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Safe Drinking Water Act: Enacted by Congress in 1974, this federal law administered by the EPA and equivalent state regulators to establish and enforce drinking water standards. Safe Drinking Water Act

safety clause: 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, who was introduced to the property by the broker, during the period of the listing.

sale-leaseback: A transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.

sales comparison approach: The process of estimating the value of a property by examining and comparing actual sales of comparable properties. (See appraisal)

sales contract: A real estate sales contract contains the complete agreement between a buyer of a parcel of real estate and the seller. Depending on the area, this agreement may be known as an offer to purchase, a contract of purchase and sale, a purchase agreement, an earnest money agreement or a deposit receipt.

salesperson: A person employed directly or indirectly by a licensed real estate broker to perform various tasks and responsibilities. These may include selling and/or buying real estate; negotiating purchase, sale or exchange of real estate; negotiating leases, rents and/or improvements.

sandwich lease: Another term used is "sublease." This is when a tenant has a current lease with the owner of a property and then "sublets" the property to a third party. The tenant is then "sandwiched" between the owner and the end user, acting as lessee and lessor at the same time.

satisfaction of mortgage: When all mortgage loan payments have been made and the note has been paid in full, a satisfaction of mortgage (also known as a release of mortgage or mortgage discharge) returns to the mortgagor all interest in the real estate, which was conveyed to the mortgagee by the original recorded mortgage document.

savings and loan association (S&L): A financial institution whose principal function is to promote thrift and home ownership. Depositors earn interest on their deposits, often at a higher rate than is offered at commercial banks. The S&L invests some of these deposits in residential mortgage loans, enabling more people to purchase and/or repair their homes. Savings and loan associations are active participants in the home loan mortgage market. (See thrift)

second mortgage: A mortgage (or trust deed) that is junior or subordinate to a first mortgage; typically, an additional loan imposed on top of the first mortgage, taken out when the borrower needs more money. Because the risk involved to the lender is greater with the second mortgage, the lender's conditions are usually more stringent, the term is shorter and the interest rate is higher than for the first mortgage. (See mortgage)

secondary financing: A loan taken out in addition to a first loan, usually obtained from an individual lender.

secondary mortgage market: A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for selling mortgages; also called secondary money market, not to be confused with secondary financing. (See primary mortgage market)

secret profit: Refers to a broker making an undisclosed profit at the seller's expense; for example, when the broker has an undisclosed relative buy the listed property and then resell it to a buyer whose earlier offer was never presented to the seller.

section 202: Government program that provides capital for the construction, rehabilitation or acquisition of nonprofit housing for low income elderly. (See section 8)

section 8: Federally subsidized housing administered by HUD where the tenant pays up to thirty percent of his or her adjusted monthly income and HUD pays the difference between that amount and the market rent. Property owners are not required to participate. (See section 202)

section(s): As used in the government survey method, a land area of one square mile, or 640 acres. A section is 1/36 of a township, or each township contains 36 sections. Sections are numbered 1 through 36. Section 1 is always in the northeast, or upper right-hand, corner. The numbering proceeds right to left to the upper left-hand corner. From there, the numbers drop down to the next tier and continue from left to right, then back from right to left. (See government survey system)

securitization: The pooling of real estate mortgages and trust deeds to act as collateral for the sale of securities to public and private investors. (See secondary mortgage market)

security: Evidence of obligations to pay money or of rights to participate in earnings and distribution of corporate, trust or other property. A security is usually found where an investor subjects his or her money to the risks of an enterprise over which he or she exercises no managerial control.

security agreement: Security interests in chattels (personal property) are created by an instrument known as a security agreement. To give notice of a security interest, a financing statement must be recorded. (See personal property, Uniform Commercial Code)

security deposit: Money deposited by or for the tenant with the landlord, to be held by the landlord for the following purposes: 1. to remedy tenant defaults for damage to the premises (be it accidental or intentional), for failure to pay rent due or for failure to return keys at the end of the tenancy; 2. to clean the dwelling so as to place it in as fit a condition as when the tenant commenced possession, considering normal wear and tear; and 3. to compensate for damages caused by a tenant who wrongfully quits the dwelling unit. (See landlord, tenant)

seller carryback financing: A sale of real property where the seller receives a portion of the sales price in the form of a promissory note secured by the real property purchased. An extension of credit by the seller.

seller financing disclosure statement: There are specific additional duties imposed upon the licensee who negotiates a sale of real property when the seller receives a portion of the sales price in the form of a promissory note secured by the real property purchased. This seller financing disclosure statement is required in a transaction for the purchase of a dwelling for not more than four families where the purchase includes an extension of credit by the seller and where the licensee is acting as an "arranger of credit." (See arranger of credit, promissory note)

seller's agent: An agent who represents the seller of real property. (See buyer's agent)

Seller's Real Property Disclosure Form: As required by Nevada Real Estate Division Code NRS 113. 100-113.150, 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. Must be made by the seller at least 10 days before residential property is conveyed to a buyer.

senior loan: A real estate loan in the first priority position. (See junior mortgage)

separate property: Under community property law, property owned solely by either spouse before the marriage, acquired by gift or inheritance after the marriage or purchased with separate funds after the marriage. (See community property)

septic system: A system for collecting, treating and eliminating waste from a home waste drainage system.

setback: The amount of space local zoning regulations require between a lot line and a building line.

set-up sheet: Also know as an "Annual Property Cash Flow Statement." Includes cash flow information about a listed rental property that is passed out to other real estate companies and/or given to prospective buyers.

servicing agreement: Signed documentation as to who will service the loan.

servient tenement: Land on which an easement exists in favor of an adjacent property (called a dominant tenement or estate); also called a servient estate. If property A has a right-of-way across property B, property B is the servient tenement. The servient owner may not use the property in such a way as to interfere with the reasonable use of the dominant owner. (See dominant tenement, easement)

severalty: Sole ownership of real property.

