SAFE RATE
A rate of return on investment that can be earned
through relatively risk-free investments.
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SALE AND LEASEBACK (SALE-LEASEBACK)
A technique used by owners of property as a means
of raising capital. The process involves the simultaneous
selling and leasing back of the property, usually
through a net lease. The advantages to the seller
include the freeing of capital previously tied up
in the project and the inclusion of the rental payment
as a legitimate operating expense for income tax purposes.
For the investor, the rental payment represents a
return on investment and any depreciation for tax
purposes or increases in value due to market conditions
accrue to the investor.
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SALE OF PERSONAL RESIDENCE BY ELDERLY
A provision in the federal income tax law which allows
for a forgiveness of $125,000 in capital- gains taxes
for taxpayers 55 years or older who sell their principal
residence. To qualify, a taxpayer must be at least
55 years old on or before the date of the sale. The
house must have been the principal residence in at
least three of the five years preceding the sale.
If married, only one spouse must be 55 years old,
but both must join in making the election. If filing
separately, each spouse is only allowed half the exclusion
or $62,500.
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SALES ASSOCIATE A licensed real
estate salesperson or broker who is employed by and
works on behalf of a real estate broker.
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SALES COMPARISON APPROACH A means
of estimating value by comparing recent sales of comparable
properties to the subject property after making appropriate
adjustments for any differences. Also known as the
market (sales) approach, this method is effective
in an active market in which sales comparables can
be identified and information collected. The comparable
properties selected should be substantially similar
to the subject property and should be arms-length
transactions.
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SALES CONTRACT An agreement by which
the buyer and seller agree to the terms and conditions
of a sale
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SALESPERSON A person licensed by
a state real estate commission to perform on behalf
of any licensed real estate broker any act or acts
authorized to be performed by the broker. This is
the person often carelessly or casually referred to
as an agent.
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SALES PRICE The actual price agreed
to by the purchaser and seller. Also referred to as
gross price, the sales price is generally more than
the seller actually receives since both the sales
commission and all the seller’s closing costs
are subtracted before determining the net sales price
realized by the seller.
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SALVAGE VALUE The expected worth
of a piece of property at the end of its economic
life.
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SANDWICH LEASE A lease agreement
created when a lessee (tenant) sublets the property
to another person, thus creating a sublessor-sublessee
relationship. The person in the "sandwich"
is a lessee to one party and a lessor to another party.
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SATELLITE TENANT A smaller tenant
in a shopping mall. Such tenants are dependent upon
the larger and better-known tenants to attract customers
to the mall. Examples of satellite tenants include
cigar stores, candy stores, and specialty apparel
stores.
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SATISFACTION OF MORTGAGE A written
release issued by a mortgagee (lender) stating that
a mortgage has been paid in full.
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SAVINGS AND LOAN ASSOCIATION (S&L)
A supplier of mortgages, lending primarily on single-family
residential real estate. While savings and loan associations
(S&Ls) are not the largest financial intermediary
in terms of total assets, historically they have been
an important source of funds in terms of the dollars
made available for financing real estate.
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SAVINGS ASSOCIATION INSURANCE FUND (SAIF)
The fund operated through the Federal Deposit Insurance
Corporation (FDIC) which insures deposits of savings
and loan associations. SAIF was created as part of
the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 and replaced the Federal Savings and Loan
Insurance Corporation (FSLIC).
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SCARCITY An economic principle which
when used to explain real estate markets states that
while there is no physical shortage of land in the
United States, there are occasional shortages of economically
useful land at particular locations.
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SCENIC EASEMENT An easement created
for the purpose of preserving a certain view or to
prevent any construction on a particular site so as
to preserve the land in its natural state.
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SEAL An impression in wax or paper
to signify the formality of the execution of a legal
instrument. In earlier times the signature of a grantor
had to be under seal, particularly in times when many
people were unable to sign their own name. Today,
however, many states recognize the initials L.S.,
which means 'in place of the seal;' or the word, "seal,'
as a substitute. Other states have no requirement
for a seal unless a corporation is the grantor.
