DAMAGES
The court-ordered payment a person receives when his
or her personal rights or property rights have been
violated or injured through an unlawful act or negligence
on the part of another.
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DATE The mention in a written instrument,
such as a sales contract or deed, of the time (day,
month, and year) when it was made or when a future
event is to occur. Real estate contracts may have
more than one date mentioned.
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DATE OF APPRAISAL The day, month,
and year as of which the opinion of value, as expressed
in the appraisal, is based. Since changes in the value
of property can occur very quickly, the date of appraisal
is an important part of the appraisal form or report.
The inclusion of the date makes it clear to anyone
examining the appraisal that the value estimate is
as of a specific date.
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DATUM A level surface to which the
elevations of points used in legal descriptions are
referred. Besides the mean sea level datum some arbitrarily
chosen datum such as a bench mark is often used in
surveying work.
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DEALER One who holds property for
sale to customers. If a person is classified as a
dealer for federal income tax purposes, any gain or
loss on the exchange or sale of property is treated
as ordinary gain or loss and not as capital gain or
loss. Dealers also may not take advantage of tax-free
exchange rules which can be used by non-dealer investors.
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DEAD END STREET A street with only
one entrance, the other end being closed.
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DEBENTURE (BOND) A long-term bond
or note issued by corporations and governments and
not secured by a mortgage or lien on any specific
property. Since there is no specific property securing
the debenture, the ability to repay the debt is based
solely on the financial strength of the issuer.
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DEBIT An amount due or owing, as
compared to a credit which is an amount due or to
be received. Debit entries are made on closing statements
to reflect charges made to both parties.
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DEBT An obligation of money, goods,
or service either in the present or in the future
from one person to another.
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DEBT COVERAGE RATIO (DCR) The relationship
between the annual net operating income (N.O.I.) of
a property and the annual debt service of the mortgage
loan on the property. Lenders and investors calculate
the ratio to assist them in determining the likelihood
of the property generating enough income to pay the
mortgage payments. From the lender's viewpoint, the
higher the ratio, the better.
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DEBT EQUITY RATIO The relationship
between the total loan amount owed to the lender(s)
and the invested capital of the owner(s). In real
estate investments this ratio, also known as the leverage
ratio, can be very high due largely in part to the
loan security of real estate, thus real estate investments
are often highly leveraged. Owner-occupied residential
real estate typically has a high debt-equity ratio,
particularly homes recently purchased. A $100,000
home purchased with $20,000 cash and an $80,000 mortgage
would have a debt-equity ratio of 4:1 ($80,000/$20,000).
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DEBT FINANCING The use of borrowed
funds, or other people's money, to purchase real estate.
Also known as debt capital as compared to equity capital,
which is the amount of one's own money used to purchase
real estate.
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DEBTOR One who owes debt.
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DEBT SERVICE The periodic payment
(monthly, quarterly, annually) necessary to pay the
interest and principal on a loan which is being amortized.
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DEBT-TO-INCOME RATIO The relationship
between a person's periodic (normally monthly) debt
and his or her income. While lenders use various rules
of thumb in determining the maximum amount of money
a person can borrow, the ratio often used is that
the total principal, interest, taxes, and insurance
(PITI) due each month should not exceed 25 to 28 percent
of the borrowers monthly gross income.
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DECEDENT A deceased person. One
who is deceased with a will is known as a testator
while a deceased person without a will is said to
have died intestate.
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DECLARATION OF TRUST Acknowledgment
by a person who holds legal title to property that
he or she is holding the property as trustee for someone
else or for a specified purpose.
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DECLINING-BALANCE DEPRECIATION An
accelerated method of depreciation for tax purposes
in which the remaining depreciable balance each year
is the base for calculating the subsequent year's
depreciation. The result is a faster write-off in
the early years than would be possible using a straight-line
method of depreciation.
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DECREASING ANNUITY A series of periodic
payments or receipts that progressively decline over
time.
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DECREE A court order or declaration
announcing the legal consequences of the facts.
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DECREE OF FORECLOSURE A court order
following the actions of a mortgagee who has a lien
against a parcel of real property which states the
amount of the outstanding debt and orders the sale
of the property with the proceeds being used to satisfy
the debt.
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DEDICATION A donation of property
by a property owner to a public authority such as
a local government without payment and for a public
use.
