MAI Member,
Appraisal Institute. A professional designation awarded
by the Appraisal Institute to persons who have met
minimum education, experience, and demonstration requirements
in the areas of valuation and appraisal.
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MAINTENANCE The act of keeping a
building in general repair. Lack of proper maintenance
will result in a loss in value.
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MAINTENANCE COSTS The expenditure
necessary to keep a building and grounds in general
repair. Such costs appear on an income statement as
an operating expense and are the responsibility of
the property manager. While maintenance costs vary
greatly from property to property, there is some degree
of uniformity with like-like properties. As such,
investors and lenders often examine the history of
maintenance costs as an indication of how a specific
property has been maintained.
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MAINTENANCE FEE Payment made by
the unit owner of a condominium to the homeowner's
association for expenses incurred in the maintenance
and upkeep of the common areas. The fee is ordinarily
collected monthly and failure to pay can lead to liens
being placed on the individual unit, attachment, and
foreclosure.
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MALL Part of a retail shopping area
set aside for pedestrian traffic.
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MANAGEMENT AGREEMENT An employment
contract between the owner of real estate and a property
management firm that agrees to oversee the management
of the property. As is true in any business agreement,
the property manager or management firm and the owner
of the property should enter into a formal contract.
The management contract should include the responsibilities
specified in the employment agreement, the term and
period of the contract, the management policies to
be followed, the power and authority of the property
manager, and the compensation for the management services.
Normally, a property manager's compensation is an
agreed-upon percentage of gross income. The range
can vary from a very small amount, perhaps one percent
on a large structure, to as much as ten or fifteen
percent on a single-unit house.
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MANAGEMENT FEE The agreed-upon compensation
paid to a property management company for managing
a real estate project. The fee is usually based on
a percentage of effective gross income.
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MANAGEMENT PLAN A written report
of what the property management company hopes to accomplish
and how it intends to do so. Before assuming the management
of a piece of property, a long-range plan should be
developed. However, before the plan can be developed,
an analysis has to be made of the owner's objectives.
Certainly, the property manager has to be confident
that these objectives can be met. A physical inspection
of the property itself has to be made, and the property
manager needs to understand existing market conditions
regarding competition, rental structures and operating
expenses.
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MANUFACTURED HOUSING A housing unit
primarily constructed in a plant or factory prior
to transporting it to the lot where it is set. Manufactured
housing can be delivered in various stages of production
which offers the purchaser the flexibility of buying
the "shell" up to and including purchase
of a completely finished unit. Cost per square foot
for manufactured housing is normally considerably
less than comparable costs for stickbuilt structures.
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MANUFACTURED HOUSING INSTITUTE This
trade organization represents the manufacturers and
dealers of mobile and modular homes throughout the
United States. The institute's headquarters is 1745
Jefferson Davis Highway, Arlington, Virginia 22301;
(703) 979-6620.
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MARGINAL LAND Land which for one
or more reasons is incapable of producing much income
given the costs that would be incurred to produce
the income. Examples of deficiencies would include
poor access, steep terrain, inadequate drainage, and
oddshaped lots.
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MARGINAL TAX BRACKET The rate of
federal income tax that will apply to the next increment
of taxable income.
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MARGINAL UTILITY The addition to
total utility of the last unit of a resource.
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MARINA A docking and servicing for
boats and equipped to provide repair service, gasing,
and supplies.
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MARKET The economic function of
bringing buyers and sellers together through the price
mechanism.
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MARKETABLE TITLE Title to property
which is free from reasonable doubts or objections
and which the courts would compel a purchaser to accept
under the terms of a sales contract.
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MARKETING PLAN A report detailing
the means by which a parcel(s) of real estate will
be sold. The plan, if developed properly, will identify
the target market, establish how and when the property
will be shown and, generally, cover the total marketing
of the property. Such a plan, while it may be used
for a single parcel such as a home, is very commonly
used in association with timesharing and second home
sites. The marketing plan should be developed prior
to the property being available for purchase.
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MARKET PRICE The amount of money
actually paid in a transaction.
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MARKET RENT The rental income that
a property is likely to command in the current market.
Market rent, also referred to as economic rent, may
be either higher or lower than what the property is
actually renting for under the terms of a lease.
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MARKET RENTAL RISK The probability
that market rental rates will change, affecting the
value of a property that is subject to fixed rent.
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MARKET SEGMENTATION The identification
and analysis of submarkets within a larger market.
