windows face the street, would be misrepresentation. (See caveat emptor, misrepresentation)

punitive damages: Damages awarded to one party to punish another party for dishonest conduct. Meant to deter others from committing a similar offense.

pur antre vie: "For the life of another." A life estate pur autre vie is a life estate that is measured by the life of a person other than the grantee.

purchase-money mortgage: A mortgage given as part of the buyer's consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a part of the transaction. It is commonly a mortgage taken back by a seller from a purchaser in lieu of purchase money. A purchase-money mortgage is usually used to fill a gap between the buyer's down payment and a new first mortgage or mortgage assumed, as when the buyer pays 10 percent in cash, gets an 80 percent first mortgage from a bank, and then the seller takes back a purchase-money second mortgage for the remaining 10 percent.

pyramiding: The process of acquiring properties by refinancing properties already owned and investing the loan proceeds in additional properties.

Q

qualified intermediary: Corporation or entity who facilitates a 1031 tax deferred exchange (also known as an "accommodator"). To be a qualified intermediary, the intermediary must not be a related party.

quantity-survey method: The appraisal method of estimating building costs by calculating the cost of all of the physical components in the improvements, adding the cost to assemble them and then including the indirect costs associated with such construction. (See appraisal)

quasi contract: A contract implied by law, as a matter of equity, when no actual contract exists.

quiet enjoyment: An implied warranty that the landlord will not interfere with the tenant's reasonable use and enjoyment of a leased property. (See implied warranty)

quiet title: A court action to remove a cloud on the title.

quitclaim deed: A conveyance by which the grantor transfers whatever interest he or she has in the real estate, without warranties or obligations.

R

radon: A naturally occurring gas that is suspected of causing lung cancer. National Safety Council on Radon

rafter: A roof structural support system using "2 by" wood components that are nailed together (as opposed to trusses that are connected using press-on metal plates). (See truss)

range: 1. A measure of the difference between the highest and lowest variates. (See variates) 2. A strip of land six miles wide, extending north and south and numbered east and west according to its distance from the principal meridian in the rectangular (government) survey system of legal description. For example, Range 3 East would be a strip of land between 12 and 18 miles east of its principal meridian.

rate cap: The limit on the amount the interest rate can be increased at each adjustment period in an adjustable rate loan. The cap may also set the maximum interest rate that can be charged during the life of the loan. (See adjustable rate mortgages (ARMs))

rate factor: The number of dollars required to pay off each $1,000 of a mortgage loan.

ratification: Method of creating an agency relationship in which the principal accepts the conduct of someone who acted without prior authorization as the principal's agent.

ready, willing and able buyer: One who is prepared to buy property on the seller's terms and is ready to take positive steps to consummate the transaction.

real estate: The physical land at, above and below the earth's surface with all appurtenances, including any structures; any and every interest in land whether corporeal or incorporeal, freehold or nonfreehold; for all practical purposes, the term real estate is synonymous with real property.

Real Estate Advisory Commission: A ten member panel appointed by the Real Estate Commissioner, who preside over meetings. Six commission members must be licensed California real estate brokers, and four must be non licensed members of the public. Unlike the commissioner, commission members serve without compensation. They make recommendations to the Real Estate Commissioner on relevant matters.

real estate assistant: A real estate assistant (also known as a personal assistant or professional assistant) is a combination of office manager, marketer, organizer and facilitator with a fundamental understanding of the real estate industry.

real estate brokerage: A Real Estate Brokerage is a business in which real estate license-related activities are performed under the authority of a real estate broker.

real estate commissioner: The Real Estate Commissioner is appointed by the governor and serves at the governor's discretion. The commissioner determines administrative policy and enforces that policy in the best interests of those dealing with real estate licensees. The person selected as commissioner must have been a practising real estate broker in California for five years or otherwise engaged in real estate activity for five of the past ten years.

real estate dealer: A real estate dealer holds property primarily for resale to customers in the course of business, in contrast to a real estate investor who holds property for personal investment. Dealers are denied certain income tax benefits available to investors.

Real Estate Educators Association (REEA): A professional organization established by and for real estate educators, including individuals and institutions. REEA is international in scope and represents every aspect of real estate education which include, degree programs, continuing education, sales training, GRI (Graduate, REALTORS Institute), prelicense, graduate studies, consulting, research and publishing. Members of this association come from colleges, universities and proprietary schools, regulatory agencies, real estate organizations, boards and associations, and other delivery systems.