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DEDUCTION Any ordinary and necessary
expense paid or incurred in a taxable year which is
related to business or the production of income. Such
deductions are in addition to any other deduction
Permitted by law and depend upon the accounting method
used by the taxpayer. Except where specifically authorized
by Congress, expenses for personal or family purposes
are usually not deductible. A deduction has the effect
of reducing the amount of taxable income and thereby
reducing a taxpayer's tax liability. If a person owns
a house which serves as his or her personal residence,
Congress permits mortgage interest, property taxes,
and casualty losses as allowable deductions. In addition
to these deductions, owners of real estate held for
other purposes may be entitled to deductions for maintenance
expenses, minor repairs, insurance premiums, and depreciation.
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DEED A written instrument, usually
under seal, conveying some property interest from
a grantor to a grantee. A grantor is the person who
conveys the property interest; the grantee is the
person to whom the grant is made. In order for a deed
to be effective in transferring title, it must be
in proper legal form and executed as specified by
the law in the state in which the property is located.
7le title is actually transferred the moment the deed
is properly delivered to and accepted by the grantee.
In order to protect the validity of the title from
subsequent innocent third parties purchasing the same
property from the original grantor, the deed must
be recorded as required by the particular state's
recording statute. This also gives assurance to third
parties that no one else has good title unless the
title has been recorded. This gives constructive notice
to third parties. When a deed is delivered, all prior
oral and written agreements are merged into the deed
and are collateral. This means that when a deed is
delivered and accepted all prior agreements which
are inconsistent with the deed are superseded and
have no legal effect. An exception to this rule occurs
in cases of fraud and mutual mistake. Another exception
exists when the contract specifically provides that
the obligations will survive the closing.
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DEED BOOKS Part of the public records
found in the county clerk's or recorder's office in
which copies of deeds transferring real property in
that jurisdiction are recorded. These books are also
known as libers.
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DEED IN LIEU OF FORECLOSURE A special
purpose deed used by a borrower (mortgagor) who is
in default to convey the property to the lender (mortgagee)
in order to eliminate the need for a foreclosure.
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DEED IN TRUST A special purpose
deed for carrying out fiduciary purposes in which
the real property is conveyed to a trustee in a land
trust. The power to sell, lease, mortgage, and so
forth are given to the trustee under the provision
of the trust agreement.
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DEED OF RECONVEYANCE A deed used
to transfer title from the trustee back to the trustor
(borrower) after the outstanding debt has been paid
in full.
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DEED OF RELEASE A special purpose
deed given by lien holders, remaindermen, or mortgagees
to relinquish their claims on the property.
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DEED OF SURRENDER A special type
of deed used to merge a life estate with a reversion
or remainder.
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DEED OF TRUST A deed to real property
which serves the same purpose as a mortgage but instead
of two parties, three parties are involved. The third
party holds title for the benefit of the lender. The
borrower under a note secured by a deed of trust or
trust deed is called the trustor or in some states
the grantor. The lender is called the beneficiary.
When a loan is made the borrower conveys naked title
to a third party called the trustee who holds the
title for the benefit of the lender although the instrument
itself may remain in the lender's possession. A states
deed of trust act specifies who may act as a trustee.
Some states have created the office of public trustee,
while others allow individuals such as attorneys or
brokers or entities such as title insurance companies
or savings and loan associations to serve in that
capacity. As with mortgages, states have title theory
and lien theory deeds of trust.
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DEED POLL A deed made by only one
party who binds only himself or herself to the deed.
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DEED RESTRICTION DEFAULT The failure
to perform a contractual obligation or duty. Since
each party to a contract has a duty to perform as
promised, the non-defaulting party has a number of
alternative remedies from which to choose. Quite often
real estate contracts such as sales agreements, leases,
and mortgages specify the act(s) that will result
in default as well as the remedies available to the
innocent party.
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DEFAULT JUDGMENT A judgment entered
by a court against a person who falls to answer a
complaint or appear in court at an appointed time.
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DEFAULT RATIO A ratio used in financial
analysis that compares the effective gross income
(the rent collected from a project) to the operating
expenses plus the debt service.
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DEFEASANCE CLAUSE A provision found
in a mortgage which "defeats" the passing
of title to the lender (mortgagee) had the borrower
(mortgagor) not met the terms and conditions specified
in the mortgage. When the debt is repaid this clause
nullifies any interest the lender may have had in
the property. Typical wording of a defeasance clause
would be as follows: "Provided, however, if the
said mortgagor, his heirs, personal representatives,
or assignees, shall make or cause to be made the payments,
and perform and comply with the covenants and conditions
herein mentioned on his part to be made and done,
then this mortgage shall be void."
