Inside Foresite, Beyond Common

It is important to note that commercial real estate professionals will use terms in different contexts with variations in the meanings. Terms can also vary by geographic location. Do not rely on any of these definitions as legal interpretations.

1031 Exchange – An exchange of investment real estate that defers the taxable basis

1034 Exchange – An exchange of a persons residence that defers the taxable basis

Acceleration Clause – A clause in a note, trust deed or mortgage advancing the date of maturity of the debt upon the happening of a certain event, such as a sale or transfer of title to property.

Adjustment Date – The date the interest rate changes on an adjustable-rate mortgage

Adjustable Rate Mortgage (ARM) – A mortgage with an interest rate that is periodically adjusted up or down, depending on a specific index.

Agency – A relationship between two or more persons whereby one is authorized to act for another

Amortization – Payment of principal and interest at stated periods for a stated time until debt is paid off

Amortization Schedule – A table which shows how much from each payment will be applied towards principal and how much towards interest

Annual Percentage Rate (APR) – The finance charges for a loan, including points and other loan fees, that are in addition to interest on the loan

Appraisal – An opinion of value put together using the appraiser’s knowledge and analysis of the property. Most of the value is based on historical sales information

Appreciation – An increase in value due to market conditions, property improvements or other factors

Appurtenance – Anything incidental to or belonging to land and considered a part of the real property

Assessed Value – The value of property for taxation purposes

Assumption of a Mortgage (or Deed of Trust) – An agreement in which the buyer accepts liability for payment of a seller’s existing promissory note secured by a mortgage or deed of trust

Balloon Payment – A final installment payment larger than preceding installment payments on a promissory note

Beneficiary – One for whose benefit a trust is created, such as a lender whose loan is secured by a deed of trust

Beneficiary’s Demand – The payment required by a beneficiary under a deed of trust before authorizing a reconveyance, the removal of the lien on title to property created by a deed of trust

Beneficiary Statement – The statement of a beneficiary under a deed of trust stating the principal balance due on a promissory note and other information concerning the loan

Binder – A memorandum of agreement to issue insurance giving temporary coverage until a formal policy is issued

Chain of Title – A chronological list of documents comprising the record history of title to a specific parcel of real property

Commitment – A pledge, promise, or firm agreement, such as a title insurer’s contractual obligation to insure title to real property or a lender to make a loan

Contract of Sale – An agreement entered into for sale and purchase of real property

Convey – To transfer title to property from one to another

Dedication – The donation of land for public use by its owner

Deed – A written document transferring ownership of land from one to another

Deed of Trust – A three party security document conveying title to land, secured by the performance of an obligation, such as the repaying of a loan. It is also called a trust deed

Default – Omission or failure to fulfill a duty or promise, discharge an obligation or perform an agreement

Discount Points – Money paid to lower the interest rate on a loan. Essentially, prepaid interest, to the investor making the loan, to guarantee an acceptable rate of return

Documentary Transfer Tax – A tax on recorded transfers of title to real property

Down leg Property – The sold property in a 1031 exchange

Down Payment – The amount or percentage of the purchase price paid by the buyer in cash, not borrowed from the lender

Dual Agency – When a broker represents both buyer and seller in a transaction

Due on Sale Clause – A clause in a promissory note or deed of trust calling for automatic maturity and payoff of the loan in the event of a sale or transfer of title to real property

Earnest Money – Given by a potential buyer to show good faith in an offer to purchase

Easement – A limited right or interest in the land of another entitling the easement holder to some use, privilege or benefit.

Encroachment – The extension of an improvement onto the land of another

Equity – The value of the property actually owned by the property owner, often calculated by adding together the purchase price, appreciation and value of improvements and then subtracting the amount of all mortgages and liens on the property

Escrow – A transaction in which an impartial,neutral, third party acts as an agent for all principles in a transaction, assuring the execution of agreed upon terms.

Fee Simple – Absolute ownership of real property

Fixture – Personal property that is considered a part of the real property because of the way it was affixed to the structure or land

Foreclosure Sale– The sale of real property given to secure performance of an obligation after the obligation has been breached. Also known as Trustee Sale

Grant Deed – A written instrument transferring title to real property

Grantee – The person/entity acquiring title to real property by a deed

Grantor – The person/entity transferring title to real property by a deed

Interest – The cost of borrowing money, usually expressed as a percentage over time

Lien – A charge on real property in order to secure payment or satisfaction of a debt or other obligation

Legal Description – A description of real property sufficient to locate it on the ground by reference to surveys or approved recorded maps

Lis Pendens – A recorded notice of the pendency of a lawsuit

Notice of Default or NOD – A recorded notice of a borrower’s failure to perform the obligations in a deed of trust. Precursor to a foreclosure

Ordinance – A legislative enactment of a city or county

Party Wall – A wall located on a boundary line of real property and used by the owners of the property on each side

PITI – The amount of principal, interest, taxes and insurance which are the bases for monthly mortgage payments

Point – One Point = one percent of the loan principal, charged in part or in multiples to obtain a loan, in addition to interest and other fees

(Discount Points) Pre-Payment Clause – A charge imposed by a lender for payment of a debt before its due date

Principal – A party to a contract; also, the amount of money borrowe upon which interest is charged

Promissory Note – A written promise, signed by the borrower, to repay a loan

Probate – The division or assessment or an estate. Based upon a will or the state

Real Property – Immovable property such as land and improvements on it, such as buildings

Reconveyance – A document, executed when obligations in a deed of trust have been met, that removes the lien on title to property created by a deed of trust

Recording – The act of filing documents in the office of the County Recorder

Request for Reconveyance – A written instruction by a beneficiary under a deed of trust acknowledging that the obligations in the deed of trust have been met, and directing that the lien on title to the property created by the deed of trust be removed

Rescission – The act of canceling the effect of a document

Rider – A supplement, addition, or endorsement to a document

Statute of Frauds – A law requiring certain agreements to be in writing in order to be enforceable, including an agreement for the sale of real property

Starker Exchange – A 1031 exchange that does not have concurrent closing of the up leg and down leg escrows

Straight Note – A promissory note calling for payment of principal in one sum rather than in installments

Subdivision – The division of a tract of land into separate parcels

Tax Service – The fee charged to a borrower by a lender to establish the notification of a real estate tax default

Title – A mode of ownership of a specific parcel of property

Title Insurance or Title Policy – A contract indemnifying the policy holder against loss resulting from a defect in the title to the insured interest in real property

Title Search – The steps required to complete the chain of title to a parcel of real property

Trustee – The fiduciary designated to hold title to real property for the benefit of another

Trustee Sale – The final foreclosure procedure

Up Leg Property – The newest acquired property in a 1031 exchange

Usury – The exaction of a greater payment or return for a loan of money than is permitted by law