BACKFILL – The replacement of excavated earth into a hole or against a structure.
BACKUP CONTRACT – A CONTRACT to buy REAL ESTATE that becomes effective if a prior CONTRACT fails to be consummated.
BAD FAITH – the allegation that INSURERS have failed to act in good faith, i.e., that they have acted in a manner inconsistent with what a reasonable POLICYHOLDER would have expected.
BAILEE – Also known as CUSTODIAN – A person with whom some article is left, usually pursuant to a CONTRACT, who is responsible for the safe return of the article to the owner when the CONTRACT is fulfilled.
BAILEES CUSTOMERS POLICY – POLICY that covers the loss or damage to PROPERTY of customers regardless of a BAILEE’S legal LIABILITY.
BALANCE – The appraisal principle which maintains that the VALUE of REAL PROPERTY is created and maintained in proportion to the balance of the components of that property. A disproportionately over improved or under improved property would not be as desirable to a buyer as one which was balanced.
BALANCE SHEET – A financial statement in table form showing assets, liabilities, and equity, in which assets equal the sum of LIABILITIES plus EQUITY.
BALLOON MORTGAGE – A MORTGAGE with a BALLOON PAYMENT.
BALLOON PAYMENT – The final installment payment on a note that is substantially greater than the preceding payments and the pays off the note in full.
BAND OF INVESTMENT – An INCOME PROPERTY appraisal technique where the overall interest rate is derived from weighing MORTGAGE and EQUITY rates.
BANKING MONTH – A standardized thirty days, frequently used in PRO-RATION.
BANKING YEAR – A standardized 360 days, frequently used in PRO-RATION.
BANKRUPTCY – The financial inability to pay one’s DEBTS when due. The DEBTOR seeks relief through court action that may work out or erase DEBTS.
BARGAIN AND SALE DEED – Also known as GRAND DEED – A DEED that conveys ownership from the GRANTOR to the GRANTEE without any expressions of WARRANTY.
BARGAIN AND SALE DEED WITH WARRANTIES – Also known as SPECIAL WARRANTY DEED – A DEED that conveys ownership from a GRANTOR to a GRANTEE with expressed WARRANTIES of protection for the GRANTEE’S ownership. It specifies that the GRANTOR will defend the DEED only against CLAIMS arising from action taken during the GRANTOR’S period of ownership.
BASEBOARD – The board or molding running along the bottom of a wall where it meets the floor to cover any gap between the wall and the floor.
BASE LINE – The major east-west line used as a reference point in the GOVERNMENT SURVEY METHOD. Township lines are measured north and south form the base line.
BASE AND MERIDIAN – Imaginary lines used by SURVEYORS to find and describe the location of land. The BASELINE is east-west; the MERIDIAN line is north-south.
BASE FEE ESTATE – Also known as FEE SIMPLE DETERMINABLE ESTATE – One of the two DEFEASIBLE fee estates, the fee simple determinable estate is created in the DEED through words of duration. For example, the GRANTOR may give a PROPERTY to a church “as long as” that the PROPERTY is used for religious purposes. Should the grantee cease using the property as indicated, the property would automatically be returned to the GRANTOR through a reverter.
BASE PERIOD – A point of time that serves as a BENCHMARK for reflecting the change in an INDEX. The base period is usually set equal to one, 110% or 100.
BASE RENT – The minimum RENT due under a LEASE that has a percentage or participation requirement.
BASIC FORM – Also known as DWELLING PROPERTY 1 – Property insurance policy that insures the dwelling at ACTUAL CASH VALUE, other STRUCTURES, PERSONAL PROPERTY, FAIR RENTAL VALUE, and certain other COVERAGES. Covers a limited number of perils.
BASIC INDUSTRY – any concern which attracts income from outside the local area. The jobs added in basic industry may also contribute to the need for local service jobs and, if the workers have families, additional new people may be brought to the area.
BASIC INDUSTRY MULTIPLIER – In ECONOMIC BASE analysis, the ratio of total population in a local area to employment in BASIC INDUSTRY.
BASIS – 1) An amount attributed to an ASSET for income tax purposes; 2) used to determine gain or loss on sale or transfer; 3) used to determine the value of a gift; 4) the original cost of the REAL PROPERTY to the INVESTOR, whether or not the PROPERTY is paid for.
BASIS POINT – One 100th of one percent.
BEAM – Any heavy structural member that TRANSVERSELY supports a load.
BEARER INSTRUMENT – A SECURITY that does not indicate the owner which is payable to whoever presents it.