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SEASONED MORTGAGE A loan made a
number of years ago and in which the borrower has
been timely and consistent in payment of the mortgage.
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SECOND A quantitative measurement
used in the metes and bounds legal description method
represented by the symbol "'. An angle N 30'
10' 5" E would be read as "North thirty
degrees, ten minutes, 5 seconds Fast."
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SECONDARY FINANCING A loan secured
by a junior mortgage on property.
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SECONDARY MORTGAGE MARKET The means
by which existing first mortgages are bought and sold.
The secondary mortgage market provides a lender with
an opportunity to sell a loan before its maturity
date. The availability of funds for financing real
estate is affected by economic conditions both local
and national.
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SECONDARY MORTGAGE MARKET ENHANCEMENT ACT
OF 1984 Federal legislation that enhanced
the development of the private mortgage securities
markets, amended federal securities laws and preempted
certain state laws.
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SECOND MORTGAGE A mortgage that
is second in priority because of the time of recording
the mortgage or of the subordination of the mortgage.
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SECTION A quantitative measurement
of land used in the Government Survey Method equal
to one mile square, containing 640 acres. There are
36 sections in a township.
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SECURITY DEPOSIT A sum of money
held by a landlord from a tenant for the purpose of
securing the performance of the terms of the lease
by the tenant for such things as the payment of rent
and repair of damages caused by the tenant.
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SEE-THROUGH BUILDING A building
characterized by a high vacancy rate, perhaps 100
percent, and thus, you can "see" through
it.
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SEISIN (SEIZIN) Possession of land
by someone holding a freehold estate in the land.
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SELF-AMORTIZING MORTGAGE LOAN A
mortgage loan that requires level annual payments
adequate to meet interest requirements and fully repay
the principal over its term.
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SELLER FINANCING A loan made by
the owner of property to the purchaser to cover part
or all of the sales price. While common with both
residential and commercial real estate, seller financing,
or owner financing as it is also called, becomes a
very popular means of "making the deal work"
when interest rates are high. During such times, the
purchaser who is unable to qualify for a loan from
a traditional lender often turns to the seller and
makes an offer to purchase contingent upon seller
financing.
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SELLER'S MARKET An economic situation
in which demand is greater than supply. The result
is greater opportunities for owners who may find someone
willing to offer the asking price or even a figure
greater than the asking price. During times of high
demand, particularly in local markets, stories appear
regarding the owner who had "five offers above
the asking price' before the property was put on the
market. In contrast, a buyer's market refers to a
situation in which demand is less than supply at which
time the advantages shift to the buyer.
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SELLING AGENT A real estate licensee
who finds the purchaser in a transaction even though
the agent did not actually list the property for sale.
The majority of residential listings, particularly
in metropolitan areas, become part of a multiple listing
service (MLS) which establishes a working and legal
relationship between the licensee who listed the property
and all other members of the MLS. By selling the property,
the selling agent is entitled to a certain agreed-to
percentage, normally 50 percent, of the real estate
commission.
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SEMENOW, ROBERT W. Author of Questions
and Answers on Real Estate, a comprehensive sourcebook
for answering problems encountered in the real estate
brokerage business. Semenow served for many years
as the executive vice- president of the National Association
of Real Estate License Law Officials (NARELLO).
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SEMIANNUAL T\vice a year at six-month
intervals.
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SEMIDETACHED HOUSING A dwelling
whereby one of the outside walls is shared with an
adjoining unit of similar style and size.
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SENIOR REAL ESTATE ANALYST (SREA)
A professional real estate designation awarded by
the Society of Real Estate Appraisers to persons who
have met minimum education and experience requirements
related to real estate value and investment analysis.
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SENIOR REAL PROPERTY APPRAISER (SRPA)
A professional real estate designation awarded by
the Society of Real Estate Appraisers to persons who
have met minimum education and experience requirements
related to the valuation and appraisal of income-producing
property.
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SENIOR RESIDENTIAL APPRAISER (SRA)
A professional real estate designation awarded by
the Appraisal Institute to persons who have met minimum
education and experience requirements related to the
valuation and appraisal of residential property.