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MARKET STUDY An analysis of activities
in a market in regard to such influences as location,
demand, and competition which may or may not affect
the value of property.
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MARKET VALUE The price in terms
of cash or its equivalent upon which a willing buyer
and a willing seller will agree, where neither is
under any undue pressure and both are typically motivated,
have adequate knowledge, and are acting in their own
best interest. This concept of value assumes that
there is sufficient activity in the marketplace to
generate enough buyers and sellers so that no one
of them controls the price. Each party is also acting
in his or her best interest and is fully informed
as to market conditions. Finally, individual financing
and taxation consequences are not considered, the
property is exposed on the market for a reasonable
period of time, and the seller is capable of conveying
marketable title. Market value is an ideal standard
which is very seldom achieved in real-world real estate
markets; nevertheless, this is ordinarily the objective
of most appraisals.
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MASS APPRAISING Simultaneously appraising
a large number of parcels of real estate. Such a technique
is sometimes done by appraisal firms employed by a
local government to reappraise property for the purpose
of estimating assessment values for property tax purposes.
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MASTER AND SERVANT RELATIONSHIP
A relationship between two people in which the employer
is liable for actions or wrongdoings on the part of
the employee. In a principal-agent relationship, the
test to determine if a principal will be liable for
the actions of an agent is whether the agent is a
servant or an independent contractor. If the principal
and agent are in a master-servant relationship, the
law will impose vicarious liability on the master
for torts committed by the servant while in the scope
of the master's employment.
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MASTER LEASE The dominant or main
lease in a building or development in which a sublease
exists.
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MASTER PLAN A program for the future
development of a community which serves as the guidelines
for capital expenditures.
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MASTER POLICY An insurance policy
that covers a number of parcels of real estate rather
than one parcel, as is normally covered with an insurance
policy.
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MATERIAL BREACH A violation of a
contract of such nature or importance that the innocent
party may rescind the contract as well as recover
damages.
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MATERIAL FACT Any fact which, if
known, would affect the judgment of one or more of
the parties to a transaction.
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MATURITY The date when a note or
negotiable instrument is due and payable.
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MAXIMUM LOAN AMOUNT The largest
dollar figure in terms of how much money can be borrowed
under a specific government program, such as a subsidized
housing program or an project.
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MEANDER LINES A measurement used
in surveying to denote the boundary line of a stream
showing the natural course of the stream.
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MEAN HIGH TIDE The average of all
the high tides as calculated over a long period of
time.
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MEAN SEA LEVEL A frame of reference
assumed to be at zero elevation used in the surveying
of land. Elevations above zero elevation are positive
and those below zero elevation are negative.
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MECHANIC'S AND MATERIALMAN'S LIENS
Statutory liens levied on property by persons who
are not compensated after Providing labor (mechanic)
or material (materialman) for the improvements to
the property. Both types of liens are commonly referred'
to as mechanic's liens. The mechanic's lien is justified
on the equitable theory that work or materials provided
by contractors add to the value of the improvements
and increase the value of the land. Because of this
theory, work and materials must become permanently
attached or incorporated into the land or improvements.
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MEETING OF THE MINDS A mutual agreement
or assent between the parties as to the terms and
conditions of a contract. To form a contract there
must be a 'meeting of the minds."
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MEGALOPOLIS A heavily populated
urban area that runs continuously through numerous
cities. An example would be the Eastern Seaboard of
the United States starting with Washington, D. C.,
and continuing through Baltimore, Philadelphia, New
Y, Boston.
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MENACE A threat of force or improper
action against a person or property in order to induce
a party to act.
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MERGER The absorption of one thing
into another.
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MERIDIANS Imaginary lines running
north-south which intersect with base lines to form
the reference points in the government survey method
of land descriptions.
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METER The basic unit of measuring
length in the metric system. A meter equals 39.37
inches.
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METES AND BOUNDS A method of land
description in which the dimensions of the property
are measured by distance and direction. This method
is the primary means of legally describing land in
some twenty states. To correctly use this method there
must be a definite starting point. This starting point
must be one that can be located by future surveyors,
thus it is necessary that it be as precise as possible.
Physical evidence of this point, referred to as a
monument, is often an iron pipe set in concrete which
in turn can be and often is referenced to a permanent
reference point such as a bench mark. Bench marks
are bronze discs permanently placed and precisely
identified by government survey teams. Monuments,
both natural and artificial, also include fences,
rivers and streams, trees, wooden stakes and road
intersections. However, none of these is as precise
as bench marks. Once the point of beginning (POB)
on the property has been established, boundary lines
are identified and described until the land being
surveyed has been "completely enclosed."