Real Estate Investment Trust (REIT): A method of pooling investment money using the trust form of ownership. In the 1960s Congress provided favored tax treatment for certain business trusts by exempting from corporate tax certain qualified REITs that invest at least 75 percent of their assets in real estate and that distribute 95 percent or more of their annual real estate ordinary income to their investors. As an alternative to the partnership or corporate methods of investing in real estate, the REIT offers some of the flow-through tax advantages of a partnership or syndication while retaining many of the attributes and advantages of a corporate operation. (See noninstitutional lenders)

real estate investor: A real estate investor holds property for personal investment reasons, in contrast to a real estate dealer who holds property primarily for resale to customers. Investors are allowed certain income tax benefits denied to dealers.

real estate license law: State law enacted to protect the public from fraud, dishonesty and incompetence in the purchase and sale of real estate.

Real Estate Mortgage Investment Conduit (REMIC): A tax entity that issues multiple classes of investor interests (securities) backed by a pool of mortgages. (See securitization)

real estate owned (REO): A term used by lenders to refer to properties acquired through foreclosure.

real estate recovery fund: A fund established in some states from real estate license revenues to cover claims of aggrieved parties who have suffered monetary damage through the actions of a real estate licensee.

Real Estate Settlement Procedures Act (RESPA): A federal law, enacted in 1974 and later revised, that ensures that the buyer and seller in a real estate transaction have knowledge of all settlement costs when the purchase of a one-to-four-family residential dwelling is financed by a federally related mortgage loan. Federally related loans are broadly defined to include loans made by savings and loan associations or other lenders whose deposits are insured by federal agencies, insured by the FHA or VA, administered by the Department of Housing and Urban Development or intended to be sold by the lender to Fannie Mae or a similar federal agency. HUD—RESPA Overview

Real Estate Transfer Disclosure Statement: As required by California Civil Code Sections 1102-1102.14, a transferee (buyer) of residential real property is entitled to a statement from the transferor (seller) which provides information regarding the physical condition of the property.

Realtist: A member of a national organization, generally composed of African-American real estate brokers, known as the National Association of Real Estate Brokers (NAREB).

REALTORS® Code of Ethics: A written system of standards of ethical conduct. Because of the nature of the relationship between a broker and a client or other persons in a real estate transaction, a high standard of ethics is needed to ensure that the broker acts in the best interests of both the principal and any third parties.

real property: The earth's surface, the air above and the ground below, as well as all appurtenances to the land including buildings, structures, fixtures, fences and improvements erected upon or affixed to the same, excluding growing crops. The term real property includes the interests, benefits and rights inherent in the ownership of real estate. (See bundle of rights)

real property sales contract: See land contract

real property security: A guaranteed loan or a loan where the broker will assume payments.

real property securities dealer: A real property securities dealer is a broker who sells an existing trust deed and guarantees a return on it.

reality of consent: Although a contract may meet all of the basic requirements, it may still be void or voidable, according to the realty of consent, which states that a contract must be entered into as a free and voluntary act of each party, and each party must be able to make a prudent and knowledgeable decision without undue influence. A mistake, misrepresentation, fraud, undue influence or duress would deprive a person of that ability, and if any of these circumstances were present, the contract would be voidable by the injured party. If the other party were to sue for breach, the injured party could use lack of voluntary assent as a defense.

REALTOR®: A registered trade name that may be used only by members of the state and local real estate boards affiliated with the National Association of REALTORS® (NAR). The term REALTOR® designates a professional who subscribes to associations of REALTORS® to govern real estate practices of members of the board. The use of the name REALTOR® and the distinctive seal in advertising is strictly governed by the rules and regulations of the national association.

REALTOR-ASSOCIATE® (RA): A licensed salesperson who is a member of the National Association of REALTORS® focusing its efforts on the marketing and brokerage of land.

realized capital gain: When a property is sold, a capital gain or loss is realized. (See capital gains, excluded capital gains, deferred capital gains, recognized capital gains)

rebate law: Law that prohibits escrow and title insurance companies from giving rebates or favorable treatment as consideration for the referral of business.

recapture clause: A clause in some percentage leases where the lessor has the right to terminate a lease if a tenant does not obtain a desired gross. (See percentage lease)

recapture rate: A periodic allowance for the recovery of investment capital from the property's income stream.

