CAFETERIA PLAN – Also known as FLEXIBLE BENEFIT PLANS – Generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental and other plans that best meet their specific needs.
CALENDAR – YEAR DEDUCTIBLE – Amount payable by an INSURED during a calendar year before a group or individual HEALTH INSURANCE POLICY begins to pay for medical expenses
CALIFORNIA BUNGALOW – A one story, small, compact, early twentieth century house.
CALIFORNIA RANCH – A post-World War II style, one story, ground-hugging house with a low, pitched roof.
CALL PROVISIONS – Clauses in a LOAN that give the lender the right to accelerate the DEBT upon the occurrence of a specific event or date.
CANCELABLE – A CONTRACT of HEALTH INSURANCE that may be canceled during the POLICY TERM by the INSURER or INSURED.
CANCELLATION – The discontinuance of an INSURANCE POLICY before its normal expiration date, either by the INSURED or the company.
CANCELLATION CLAUSE – A CONTRACT provision that gives the right to terminate obligations upon the occurrence of specified conditions or events.
CANTILEVER – Any structural support which itself is supported only at one end and bears its load through its material strength and rigidity. Often use for covered parking, balconies, etc.
CAP – In ADJUSTABLE RATE MORTGAGES, a limit placed on adjustments to protect the borrower from large increases in the INTEREST RATE or the payment level.
CAPACITY – The amount of capital available to an INSURANCE COMPANY or to the industry as a whole for UNDERWRITING general INSURANCE COVERAGE or
COVERAGE for specific perils.
CAPACITY OF PARTIES – One of the requirements for a valid CONTRACT. Parties with less than full capacity include MINORS, the mentally insane, and those who are intoxicated.
CAPE COD COLONIAL – An early American style one and a half story compact house that is small and symmetrical with a central entrance. The roof is the steep gable type covered with shingles. The authentic types have low central chimneys, but end chimneys are very common in the new versions. Bedrooms are on the first floor. The attic may be finished into additional bedrooms and a bath. A vine-covered picket fence is traditional.
CAPITAL ASSET – Any ASSET held by a taxpayer which is not for resale to a customer in the normal course of the taxpayer’s business, such as REAL ESTATE, stocks, BONDS, TRADE FIXTURES, etc.
CAPITAL CALLS – Additional money to be INVESTED by EQUITY owners to fund deficits in construction costs or operating costs.
CAPITAL EXPENDITURE – An improvement that will have a life of more than one year. Capital expenditures are generally DEPRECIATED over their useful life, as distinguished from repairs, which are subtracted from income of the current year. Contrasted with ORDINARY AND NECESSARY BUSINESS EXPENSES.
CAPITAL GAIN – 1) Taxable income derived from the sale of a CAPITAL ASSET. Capital gains may be either SHORT TERM or LONG TERM; 2) profit realized on the sale of SECURITIES. An unrealized capital gain is an increase in the VALUE of SECURITIES that have not been sold.
CAPITAL LOSS – Any loss from the sale of a CAPITAL ASSET, which may reduce the income tax LIABILITY of the seller.
CAPITALIZATION – The conversion of INCOME into VALUE. In the INCOME APPROACH TO VALUE, the INCOME, when divided by the RATE, results in the CAPITALIZED VALUE.
CAPITALIZATION RATE – Also known as CAP RATE and OVERALL RATE. The rate used to CAPITALIZE INCOME into VALUE in the INCOME APPROACH TO VALUE.
CAPITALIZE – To estimate the present lump sum value of an INCOME STREAM; to set up the cost of an ASSET on financial records.
CAPITALIZED VALUE – The VALUE estimated by converting an INCOME STREAM into a lump sum amount.
CAPITAL RETENTION APPROACH – A method used to estimate the amount of LIFE INSURANCE to own. Under this method, the INSURANCE proceeds are retained and are not LIQUIDATED.
CAPITAL STRUCTURE – The composition of capital invested in a PROPERTY, reflecting the interests of those who contributed both DEBT and EQUITY capital.
CAPITATION – A method of payment for health services in which a physician or hospital is paid a fixed, per capita amount for each person served regardless of the actual number of services provided to each person.
CAPTIVE INSURANCE COMPANY – A company owned solely or in large part by one or more non-insurance entities for the primary purpose of providing INSURANCE COVERAGE to the owner or owners.
CAPTIVE INSURER – INSURANCE COMPANY established and owned by a parent firm in order to INSURE its loss exposures while reducing PREMIUM costs, providing easier access to a REINSURER, and perhaps easing tax burdens. See also ASSOCIATION CAPTIVE; PURE CAPTIVE.