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DEFEASIBLE Subject to be revoked
or defeated upon the occurrence of a future event
or the performance of a condition subsequent, generally
used in regard to rights and interests in real estate.
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DEFECT OF RECORD Any lien, claim
or encumbrance on a particular piece of real estate
that has been properly recorded in the public records.
Recorded defects impair clear title and may result
in the title being unmarketable.
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DEFENDANT The person against whom
a lawsuit has been brought or against whom recovery
is sought by the plaintiff.
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DEFERRED ANNUITY A series of periodic
payments or receipts that begin at some point in the
future.
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DEFERRED CHARGES In accounting,
expenditures for intangible assets, such as mortgage
placement fees or property leasing commissions, that
are to be written off over the life of the service
provided.
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DEFERRED INCOME Income to be received
in the future.
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DEFERRED INTEREST MORTGAGE A financing
technique in which a lower interest rate and thus
a lower monthly mortgage payment is charged. Upon
the selling of the property the lender receives the
deferred interest plus a specified fee for postponing
the interest that would normally have been paid each
month. This type of mortgage is particularly aimed
at those people who only plan to keep the property
for a short period of time.
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DEFERRED LIABILITY A debt that need
not be paid currently. Accelerated depreciation frequently
causes a deferred income tax liability for income-
producing property.
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DEFERRED MAINTENANCE Inadequate
repair and upkeep of a building which results in physical
depreciation and loss in value.
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DEFICIENCY The lack of an item or
its inadequate capacity.
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DEFICIENCY JUDGMENT A personal claim
based on a court order against a borrower (mortgagor)
for difference between what is owed the lender (mortgagee)
and the amount realized following a foreclosure on
the property. The deficiency occurs when the prop
fails to sell at foreclosure for a price which covers
the outstanding mortgage amount. Some mortgages, particularly
commercial loans, are written so that the lender recourse
only against the property (non- recourse mortgage)
and thus, if the prop fails to sell at foreclosure
for the amount owed, no personal judgment can brought
against the borrower.
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DEFLATION A decline in the general
level of prices.
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DEGREE A land surveying measurement
denoting 1/360th part of a circle. The term used in
metes and bounds method of surveying and is denoted
by the symbol ... in 90'.
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DELINQUENCY DATE A specific time
after which a penalty is incurred for nonpayment of
a debt. real estate lending, promissory notes normally
have a due date, typically the first of each month,
and a delinquency date, normally sometime between
the tenth the fifteenth.
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DELINQUENCY RATIO A ratio used by
commercial banks and other lenders to denote the number
of overdue loans relative to the total loans being
serviced.
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DELIVERY The formal surrender of
control or ownership of something to someone else.
Legal documents such as deeds and mortgages do not
become valid until they have been delivered and accepted.
What constitutes delivery depends upon the intent
of the parties. For a deed, there must be an objective
intent on the part of the grantor to give up present
control of the deed.
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DEMAND An economic term commonly
used to denote a qualified buyer(s) who is ready,
willing, and able to make a purchase.
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DEMAND DEPOSIT Funds on deposit
with banks which are subject to immediate withdrawal
by the depositor(s). Commonly known as checking accounts,
demand deposits are different from time deposits,
commonly referred to as savings accounts, which require
the depositor to wait a specified period of time before
withdrawing or else pay a penalty for early withdrawal.
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DEMAND LOAN A loan which permits
the lender to call the loan due and payable at any
time. Normally, real estate loans are not demand loans.
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DEMISE A conveyance of an estate
to someone for life, for a certain number of years,
or at will by means of a lease. The word demise is
synonymous with "lease" or 'let' and use
of the word in a lease implies a covenant for quiet
enjoyment which means the landlord (lessor) guarantees
that the tenant (lessee) will not be disturbed by
someone having superior claims against the property.
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DEMISED PREMISES The part of a property
which is leased to a tenant.
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DEMOGRAPHY The study of populations
with respect to density and distribution. Demographic
information is of particular importance to people
involved in market analysis and highest and best use
analysis in determining potential land uses of a particular
site.
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DEMOLITION COSTS The total expenses
incurred in tearing down and removing the improvements
on a parcel of land.
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DEMOLITION LOSS A tax deduction
which may be taken under certain circumstances when
an improvement is voluntarily demolished. No deduction
may be taken if there was an intent to demolish the
building at the time the property was acquired. If
the building is used in trade or business or for production,
and a decision is made to demolish the building after
acquisition, then the taxpayer will ordinarily be
entitled to the demolition loss deduction.