reconstructed cash flow analysis: An estimated cash flow analysis for a rental property, prepared by an agent using accurate property information. Its purpose is to present what the cash flow numbers for the investment property will look like when in the hands of a potential buyer.

recasting: The process of rewriting existing loans, especially when there is a default. The term and interest rate may be adjusted to take pressure off the borrower.

receiver: An independent party appointed by a court to impartially receive, preserve and manage property that is involved in litigation, pending final disposition of the matter before the court.

recission: An option in the discharge of a contract. If both parites agree, they may rescind a contract in a process called recission.

recognition clause: A clause found in some blanket mortgages used to purchase a tract of land for subdivision development providing for protection of the rights of the ultimate buyers of individual lots in case of default by the developer. (See blanket mortgages)

recognized capital gains: The recognized capital gain from the sale of an asset subject to income taxes. (See capital gains, deferred capital gain, excluded capital gain, realized capital gain)

reconciliation: 1. The final step in an appraisal process, in which the appraiser reconciles the estimates of value received from the direct sales comparison, cost, and income approaches to arrive at a final estimate of market value for the subject property. 2. The balancing of entries in a double-entry accounting system. (See appraisal)

reconveys: In satisfying a deed of trust, the trustee reconveys full title to the borrower.

reconveyance deed: A deed used by a trustee under a deed of trust to return title to the truster.

recording: The act of entering into the book of public records the written instruments affecting the title to real property, such as deeds, mortgages, contracts for sale, options and assignments. There is also a body of public records apart from the real estate recording system that has a bearing on the quality of title. A title searcher would also check, for example, public records regarding probate, marriage, taxes and judgements.

recreant: 1. cowardly or craven. 2. unfaithful, disloyal, or traitorous.

rectangular (government) survey system: A system established in 1785 by the federal government, providing for surveying and describing land by reference to principal meridians and base lines.

redemption: The right of a defaulted property owner to recover his or her property by curing the default. (See equitable redemption, statutory redemption)

redemption period: A period of time established by state law during which a property owner has a right to redeem real estate after a foreclosure or tax sale by paying the sales price, interest and costs. Note that many states do not have such statutory redemption periods.

red flag: A visual sign or indication of a defect. Something that warns a reasonably observant person of a potential problem, thus requiring further investigation. A broker who spots uneven floors or water-stained ceilings is on notice to inquire about soil settlement and roof leakage problems.

redlining: A practice by some lending institutions that restricts the number of loans or the loan-to-value ratio in certain areas of a community. A redlining policy may be so severe that in effect the lending institution prohibits lending any money in certain areas of the city. The usual justification for redlining is that the lender wants to limit the risks in an area that is deteriorating. The lender discriminates against a whole class of risks rather than distinguishing among individual risks.

reduction certificate (payoff statement): The document signed by a lender indicating the amount required to pay a loan balance in full and satisfy the debt; used in the settlement process to protect both the seller's and the buyer's interests.

refinance: To obtain a new loan to pay off an existing loan, or to pay off one loan with the proceeds from another. Properties are frequently refinanced when interest rates drop and/or the property has appreciated in value. Sometimes, a buyer will purchase a property by way of a contract for deed with the expectation of either selling the property before the balance under the contract for deed becomes due or refinancing at better terms and interest rates than exist at the time the agreement of sale is entered into. (See realized capital gains)

reformation: An action by a court to revise a contract to read as it was intended by the parties to read rather than as stated.

reflective coatings: A black tinted window coating. Reflective coatings greatly reduce the transmission of daylight through clear glass. Commonly used in hot climates in which solar control is critical.

regression: An appraisal principle that states that between dissimilar properties the value of the better-quality property is affected adversely by the presence of the lesser-quality property. (See appraisal)

Regulation Z: Implements the Truth-in-Lending Act requiring credit institutions to inform borrowers of the true cost of obtaining credit.

reinstatement: To bring something back to its prior position, as in restoring a defaulted loan to current status.

rejection: Proposing any deviation from the terms of the offer constitutes a rejection of the original offer and becomes a new offer. (See counteroffer)

release: Any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment of a hazardous or toxic chemical or extremely hazardous substance.

release clause: A provision found in many blanket mortgages enabling the mortgagor, upon payment of a specific sum of money, to obtain a partial release of particular portions or parcels of the collateral.

release deed: A document, also known as a deed of reconveyance, that transfers all rights given a trustee under a deed of trust loan back to the grantor after the loan has been fully repaid.

release of liability: The release of an old borrower from further responsibility for repayment of an assumed loan.