CAP RATE – Also known as CAPITALIZATION RATE and OVERALL RATE – The rate used to CAPITALIZE INCOME into VALUE in the INCOME APPROACH TO VALUE.
CAPTURE RATE – The sales or leasing rate of a REAL ESTATE development compared to the sales or leasing rate of all developments in the MARKET AREA.
CAREER AVERAGE FORMULA – A PENSION PLAN formula that bases retirement benefits on earnings during all years of service to the employer.
CARPENTER GOTHIC STYLE – A style of VICTORIAN GOTHIC architecture adapted to the resources of contemporary woodworking tools and machinery.
CARGO INSURANCE – Type of ocean marine INSURANCE that protects the shipper of the goods against financial loss if the goods are damaged or lost.
CARRY BACK MORTGAGE – A MORTGAGE given by the buyer to the seller as part or all of the purchase price of the PROPERTY. This MORTGAGE secures an extension of credit (a SOFT-MONEY loan) from seller to buyer, rather than a transfer of cash (a “hard-money” loan). In the event of FORECLOSURE of such a MORTGAGE, the mortgagee (seller) is usually not entitled to a DEFICIENCY JUDGMENT. In some areas referred to as a PURCHASE MONEY MORTGAGE.
CARRYING CHARGES – Expenses necessary for holding PROPERTY, such as taxes and interest on idle PROPERTY or property under construction.
CARRYOVER BASIS – In a tax-deferred EXCHANGE, the ADJUSTED TAX BASIS of the PROPERTY SURRENDERED that is used to determine the TAX BASES of the PROPERTY acquired.
CARTEL – Illegal in the United States, a group who collectively try to affect prices by controlling production and marketing.
CASH AVAILABLE FOR DISTRIBUTION (CAD) – Derived from the amount earned by a REAL ESTATE INVESTMENT TRUST (REIT). It is FUNDS FROM OPERATIONS (FFO), less the cost of recurring CAPITAL EXPENDITURES such as replacing building roofs, resurfacing parking lots, and major repairs to HVAC equipment.
CASH EQUIVALENT – The conversion of the price of PROPERTY that sold with either favorable or unfavorable financing into the price the PROPERTY would have sold for had the seller accepted all cash in the transaction.
CASH FLOW – The money remaining after the payment of all expenses, including OPERATING EXPENSES and DEBT SERVICE.
CASH FLOW ANALYSIS – Also known as DISCOUNTED CASH FLOW – A method of INVESTMENT ANALYSIS in which anticipated future cash INCOME from the INVESTMENT is estimated and converted into a RATE OF RETURN on initial investment based on the TIME VALUE OF MONEY. In addition, when a required RATE OF RETURN is specified, a net present value of the INVESTMENT can be estimated.
CASH FLOW MORTGAGE – DEBT instrument under which all or nearly all the CASH FLOW generated by the rental income is paid to the lender. There is no stated INTEREST RATE.
CASH METHOD – A method of accounting based on cash receipts and disbursements.
CASH SURRENDER VALUE – The amount available in cash upon voluntary termination of a POLICY by its owner before it becomes payable by death or MATURITY.
CASUALTY INSURANCE – INSURANCE concerned with the insured’s legal LIABILITY for injuries to others or damage to other persons’ PROPERTY; also encompasses such forms of INSURANCE as plate glass, burglary, robbery and WORKERS’ COMPENSATION.
CATASTROPHE – Event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.
CATSLIDE (IN SOUTH) – Also known as SALTBOX COLONIAL – An early American style two- or two and a half story house that is square or rectangular with a steep gable roof that extends down to the first floor in the rear.
CAUSES-OF-LOSS FORM – Form added to COMMERCIAL PROPERTY insurance POLICY that indicates the causes of loss that are covered. There are four causes-of-loss forms: basic, broad, special, and earthquake.
CAVEAT EMPTOR – Let the buyer beware. The buyer is responsible for examining the PROPERTY and then buying at his or her own risk.
CAVEATS – Warnings, often written to a potential buyer, to be careful; often offered as a way for the seller or broker to minimize LIABILITY for what otherwise might be a deceptive trade practice.
CEASE AND DESIST – Order by a court or administrative agency prohibiting a person or business from continuing an activity. Used in REAL ESTATE BROKERAGE to prevent ANTITRUST behavior firms or in illegal DISCRIMINATION.