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SEPARATE PROPERTY Property individually
owned by either husband or wife during the time of
marriage, as opposed to property jointly owned by
husband and wife.
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SERVICING FEE The periodic (monthly
or annual) payment made by the purchaser of a mortgage
to the mortgage banker who originally made the loan
for servicing the loan. The fee, which varies from
one-fourth to one-half percent of the outstanding
loan balance, covers the administrative costs of servicing
such as collection and payment of property taxes and
property insurance premiums.
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SERVICING (THE LOAN) The periodic,
normally monthly, collection of mortgage interest
and principal repayment and other mortgage- related
expenses, such as property taxes and property insurance.
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SERVIENT ESTATE The property or
parcel of land which is burdened by an easement.
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SETBACK REQUIREMENT(S) The distance,
normally measured in feet, back from the street or
property line upon which no permanent improvements
such as a building can be met. Setback requirements
may be publicly imposed through zoning ordinances
or privately imposed through deed restrictions or
covenants.
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SETTLEMENT The closing of a real
estate transaction at which time prorations and adjustments
are made between buyer and seller for the purpose
of concluding the transactions.
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SETTLEMENT BOOK A booklet given
by a lender to an applicant for a residential loan
entitled Settlement Costs and You. The book describes
the settlement procedures, the various services the
buyer needs, and information on the borrower's rights
under the Real Estate Settlement Procedures Act.
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SEVERALTY Individual ownership of
real estate. The word severalty or several in property
law means separate or severed. It should not be confused
with the normal usage of the word "several"
which means many. Owning land in severalty means owning
an estate or other interest in the land by separate
or individual right. An individual who is the sole
owner of property has exclusive right to the estate
without sharing the ownership of the estate with another.
The person who owns the estate in severalty is the
only one required to sign a deed to convey title,
unless an additional signature is required to release
some courtesy, dower, or homestead right which might
be recognized in a particular state. It is also possible,
however, for an estate to be owned in some type of
concurrent or multiple ownership.
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SEVERANCE Action that results in
the removal or separation of something from the land.
For example, the cutting of trees results in those
trees being severed from the land.
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SEVERANCE DAMAGE The loss in value
to the remaining tract or parcel of land resulting
from a partial taking of land through the power of
eminent domain.
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SHAKEOUT The activities taking place
in a real estate market during bad financial times.
Since real estate markets are unique, one segment
of the market, (for example, office buildings) may
be going through tough times while another segment,
such as single-family residential, is in the midst
of a boom period. The shake-out often results in marginal
projects going under as well as poorly-financed developers
and builders leaving the market.
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SHARED APPRECIATION MORTGAGE (SAM)
A mortgage in which the lender shares in the appreciation
or increased value of the real estate. Under such
an agreement, the lender receives a part of the gain
realized from a sale of the property and in exchange
the lender typically reduces the interest rate on
the loan. In the event the property is not sold by
a predetermined date, a provision is normally included
in the mortgage which provides for an independent
appraisal of the property by a third party. The value
estimated by the appraisal is then used to determine
the amount of gain due the lender by the borrower.
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SHELL LEASE A type of lease arrangement
under which the lessee (tenant) rents the shell of
a building and agrees to make the necessary interior
improvements such as wiring and plumbing, walls, painting,
and carpeting.
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SHERIFF'S DEED A deed given to a
buyer when property is sold through court action in
order to satisfy a judgment for money or for foreclosure
of a mortgage.
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SHERIFF'S SALE A forced sale of
property, the proceeds of which are used to satisfy
the unpaid claims of the debtor. The legal conveyance
of any property sold during the sale will be done
by a sheriffs deed.
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SHOPPING CENTER A type of retail
space consisting of various stores and normally located
on enough land to provide off-street parking.
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SHORT RATES An insurance concept
relating to the fact that the insured party under
an insurance policy has the right to cancel a policy
at any time. Written or oral notice must be received
by the insurance company, and any unused part of the
premium is refunded. However, the refund is normally
less than the straight pro rata charge since upon
cancellation insurance companies calculate the used
portion based on short rates. Short rates are higher
than pro rata charges and thus the percentage refunded
is not the same as the percentage of the unused term
of the coverage.