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DENSITY The number of buildings
or persons occupying a certain area of land, generally
an acre.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
(HUD) A federal agency actively engaged in
housing programs and related activities including
urban renewal, model cities, block grants, public
housing and subsidy programs. The Federal Housing
Administration (FIL4), the Government National Mortgage
Association (GNMA), and the Office of Interstate Land
Sales Registration are all under HUD's jurisdiction.
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DEPARTMENT STORE A large store divided
into sections or departments selling a wide range
and variety of products. Local department stores are
often used as anchor tenants in shopping centers.
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DEPENDENCY, PRINCIPLE OF An economic
principle which states that the use and thus the value
of a particular parcel of land can change as a result
of modifications of other parcels or other changes
in the land-use pattern or environment.
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DEPLETION A tax deduction which
may be taken by taxpayers who own property interests
in extractive industries such as mines, oil, gas,
or other natural deposits.
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DEPOSIT Money offered by a prospective
purchaser to indicate his or her good faith in entering
into a sales contract. If the sale is completed then
the deposit is credited to the purchaser and applied
towards the purchase price. However, if the purchaser
defaults then the deposit is normally kept by the
seller as liquidated damages. Depending upon the terms
of the listing agreement, the seller may split the
deposit with the listing broker. Default by the seller
results in all of the deposit being returned to the
purchaser, with the broker having no legal claim to
any of the money.
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DEPOSIT INSURANCE ACT A federal
act enacted during the Great Depression creating the
Federal Deposit Insurance Corporation (FDIC) to insure
deposits of member commercial banks.
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DEPOSIT OF TITLE-DEEDS The placing
of title-deeds to land in the hands of a lender for
the purpose of securing a loan.
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DEPOSITION The testimony of a witness
taken outside of court for the purpose of using the
testimony during a trial.
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DEPOSITORY INSTITUTIONS DEREGULATION AND
MONETARY CONTROL ACT (1980) A federal act
that resulted in significant deregulation of federally
chartered commercial banks and savings institutions.
Included in the legislation were provisions to phase
out ceilings on interest rates being paid by lenders
(Regulation Q) and limitation over the type of loans
savings institutions could make. The act also overrode
state usury laws for all federally insured institutions.
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DEPRECIABLE BASIS The amount on
which depreciation deductions are based for income
tax purposes. Allocation must be made between land
and improvements, since ordinarily only the improvements
to and on the land may be depreciated.
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DEPRECIABLE LIFE The estimated economic
useful life of a depreciable asset such as a building.
Depreciable life is not a measure of how long the
building will remain standing, but rather how long
the improvements are expected to provide an economic
return. As an analogy, automobiles may last for decades,
but the cost and annoyance of repairs and the modern
equipment of newer cars gives most automobiles a short
useful life. Improvements to real estate are long-
lasting, but without renovation, they steadily march
to the junkyard.
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DEPRECIATED COST In taxation, the
cost new minus any depreciation taken.
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DEPRECIATION (ACCOUNTING) A method
of allocating the cost of a wasting asset over its
estimated useful life. For income tax purposes, depreciation
is a provision for the estimated wear and tear of
an asset. Depreciation deductions can be claimed as
a tax deduction on real estate improvement (not land),
regardless of whether the market indicates an increase
or decrease in the value of the property. To claim
depreciation on an income tax return, a bookkeeping
entry is required, not a cash payment. In many real
estate investment situations, depreciation deductions
are of significant value. The deductions reduce income
taxes without a cash payment. However, there will
be a day of reckoning. Ultimately, the tax implications
catch up with the real economic situation. Depreciation
deductions serve to reduce the adjusted tax basis
of property, so, upon a resale, there will be a greater
capital gain on which a tax is due. Most investors
prefer to enjoy substantial amounts of current depreciation
deductions in the face of a future tax because of
(1) the time value of money, and (2) the possibility
of lower tax rates upon resale. Lower tax rates may
be due to more favorable capital gains rates, or planning
the sale to occur in a tax year when there are off-setting
losses. The time value of money implies that taxpayers
would rather pay taxes later than now. It is like
getting an interest-free loan from the Government.