severance: Changing an item of real estate to personal property by detaching it from the land; for example, cutting down a tree.

sharecropping: In an agricultural lease, the agreement between the landowner and the tenant farmer to split the crop or the profit from its sale, actually sharing the crop. (See agricultural lease)

shared-appreciation mortgage (SAM): A mortgage loan in which the lender, in exchange for a loan with a favorable interest rate, participates in the profits (if any) the borrower receives when the property is eventually sold.

sheriff's deed: The deed given after a sheriff's sale. (See deed)

shingles: Roofing material characterized by short, rectangular sections, nailed to the roof decking in an overlapping pattern. Asphalt shingles are the most common type. (See roof decking)

short term rate: A reduced rate for title insurance applicable in cases where the owner of a property has been insured previously or where any lender has been insured somewhat recently on the property.

shower pan: A waterproof "pan" placed beneath the floor tiles or concrete base of a shower that prevents leaking.

"sick building" syndrome: The term "sick building syndrome" (SBS) is used to describe situations in which building occupants experience discomforting health conditions that appear to be linked to time spent in a building, but no specific illness or cause can be identified. EPA Sick Building Syndrome Factsheet

simple interest: Interest computed on the principal balance, and disregards previously accumulated (upaid) interest.

signatory: 1. having signed or joined in signing a document. 2. a signer, or one of the signers, of a document.

single agency: The practice of representing either the buyer or the seller but never both in the same transaction. The single-agency broker may be compensated indirectly through an authorized commission split or directly by the principal who employed the agent to represent him or her. (See dual agency)

single-family, owner-occupied dwellings: A dwelling which will be owned and occupied by a signatory to the mortgage or deed of trust secured by such dwelling within 90 days of the execution of the mortgage or deed of trust.

situs: The personal preference of people for one area over another, not necessarily based on objective facts and knowledge.

slab: A flat piece of concrete, typically used as a walking surface, but may also serve as a load bearing device as in slab homes.

soft money loan: A loan where credit not cash is extended, usually by the seller carrying all or part of the financing.

Soldiers and Sailors Civil Relief Act: A law prohibiting foreclosures while a person is serving in the military and within three months thereafter except by court order.

sole proprietorship: A method of owning a business in which one person owns the entire business and reports all profits and losses directly on his or her personal income tax return, as contrasted with corporate, joint or partnership ownership. A sole or individual proprietorship is easy to organize and flexible to operate. It is frequently used in real estate brokerage. An individual proprietor may run a brokerage company if he or she has a valid broker's license. The proprietor may use his or her own name or a fictitious name previously registered as required by state law. There is a growing tendency for sole proprietors to incorporate and thus take advantage of certain tax and fringe benefits, such as those provided by pension and profit-sharing plans.

sole tenancy: See tenancy in severalty.

solid core door: A door where the inner material (core) is made of solid wood. This type door is usually used for doors to the outside or garage.

solid waste: As defined under Resource Conservation and Recovery Act, any solid, semi-solid, liquid, or contained gaseous materials discarded from industrial, commercial, mining, or agricultural operations, and from community activities. Solid waste includes garbage, construction debris, commercial refuse, sludge from water supply or waste treatment plants or air pollution control facilities, and other discarded materials.

source reduction: The design, manufacture, purchase, or use of materials (such as packaging) that reduce the amount or toxicity of garbage. Source reduction can reduce waste disposal and handling costs because the expense of recycling, composting, combustion and landfill are avoided. Source reduction conserves resources and reduces pollution.

special agent: One authorized by a principal to perform a particular act or transaction without contemplation of continuity of service as with a general agent. The real estate broker is ordinarily a special agent appointed by the seller to find a ready, willing and able buyer for a particular property. An attorney-in-fact under a limited power of attorney is a special agent. (See agency, agent, general agent)

special assessment: A tax or levy customarily imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community. Because the proposed improvement will enhance the value of the affected homes, only those affected owners must pay this special lien. Common examples of special assessments are water, sidewalk and sewer assessments, or other special improvements such as parks and recreational facilities.

special limitation: A fee simple estate may also be qualified by a special limitation. The estate ends automatically upon the current owner's failure to comply with the limitation. The former owner retains a possibility of reverter. If the limitation is violated, the former owner (or his or her heirs or successors) reacquires full ownership, with no need to reenter the land or go to court. A fee simple with a special limitation is also called a fee simple determinable because it may end automatically. The language used to distinguish a special limitation-the words "so long as" or "while" or "during"-is the key to creating this estate.

special-purpose property: Hotels, resorts, nursing homes, theaters, schools, places of worship and other organizations whose specialized needs dictate the design and operation of the property.

special studies zone: A specific area where an investigation is taking place regarding seismic or geologic considerations.

special warranty deed: A deed in which the grantor warrants or guarantees the title only against defects arising during the period of his or her tenure and ownership of the property and not against defects existing before that time. Such a deed is usually identified by the language "by, through, or under the grantor, but not otherwise." A special warranty deed is often used when a fiduciary such as an executor or trustee conveys the property of his or her principal, because the fiduciary usually has no authority to warrant against acts of his or her predecessors in title.

specific lien: A lien affecting or attaching only to a certain, specific parcel of land or piece of property. (See lien)

specific performance: An action brought in a court of equity in special cases to compel a party to carry out the terms of a contract. The basis for an equity court's jurisdiction in breach of a real estate contract is the fact that land is unique and mere legal damages would not adequately compensate the buyer for the seller's breach.

splash block: A small, specially designed portable concrete pad. Oriented downhill, splash blocks direct water from rain gutter down drains or under outside hose faucets to flow away from the house.