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SILENT PARTNER A participant in
a partnership whose name is unknown to the public
but who nevertheless shares in the proceeds of the
partnership.
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SIMPLE INTEREST Interest earned
only on the initial principal, not on the accrued
interest.
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SINGLE AGENCY The action on the
part of a real estate broker to represent either the
buyer or the seller but never both parties in the
same transaction.
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SINGLE-FAMILY RESIDENCE (UNIT) A
housing unit designed and maintained for occupancy
by only one family. Zoning ordinances as well as subdivision
regulations often limit the use that can be made of
certain land to that of single-family residences.
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SINKING FUND Periodic deposits of
money into an account that, with its interest earnings,
will be used to replace assets or to retire loans.
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SIOR A professional designation
denoting Specialist in Industrial and Office Really
earned by industrial and office Realtors who have
established a creditable track record in either industrial
or office real estate transactions for seven years.
Candidates also complete required course work in addition
to fulfilling professional experience criteria. The
designation is awarded by the Society of Industrial
and Office Realtors, a professional affiliate of the
National Association of Realtors.
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SITE The location or place of a
plot of ground set aside for a particular type of
land use.
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SITUS A term used to refer to the
economic location of a particular parcel of land.
Economic location is an important factor in determining
the success or failure of real estate. The importance
of location is due largely to the fact that individuals
need specific types of land for specific uses at specific
places.
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SLUM A part or section of a city
or town generally inhabited by the very poor. Such
an area is normally characterized by a large amount
of deteriorated housing, poor public facilities, absentee
ownership, and a high incidence of crime.
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SOCIETY OF INDUSTRIAL AND OFFICE REALTORS
(SIOR) An affiliate of the National Association
of Realtors whose members specialize in the brokering
and marketing of industrial and office space. Active
members of the society, which in 1986 changed its
name from Society of Industrial Realtors to reflect
office property brokerage and marketing, are experienced
professionals who have a minimum of seven years of
industrial or office property sales experience and
have met a minimum volume of business requirements.
They are trained to match buyers and sellers of unusual
and complex industrial and office properties. The
society awards two professional designations: (1)
SIOR (specialist in industrial and office real estate),
and (2) P.R.E. (professional real estate executive).
The mailing address is Suite 400, 777 14th Street,
N.W., Washington, D.C. 20005-3271; (202) 383-1150.
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SOFT MARKET A market situation in
which there are few buyers and thus those that do
exist are apt to find a great deal of supply given
the limited demand.
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SOUTHERN BUILDING CONGRESS INTERNATIONAL,
INC. This group provides assistance and information
to local governments in their building code administration.
The headquarters is 3617 8th Avenue South, Birmingham,
Alabama 35222; (205) 591- 1853.
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SPEC HOUSE A home either currently
under construction or one finished by a builder in
which a Purchaser has yet to be found.
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SPECIAL AGENT A person limited in
authority to transact a single business affair or
a specific series of business affairs or to perform
restricted acts for a principal. Ordinarily, a real
estate broker is construed to be a special agent.
A person dealing with a special agent Must inquire
as to the scope of the agent's actual authority.
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SPECIAL ASSESSMENT An assessment
levied against property by a local jurisdiction when
property receives a special benefit which differs
significantly from the benefit that the public at
large receives.
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SPECIAL LIEN A claim against a particular
piece of property. Examples of special liens include
mortgages, mechanic's and material-man's liens, property
tax liens, and special assessments. In contrast, a
general lien is a claim against all of one's property,
both personal and real, such as a federal income tax
lien.
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SPECIAL-PURPOSE PROPERTY A type
Of improved land that due to certain layout and design
features has only one highest and best use. Examples
of special-purpose property could include a hospital
or school.
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SPECIFIC PERFORMANCE Action brought
about in a court of law to force a party to carry
out the terms and conditions of a contract.