Boundary lines measure distance and direction. Where
two boundary lines cross, referred to as a comer,
a monument is often used to identify the intersection.
Distance is stated in terms of feet, normally to the
nearest hundredth (for example, 212.65 ). Direction
is given by its bearing, which shows the direction
of one object with respect to another object. The
bearing of a boundary line is the acute angle (an
angle of less than 90 degrees) the line makes with
a meridian (an imaginary line running north to south
extending from the North Pole to the South Pole).
In land description, the bearings are identified with
reference to the quadrants on a compass and are expressed
in terms of degrees, minutes, and seconds. A circle
contains 360 degrees, 1 degree contains 60 minutes,
and each minute contains 60 seconds. The circle is
divided into four quadrants, each containing 90 degrees.
The quadrants are identified by their boundary lines,
namely Northeast (NE), Northwest (NW), Southeast (SE),
and Southwest (SW). For each boundary line set in
a metes and bounds description, the distance of the
line, the direction of the line, and the monument
used to mark the end of the distance should be clearly
and precisely stated in the legal description.
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METROPOLITAN AREA The land in and
around a city. The area may cross both county and
state lines, as for example, Washington, D. C., which
includes parts of Virginia and Maryland.
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METROPOLITAN STATISTICAL AREA (MSA)
A reference to a geographic area which contains at
least 50,000 residents within a total metropolitan
population of at least 100,000. Historically, such
an area has been referred to as a Standard Metropolitan
Statistical Area (SMSA).
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MIDDLEMAN A person who brings parties
together for the purpose of entering into a contract
such as the borrowing of money to finance a real estate
project. Normally, the middleman is paid a fee, often
referred to as a finders fee, if and when the parties
enter into an agreement.
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MILE A measure of length equaling
5,280 feet, 1,760 yards, 1,609 kilometers, or 8 furlongs.
Such a measurement is a statute mile, whereas a nautical
mile contains 6,080 feet.
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MILITARY CLAUSE A clause included
in a lease of residential property which allows the
tenant to terminate the lease without penalty if and
when the tenant is transferred to another location.
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MILL One-tenth of one cent. Property
taxes in many jurisdictions are stated in mills.
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MILLAGE RATE A tax rate stated in
tenths of a cent.
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M!NERAL DEED A conveyance by an
owner of the subsurface rights to his or her property
while reserving the surface and air rights to the
property.
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MINERAL LEASE An agreement entered
into by an owner permitting another party to explore
for and, if found, extract minerals in consideration
of the payment of a rent or royalty.
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MINERAL RIGHTS The right to share
in the sale of minerals that may be extracted from
one's land.
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MINIMALL A shopping area consisting
of small specialty stores and absent of any anchor
tenants, such as one of the national retailers.
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MINIMUM-GUARANTEED PERCENTAGE LEASE
A type of percentage lease that provides the lessor
(landlord) a minimum rent regardless of the amount
of sales. The minimum guarantee is referred to as
a 'floor," referring to the fact that the rent
cannot fall below that amount.
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MINIMUM LOT SIZE A provision of
a zoning ordinance stipulating the minimum dimensions
of a lot necessary for the construction of a building,
for example, two-acre lots for each residence.
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MINIMUM PROPERTY STANDARDS Minimum
construction and location requirements that must be
met before the Federal Housing Administration (FIL4)
will underwrite a loan for residential property.
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MINIMUM RENT The least amount of
rent due from a tenant under a lease with a varying
rental schedule.
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MINIWAREHOUSE A one-story structure
partitioned into individual units for use by individuals
and businesses to store personal belongings. Individual
units are normally rented on a month-to-month basis
with the rent charged varying with the unit size.
Units vary in size from 50 or 60 square feet up to
500 square feet.
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MINOR An infant or person who has
not attained the age of majority and thus does not
have the legal capacity to be bound by most contracts.
Most contracts entered into by a minor are voidable
at the minor's option. However, a minor may choose
to ratify a contract after achieving the age of majority.
A minor or infant is bound to pay the reasonable value
of necessities. Necessities include food, shelter,
and clothing which are appropriate for a person in
the minor's station of life.
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MISDEMEANOR An offense or crime
lower or less than a felony.
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MISNOMER Mistake in name. Normally,
when a mistake in name occurs in a deed a correction
deed, also known as a deed of confirmation, is used
to correct the error.