split-fee financing: A form of joint venture participation where the lender purchases the fee land under the proposed development project and leases it to the developer. The lender also finances the improvements to be constructed on this leasehold. (See joint venture)

spot zoning: Zoning of parcels not in conformance with the general zoning of an area. (See zoning)

square-foot method: A method of estimating a building's construction, reproduction or replacement costs; whereby the structure's square-foot floor area is multiplied by an appropriate construction cost per square foot. (See appraisal)

standard coverage policy: A standard coverage policy normally insures the title as it is known from the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements and improperly delivered deeds. (See extended coverage policy, title insurance)

standby takeout commitment: An agreement by an interim lender to advance funds to take out a construction lender. (See interim financing)

stare decisis: The reliance of courts on previous decisions when judging disputes. (See common law)

statement of information: Also called a "Statement of Identity." Statements provided to the escrow agent verifying pertinent data identifying the grantor, grantee, or borrower.

statement of reasons: The Federal Equal Credit Opportunity Act (ECOA) (Title VII of the Consumer Protection Act) requires that a lender/creditor who denies an application for credit must provide the applicant with a statement of reasons, or written notification of the applicant's right to obtain a statement of reasons, within thirty days after receipt of a completed application for credit,. (See Equal Credit Opportunity Act)

statute of frauds: State law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable.

statute of limitations: That law pertaining to the period of time within which certain actions must be brought to court. The law is intended to protect the vigilant against stale claims by requiring the prompt assertion of claims; thus an action must be brought (i.e., the complaint filed) within a specified time of the occurrence of the cause of action. After the time period expires, the claim is said to be "outlawed" and may not be enforced in court. The theory behind the statute of limitations is that there must be some end to the possibility of litigation. It is said that stale witnesses and stale records produce little truth and result in accidental justice, if any.

statutory law: The laws, rules and regulations enacted by legislatures and other governing bodies. (See civil law, common law, constitutional law)

statutory lien: A lien imposed on property by statute—a tax lien, for example—in contrast to an equitable lien, which arises out of common law. (See lien)

statutory redemption: The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges. (See equitable redemption)

steering: The illegal practice of channeling homeseekers interested in equivalent properties to particular areas, either to maintain the homogeneity of an area or to change the character of an area to create a speculative situation. This practice makes certain homes unavailable to homeseekers on the basis of race or national origin, and on these grounds it is prohibited by the provisions of the federal fair housing act. Steering is often difficult to detect, however, because the steering tactics can be so subtle that the homeseeker is unaware that his or her choice has been limited. Steering could be a licensee's use of a word, phrase or act that is intended to influence the choice of a prospective property buyer on a discriminatory basis.

stigmatized property: A property that has acquired an undesirable reputation due to an event that occurred on or near it, such as violent crime, gang-related activity, illness or personal tragedy. Because of the potential liability to a licensee for inadequately researching and disclosing material facts concerning a property's condition, licensees should seek competent counsel when dealing with a stigmatized property. Some states restrict the disclosure of information about stigmatized properties. In other states, the licensee's responsibility may be difficult to define because the issue is not a physical defect, but merely a perception that a property is undesirable.

stock cooperative: Ownership of real property by a corporation where each stockholder is entitled to occupancy of a unit under a lease. (See cooperative)

stop date: Date on a term loan when the balloon payment is due. (See balloon payment)

stop notice: A notice given to a lender that a subcontractor has not been paid. Unless bond is posted, the lender must withhold moneys due a prime contractor.

straight-line method: A method of depreciation, also called the age-life method, that is computed by dividing the adjusted basis of a property by the number of years of estimated remaining useful life. The cost of the property is thus deducted in equal annual installments. For example, if the depreciable basis is $ 100,000 and the estimated useful life is 25 years, the annual depreciation deduction is $4,000 for each year during the useful life of the asset. Prior to 1986, taxpayers sometimes used a form of accelerated depreciation such as 175 percent of straight line. The IRS had rules to recapture the amount of depreciation that was in excess of the straight-line rate. (See depreciation)

straight (term) loan: A loan in which only interest is paid during the term of the loan, with the entire principal amount due with the final interest payment.

straight note: A promissory note evidencing a loan in which payments of interest only are made periodically during the term of the note, with the principal payment due in one lump sum upon maturity. A straight note is usually a nonamortized note made for a short term, such as three to five years, and is renewable at the end of the term. (See promissory note)

stratified marketplace: The real estate market is a marketplace that is stratified based on price.

strict foreclosure: In a strict foreclosure procedure, after a delinquent borrower has been notified and the proper papers have been filed, the court designates a specific period during which the balance of the default must be paid in full. If the payment is not made, the borrower's equitable and statutory redemption rights are waived and the court awards full legal title to the lender. There is no deficiency judgement in strict foreclosure cases. (See foreclosure, judicial foreclosure, nonjudicial foreclosure)

strict liability: An owner of a property is responsible to an injured party without excuse. (See liability)

subagent: An agent of a person who is already acting as an agent for a principal. The original agent can delegate authority to a subagent where such delegation is either expressly authorized or customary in the trade. For example, it is customary for listing brokers to delegate certain functions of a ministerial nature to subagents, such as to show property and solicit buyers.

Subdivided Land Law: A disclosure law enacted to protect buyers of subdivided parcels. A public report is required for subdivisions of five or more parcels. (See public report, subdivision)

subdivider: One who buys undeveloped land, divides it into smaller, usable lots and sells the lots to potential users.

subdivision: Any land that is divided or is proposed to be divided for the purpose of disposition into two or more lots, parcels, units or interests. Subdivision refers to any land, whether contiguous or not, if two or more lots, parcels, units or interests are offered as part of a common promotional plan of advertising and sale.

subdivision and development ordinances: Municipal ordinances that establish requirements for subdivisions and development.