reliction: An increase of the land by the permanent withdrawal of the ocean or a river.

relinquished property: The property given up in the exchange.

remainder: The right of future possession and use that goes to someone other than the grantor upon termination of a life estate.

remainder estate: A future interest in real estate created at the time and by the same instrument of the original estate, but limited its immediate authority upon the termination of the prior estate. For example, Hoe Phigg owns a property in fee simple and conveys the property "to Barry Clink and upon Clink's death, to Cora Quibb and her heirs." Cora Quibb has a remainder estate, which is vested because the estate automatically passes to Cora Quibb and her heirs upon the death of Barry Clink.

remainder interest: The remnant of an estate that has been conveyed to take effect and be enjoyed after the termination of a prior estate, such as when an owner conveys a life estate to one party and the remainder to another.

rent: A fixed, periodic payment made by a tenant of a property to the owner for possession and use, usually by prior agreement of the parties.

rental center: A special leasing office located in an apartment complex. Usually includes a furnished model and a closing area.

rental income: The result when vacancies (uncollected rent) is subtracted from gross scheduled income.

rental statement: A summary of rental amounts paid and security deposits collected on a property used for rental purposes.

rent control: Ordinances that limit the rent a landlord can charge for a property.

rent factor: A multiplier used to establish the rental rate for industrial properties based on the owner's desired rate of return.

rent schedule: A statement of proposed rental rates, determined by the owner or the property manager or both, and based on a building's estimated expenses, market supply and demand and the owner's long-range goals for the property.

rent skimming: In "no down-payment sales" where the buyer of a property collects rents and deposits on the property without making payments on the loan.

rent up: A requirement of a lender that a developer lease a stated amount of space in a building as a prerequisite to a permanent lender "taking out" the interim lender.

renunciation: An act or instance of relinquishing, abandoning, repudiating or sacrificing something, as a right, title, person, etc.

repair or corrective maintenance: Involves the actual repairs that keep the building's equipment, utilities and amenities functioning. Repairing a boiler, finding a leaky faucet and mending a broken air-conditioning unit are acts of corrective maintenance.

replacement cost: The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original.

replacement property: The property acquired in the exchange.

rescind: To annul, cancel.

rescission: The legal remedy of canceling, terminating or annulling a contract and restoring the parties to their original positions; a return to the status quo. Contracts may be rescinded due to mistake, fraud or misrepresentation and, there is no need to show any money damage.

reserve fund: Monies a lender will often require a borrower to set aside as a cushion of capital for future payment of items such as taxes, insurance, furniture replacement and deferred maintenance. Sometimes a reserve fund is referred to as an impound account or customer's trust fund. Replacement reserves should be maintained especially when the owner is installing items having a short life expectancy-for example, appliances, furniture or carpeting in a furnished apartment.

reserve funds: An expense category in the operating budget. Monies that are set aside for replacement expenditures not covered by insurance such as roof or furnace repairs. (See operating budget)

reserve requirements: A flat percentage of deposits, required by the Federal Reserve, to be set aside by member banks as a precaution. (See Federal Reserve)

Residential Purchase Agreement: A model purchase agreement form, initially developed in 1985 by the California Association of Realtors® in cooperation with the State Bar Association, that ensures a real estate purchase agreement will be complete and in compliance with state law.

Resolution Trust Corporation: The organization created by FIRREA to liquidate the assets of failed savings and loan associations.

respondent: 1. The party who makes an answer to a bill or other proceeding. 2. The party who contends against an appeal.

restraining order: An order that may issue from filing for an injunction. Though the term is sometimes used as a synonym of injunction, it is distinguished from an injunction in that it is intended only as a restraint upon a defendant until the granting of a temporary or perpetual injunction. (See injunction)

restricted license: A probationary real estate license granted after a license was revoked, suspended or denied.

restrictive covenants: A clause in a deed that limits the way the real estate ownership can be used. (See covenants, conditions & restrictions, deed restrictions)

Resource Conservation and Recovery Act: Federal law administered by the EPA which regulates the generation, processing and transportation of hazardous waste. Resource Conservation and Recovery Act Overview

retail property: Income-producing property from which various types of retail products are sold.

retainer: Retainer is a professional relationship between an advisor and a client in which a client engages the services of a professional through payment of a fee. The professional's obligation is to provide advice or services as needed by the client.

retaining wall: A wall built to hold back or support a bank of earth.