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MISREPRESENTATION An innocent or
negligent misstatement of a material fact detrimentally
relied upon by an innocent party. If a person makes
a misrepresentation and later learns of the mistake,
a duty then arises to inform the person who is detrimentally
relying on the misrepresentation. Failure to do so
is fraud
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MISTAKE An unintentional error or
misunderstanding. Certain kinds of mistakes are grounds
for rescinding a contract; others are not. Mistakes
are classified as unilateral or mutual. A unilateral
mistake is a mistake of a material fact involving
a contract made by just one of the parties. If only
one of the parties is mistaken as to a material fact,
the mistake is not a defense unless the other party
is chargeable with knowledge of the mistake. Whether
or not the mistake is chargeable is judged by a "reasonable
man" standard; that is, whether a reasonable
person would believe that the other party made a mistake.
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MIXED-USE COMMERCIAL PROJECT A real
estate development that contains two or more different
uses all intended to be harmonious and complementary.
An example would include a high-rise building with
retail shops on the first two floors, office space
on floors three through ten, apartments on the next
ten floors, and a restaurant on the top floor.
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MOBILE HOME A manufactured unit
constructed on a chassis and wheels and designed for
permanent or semi-attachment to land.
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MOBILE HOME LOAN A loan acquired
for the purchase of a mobile home. Certain lenders,
although not all, make loans on mobile homes. Typically,
the amount financed is for much less than the average
residential loan, and the amortization period is much
shorter, perhaps seven to ten years, even though longer
terms are available under both FHA and VA financing.
The amortization period is usually shorter since,
unlike a permanent home, a mobile home normally depreciates
in value, and thus, the lender wants to be repaid
over a shorter period of time. A fear of some lenders
is that since mobile homes are not permanently affixed
to the land, the security for the loan, the mobile
home, can be moved by a dishonest borrower. Thus,
not all lenders make mobile home loans.
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MOBILE HOME PARK A parcel of land
zoned and developed for use by occupants of mobile
homes.
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MODEL HOME A house built and used
by a builder to demonstrate quality of construction,
floor plans, styles, and amenities that are to be
available in other homes available for sale by the
builder. Quite often a builder will construct one
or more model homes at the entrance to a subdivision.
Once the other homes have been built and sold, the
model homes are placed on the market and sold as residences.
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MODULAR HOUSING A form of housing
in which construction of the unit takes place at a
factory, followed by the assembling of the house on
the building site. Cost per square foot is considerably
less due in part to the design which allows for little
waste of materials and provides efficiency during
construction.
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MONEY MARKET The short-term financial
market which brings together investors who wish to
invest in assets maturing in a short period of time
and users of capital who wish to raise funds by selling
short-term instruments. Treasury bills and commercial
are examples of money market instruments. MONUMENT
Physical evidence, either natural or manmade, which
has been established as the boundary(s) for a parcel
of land. Land is sometimes described by monuments
which serve to identify the boundaries of the subject
parcel. This method, while quite common in older descriptions
in rural areas, relies on the use of both natural
and artificial monuments. Land description by monuments
is considered less exact than a description by metes
and bounds since the boundaries used are sometimes
something not permanent, for instance, a river bed
or a pile of rocks. Oftentimes reference is made to
land owned by someone else, for instance, a neighbor's
farm.
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MORATORIUM In regard to the development
of land, a temporary suspension or delay in the granting
or approval of building permits, sewer and water hookups,
or rezoning requests. Such action may be initiated
by a local government to allow time for a comprehensive
growth management study which will be used to assist
in formulating future growth plans.
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MORE OR LESS Used in the legal description
of land to denote that the total acreage given in
the description is an approximation.
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MORTGAGE An interest created by
a person in regards to a particular property to secure
the payment of a debt or performance of some other
obligation. This interest may be a lien or a conditional
title interest subject to defeasance when the debt
is paid or the obligation fulfilled. A borrower who
gives a mortgage is called a mortgagor and the lender
who receives the pledge is called the mortgagee. It
is important to realize that the mortgage is given
by the borrower, not the lender. The term "mortgage"
is derived from the Old French term 'mort' meaning
dead and "gage" meaning pledge. Thus, when
a mortgage note is paid off, the pledge is canceled
or becomes dead.
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MORTGAGE-BACKED SECURITIES Securities
purchased by investors that are secured by mortgages.
Such securities are also known as pass-through securities
since the debt service paid by the borrower is passed
through to the purchaser of the security.