Subdivision Map Act: An act providing for local control of subdivisions. Cities and counties are required to adopt an ordinance to regulate subdivisions. (See subdivision)

subjacent support: The right of land to be supported by land which lies beneath it. (See lateral support)

subject property: A reference to the real property under discussion, or the real property under appraisal. (See appraisal)

"subject to": The recognition by a buyer of conditions (such as a prior loan), which are not the buyer's legal responsibility.

sublease: A lease given by a lessee for a portion of the leasehold interest, while the lessee retains some reversionary interest. The sublease may be for all or part of the premises, for the whole term or part of it, as long as the lessor retains some interest in the property. Leases normally contain a clause prohibiting subletting without prior consent of the lessor. The lessee remains directly liable to the lessor for the rent, which is usually paid by the sublessee to the lessee and then from the lessee to the lessor. The sublessee does not have a contractual obligation to pay rent to the original lessor.

sublet: The partial transfer of a tenant's right in a rental property to a third party. (See sublease)

subordination agreement: A written agreement between lienholders to change the priority of mortgage, judgment and other liens. Under a subordination agreement, the holder of a superior or prior lien agrees to permit a junior lienholder's interest to move ahead of his or her lien. (See junior mortgage, lien)

subordination clause: A clause in which the holder of a mortgage permits a subsequent mortgage to take priority. Subordination is the act of yielding priority. This clause provides that if a prior mortgage is paid off or renewed, the junior mortgage will continue in its subordinate position and will not automatically become a higher or first mortgage. A subordination clause is usually standard in a junior mortgage, because the junior mortgagee gets a higher interest rate and is often not concerned about the inferior mortgage position. (See junior mortgage)

subprime lenders: Lenders who specialize in B, C, or D catagory paper. (See B, C, or D paper)

subrogation: The substitution of one creditor for another, with the substituted person succeeding to the legal rights and claims of the original claimant. Subrogation is used by title insurers to acquire from the injured party rights to sue in order to recover any claims they have paid.

subscribe: 1) to give, pay, or pledge (a sum of money) as a contribution, investment, etc. 2) to append one's signature or mark to (a document), as in approval or attestation of its contents.

substitution: An appraisal principle that states that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution. (See appraisal)

substitution of entitlement: Replaces one eligible veteran with another on an existing Veterans Administration loan. The entitlement is restored to the original veteran. (See Veterans Administration loan)

subsurface rights: Ownership rights in a parcel of real estate to the water, minerals, gas, oil and so forth that lie beneath the surface of the property. (See surface rights)

subterranean termites: A type of termite that nests underground. (See termite inspection)

subterfuge: A clever trick or strategy used to evade a rule, escape a consequence, hide something, etc.

successors: Those who succeed to or to whom the corporation's rights in the property are transferred. (See heirs)

suit for possession: A court suit initiated by a landlord to evict a tenant from leased premises after the tenant has breached one of the terms of the lease or has held possession of the property after the lease's expiration.

suit for specific performance: If a seller breaches a real estate contract, the buyer may sue for specific performance. The buyer asks the court to force the seller to go through with the sale and convey the property as previously agreed. The buyer may choose to sue for damages, in which case the buyer asks that the seller pay for costs and hardships suffered as a result of the seller's breach.

suit to quiet title: A court action intended to establish or settle the title to a particular property, especially when there is a cloud on the title.

sump: A reservoir that collects and holds water or some other liquid, which is subsequently disposed of by using a pump.

Superfund: Popular name of the hazardous waste cleanup fund established by the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) as amended by the Superfund Amendment and Reauthorization Act of 1986 (SARA). Superfund focuses on the cleanup of releases of hazardous substances on property. It creates significant legal exposure based on strict liability for owners, landlords and, sometimes lenders. EPA—Superfund Homepage

Superfund Amendments and Reauthorization Act (SARA): An amendatory statute that contains stronger cleanup standards for contaminated sites, increased funding for Superfund and clarifications of lender liability and innocent landowner immunity. (See Comprehensive Environmental Response, Compensation and Liability Act) EPA—SARA Overview

supply: The amount of goods available in the market to be sold at a given price. The term is often coupled with supply and demand The appraisal principle that follows the interrelationship of the supply of and demand for real estate. As appraising is based on economic concepts, this principle recognizes that real property is subject to the influences of the marketplace just as is any other commodity. (See appraisal, demand)

surety bond: An agreement by an insurance or bonding company to be responsible for certain possible defaults, debts or obligations contracted for by an insured party; in essence, a policy insuring one's personal and/or financial integrity. In the real estate business a surety bond is generally used to ensure that a particular project will be completed at a certain date or that a contract will be performed as stated.

surface rights: Ownership rights in a parcel of real estate that are limited to the surface of the property and do not include the air above it (air rights) or the minerals below the surface (subsurface rights).

surrender: Giving up leasehold rights by a tenant in exchange for a release from future obligations under a lease.

survey: The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.

survivorship: The right of surviving joint tenants to the ownership interest of another joint tenant upon the latter's death. (See joint tenancy)

SWAP Program: A Freddie Mac program where lower yield mortgages are exchanged for Participation Certificates. (See participation certificates)

syndicate: A combination of people or firms formed to accomplish a business venture of mutual interest by pooling resources. In a real estate investment syndicate the parties own and/or develop property, with the main profit generally arising from the sale of the property.

syndication: A descriptive term for a group of two or more people united for the purpose of making and operating an investment. A syndication may operate in the form of a REIT, corporation, general partnership, limited partnership or even as tenancy in common.