retaliatory eviction: An eviction due to a tenant's complaints to the landlord, a public agency or tenant association. It is illegal for a landlord to decrease services, increase rent or evict the tenant within 180 days of such a complaint. (See eviction)

retirement communities: Many of them in temperate climates, are often structured as PUDs. They may provide shopping, recreational opportunities and health care facilities in addition to residential units.

retroactive liability: A liability is not limited to the current owner of a property, but includes people who have previously owned the property. (See liability)

return on investment: The net annual income divided by the original cash investment equals a percentage return on investment.

reverse-annuity mortgage (RAM): A loan under which the homeowner receives monthly payments based on his or her accumulated equity rather than a lump sum. The loan must be repaid at a prearranged date or upon the death of the owner or the sale of the property.

reversion: The right of future possession and use by the grantor of a life estate. (See life estate)

reversionary interest: The remnant of an estate that the grantor holds after granting a life estate to another person. (See life estate)

reversionary right: The return of the rights of possession and quiet enjoyment to the lessor at the expiration of a lease.

revocation: An offeree may fail to accept the offer before it expires. The offeror may revoke the offer at any time before receiving the acceptance. This revocation must be communicated to the offeree by the offeror, either directly or through the parties' agents.

right of correlative user: The right of a landowner to the reasonable use of underground percolating water. (See water rights)

right of first refusal: The right to the first opportunity to lease or purchase real property. For example, apartment tenants might retain the right of first refusal when their units are being converted to condominiums.

right of prior appropriation: A water rights concept in California and other states that the first user of riparian water obtains priority over subsequent users. (See water rights)

right of survivorship: The distinctive characteristics of a joint tenancy (also tenancy by entirety) by which the surviving joint tenant(s) succeeds to all right, title and interest of the deceased joint tenant without the need for probate proceedings.

right-of-way: The right given by one landowner to another to pass over the land, construct a roadway or use as a pathway, without actually transferring ownership.

riparian rights: The rights of a landowner whose land borders on a stream or watercourse to use and enjoy the water which is adjacent to or flows over the owners land provided such use does not injure other adjacent land owners. Property boundary would be the center line of a non-navigable river or the low waterline of a navigable stream or river. (See littoral rights, water rights)

risk: The probability of getting your money back. High risk means low probability; low risk means high probability.

risk assessment: Qualitative and quantitative evaluation of the risk posed to human health and/or the environment by the actual or potential presence and/or use of specific pollutants.

risk-based financing: When the lender sets loan terms based on potential risk. Borrowers that show little risk of default would be entitled to a better rate and terms than a borrower where a higher probablity of default is indicated.

risk management: Evaluation and selection of appropriate property and other Insurance.

rolled roofing: An asphalt roofing material that is manufactured in rolls with granules on one side. Asphalt roofing is a relatively inexpensive and short-lived product, and should not be used as a roofing material over living spaces.

rollover loan: A loan that includes a call date earlier than its normal amortization period; also called a renegotiable rate loan or a bullet loan.

Roman Civil Law: Roman private property ownership codes enforced by Spain on early California land owners. (See civil law)

roof decking: The undersupport material which is typically wood for attaching shingles and other materials to the roof. (See shingles)

root of the title: The original grant (or root) of the title.

routine maintenance: Includes such day-to-day duties as cleaning common areas, performing minor carpentry and plumbing adjustments and providing regularly scheduled upkeep of heating, air-conditioning and landscaping.

rules and regulations: Real estate licensing authority orders that govern licensees' activities; they usually have the same force and effect as statutory law.

Rumford Act: California's fair housing law. (See Fair Employment and Housing Act)

run with the land: A phrase describing rights or covenants that bind or benefit successive owners of a property. An example is a restrictive building covenant in a recorded deed that would affect all future owners of the property. Unlike an easement in gross, an easement appurtenant runs with the land and thus passes to a succeeding owner even if it is not specified in the deed. For example, if the grantee Sylvia Buckner agrees, as part of the consideration to a transaction, to repair a building located on land owned by grantor Leonard Musslewhite, such a covenant will not run with the land. This is because it merely places a duty on the grantee Buckner. The promise does not touch and concern the land granted from Musslewhite to Buckner--it is only a personal covenant for the grantor's benefit.

R-value: A term used to describe the effectiveness of various kinds of insulation to indicate their resistance to heat flow. If more than one layer of insulation is used, the R-value of the individual layers are added together to indicate a total R-value.