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MORTGAGE BANKER A financial middleman
who, in addition to bringing borrower and lender together,
makes loans, packages them, and sells the packages
to both primary and secondary investors. If a mortgage
banker is not financially strong enough to package
the loan, financial help is sought from a lender,
typically a commercial bank. The bank becomes a warehouse
for mortgage money, and the mortgage banker draws
on these funds until payment is received from the
investors. Usually the mortgage banker continues to
service the loan (collect debt service, pay property
taxes, handle delinquent accounts, etc.) even after
the loan has been packaged and sold. For this management
service a small percentage of the balance paid to
the investor goes to the mortgage banker. Obviously,
the success of the mortgage banker depends upon the
ability to generate new loans. In some geographic
areas mortgage bankers are the primary source for
financing real estate. All mortgage bankers try to
stay in constant touch with investors and are aware
of changing market conditions and lender requirements.
Quite often the loan origination fee or finder's fee
charged the borrower is more than offset by a lower
interest rate from a lender not directly accessible
to the borrower. Mortgage bankers are involved in
both commercial and residential financing and also
carry out related activities, such as writing hazard
insurance policies, appraising, and investment counseling.
As with mortgage brokers, mortgage bankers are regulated
by state law.
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MORTGAGE BANKERS ASSOCIATION OF AMERICA (MBA)
The Mortgage Bankers Association of America is the
primary trade organization of the mortgage bankers
and brokers in the United States. The association
provides numerous seminars and publications for its
membership and sponsors the designation CMB (Certified
Mortgage Banker). The headquarters is 1125 15th Street,
N.W., Washington, D.C. 20005; (202) 861-6500.
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MORTGAGE BOND PROGRAM A means of
providing financing for real estate through the proceeds
of issuing tax-exempt bonds. Since the bonds are tax-exempt,
the interest rate paid when the bonds are sold is
less than other bond rates. This, in turn, means that
the money made available to the ultimate borrowers
will be at a below-market rate of interest.
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MORTGAGE BROKER A person who brings
together a user of capital (borrower) and a supplier
of capital (lender) and in return is paid a finder's
fee. A finder's fee equal to one percent or so of
the amount borrowed is normally paid by the borrower.
Thus, the financial success of the mortgage brokerage
firm depends upon the ability to locate available
funds and to match these funds with creditworthy borrowers.
Certain sources of funds, particularly insurance companies,
do not always deal directly with the person looking
for capital; rather, they work through a mortgage
broker. Thus, if you wish to borrow from certain lenders
you would need to go through a mortgage broker. Normally,
the mortgage broker is not involved in servicing the
loan once it is made and the transaction is closed.
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MORTGAGE COEFFICIENT A multiplier
used in certain income property appraisal techniques
to compute a capitalization rate. In the Ellwood Technique
for appraising property the mortgage coefficient is
designated by the symbol "C."
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MORTGAGE COMMITMENT An agreement
whereby a mortgage lender agrees to fund a certain
mortgage loan and a borrower agrees to comply with
its requirements.
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MORTGAGE CONSTANT The relationship
between annual mortgage loan requirements and the
initial mortgage loan principal, expressed as a decimal
or percentage, for level-payment mortgage loans.
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MORTGAGE CORRESPONDENT A person
authorized to represent a financial institution in
a particular geographic area for the purpose of placing
loans.
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MORTGAGEE A lender who receives
a pledge of property to secure a debt.
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MORTGAGEE IN POSSESSION A lender
or creditor who has taken over property after default
for the purpose of collecting rents and conserving
the property until foreclosure.
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MORTGAGE-EQUITY TECHNIQUE A technique
for estimating the value of income-producing property
based on the sum of the mortgage principal added to
the discounted present value of the forecasted cash
flow and the reversion to equity.
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MORTGAGE GUARANTY INSURANCE CORPORATION (MGIC)
A private insurance company which insures a certain
percentage of a conventional loan, thus reducing the
lender's risk on a high loan-to-value ratio. MGIC,
or 'MAGIC" as it is commonly known, was established
in 1957 to offer a borrower on a conventional loan
what FHA offers on its insured loans.
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MORTGAGE INSURANCE COMPANIES OF AMERICA
A trade association comprised of the nation's private
mortgage insurance companies. The address is 1615
L Street, N.W., Washington, D.C. 20006; (202) 785-0767.
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MORTGAGE INSURANCE PREMIUM (MIP)
The charge paid by the borrower to cover the cost
of a mortgage insurance policy under an FI-L4 insured
mortgage. The insurance policy provides protection
for all or a certain percentage of the loan amount
to the lender in case of default by the borrower.
