Glossary

Additions, upgrades and replacements that increase a property’s value. Improvements to a home increase the adjusted tax basis of the property and may reduce any capital gain realized when the property is sold. Repairs, which merely maintain value, do not affect tax basis.

Latin for "against the person." A judgment may be filed against all property owned by a person.

Latin for "against the thing." A proceeding against the realty directly, as distinguished from a proceeding against a person (such as used in taking land for nonpayment of taxes.)

Recently or just begun; unfinished, begun but not completed. Examples in real estate include dower or curtesy rights prior to the death of a spouse, instruments that are supposed to be recorded and interests that can ripen into a vested estate.

The money or other benefit coming from the use of something. Gross sales or income is the full amount received; net income is the remainder after subtracting expenses. Many in real estate prefer to use cash flow as the measure of income, whereas those in accounting prefer net income.

One of the three appraisal methods used in arriving at an estimate of the market value of property; the value of the property is the present worth of the income it is expected to produce during its remaining life. Annual income for rental property can be capitalized into value to estimate its worth.

Property whose ownership appeal is that it produces income. Examples include office buildings, shopping centers, rental apartments and hotels.

One not legally capable of completing a contract. Includes the mentally ill, minors and others considered incapable. When conducting business with an incompetent, the guardian’s consent is required.

A defect that cannot be corrected or that is financially impractical to correct; a defect in the structure of a building. When appraising real estate using the cost approach, incurable depreciation is separated from curable to indicate the actual loss in value sustained by the property.

A written agreement made between two or more persons having different interests. Indentures, such as deeds of trust, describe the terms of the agreement in mortgages, deeds and bonds.

A lease in which rental rates are tied to an agreed upon index of costs, such as the Consumer Price Index. An index lease can allow fairness to both parties in a long-term leasing arrangement.

Property used for industrial purposes, such as factories and power plants. Land to be used for industrial purposes often must be zoned for that purpose.

A writ or order issued by a court to restrain one or more parties to a legal proceeding from performing an act that is deemed inequitable or unjust to another party or parties in the proceeding. An injunction can prevent a wrongdoing while the legal process continues.

Parts of the same debt, payable at successive periods as agreed; payments made to reduce a mortgage. Many debts are paid in installments that include interest for a recent period plus some amount for amortization.

Written legal document, created to effect the rights and liabilities of the parties to it, such as a deed, will or lease.

Material added between walls and above ceilings to reduce heating and cooling costs. The amount of insulation in a house helps determine inside temperature and the utility bills. The effectiveness of insulation material is indicated by its R-value; the higher the number, the better the insulation. Homeowners may take other actions, such as limiting air leakage around windows and doors, to supplement the effectiveness of insulation.

A title that can be insured by a title insurance company. When acquiring real estate, determine whether the title is insurable. If a title is not insurable, there are likely to be valid claims that affect its use or ownership.

A service that reimburses losses caused by specific hazards. The beneficiary pays a premium to be covered for a limited period. If damage occurs during the insured period, the beneficiary may file a claim for repayment of losses subject to limitations. Insurance against fire, theft and liability is essential for any property owner. Most lenders require insurance coverage at least in the amount of the loan.

The extent of insurance service. Includes a description of the types of events that qualify for valid claims and the dollar limit on a claim. For hazard insurance, most homeowners should have coverage equal to the cost of replacing the structure, while liability coverage should be high enough to prevent financial disaster. The types of events covered are described in the policy document provided by the insurance company.

The document that describes the coverage and terms of the protection provided. Insurance policies are legal documents that explain the rights of the beneficiary should something occur that is covered by the policy.

Value that cannot be seen or touched, such as the goodwill of an established business.

1. Money paid for the use of money. 2. The type and extent of ownership.

The percentage of a sum of money charged for its use. Also, the rate of return on an investment. The loan interest rate is an important ingredient in determining the periodic installment payment.

Loan in which all periodic payments go toward interest only. At the end of the loan term, the entire principal is due. By restricting payments to interest only, the monthly payment is minimized, and the entire payment may be deducted from taxable income. Interest only loans usually are refinanced before the principal payment comes due.

A loan used when a property owner is unable or unwilling to arrange permanent financing. Interim financing is used to finance construction of a home.

Used to describe a person who dies leaving no will or leaving a defective will. His or her property goes to legal heirs. State law determines inheritance rules for those who die intestate. If there are no heirs, the property escheats to the state.

Property that is owned for its income generating capacity or expected resale value, such as apartments, office buildings or undeveloped land.

A lien imposed against property without the owner’s consent, as in unpaid taxes or special assessments. A lien can be created without any action by the landowner.

Incapable of being recalled or revoked; unchangeable, unalterable.