T

table funding: Simultaneous conveyance of purchase price and title as well as all loan papers at a closing.

tacking: Adding or combining successive periods of continuous occupation of real property by adverse possessors. This concept enables someone who has not been in possession for the entire statutory period to establish a claim of adverse possession.

take-out financing: Long-term permanent financing. In the usual large construction project, the developer obtains two types of financing. The first is the interim loan, a short-term loan to cover construction costs. Before lending any money, however, the interim lender normally requires a commitment by a permanent lender to agree to "take out" the interim lender in which the lender pays off the construction loan and leaves the developer with a permanent long-term loan when the building has been completed.

taking: The concept of taking comes from the Takings clause of the fifth amendment of the United States Constitution. The clause reads, "nor shall private property be taken for public use, without just compensation." This means that when land is taken for public use through the government's power of eminent domain or condemnation, the owner must be compensated. (See eminent domain)

talking sign: A radio transmitter with a range of up to 250 feet that broadcasts a description of a property to prospects listening to a radio tuned to the transmitter's frequency.

tandem plan: A mortgage subsidy program offered from time to time by the United States Congress. The Government National Mortgage Association (GNMA) purchases certain mortgages at below market interest rates, granting borrowers low-interest loans. GMNA sells the loans on the secondary market at a discount, the discount being the amount of the subsidy. These programs are offered "in tandem" with local mortgage lenders. (See GNMA, secondary mortgage market)

taxation: 1. The process by which a government or municipal quasi-public body raises monies to fund its operation. 2. The impact an investment has on the investor's liability for the payment of federal, state, and local taxes.

tax bill: A property owner's tax bill is computed by applying the tax rate to the assessed valuation of the property.

tax credit: An amount by which tax owed is reduced directly.

tax deed: An instrument, similar to a certificate of sale, given to a purchaser at a tax sale. (See certificate of sale)

tax deferred exchange (1031 exchange): Under Section 1031 of the Internal Revenue Code, some or all of the realized gain from the exchange of property may not need to be immediately recognized for tax purposes. Both properties in an exchange must be held for productive use in trade or business or for investment and must be of a like-kind. (See like-kind, realized capital gain)

tax-free gifts: Gifts that are free from federal gift taxes.

tax levy: The amount to be raised from the general real estate tax is then imposed on property owners through a tax levy. A tax levy is the formal action taken to impose the tax, usually a vote of the taxing district's governing body.

tax lien: A charge against property, created by operation of law. Tax liens and assessments take priority over all other liens. (See assessments, lien) IRS on Federal Tax Liens

tax rate: The tax rate for each taxing body is computed separately. To arrive at a tax rate, the total monies needed for the coming fiscal year are divided by the total assessments of all real estate located within the taxing body's jurisdiction.

Tax Reform Act of 1986 (TRA 86): Sweeping revisions to the income tax laws, enacted by the United State Congress in 1986, that lowered tax rates and eliminated many tax shelters.

Taxpayer Relief Act of 1997 (TRA 97): Enacted by the United State Congress and effective May 7, 1997, TRA '97 provides for broader exemption from capital gains taxes on the profits on the sale of a personal residence. Replaces the old provision for a "one-time" exemption of $125,000 for sellers over age 55.

tax sale: A court-ordered sale of real property to raise money to cover delinquent taxes.

tax shelter: A phrase often used to describe some of the tax advantages of real estate or other investments, such as noncash deductions for cost recovery (depreciation), interest, taxes and postponement or even elimination of certain taxes. The tax shelter not only may offset the investor's tax liability relevant to the real estate investment but also may reduce the investor's other ordinary income, which reduces overall tax liability.

tenancy at sufferance: A tenancy (or estate) in which a person wrongfully holds or occupies a property after the expiration of a lease without the consent of the landlord. No notice of termination is required for the landlord to evict the tenant.

tenancy at will: A tenancy (or estate) 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.

tenancy by the entirety: Some states allow husbands and wives to use a special form of co-ownership called tenancy by the entirety. In this form of ownership, each spouse has an equal, undivided interest in the property. (The term entirety refers to the fact that the owners are considered one indivisible unit because early common law viewed a married couple as one legal person).

tenancy for years: A tenancy for a definite period of time. The tenant must vacate the property at the end of the lease unless an extension or new lease has been agreed upon.

tenancy in severalty: Ownership of a property by one person, rather than held jointly with others. Also called sole tenancy.

tenant: In general, one who exclusively holds or possesses property, such as a life tenant or a tenant for years; commonly used to refer to a lessee under a lease. A tenant's occupancy, although exclusive, is always subordinate to the rights of the owner. Tenant refers to an occupant, not necessarily a renter. Landlord-Tenant Law Overview

tenant emergency procedures manual: A printed manual outlining emergency procedures, including evacuation plans and contact information for emergency personnel. The manual is used by building managers in the event of accident, illness, fire, natural disaster or other emergency situation.

tenants in common: A form of concurrent ownership of property between two or more persons, in which each has an undivided interest in the whole property. This form is frequently found when the parties acquire title by descent or by will. Each cotenant is entitled to the undivided possession of the property, according to his or her proportionate share and subject to the rights of possession of the other tenants. No cotenant can exclude another cotenant, or claim ownership of a specific portion of the property. Each cotenant holds an estate in land by separate and distinct titles, but with unity of possession. Their interests may be equal, as in joint tenancy, or unequal. Where the conveyance document does not specify the extent of interest of each cotenant, there is a rebuttable presumption that the shares are equal. Unlike a joint tenancy, there is no right of survivorship in a tenancy in common. Therefore when one of the cotenants dies, the interest passes to his or her heirs or beneficiaries and not to the surviving tenants in common. The property interest of a tenant in common is thus subject to probate. Also, unlike joint tenancy, dower rights may exist in property held in common.

tenant improvements: A commercial or an industrial property manager often is called on to make tenant improvements. These are alterations to the interior of the building to meet a tenant's particular space needs. Such construction alterations range from simply repainting or recarpeting to completely gutting the interior and redesigning the space by erecting new walls, partitions and electrical systems.