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SPECIAL USE PERMIT A means by which
an individual is legally permitted to make use of
a parcel of land that is an exception to the zoning
ordinances.
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SPECIAL WARRANTY DEED A deed in
which the seller (grantor) warrants only against defects
of title that have occurred after the grantor acquired
title. Because sellers are often reluctant to assume
the risk of title defects which may have occurred
prior to their acquisition of the title, they will
limit their liability by giving a special warranty
deed rather than a general warranty deed. The special
warranty deed does not contain the covenant of warranty
of title. Instead, the grantor will warrant against
defects that have occurred after the grantor acquired
title.
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SPECIFICATION A legal remedy by
which a court of law can order a contract to be performed
as agreed to by the parties to the contract. Such
remedy is available when the subject of the contract
is a unique good. Since by definition all real estate
is considered unique, the remedy of specific performance
is available to both the purchaser and seller of real
estate in case one of the parties attempts to default
on the contract. The term is also used to denote written
instructions and information made available to the
contractor of a building detailing the type of construction,
material to be used, and details as to building design,
etc.
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SPECULATIVE BUILDER A person who
constructs or builds real estate without having a
definite purchaser or tenant under contract at the
time construction begins. The builder begins the construction
with the opinion that due to the location of the property,
quality of construction, and/or general business conditions
a purchaser or tenant will step forward prior to completion
of the project. Speculative building is particularly
common in the housing industry, especially during
times of low interest rates and increases in the demand
for housing. In contrast, a contract builder has entered
into a contract with someone to build or construct
a structure for them.
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SPECULATOR A person who acquires
title or legal control of real estate with the belief
that due to changing market conditions the property
can be sold at a future date for more than what was
initially invested. Such action is particularly common
in viable real estate markets where cities or communities
are growing rapidly and the direction of growth is
toward a particular part of the city.
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SPILLOVER EFFECT The economic impact
felt by one parcel of land as a result of changes
or modifications of other parcels. Such changes can
be the result of both private and public expenditures.
Consider, for example, the impact of building a freeway
interchange next to a parcel of land, or the impact
of an adjoining property owner developing a large
shopping center. These modifications and the resulting
spill-over effect will in all likelihood change the
highest and best use of the surrounding real estate.
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SPLITTING FEES The means by which
a person shares compensation with one or more other
persons. Generally, a licensed real estate broker
can split a commission with any other licensed real
estate broker or with any salesperson licensed on
his or her behalf. Splitting fees with salespersons
licensed through other brokers without going through
the licensed broker is illegal, as is splitting a
fee or making compensation to any unlicensed person
for assisting in the transaction.
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SPOT ZONING A rezoning of a particular
parcel of land to a zoning classification which is
significantly different from the adjoining properties.
Generally, spot zoning involves a relatively small
parcel of land. Such action has normally not been
favored by the courts unless it can be shown that
such action is in line with the general comprehensive
master plan of the jurisdiction.
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SPREADING AGREEMENT An agreement
by a mortgagor (borrower) to place additional property
under the provisions of an existing mortgage. The
purpose of such action is to give the mortgagee (lender)
additional security for a loan.
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SQUARE-FOOT METHOD A technique used
to estimate the total cost of construction in which
the total number of square feet to be constructed
is multiplied by a cost per square foot figure to
derive total cost. Builders and architects have some
idea as to what a particular type of construction
will cost on a square-foot basis, given the quality
of construction desired, the amount of materials to
be used, and the manner in which construction will
take place. By having a cost per square foot available
to them, the estimate of total construction cost is
obtainable.
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SQUATTER A person who is occupying
the land of another without legal title or authority
to do so.
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SQUATTER'S RIGHT The legal right
of a person who is in adverse possession of the land
belonging to another. Such a person is referred to
as a squatter and may under certain conditions acquire
legal title to the land through the open, actual,
notorious, and continuous use of the land.
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SRA An appraisal designation denoting
Senior Residential Appraiser (SRA), awarded by the
Appraisal Institute. Membership is intended for professionals
who specialize in the appraisal of residential properties
including single family-homes, condominiums, townhouses,
and multi-family structures up to four units.