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DEPRECIATION/AMORTIZATION RATIO
The relationship between depreciation deductions and
mortgage payments for income-producing property. Depreciation
claimed for income purposes allows a tax deduction
without a cash payment. Mortgage payments that apply
toward principal reduction require an actual cash
payment but are not deductible for income tax purposes,
so they have an opposite effect. Since all other operating
expenses such as maintenance and property tax are
tax- deductible, the difference between the depreciation
claimed for tax purposes and the mortgage payments
is clearly reflected in taxable income. Thus, any
excess of depreciation over mortgage principle payments
in a taxable year will cause some of the before-tax
cash flow (cash throw-off) to be tax-free.
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DEPRECIATION (APPRAISAL) A loss
in utility, and hence value, from any cause. In the
cost approach to value, the depreciation factor attempts
to make adjustments between the attributes of the
selected building, as if it were new, and the subject
property's physical condition and economic setting.
It is a way of adjusting the hypothetical new structure
on which the cost estimate was based and distinguishing
it from the subject property. An appraiser may estimate
depreciation through observation and/or by applying
a formula based on the effective age and remaining
life of each component of the property. The indirect
method of estimating depreciation is to subtract values
for the property, estimated from the market or income
approach (or both), from the reproduction cost of
the subject property, plus the value of the land.
The difference obtained is the total depreciation
sustained.
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DEPRECIATION METHODS Those methods
allowed for depreciating real estate improvements
(not the land) as prescribed by the Internal Revenue
Code.
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DEPRECIATION RECAPTURE A provision
contained in the Internal Revenue Code that makes
excess depreciation taken on real property subject
to income tax upon the sale or disposition of the
property.
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DEPTH TABLE A table showing the
percentage relationship between the depth of a lot
being appraised and the value as compared to values
indicated by a standard lot in the market. Such tables
are sometimes used by appraisers and tax assessors
in estimating the value of a particular parcel of
land. Several rules of thumb for depth adjustment
have been developed. Among the more common are the
4-3-2-1 rule, the Hoffman rule, the Hoffman-Neill
rule, the parabolic formula, and the Milwaukee rule.
Little reliance can be placed on these rules without
first testing market behavior. In some markets very
little price differentiation exists between different-sized
lots within acceptable rates. In other markets prices
may be affected by size. A much preferable approach
is the use of linear or multiple regression. This
is a statistical technique used to calculate the mathematical
relationships between variables. It requires the use
of large numbers of data points to provide reliability.
Using one of many calculators currently available,
the appraiser can use regression to determine the
existence of a relationship between lot depth and
sales price.
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DERELICTION A process by which water
gradually recedes, leaving dry land where water previously
was.
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DERIVATIVE CONVEYANCE A conveyance
of property which presupposes that a conveyance of
the property has previously occurred. Such a conveyance
only serves to alter or confirm the interest originally
conveyed.
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DESCENT The transfer of title to
property upon the death of the owner who has died
without a will (intestate) to those heirs related
by blood or marriage, whom the law designates. If
a person dies intestate the disposition of the person's
property will pass as defined by state laws called
statutes of descent and distribution. Real estate
will pass directly to a person's heirs as defined
by the state law in which the real estate is located
subject to the debts of the decedent. A court in the
state where the decedent lived will appoint a person
called an administrator to dispose of the property
of the estate. The administrator will collect the
assets of the estate, pay debts and distribute the
remainder. The administrator is usually required to
put up a bond and may sell that real property which
is necessary to pay off the estate's debts if the
sale of personal property produces insufficient proceeds.
The real estate remains charged with debts of the
estate until the state's statute of limitations has
run. States have different rules as to who receives
property of the decedent.
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DESCRIPTION The part of a deed,
mortgage, sales contract, or other such legal instruments
which identifies the real estate involved in the transfer.
When land is conveyed one party to another the instrument
of conveyance needs to contain a legally sufficient
description of the parcel. Courts have interpreted
this to mean that property sufficiently described
if a competent civil engineer or surveyor could locate
subject property given the land description. Since
no two parcels of land could be exactly alike in location,
each parcel requires a unique description. A legal
instrument, such as a deed, which does not have a
legally sufficient description is void and not enforceable.
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DESIGNATED REAL ESTATE BROKER An
officer of a corporation who has been designated by
the corporation as its broker of record. The person
so designated must meet the minimum qualifications
for acquiring and maintaining a broker's license and
is responsible for the corporation's real estate brokerage
activities.
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DESIGNATED REAL ESTATE INSTRUCTOR (DREI)
A professional designation awarded by the Real Estate
Educators Association to persons involved in real
estate education.
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DETACHED SINGLE-FAMILY HOME A free-standing
structure designed for one family unit.
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DETERIORATION A loss in value due
to wear and tear by action of either the natural elements
or use of the property.