tenement: A common law real estate term that describes those real property rights of a permanent nature. These rights relate to the land and pass with conveyance of the land, such as buildings and improvements.

termite inspection: A visable check of a property for the presence of termites. Usually performed by a licensed exterminator. Buyers often make a termite inspection a condition of a sales contract, and require a pest control report or a clearance letter showing the property to be clear of any live, visable infestation. The VA, FHA and Fannie Mae all require a termite inspection as a condition of a loan.

term loan: A short-term loan requiring interest-only payments until maturity, at which time the entire principal is due and payable.

testamentary trust: A trust established by will.

testate: Having made and left a valid will.

testator: A person who has made a valid will. A woman often is referred to as a testatrix, although testator can be used for either gender.

thermal mass: Thermal mass is a property that enables building materials to absorb, store, and later release significant amounts of heat. Buildings constructed of concrete and masonry have a unique energy savings advantage because of their inherent thermal mass.

third party originator: Third-party originators prepare loan applications for borrowers and submit the applications to lenders.

Thirteenth Amendment to the United States Constitution (1868): Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

Section 2. Congress shall have power to enforce this article by appropriate legislation. (See Fourteenth Amendment) Constitution of the United States of America

3-way switch: A light switch that allows a person to turn the light on or off from either end of a hallway or stairway.

30-day notice: Notice to vacate a premises under a periodic tenancy. Notice must be for the rent period, but not more than 30 days. (See periodic tenancy)

three-day notice: Notice to quit, quit or cure, or quit or pay rent. Three-day notice must be given before an unlawful detainer action. (See unlawful detainer action)

threshold notification: Notification by brokers that they have met the threshold requirements for filing status and fiscal year reports on trust fund activities.

thrift: Another name for a savings and loan association; a financial institution established to promote "thrift" by accepting savings deposits, and to make home mortgage loans. (See savings and loan association)

tier (township strip): A strip of land six miles wide, extending east and west and numbered north and south according to its distance from the base line in the rectangular (government) survey system of legal description.

timing: Refers to the length of time one must wait to receive cash flow from an investment.

time is of the essence: A contract clause that emphasizes punctual performance as an essential requirement of the contract. Thus, if any party to the instrument does not perform within the specified time period (the drop-dead date), that party is in default, provided the nondefaulting party has made a valid tender of performance. If no tender is made, then the clause may be waived. The clause may also be waived by the subsequent acts of the parties such as accepting tardy payments or signing escrow instructions that allow for extensions of time in which to perform.

time-sharing: A modern approach to communal ownership and use of real estate that permits multiple purchasers to buy undivided interests in real property (usually in a resort condominium or hotel) with a right to use the facility for a fixed or variable time period. Under time-sharing forms of ownership, potential purchasers of property buy fixed or floating time periods for use of a specific apartment within a project.

title: 1. The right to or ownership of land. 2. The evidence of ownership of land. (See ownership) BLM—General Land Office Records Website

title defects: An unresolved claim against the ownership of property, which prevents presentation of a marketable title. Such claims may arise from failure of the owner's spouse or former partner to sign a deed, current liens against the property or an interruption in the title records to a property.

title insurance: A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Unlike other types of insurance, which protect a policyholder against loss from some future occurrence (such as a fire or auto accident), title insurance in effect protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title.

Needless to say, a title company will not insure a bad title any more than a fire insurance company would insure a burning building. However, if upon investigation of the public records and all other material facts, the title company feels that it has an insurable title, it will issue a policy. (See extended coverage policy, mortgagee's title insurance, standard coverage policy)

title insurance fees: The costs involved in purchasing title insurance. May include title insurance policy and search fees.

title search: The examination of public records relating to real estate to determine the current state of the ownership.

title theory: Some states interpret a mortgage to mean that the lender is the owner of mortgaged land. Upon full payment of the mortgage debt the borrower becomes the landowner.

Torrens system: A method of evidencing title by registration with the proper public authority, generally called the registrar, named for its founder, Sir Robert Torrens, an Australian who developed the system in 1857. Torrens took the idea from the system of registering title to shipping vessels.

A legal system for the registration of land, used to verify the ownership and encumbrances (except tax liens), without the necessity of an additional search of the public records. The purpose of the Torrens Act pertaining to registration of title to land is to conclusively establish an indefeasible title to the end that anyone may deal with such property with the assurance that the only rights or claims of which he or she need take notice are those so registered. The Torrens system of registration is the title itself; it differs from a title insurance policy, which is only evidence of title. In other words, a person does not acquire title to Torrens-registered real property unless that person registers the title.

The distinctive feature of registered property is that title does not pass, and encumbrances (such as mortgages) are not effective against the property until such encumbrances or conveyances are noted on the registered certificate of title. A party who suffers loss through an error made by the governmental registrar can recover damages from the state through an assurance fund. The registrar, however, will not personally defend against litigation or reimburse the landowner for litigation expenses, which is one reason why most mortgagees require title insurance even for Torrens-registered titles.

Under the Torrens system, the landowner initially petitions a state court to register his or her property, giving notice to all interested parties. After a search of title is filed with the court, there is generally a hearing to determine the status of the title and the court's determination is made in the form of a court decree. The procedure is similar to a quiet title suit. The initial use of the Torrens system is optional. But once property is registered, all subsequent transfers must follow the registration procedures.