BEARING WALL – Also known as LOAD-BEARING WALL – Any wall that supports a vertical load in addition to its own weight.
BEDROOM COMMUNITY – A RESIDENTIAL community in the SUBURBS, often near an employment center, but itself providing few employment opportunities.
BEFORE-AND-AFTER RULE – In an EMINENT DOMAIN AWARD, many jurisdictions appraise the PROPERTY VALUE before the taking, then the PROPERTY VALUE after the taking, considering enhancement or injury to the property that was the result of CONDEMNATION.
BEFORE-TAX CASH FLOW – CASH FLOW prior to deducting income tax payments or adding income tax benefits.
BEFORE-TAX EQUITY REVERSION – Same as AFTER-TAX PROCEEDS FROM
RESALE, except it does not consider income taxes.
BELOW-MARKET INTEREST RATE (BMIR) – In some GOVERNMENT-SUBSIDIZED HOUSING, the owner is charged a low interest rate with the requirement that savings be passed on to TENANTS in the form of RENT reduction.
BENCHMARK – A permanent, man-made marker used in a SURVEY to set elevation and altitudes above sea level.
BENEFICIARY – 1) The LENDER under a DEED OF TRUST; 2) the recipient of the proceeds of a living TESTAMENTARY or LAND TRUST; 3) the person designated or provided for by the POLICY terms to receive any BENEFITS provided by the POLICY or plan upon the death of the INSURED.
BENEFIT PERIOD – A period of time typically one to three years during which MAJOR MEDICAL BENEFITS are paid after the DEDUCTIBLE is satisfied. When the benefit period ends, the INSURED must then satisfy a new DEDUCTIBLE in order to establish a new benefit period.
BENEFITS – The amount payable by the INSURANCE COMPANY to a CLAIMANT, ASSIGNEE or BENEFICIARY under each COVERAGE.
BEQUEATH – To specify by will the recipient of PERSONAL PROPERTY.
BEQUEST – A gift of PERSONAL PROPERTY given in a will. The person giving the BEQUEST is the BEQUESTOR; the person receiving the BEQUEST is the BEQUESTEE.
BEQUESTEE – the person receiving a BEQUEST.
BEQUESTOR – The person giving a BEQUEST.
BETTERMENT – An improvement to REAL ESTATE.
BIANNUAL – Also known as SEMIANNUAL – Occurring twice a year.
BID – The amount someone offers to pay.
BIENNIAL – Occurring every two years.
BILATERAL CONTRACT – A CONTRACT which is two-sided, or has two or more parties; that is, in which each party promises to do something in exchange for the other party’s promise to do something. Most REAL ESTATE CONTRACTS are bilateral.
BI-LEVEL – A house built on two levels in which the main entrance is situated above the lower level but below the upper level.
BILL OF ASSURANCE – The name given in some states to the total collection of RESTRICTIVE COVENANTS that apply to a group of CONTIGUOUS LOTS.
BILL OF SALE – A written receipt from a seller to buyer transferring the ownership of PERSONAL PROPERTY.
BINDER – 1) an agreement, accompanied by a deposit, for the purchase of REAL ESTATE, to evidence good faith on the part of the purchaser; 2) a written or oral CONTRACT issued temporarily to place INSURANCE in force when it is not possible to issue a new POLICY or endorse the existing POLICY immediately. A binder is subject to the PREMIUM and all the terms of the POLICY to be issued.
BINDING RECEIPT – A receipt given for a PREMIUM payment accompanying the APPLICATION for INSURANCE. If the POLICY is approved, this binds the company to make the POLICY effective from the date of the receipt.
BI-WEEKLY LOAN – A MORTGAGE which requires PRINCIPAL and INTEREST payments at two-week intervals. The payment is exactly half of what a monthly payment would be. Over a year’s time, the twenty-six payments are equivalent to thirteen monthly payments on a comparable MORTGAGE LOAN. As a result, the loan will AMORTIZE much faster than a LOAN with monthly payments.
BLACKOUT PERIOD – The period during which Social Security benefits are not paid to a surviving spouse – between the time the youngest child reaches age sixteen and the widow’s sixtieth birthday.
BLACK’S GUIDE – A data source for office buildings in certain major cities. Offers rental information on multi-tenant office buildings in the cities and SUBURBAN areas it covers.
BLANKET CONTRACT – A CONTRACT of HEALTH INSURANCE affording BENEFITS, such as ACCIDENTAL DEATH AND DISMEMBERMENT, for all of a class of persons not individually identified. It is used for such groups as athletic teams, campers, and travel policy for employees, etc.