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DEVELOPER One who does whatever
is necessary to transform an undeveloped tract of
land into parcels ready for construction. This could
mean acquiring a 100-acre tract of land from a farmer,
subdividing the large parcel into one-half acre tracts,
putting in roads, curbs, gutters, sewers, and water
mains and then selling the individual lots to either
builders or private individuals who in turn construct
houses on the lots. I-and development can also involve
commercial property such as the development of a large
shopping district or industrial property such as an
industrial park.
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DEVELOPMENT LOAN A loan to fund
the cost of converting an undeveloped tract of land
into parcels ready for construction. Such loans, intended
to be short-term, are normally tied to the prime rate
and are made by lenders expecting repayment when the
improvements to the land are completed.
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DEVELOPMENT RIGHTS The rights to
improve or develop land that are sold or given by
one property owner to another.
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DEVISE Transferring title to real
property by means of a will. In order to make a valid
formal will a person must be of statutory age, generally
eighteen or twenty-one in most states, although some
states set the age as low as fourteen. In addition,
the person must be of "sound mind' at the time
of the execution of the will. A formal will must be
in writing, which may be typed, printed, or handwritten.
Real estate must be described with sufficient certainty,
but it is not required that a complete legal description
be included. A formal will must be signed. In addition,
states impose a strict requirement that the will be
witnessed. Some states recognize non-witnessed wills
called holographic wills. A holographic will is one
which is entirely handwritten. Such a will is valid
only in some jurisdictions and there only if it is
free from suspicion of fraud or other defects. In
addition many states recognize nuncupative wills.
A nuncupative will is an oral will which a terminally
ill testator or testatrix declares before qualified
witnesses. This will must be reduced to writing within
a statutorily prescribed time period in order to be
admitted into probate. Unlike a deed which cannot
be changed or withdrawn by a grantor after it has
been delivered and accepted, a will may be changed
or revoked by the testator at any time during his
or her lifetime. A will may be changed by making out
a new will or by drafting a codicil to a will. A codicil
is a supplement or addition to the original will and
must be executed with the same formality. Any attempt
to modify the original will by crossing out a provision
will not ordinarily be effective. The courts may view
such as alteration as a revocation of the will.
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DEVISEE The person to whom real
property is given by will.
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DEVISOR A giver of real property
by means of a will; also known as a testator.
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DIMINISHING RETURNS, POINT OF The
point in time or production where returns fail to
increase in proportion t additional investments of
labor, capital, management, or land.
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DINK Double income, no kids. A term
used to denote a working couple, often in the market
for condominium ownership or other types of real estate
investments.
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DIPLOMAT CLAUSE A provision included
in a lease allowing for immediate termination of the
lease when the tenant, who is a diplomat of a foreign
government, is transferred to another country.
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DIRECT CAPITALIZATION A method of
capitalizing income based on dividing net operating
income by a rate of return derived by analyzing similar
properties and comparing their net income to their
selling price. Also known as the overall capitalization
rate, this approach takes into account the unique
operating characteristics of each property.
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DIRECT COSTS Expenditures made in
the construction of an improvement that can be directly
attributable to the improvement. Also known as hard
costs, direct costs include such items as labor, material,
contractor's overhead, and profit.
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DIRECTIONAL GROWTH The direction
towards which a city or area tends to be growing.
Land values, and thus the uses to which land is put,
are directly affected by the direction the growth
takes.
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DISAFFIRM To disclaim or refuse
consent previously given.
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DISASTER LOAN A loan either made
or guaranteed by a governmental agency to owners property
which has been damaged or destroyed as a result of
such natural disasters as floods, riots, or earthquakes.
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DISBURSEMENT A cash expenditure
for the purpose of settling a debt.
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DISCLAIMER Rejection or refusal
of a legal claim, power, or property. In real estate,
disclaimer would be the refusal by a party to accept
an estate which had bee conveyed to him or her.
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DISCLOSED PRINCIPAL A kind of principal
in a principal-agent relationship whose identity is
know the third person before the third person enters
into contractual relations negotiated by the agent.
Under such a principal-agent relationship the agent
is considered liable under the contract in the absence
of personal wrongdoing. N real estate transactions
involve a disclosed principal.
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DISCLOSURE STATEMENT A written statement
required under the National Consumer Credit Protection
Ac referred to as the Truth-in- Lending Act, to be
given by a lender to individual borrowers for certain
types of consumer loans. All real estate lending transact
involving consumers are covered, as is all credit
extended in five or more installments and not in excess
of $25,000 for personal, family, household, or agricultural
purposes. Two important disclosures included are the
finance charge and the annual percentage rate (APR).