Approximately 10 states have adopted the Torrens system. It is also popular in Canada, Australia and Great Britain. In some states, Torrens-registered property is not subject to a general judgment lien, nor can title be lost through adverse possession.

tort: A wrongful act; a violation of a legal right.

town house: A type of dwelling unit normally having two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor; a series of individual houses having architectural unity and a common wall between each unit.

township: A division of territory, used in the government (rectangular survey system of land description, which is six miles square, and contains 36 sections, each of which is one mile square and consists of 23,040 acres.

township line: Lines running east and west, parallel to the base line and six miles apart. (See base line)

township squares: When the horizontal township lines and the vertical range lines intersect, they form squares. These township squares are the basic units of the rectangular survey system. Townships are 6 miles square and contain 36 square miles (23,040 acres).

township tiers: Township lines form strips of land called township tiers. These township tiers are designated by consecutive numbers north or south of the base line. (See base line, township line)

Toxic Substance Control Act: Enacted by Congress in 1976, the act authorizes EPA to secure information on all new and existing chemical substances and to control any of these substances determined to cause an unreasonable risk to public health or the environment. The act was established to ensure that the human health and environmental effects of chemical substances were identified and properly controlled prior to placing these materials into commerce. Toxic Substance Control Act Website

tranche: A series of bonds issued for a CMO. (See CMO

trade fixture: An article of personal property annexed or affixed to leased premises by the tenant as a necessary part of the tenant's trade or business. At the termination of a lease, a tenant must leave most fixtures in the premises; however, trade fixtures are removable by the tenant before expiration of the lease, and the tenant is responsible for any damages caused by their removal. However, a tenant cannot usually remove replacement fixtures, that is, improvements installed to replace worn-out ones. For instance, if a tenant installs a new bar to replace an old bar in a tavern the tenant leases, the tenant cannot remove the bar upon termination of the lease. If the tenant fails to remove trade fixtures within a reasonable time of lease expiration, the fixtures will be considered abandoned and will become the property of the landlord.

trading on the equity: The practice of agreeing to buy real estate and then assigning the purchase agreement to another buyer before closing takes place; thus turning a profit by "selling the paper."

transaction broker: A transaction broker (also referred to as a nonagent, facilitator, coordinator or contract broker) is not an agent of either party. A transactional broker's job is simply to help both the buyer and the seller with the necessary paperwork and formalities involved in transferring ownership of real property. The buyer and the seller negotiate the sale without representation.

transfer tax: A state tax imposed on the transfer or conveyance of realty or any realty interest by means of deed, lease, sublease, assignment, contract for deed or similar instrument. One purpose of the tax is to acquire reliable data on the fair market value of the property to help establish more accurate real property tax assessments.

Treasury bill, note, bond: Treasury bill issued for less than a year; Treasury note issued from one to five years; Treasury bond issued from five to ten years.

trespass: Unlawful entry or injury to the property of another.

trigger terms: Terms in an advertisement which trigger additional disclosure of all credit terms.

trip hazard: Any situation where there is an increased likelihood of tripping (e.g. stairs that do not have a uniform tread or riser height all the way along the stairs).

triple-net lease: A net-net-net lease where, in addition to the stipulated rent, the lessee assumes payment of all expenses associated with the operation of the property. This includes both fixed expenses, such as taxes and insurance, and all operating expenses, including costs of maintenance and repair. In some cases, the triple-net tenant even pays the interest payments on the lessor's mortgage on the property leased.

Strictly speaking, the term triple-net lease is redundant because "net lease" adequately describes the situation. Rather than rely on labels, however, the parties must examine the provisions of the lease to discover the extent of the tenant's responsibilities.

triplex: A building comprised of three dwelling units, each having a front and rear (or side) door and yard; similar to row houses.

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

trust: An arrangement whereby legal title to property is transferred by the grantor (or trustor) to a person called a trustee, to be held and managed by that person for the benefit of another, called a beneficiary.

trustee: 1) One who holds property in trust for another as a fiduciary and is charged with the duty to protect, preserve and enhance the value and the highest and best use of the trust property. 2) One who holds property in trust for another to secure the performance of an obligation. In those states using trust deeds as security devices, the trustee holds bare legal title to the property pending the borrower/trustor paying off the underlying debt or promissory note. The trustee is usually a lending institution, trust company or title insurance company.

trust deed: Also called a deed of trust. A legal document in which title to property is transferred to a third-party trustee as security for an obligation owed by the trustor (borrower) to the beneficiary (lender). A trust deed is similar to a mortgage—the main difference is that it involves three parties. When a borrower repays the note secured by a trust deed, the trustee must reconvey title back to the borrower by way of a deed of reconveyance. (See deed of reconveyance)

trust deed lien: A lien on the property of a truster that secures a deed of trust loan. (See lien)

trustee's deed: A deed executed by a trustee conveying land held in a trust.

trust funds: Money or other things of value that are received by a broker or salesperson on behalf of a principal or any other person, and which are held for the benefit of others in the performance of any act(s) for which a real estate license is required.

trust fund bank account: An account set up by a broker, attorney or other agent at a bank or other recognized depository, into which the broker deposits all funds entrusted to the agent by the principal or others; also called an earnest money or escrow account. (See earnest money, escrow account)

trust ledger: Ledger where a property manager records monies paid out on behalf of an owner.

trustor: The person who creates a trust and gives the instructions to the trustee.

truth-in-lending law: A body of federal law effective July 1969 as part of the Consumer Credit Protection Act, and implemented by the Federal Reserve Board's Regulation Z. It was amended in 1982 by the Truth-in-Lending Simplification and Reform Act and later amendments. The main purpose of this law is to ensure that borrowers and customers in need of consumer credit are given meaningful information with respect to the cost of credit. In this way consumers can more readily compare the various credit terms available to them and thus avoid the uninformed use of credit. This law creates a disclosure device only, and does not establish any set maximum or minimum interest rates or require any charges for credit. (See Regulation Z) Truth-In-Lending Law

two-step mortgage: A hybrid loan between a fixed-rate and adjustable-rate loan where a lower rate remains in effect for seven years and is then adjusted once for the balance of the loan period. (See hybrid financing)

U

uncollected rent: Uncollected rent or vacancy is subtracted from gross scheduled income. Uncollected rent is an estimate expressed as a percentage then converted to dollars. (See gross scheduled income)

unconscionable contracts: An agreement that is so unfair and one-sided that the courts will refuse to honor it.