BLANKET MEDICAL EXPENSE – A provision, which entitles the INSURED person to collect up to a maximum, established in the POLICY for all hospital and medical expenses incurred, without any limitations on individual types of MEDICAL EXPENSES.
BLANKET MORTGAGE – A single MORTGAGE that is secured by more than one PARCEL of REAL ESTATE. As individual PARCELS are sold, they are released from under the blanket.
BLEEDING A PROJECT – 1) In new construction, overstating expenses and fees so as to divert a larger than normal amount of the project costs to the developer’s profit; 2) managing an existing piece of REAL ESTATE.
BLENDED RATE – An interest rate, applied to a REFINANCED LOAN that is higher than the rate on the old loan but lower than the rate offered on new loans. Generally offered by the lender to induce homebuyers to REFINANCE existing, low-interest rate loans as an alternative to assuming the existing LOAN.
BLIGHTED AREA – A section of a city in which a majority of the structures are DILAPIDATED.
BLIND POOL – An INVESTMENT program in which monies are invested into an association without investors knowing which PROPERTIES will be purchased.
BLOCKBUSTING – Also known as PANIC PEDDLING – The illegal act of inducing homeowners to sell their REAL PROPERTY by making misrepresentations concerning the entry or potential entry of minority persons into the neighborhood.
BLUE CROSS – An independent, nonprofit membership corporation providing protection on a service basis against the cost of hospital care in a limited geographical area.
BLUEPRINT – A detailed set of plans used as the guide for construction of a building.
BLUE SHIELD – An independent, non-profit membership corporation providing protection on a service basis against the cost of surgical and medical care in a limited geographical area.
BLUE-SKY LAWS – State laws requiring the OFFERROR of SECURITIES to give FULL DISCLOSURE, and register the offering as required by federal and state law.
BOARD OF DIRECTORS – People elected by stockholders to govern the corporation. Nonprofit and other organizations also have BOARDS that establish policies for the organization.
BOARD OF EQUALIZATION – A government entity whose purpose is to assure uniform property tax assessments.
BOARD FOOT – A unit of lumber measurement one foot wide, one foot long, and one inch thick, or 144 cubic inches.
BOARD OF REALTORS – A local group of REAL ESTATE licenses who are members of the state and NATIONAL ASSOCIATION OF REALTORS.
BOAT OWNERS PACKAGE POLICY – A special package policy for boat owners that combines PHYSICAL DAMAGE INSURANCE, MEDICAL EXPENSE INSURANCE, LIABILITY INSURANCE and other COVERAGES in one CONTRACT.
BOILER AND MACHINERY INSURANCE – Coverage for loss arising out of the operation of pressure, mechanical, and electrical equipment. It covers loss of the boiler and machinery itself, damage to other PROPERTY and BUSINESS INTERRUPTION losses.
BOILERPLATE – 1) Standard language found in CONTRACTS; 2) preprinted material.
BONA FIDE -1) In good faith; 2) genuine; 3) without fraud or deceit.
BOND – A certificate issued by a government or corporation as evidence of a DEBT and of the terms under which it is undertaken. The issuer of the bond promises to pay the bondholder a specified amount of interest for a specified period and to repay the loan on the expiration (maturity) date.
BOOK DEPRECIATION – The amount of DEPRECIATION periodically charged off on the accounting records of the owner.
BOOK OF BUSINESS – The number, size and type of accounts (policyholders) that an AGENT “owns.”
BOOK VALUE – 1) The purchase price minus accounting DEPRECIATION; 2) the VALUE of a CAPITAL ASSET as shown on the accounting books of the owner, usually as the ACQUISITION COST, plus IMPROVEMENTS, minus DEPRECIATION.
BOOT – In a tax-deferred exchange, any cash or other PROPERTY included in the transaction to make the exchange an even proposition.
BORDEREAU – An itemized statement of transactions, today resembling a spreadsheet format, commonly used in REINSURANCE.
BORROWER – Also known as DEBTOR – A person who owes money.
BOTTOMLAND – 1) Low LAND near a river, lake, stream, which is often flooded; 2) LAND in a valley or dale.
BRANCH OFFICE SYSTEM – Type of LIFE INSURANCE marketing system under which branch offices are established in various areas. Salaried branch managers, who are employees of the company, are responsible for hiring and training new AGENTS.
BREACH OF CONTRACT – 1) A violation of terms of a legal agreement; 2) DEFAULT: breach of contract allows the non-breaching party to rescind the CONTRACT, sue for damages, or sue for performance of the CONTRACT; 3) the non-performance or violation of any of the terms of a CONTRACT.