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DISCOUNT The amount of money paid
at the front end to acquire a loan. This amount deducted
from the principal at the time the loan is made and
thus represents int4 paid in advance. The discount
is normally stated in terms of points or percent.
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DISCOUNTED MORTGAGE A mortgage sold
below the amount of the remaining principal balance
in order to provide a satisfactory yield to the purchasing
mortgage investor.
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DISCOUNTING The process of converting
investment inflows to a present value. Since money
has a time value, one dollar to be received in the
future is worth less than one now. How much less (the
amount of discount) depends on: (1) the time span
between the cash outflow and inflow, and (2) the necessary
rate of inter discount.
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DISCOUNT POINTS A fee charged by
a lender at closing or settlement that results in
increasing the lender’s effective yield (internal
rate of return) on the money borrowed. discount point
represents a one-time charge by the lender equal to
1% of the principal. Often sellers pay these point
to comply with government regulations by law the buyer
cannot pay discount points on VA mortgages. Why would
third persons want to pay discount points if the loan
is actually being given borrower and not to themselves?
The third person usually stands to benefit f loan
indirectly.
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DISCOUNT RATE The rate of interest
charged by the Federal Reserve System to banks who
money from the Federal Reserve. An increase in the
rate not only discourage from borrowing, but it also
serves as a signal to the money market that interest
rates are probably going to increase. Accordingly,
interest rates charged by banks 1 customers usually
increase as a result of an increase in the discount
rate. The term is also used to explain the compound
interest rate used in the in approach to value to
convert expected future cash flows into a present
value.
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DISCOUNT REAL ESTATE BROKER A licensed
real estate broker who charges a lower sales commission
normally charged in exchange for the seller performing
some of the normally performed by the broker. A discount
broker may charge as little two percent commission
if the seller agrees to, for example, be available
to house to potential buyers and pay the advertising
expenses normally incurred broker.
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DISCRIMINATION Failure to treat
all people equally. It is the stated policy of the
government to eradicate discrimination in real estate
markets.
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DISINTERMEDIATION The withdrawing
of funds from financial institutions by depositors
who in turn invest directly into short-term financial
instruments, such as treasury bills and commercial
paper. Such activity occurs when the interest rate
paid on these short-term instruments is higher than
the rate(s) offered by savings and loan associations,
mutual banks, and commercial banks. The result is
less mortgage money available for loans, since the
short-term instruments being purchased are normally
not made available for real estate loans.
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DISPOSSESS The removal or eviction
of someone from real estate through legal action.
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DISPOSSESS PROCEEDINGS Legal action
undertaken by a landlord to remove a tenant and regain
possession of the property for breaking a condition
or term of the lease such as nonpayment of rent.
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DISTRAINT The taking by a landlord
of personal property belonging to the tenant to satisfy
past-due rents. Under common law a landlord had the
right to seize the tenant's property on the premises
and to sell or hold the property to satisfy a claim
for rent. Today, a court action is required and the
priority of the landlord's lien will depend upon local
law.
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DISTRESS The common law right of
a landlord to seize the personal property of a tenant
to satisfy past-due rent.
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DISTRESSED PROPERTY Real estate
which must be sold due to a pending mortgage foreclosure.
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DISTRICT A classification of neighborhoods
in which the land uses are similar, such as commercial,
multifamily, or industrial.
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DOCUMENT An official paper establishing
facts or giving instructions.
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DOCUMENTARY STAMP A tax levied by
some local and state governments at the time legal
instruments such as deeds and mortgages are entered
into public record. Prior to January 1, 1968, there
was a requirement for U. S. revenue stamps on deeds
at the rate of $.55 per $500.
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DOG A parcel of real estate that
is very difficult to sell due to location, condition,
or design. Such property normally remains on the market
for an extended period of time and may sell at substantially
below the listing price.
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DOMICILE The legal residence of
a person. A person has only one domicile, which is
the place to which he or she intends to return, even
though he or she may now reside someplace else.
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DOMINANT ESTATE The tract of land
that benefits as a result of an easement on a servient
estate.
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DONEE The recipient of a gift.
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DONOR The giver of a gift.
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DOUBLE-DECLINING BALANCE DEPRECIATION
In accounting, an accelerated depreciation method
restricted to certain qualified properties. The method
calculates depreciation at twice the rate of the straight-line
method on a balance that is reduced each year as the
depreciation is taken.