underground storage tanks (USTs): USTs are commonly used for storing petroleum products, chemicals or process wastes. Sites which use USTs include airports, gas stations, industrial locations and military bases. Over time neglected tanks may leak hazardous substances into the environment, contaminating groundwater. State and federal laws impose strict requirements on landowners where USTs are located to detect and correct leaks to protect groundwater. EPA—Office of Undergound Storage Tanks

underwriter: A person who evaluates the risk of default by a mortgage loan applicant, and grants approval or denial of the loan.

underwriting: The process of evaluating a mortgage loan applicant's credit, collateral value and the risks in making a loan.

undisclosed dual agency: A broker may not intend to create a dual agency. However, like any other agency, it may occur unintentionally or inadvertently. Sometimes the cause is carelessness, and other times a salesperson does not fully understand his or her fiduciary responsibilities. Some salespersons lose sight of other responsibilities when they focus intensely on bringing buyers and sellers together. For instance, a salesperson representing the seller might suggest to a buyer that the seller will accept less than the listing price, or that same salesperson might promise to persuade the seller to accept an offer that is in the buyer's best interests. Giving a buyer any specific advice on how much to offer can lead him or her to believe that the salesperson represents the buyer's interests and is acting as the buyer's advocate.

undue influence: Strong enough persuasion to completely overpower the free will of another and prevent him or her from acting intelligently and voluntarily, as in a case where a broker guilty of blockbusting has induced someone to sell in fear of a change in the racial character of the community. Undue influence usually requires a close or confidential relationship like parent-child, broker-seller, attorney-client, or trustee-beneficiary. When a person has been unduly influenced to sign a contract, that person can void the contract.

unenforceable contract: A contract which is considered unenforceable either because it cannot be proven or will not be enforced by a court. In addition to being considered void or illegal, other reasons for unenforceable contracts may be because they were not presented in writing which may have been a requirement under state statutes of frauds or the statutes of limitations period has elapsed.

unequivocal: Unambiguous; clear; having only one possible meaning or interpretation.

Uniform Building Code: A national building code published by the International Conference of Building Officials. It has been adopted in part by municipalities throughout the United States, but used mostly in the western states. (See building code)

Uniform Commercial Code: A codification of commercial law, adopted in most states, that attempts to make uniform all laws relating to commercial transactions, including chattel mortgages and bulk transfers. Security interests in chattels are created by an instrument known as a security agreement. To give notice of the security interest, a financing statement must be recorded. Article 6 of the code regulates bulk transfers--the sale of a business as a whole, including all fixtures, chattels and merchandise.

Uniform Condominium Act (UCA): Many states have adopted the Uniform Condominium Act (UCA). Under its provisions, a condominium is created and established when the owner of an existing building (or developer of unimproved property) executes and records a declaration of condominium. Uniform Condominium Act—Full Text

Uniform Partnership Act (UPA): Most states have adopted the "Uniform Partnership Act" (UPA), which permits real estate to be held in the partnership name. The "Uniform Limited Partnership Act" (ULPA) has also been widely adopted. It establishes the legality of the limited partnership entity and provides that realty may be held in the limited partnership's name. Profits and losses are passed through the partnership to each partner, whose individual tax situation determines the tax consequences. Uniform Partnership Act—Full Text Uniform Limited Partnership Act—Full Text

Uniform Residential Landlord and Tenant Act (URLTA): A uniform act intended to provide some consistency in regulating the relationship of landlord and tenant in residential leases. A number of states have adopted all or parts of the URLTA, or have enacted similar legislation. Uniform Residential Landlord and Tenant Act—Full Text

uniform residential loan application: A loan application form required by Freddie Mac and Fannie Mae.

Uniform Settlement Statement: The standard HUD Form 1 required to be given to the borrower, lender and seller at the time or before settlement by the settlement agent in a transaction covered under the Real Estate Settlement Procedures Act. The lender must retain its copy for at least two years.

unilateral contract: A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.

unit-in-place method: The appraisal method of estimating building costs by calculating the costs of all of the physical components in the structure with the cost of each item including its proper installation, connection, etc. Also called the segregated cost method. (See appraisal)

unity of ownership: The four unities that are traditionally needed to create a joint tenancy-unity of title, time, interest and possession.

unity of possession: One of the four "unities" required to create a joint tenancy. All joint tenants hold an undivided right to possession. (See joint tenancy, four unities)

unlawful detainer action: A legal action that provides a method of evicting a tenant who is in default under the terms of the lease; a summary proceeding to recover possession of property.

universal agent: A person empowered to do anything the principal could do personally. The universal agent's authority to act on behalf of the principal is virtually unlimited.

Unruh Civil Rights Act: Forbids discrimination as to sex, race, color, religion, ancestry or national origin in accommodations and business establishments. Under this law there can be no arbitrary eviction, rent increase or withholding of services by virtually any landlord, including the owner of a nonowner-occupied single-family dwelling that is sold or leased for income or gain.

Example:

Len Lessor brings an action to evict Adam Lessee from one of his rental properties because Adam has long hair, associates with black people and homosexuals, receives public assistance and is a student.

Len will not be successful because all of those "reasons" are arbitrary and fail to establish good cause for an eviction.

unsecured: Describes a debt instrument, such as a debenture, that is backed only by the debtor's promise to pay.

urea-formaldehyde: First used in building materials, particularly insulation, in the 1970s. Gases leak out of the urea-formaldehyde foam insulation (UFFI) as it hardens and become trapped in the interior of a building. Once used to conserve energy by sealing crawl spaces and attics, it is longer used because emissions were found to be a health hazard. (See formaldehyde) National Safety Council on Formaldehyde

usury: Charging interest at a higher rate than the maximum ra