Historically the premium was paid each month as part
of the mortgage payment; but, in recent years it has
been paid either in cash at closing or financed and
repaid as part of the total amount borrowed.
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MORTGAGE INTEREST DEDUCTION An allowable
tax deduction for persons who itemize their federal
and state income tax returns. Interest paid on a mortgage
loan(s) up to the cost of one's home plus the cost
of any improvements is deductible. Any interest on
debt above that amount is not deductible unless used
for medical expenses, education, or home improvements.
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MORTGAGE LIFE INSURANCE A decreasing-term
life insurance policy purchased by a borrower which
will pay off the outstanding balance in the event
of the death of the borrower (mortgagor). The premium
is paid as part of the monthly mortgage payment.
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MORTGAGE LOAN SERVICING The process
of collecting periodic mortgage payments and escrow
funds, paying property taxes and insurance, and overseeing
the administration of a loan over its life.
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MORTGAGE LOAN UNDERWRITING The process
of reviewing an application for a loan and making
a recommendation as to the desirability and risk of
the lender making the loan. The underwriting process
is an integral part of the lending process.
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MORTGAGE PORTFOLIO The total of
all mortgages held by a lender.
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MORTGAGE SECURITIES POOL A technique
by which securities backed by the value of specific
real estate mortgages are issued in the financial
market for investment purposes. Such securities, because
they are mortgage-backed, are more marketable and
generally are issued with a lower rate of interest
than if no such backing existed.
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MORTGAGE VALUE The value of an asset
for purposes of securing a mortgage loan. The term
is also used to denote the market value of a mortgage
loan.
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MORTGAGING OUT Acquiring 100 percent
of the funds necessary to acquire or develop a project;
thus, the buyer/developer does not have to put up
any up-front cash and has no equity in the property.
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MORTGAGOR A borrower who pledges
property through a mortgage to secure a loan.
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MOST PROBABLE SELLING PRICE The
likely price a property will bring, given current
market conditions, buyer and seller motivations, and
the financing terms that are likely to be employed.
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MOTEL A facility which offers lodging
for the general public.
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MULTIFAMILY HOUSING A structure
consisting of housing units for a number of different
family units. Quite often zoning ordinances require
a special zoning classification for multifamily housing.
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MULTIPLE DWELLING A structure containing
more than two units designed for accommodating households.
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MULTIPLE LISTING SERVICE (MLS) A
marketing service in which many brokers pool all of
their listings and establish procedures for sharing
commissions. Generally, multiple listing services
(MLS) require that property owners sign an exclusive
agency or exclusive right to sell listing with participating
listing brokers in order to have access to the marketing
pool.
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MULTIPLE REGRESSION A mathematical
technique used in estimating the amount of value for
a subject property based on known variables and prices
for comparable properties.
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MULTIPLIER A rate to be multiplied
by an amount.
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MUNICIPALITY A local government,
commonly referred to as a city or town.
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MUNICIPAL ORDINANCE A law or rule
such as a zoning ordinance or building code enacted
by a municipality for the purpose of conducting the
affairs of the municipality.
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MUNIMENTS OF TITLE Written evidences
of title such as a deed which an owner of land possesses
and could use to prove his or her title to the land.
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MUTUAL ASSENT The combination of
the offer and acceptance which together form the terms
of a contract.
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MUTUAL RESCISSION A means of discharging
a contract by which each party agrees to release the
other party in exchange for his or her own release.
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MUTUAL SAVINGS BANKS A source of
financing real estate for residences. Located primarily
in northeastern states, the mutual savings banks are
an important supplier of real estate financing. As
their name indicates, these banks are owned by their
depositors, who receive interest on their deposits.
All mutual savings banks are state chartered and typically
are less regulated than their closest financing relative,
the savings and loan association. The percentage of
their assets invested in real estate mortgages is
less than the average S&L, although a higher percentage
of their total mortgage portfolio is FHA and VA loans.
Most mutual banks have a relatively larger percentage
of their mortgage loan portfolio invested in multi-family
mortgages. Mutual banks also make personal loans and
interstate loans, which can result in capital being
moved from surplus areas to deficit areas. Over two-thirds
of the mutual banks maintain membership in the FDIC.
The remaining ones are insured by state savings insurance
agencies. These state agencies exercise authority
over both the type of investments and the amount of
their assets mutual banks can invest in particular
types of real estate.
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