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DOUBTFUL TITLE A situation in which
there exists some doubt as to the validity of title
a court will not force a purchaser to accept title.
In contrast, a court will compel a purchaser to accept
a marketable title when the purchaser has previously
agreed to buy the property.
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DOWER A legal life estate, recognized
in some states, that a wife acquires in her husband's
fee simple property. Conventionally, this right was
a life estate in one-third of all the property that
the husband owned at any time during the marriage.
While the husband was alive this right was inchoate
or an expectancy. This expectancy could not be defeated
by the husband by sale or mortgage. In order to convey
property which was freed from the dower interest,
the wife had to sign a release. When the husband died,
the wife's interest was called consummate, and she
was entitled to one-third of the property to be held
in life estate, despite any will provisions which
sought to dispose of the property otherwise. Most
states have abolished dower because of the uncertainty
this right has placed on title assurance. Other states
have created substitutes such as community property
or a statutory share in lieu of dower. Some states
give the widow a one-year's support which could conceivably
tie up all of the husband's estate until the right
was exercised. Other states give the widow 25 percent
to 50 percent of the estate. However, if the husband
sells his property before his death then there will
be nothing for the wife to receive under the statutory
share. In some states the husband as well as the wife
is entitled to dower rights.
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DOWN PAYMENT The amount of cash
paid by a purchaser which when added to the mortgage
amount equals the total sales price. At the time of
closing this is referred to as the purchaser's equity.
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DOWNSIDE RISK The probability that
an investor may lose the money he or she has invested
in a particular venture.
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DOWNZONING Action by a local government
to reduce the allowable density for a parcel of land,
as for example, from apartment to single-family residential.
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DRAGNET CLAUSE A clause included
in a mortgage instrument which extends the lien of
the mortgage to any and all other debts, both past
and future, of the borrower.
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DRAIN A ditch or other means by
which water flows off land. A landowner may not obstruct
or divert the natural drain of water to the detriment
of another landowner.
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DRAW An advance of money, as for
example the periodic receipt of money by a builder
from a lender under the stipulations of a construction
loan to pay for labor and materials. The term also
refers to a practice by some brokers to advance money
to certain salespersons with the money being repaid
from future commissions.
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DREI Designated Real Estate Instructor.
A designated awarded by the Real Estate Educators
Association to persons involved in real estate education.
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DRY MORTGAGE A mortgage in which
the lender has a lien on the property but does not
have any recourse against the borrower in case of
default. Such a mortgage is commonly known as a non
recourse loan.
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DUALAGENCY Action by an agent in
a principal-agent relationship resulting in the agent
representing the third party and, thus, creating two
principals. As such, the agent is in violation of
agency law which requires that he or she represent
the principal, not the third party. A principal-agent
relationship establishes a fiduciary relationship
which means that the agent owes his or her loyalty
to the principal. In addition, in most states the
real estate licensing law prohibits a licensee from
representing both buyer and seller in the same transaction.
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DUE DATE A date set on which a payment
is to be paid. If the payment is not made on or before
the due date, then it is past due. Most real estate
loans carry with them a first of the month due date
as well as a grace period up to fifteen days during
which time the payment can be made without penalty.
The last day of the grace period is known as the delinquency
date and payment after that date normally must also
include a past payment charge.
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DUE-ON-SALE CLAUSE A clause included
in many mortgages permitting the lender to require
the borrower to repay the outstanding balance when
the property is sold. Also known as a non assumption
clause, the effect is that mortgages with such a clause
are non assumable unless the lender permits the assumption.
The lender may allow the mortgage to be assumed only
after adjusting the interest rate to reflect current
market conditions. All FHA and VA mortgages are assumable.
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DUMMY Someone who buys or holds
legal title to property on behalf of someone else.
In certain instances, the true buyer wishes to keep
his or her true identity hidden and thus someone else
is used to purchase the property.
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DUPLEX A house divided into two
dwelling units with separate living facilities. The
units may be side-by-side or one on top of the other.
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DURESS The use of force or improper
actions against a person or property in order to induce
a party to enter into a contract. Examples of duress
include blackmail, extortion, unlawful retention of
property, a threat to bring criminal action, or threats
against family.
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DWELLING The building in which a
person lives.
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DWELLING UNIT Used in zoning ordinances
and building codes to denote the room or rooms joined
for occupancy by a family and containing a kitchen.
rast with tract house.
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