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SREA An appraisal designation denoting
Senior Real Estate Analyst (SRE,4) awarded by the
Society of Real Estate Appraisers. An SREA is an SRA
or SRPA whose practice has expanded to encompass all
forms of appraisal assignments as well as analytical
assignments such as market feasibility studies.
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SRPA An appraisal designation denoting
Senior Real Property Appraiser (SRPA), awarded by
the Society of Real Estate Appraisers. Membership
consists of those professionals who have expanded
their appraisal practice to include the appraisal
of income-producing properties.
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SRS A real estate designation denoting
Specialist in Real Estate Securities. The SRS designation
is awarded by the Real Estate Securities and Syndication
Institute (RESSI), an affiliate of the National Association
of Realtors.
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SR/WA A designation denoting Senior
Right of Way Agent. The designation is awarded by
the International Right of Way Association.
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STAKING A means by which the geographic
boundaries of a parcel of land are identified by placing
stakes in the ground at the boundary points.
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STAMP TAX The dollar cost of stamps
which in some jurisdictions are required to be affixed
to certain legal documents such as deeds prior to
recordation in the land records.
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STANDARD METROPOLITAN STATISTICAL AREA (SMSA)
A reference to a geographic area which contains at
least 50,000 residents. Qualification as an SMSA is
often required in order for an area to qualify for
certain types of federal programs and grants. Today,
such an area is normally referred to as a Metropolitan
Statistical Area (MSA).
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STANDARDS OF PRACTICE A set of professional
standards established and adopted by the National
Association of Realtors. These standards are interpretations
of the Realtors Code of Ethics.
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STANDBY COMMITMENT An agreement
between a real estate lender and a builder whereby
the lender stands ready to make a certain loan amount
available to the builder for a specified period of
time. Normally, a fee for making such a commitment
is charged by the lender to compensate the lender
for the risk and legal liability in committing funds
to the builder. Normally, the fee is forfeited if
the funds are not borrowed.
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STARTER HOME The first home purchased
by someone.
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STATEMENT OF RECORD A written document
that must be filed with the Department of Housing
and Urban Development (HUD) by a developer of 50 or
more lots who intends to market the lots through any
means of interstate commerce. Registration is required
under the Interstate Land Sales Full Disclosure Act.
In addition, certain disclosure must be made to prospective
purchasers. Violation of the act may lead to fine
or imprisonment.
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STRAIGHT-LINE METHOD OF DEPRECIATION
A method of computing depreciation for income tax
purposes in which the difference between the original
cost and the salvage value is deducted in even installments
over the depreciable life of the asset.
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STRAW MAN Someone who purchases
property on behalf of another so as to conceal the
identity of the true owner. A person who purchases
on behalf of another is sometimes referred to as a
nominee.
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STREET ADDRESS An easy and quick
way of identifying a parcel of land. To have mail
delivered or to find a house that has been advertised
being "For Sale" normally require no more
exact legal description than this method..
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STRICT FORECLOSURE A type of mortgage
foreclosure in which the mortgagee (lender) acquires
all of the legal interest in the property without
having to sell the property. This kind of foreclosure
is not favored in this country because the mortgagor
(borrower) loses all equity invested in the property.
Most states have foreclosure by sale in which the
pledged property is sold at public auction with the
proceeds used to pay off the debt and any remainder
being returned to the mortgagor after a deduction
of costs.
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SUBDIVISION A parcel of land that
has been divided into two or more smaller lots. An
example would include a 500-acre tract that has been
platted and made ready for the building of homes.
The subdivision has been recorded in the land records
of the county where the land is located and is available
for individuals to purchase the lots and or builders
to purchase the lots and in turn construct houses
on the lots.
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SUBDIVISION REGULATION(S) A local
ordinance that establishes various minimum standards
that must be met before a subdivision will be approved
for development. These standards relate to the size
of lots, width of the streets, curbing, lighting,
drainage, and other improvements. If a developer wishes
to turn the streets and public areas over to the local
government for it to maintain, minimum construction-quality
standards must be met before the local government
will accept responsibility.