BREAK-EVEN POINT – The amount of RENT or the OCCUPANCY LEVEL needed to pay OPERATING EXPENSES and DEBT SERVICE.
BREAK IN SERVICE – A calendar year, plan year or other consecutive twelve-month period designated by the plan during which a plan participant does not complete more than 500 hours of service.
BRICK ROW HOUSE – Also known as BROWNSTONE or EASTERN TOWNHOUSE – A nineteenth-century-style house, usually having four or five stories with a stoop leading up to the first floor. There are common sidewalls with a house on either side.
BRIDGE LOAN – MORTGAGE financing between the termination of one loan and the beginning of another loan.
BRITISH THERMAL UNIT (BTU)- A unit measure for calculating heating and cooling capacities.
BROAD FORM – DWELLING PROPERTY 2 – PROPERTY INSURANCE policy that insures the DWELLING and other STRUCTURES at REPLACEMENT COST. It adds additional COVERAGES and has a greater list of covered perils than the Dwelling Property 1 policy.
BROKER – 1) A marketing specialist who represents buyers of PROPERTY and LIABILITY INSURANCE and who deals with either AGENTS or companies in arranging for the COVERAGE required by the customer; 2) also known as AGENT or FIDUCIARY – A person licensed by the state to represent one of the parties to a REAL ESTATE transaction for
COMPENSATION.
BROKERAGE – 1) The business of being a BROKER; 2) the COMMISSION received by a BROKER for his services.
BROKER PROTECTION CLAUSE – The clause in the LISTING CONTRACT that states that, for an agreed time period after the expiration of the original LISTING, the LISTING will continue in certain respects to protect the BROKER’S CLAIM to any COMMISSION.
BROOM CLEAN – A description of the condition of PROPERTY that is to be turned over to the buyer or TENANT; the floors are to be cleared of trash and swept.
BROWNSTONE – Also known as BRICK ROW HOUSE or EASTERN TOWNHOUSE – A nineteenth-century-style house, usually having four or five stories with a stoop leading up to the first floor. There are common sidewalls with a house on either side.
BUDGET MORTGAGE – A MORTGAGE that requires monthly payments for taxes and INSURANCE in addition to INTEREST and PRINCIPAL.
BUDGET PAYMENT – Also known as PITI PAYMENT – A monthly payment that covers the four basic costs of home ownership: INTEREST, PRINCIPAL, HAZARD INSURANCE, and REAL ESTATE TAXES
BUFFER ZONE – A strip of LAND that separates one type of land use from another, usually two incompatible uses, such as a landscaped park between a residentially zoned area and an industrially zoned area.
BUILDERS AND SPONSORS PROFIT AND RISK ALLOWANCE (BSPRA) – An amount above the cost of APARTMENTS that is allowed to be included in the project cost for purpose of determining the loan amount in certain government-sponsored programs.
BUILDER WARRANTY – A guarantee on the quality of construction offered by the DEVELOPER or BUILDING CONTRACTOR.
BUILDING CAPITALIZATION RATE – In APPRAISAL, the CAPITALIZATION RATE is used to convert an INCOME STREAM into one lump sum value. The rate for the building may differ from that for the land because the building is a WASTING ASSET.
BUILDING CODE – The rules established by a political unit to regulate construction standards for minimum structural, health, and safety requirements.
BUILDING INSPECTION – 1) Physical review of PROPERTY as it proceeds under construction to ensure that each major component meets building codes: foundation, plumbing, electrical wiring, roofing, materials; 2) periodic inspection of existing public buildings for health and safety considerations.
BUILDING LINE – A line fixed at a certain distance from the front and/or sides of a lot, beyond which the building may not project.
BUILDING LOAN AGREEMENT – An agreement whereby the LENDER advances money to an owner at specified stages of construction, i.e., upon completion of the foundation, framing, etc.
BUILDING OWNERS AND MANAGERS ASSOCIATION (BOMA) – An organization of practitioners who own and manage buildings, notably office space.
BUILDING PERMIT – The written permission from a political unit allowing the construction, improvement, or DEMOLITION of any REAL PROPERTY within its jurisdiction.
BUILDING RESIDUAL TECHNIQUES – Used primarily in the APPRAISAL of
COMMERCIAL PROPERTY, this is a CAPITALIZATION of technique in which the NET OPERATING INCOME from the improvements is isolated and then CAPITALIZED to indicate the contribution of the improvements to the VALUE of the whole PROPERTY. The VALUE of the land must be known to use this technique.