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SUBJECT BUILDING The building being
appraised in an appraisal assignment.
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SUBJECT PROPERTY The reference made
to the property being appraised in an appraisal report.
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SUBJECT TO MORTGAGE A real estate
transaction in which the grantee (purchaser) takes
over the existing mortgage payments from the grantor
(seller) but assumes no personal liability on the
mortgage. When a mortgage is taken subject to, the
purchaser can walk away from the mortgage and lose
nothing but the equity already invested. If, however,
the purchaser assumes the mortgage, he or she becomes
personally liable for any deficiencies occurring in
a foreclosure sale. In both situations the original
borrower is liable to the lender unless specifically
released in a novation.
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SUBLEASE A lease agreement in which
the lessee (tenant) transfers some of the interest
in the leased property to a third party (sublessee)
but retains some reversionary interest for himself
or herself. In a sublease the sublessor has a sandwich
lease and no direct legal relationship is created
between the landlord and the sublessee. A sublease
is really an estate within an estate. The lessee becomes
a sublessor and a landlord/tenant relationship is
established between the sublessor and the sublessee.
Since the sublessor can only convey the rights which
he or she has, the sublessee is effectively bound
by any limitations in the main or underlying lease.
The sublessor remains primarily liable to the landlord
for rent and the performance of all covenants.
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SUBLESSEE The tenant under a sublease
who has subleased from someone who in turn is a lessee
(tenant) of the owner of the property.
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SUBLESSOR A lessee (tenant) who
leases part of his or her interest to a third party
(sublessee) but retains some interest in the property.
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SUBMARGINAL LAND Land that because
of location, topography, or some other defect is economically
not viable for development.
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SUBMORTGAGE A situation in which
a mortgagee (lender) borrows money from a third party
and pledges a mortgage he or she is holding as security
for the borrowed funds.
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SUBORDINATION CLAUSE A clause which
may be included in a mortgage agreement in which the
mortgagee (lender) agrees to permit a later-acquired
mortgage to have legal priority. Such a clause is
often included in a purchase money mortgage used in
the acquisition of acreage property requiring a later
construction or development loan. For example, a developer
agrees to purchase 500 acres from a landowner for
$100,000 down and a purchase money mortgage (owner
financing) of $2,000,000 for the remainder of the
purchase price. The developer may have paid a slightly
higher price to induce the landowner to subordinate
his legal position to an $8,000,000 loan secured by
a mortgage being issued by a commercial bank. Thus,
the commercial bank is in a first lien position and
the landowner is in a junior (second) mortgage position.
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SUBORDINATED GROUND LEASE A land
(ground) lease in which the rent payment due from
the lessee to the lessor is subordinated to the debt
service owed by the lessee to the mortgagee (lender).
Normally, a ground lease contains such a clause in
that without such a clause it may be more difficult
to construct improvements on the land. A lender, without
a subordination agreement by the lessor of the land,
will only consider the value of the leasehold in making
the loan, while with a subordinated ground lease the
lender will consider the full value of the property.
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SUCCESSION The legal transfer of
a person's interest in real property under the laws
of descent and distribution. If a person dies without
a will (intestate) his or her real estate will pass
directly to the 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 expired. States have different
rules as to who receives property of the decedent.
For example, depending on the state, a wife might
receive half the property, the same share as the children,
a dower's share, or the entire property.
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SUFFERANCE The passive consent given
to someone as a result of no action.
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SUFFICIENT CONSIDERATION The value
which the law finds necessary in order to support
the creation of a binding contract.
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SUIT A court action to enforce a
legal claim or right.
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SUPERADEQUACY A feature of a building
which is not fully valued by the marketplace. For
example, if a house had a marble sink with 24-karat
gold faucets, the market would probably not add the
cost of the sink and faucets to the value of the home.
The sink would be referred to as a superadequacy.
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SUPPORT DEED A deed conveyed by
a grantor to another person in consideration for an
agreement to take care of the grantor for life.
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SURETY BOND A bond issued by a company
guaranteeing the performance or action of someone
such as a contractor or builder. Surety bonds involve
three parties: (1) the principal, the individual or
company on whose behalf the surety bond is issued;
(2) the obligee, the owner or person assured of performance;
and (3) the surety, the company issuing the surety
bond.
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SURFACE RIGHT The legal right to
use or occupy the surface of land. The owner of land
may convey the surface rights to someone else and
retain the subsurface or mineral rights.
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SURPLUS FUNDS The money obtained
at a foreclosure sale over and above the amount necessary
to pay the outstanding liens against the property.
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SURRENDER The giving back of an
interest in an estate to the person who has the reversion
or remainder interest. An example of surrender would
be the giving up of the lease by the lessee (tenant)
to the lessor (landlord) prior to the expiration of
the leasing term. In the case of a lease, surrender
by the lessee and acceptance by the lessor terminates
the lease either by mutual agreement or by operation
of law. Surrender and acceptance occurs by mutual
agreement if the lessee offers to terminate the lease,
which is the surrender, and the lessor agrees to the
offer, which is the acceptance. Surrender is distinguished
from mere abandonment. A lessee may not just walk
away from a lease and hope to escape legal liability.
A lessor does not show acceptance by entering on the
realty in order to protect it after abandonment. The
landlord may attempt to lease the property for the
best terms that he or she can get in order to mitigate
(minimize) damages, and to sue the breaching lessee
for the actual injury suffered. Surrender and acceptance,
however, will occur by operation of law if the landlord
takes unqualified possession of the property and gives
a new lease without reservation.
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SURVEY The process by which the
precise physical boundaries of a parcel of land are
measured. Legal descriptions appear in listing agreements,
sales contracts, deeds, mortgages, notes, and other
instruments involving rights and interests in real
estate. When land is conveyed from 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 is sufficiently
described if a competent civil engineer or surveyor
could locate the subject property given the land description.
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SURVEYOR A person sufficiently trained
to locate and record the exact physical boundaries
of a parcel of land. When property is conveyed from
one party to another it is important to identify positively
the exact boundaries of the property so that there
is no doubt where the property lies in relation to
all other parcels. To accomplish this task a survey
is made. A surveyor physically inspects and measures
the property. The precise measurements are included
in the deed used to transfer ownership of the property.
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SURVIVORSHIP The living of one or
more persons after the death of another person(s).
In real estate ownership survivorship occurs when
one or more owners in a joint tenancy or one of the
parties in a tenancy by the entirety survives or outlives
the deceased tenant(s).
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SUSPENSION A temporary stop or forced
inactivity against someone. In the real estate brokerage
business, a real estate commission has the power to
suspend the license of a broker or salesperson. During
the time of suspension, the suspended licensee is
legally barred from performing any of the activities
or services which require a real estate license.
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SWEAT EQUITY A contribution to the
value of real estate in the form of labor provided
or services rendered. Sweat equity is normally associated
with someone who purchases property that needs work,
perhaps is below acceptable building code standards
and normally has a market value below that of property
that is not in disrepair. The purchaser, by performing
some of the repair work personally, can increase the
value and in turn, the marketability of the property,
and is thus contributing sweat equity to the property.
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SWEETENER Something added to a deal
to make it more attractive to an investor or lender.
A lender making a commercial loan may require the
developer/owner to pledge a certain part of the income
generated by the project as partial payment to the
lender over and above the debt service. The income
generated by the sweetener serves to increase the
lender's rate of return.
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SWING LOAN A loan, normally short
term, used by an owner to purchase real estate pending
the sale of another property. Normally, the loan is
repaid from the owner's equity if and when the previous
property sells.
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SYNDICATION An arrangement by which
two or more people are assembled for the purpose of
raising equity capital for purchasing real estate
or other @s of investments. Normally, the more desirable
income-producing properties available are too expensive
for the average investor to purchase alone. Therefore,
in order to purchase such properties, it is common
for investors to combine their resources and establish
some form of multiple ownership arrangement such as
a corporation, cooperative, condominium, tenancy in
common, or partnership.
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SYNDICATOR A person who establishes
and sells shares in a syndication.
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