BUILDING RESTRICTIONS – Provisions in building codes that affect the orientation, size, and appearance of a building.
BUILD TO SUIT – An arrangement whereby a landowner offers to pay to construct on his or her LAND a building specified by a potential TENANT and then to LEASE land and building to the tenant.
BUILT-INS – Appliances, machinery, and other equipment that are constructed as part of a building rather than left freestanding and moveable.
BUILT-UP ROOF – Also known as HOT TAR, MOPPED TAR and TAR AND GRAVEL ROOF – The roof finish for flat or low-pitched roofs composed of asphalt felt and asphalt, which is then covered with decorative gravel.
BULK TRANSFER – The sale of a major portion of the INVENTORY, supplies, or trade fixtures of a business. Bulk transfers are regulated by the UNIFORM COMMERCIAL CODE for the protection of the buyer and the seller’s CREDITORS. The seller must provide the buyer with a list of the seller’s creditors, and the buyer must notify the creditors prior to the sale.
BULLET LOAN – Also known as TERM, STRAIGHT or NON-AMORTIZING LOAN –
Typically a LOAN with a five- to ten-year term and no AMORTIZATION. At the end of the term the full amount is due.
BUNDLE OF RIGHTS – The theory that REAL PROPERTY ownership may be compared to a bundle of sticks, each stick representing a distinct right of ownership. The bundle includes the rights of possession, quiet enjoyment, use, control, EXCLUSION, ENCUMBRANCE, and disposition.
BUNGALOW – A small, early twentieth century style, one story house that usually has an open or enclosed front porch.
BUREAU OF LAND MANAGEMENT – An agency of the U.S. Department of the Interior that oversees the management of much of the land owned by the U.S. government, particularly national forests and other relatively undeveloped land.
BURGLARY – Breaking and entering into another person’s property with felonious intent.
BURGLARY AND THEFT INSURANCE – Coverage against property losses due to burglary, robbery, or larceny.
BUSINESS DAY – A standard day for conducting business. Excludes weekends and holidays.
BUSINESS INCOME EXPOSURE – Also known as BUSINESS INTERRUPTION
EXPOSURE – Lost profits resulting from damage to property that halts the business.
BUSINESS INSURANCE – A policy which primarily provides COVERAGE of BENEFITS to a business as contrasted to an individual. It is issued to INDEMNIFY a business for the loss of services of a key employee or a partner who becomes disabled.
BUSINESS INTERRUPTION EXPOSURE – Also known as BUSINESS INCOME
EXPOSURE — Lost profits resulting from damage to property that halts the business.
BUSINESS INTERRUPTION INSURANCE – Protection for a business owner against losses resulting from a temporary shutdown because of fire or other insured peril. The insurance provides reimbursement for lost net profits and necessary continuing expenses.
BUSINESS LIFE INSURANCE – Life insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships to protect the surviving partners against loss caused by the death of a partner, or by a corporation to reimburse it for loss caused by the death of a key employee.
BUSINESS VALUE – 1) The INTANGIBLE VALUE in a business, above the value of its TANGIBLE ASSETS, which include buildings, land, and fixtures; 2) the entire value of a business; 3) the summation of all of its parts, tangible and intangible.
BUY-BACK AGREEMENT – A provision in a CONTRACT under which the seller agrees to repurchase the property at a stated price upon the occurrence of a specified event within a certain period of time.
BUY DOWN – The action to pay additional discount points to a lender in exchange for a reduced rate of INTEREST on a LOAN. The reduced rate may apply for all or a portion of the loan term; a LOAN that has been bought down by the seller of the property for the benefit of the buyer.
BUYER’S BROKER – An AGENT hired by a prospective purchaser to find an acceptable property for purchase. The BROKER then represents the buyer and negotiates with the seller in the purchaser’s best interest.
BUYER’S MARKET – A situation where buyers have a wide choice of properties and may negotiate lower prices. Often caused by overbuilding, local population decreases, or economic slump.
BUYING “SUBJECT TO” – Technically, buying “subject to the existing financing.” The buyer purchases the property, but the seller remains fully liable for the repayment of the existing loan.
BUY-SELL AGREEMENT – 1) A pact among partners or STOCKHOLDERS under which some agree to buy the interests of the other upon some event; 2) an agreement made by the owners of a business to purchase the share of a disabled or deceased owner. The value of each owner’s share of the business and the exact terms of the buying-and-selling process are established before death or the beginning of disability.
BYLAWS – A set of regulations by which an organization conducts its activities.