CEDE – To transfer all or part of a risk written by an INSURER (the ceding, or primary company) to a REINSURER.
CEILING JOISTS – The horizontal structural members to which the ceiling is attached.
CENSUS TRACT – Geographical area mapped by the U.S. government for which demographic information is available. This information may be used by retailers, REAL ESTATE DEVELOPERS, and BROKERS to estimate consumer purchasing power in a MARKET AREA.
CENTRAL APPRAISAL DISTRICT (CAD) – A government organization that appraises the VALUE of PROPERTY for tax assessment purposes. Its costs and results of its APPRAISAL and collection efforts are shared by other government entities to avoid inconsistencies and duplication of effort.
CENTRAL BUSINESS DISTRICT (CBD) – The downtown section of a city, generally consisting of retail, office, hotel, entertainment, and governmental land uses with some highdensity housing.
CERTIFICATE OF DEPOSIT (CD) – A type of savings account that carries a specified minimum deposit and term and generally provides a higher yield than passbook-type savings accounts.
CERTIFICATE OF ELIGIBILITY – Issued by the VETERANS ADMINISTRATION to those who qualify for a VA LOAN.
CERTIFICATE OF INSURANCE – 1) A document issued by an INSURANCE COMPANY to verify the COVERAGE; 2) a statement of COVERAGE issued to an individual insured under a GROUP INSURANCE CONTRACT, outlining the INSURANCE BENEFITS and principal PROVISIONS applicable to the member.
CERTIFICATE OF NO DEFENSE – Also known as DECLARATION OF NO SET-OFF and ESTOPPELCERTIFICATE – A document signed by the borrower indicating the date of the most recent payment, the exact PRINCIPAL balance due and the INTEREST RATE.
CERTIFICATE OF OCCUPANCY – A document issued by a local government to a
DEVELOPER permitting occupation of the structure by members of the public. Issuance of the certificate usually indicates that the building is in compliance with building and public health codes.
CERTIFICATE OF PURCHASE – Also known as CERTIFICATE OF SALE – The document issued to the highest BIDDER at a FORECLOSURE sale.
CERTIFICATE OF REASONABLE VALUE – A certificate issued by the VETERANS ADMINISTRATION giving the MARKET VALUE of a PROPERTY (based on a VA appraisal) and setting the maximum amount of a VA-guaranteed LOAN.
CERTIFICATE OF SALE – Also known as CERTIFICATE OF PURCHASE – The document issued to the highest BIDDER at a FORECLOSURE sale.
CERTIFICATE OF TITLE – Also known as OPINION OF TITLE – A written statement of opinion made by a TITLE INSURANCE company, ABSTRACTOR, or ATTORNEY concerning the status and condition of the title to a PARCEL of REAL PROPERTY.
CERTIFIED COMMERCIAL INVESTMENT MEMBER (CCIM) – A designation awarded by the COMMERCIAL INVESTMENT REAL ESTATE INSTITUTE, which is affiliated with the NATIONAL ASSOCIATION OF REALTORS.
CERTIFIED FINANCIAL PLANNER (CFP) – Professional who has attained a high degree of technical competency in financial planning and has passed a series of professional examinations.
CERTIFIED GENERAL APPRAISER – One qualified to APPRAISE any PROPERTY, under the appraiser certification law recently adopted by most states. Usually requires at least two years of general appraisal experience, 150 hours of education, and passing a state examination.
CERTIFIED INSURANCE COUNSELOR (CIC) – Professional in PROPERTY and LIABILITY INSURANCE who has passed a series of examinations by the Society of Certified Insurance Counselors.
CERTIFIED PROPERTY MANAGER (CPM) – A professional designation awarded to REAL ESTATE managers by the INSTITUTE OF REAL ESTATE MANAGEMENT, an affiliate of the NATIONAL ASSOCIATION OF REALTORS.
CERTIFIED RESIDENTIAL APPRAISER (CRA) – One qualified to appraise residences and up to 4 units of housing, under APPRAISER certification law. Standards call for less education, less experience, and less comprehensive exam than for General Certification.
CERTIFIED RESIDENTIAL BROKER (CRB) – A designation awarded by the RESIDENTIAL SALES COUNCIL, which is affiliated with the NATIONAL ASSOCIATION OF REALTORS.
CERTIFIED REAL ESTATE BROKERAGE MANAGER (CRBM) – A professional designation of the REALTORS NATIONAL MARKETING INSTITUTE (RNMI).
CERTIFIED RESIDENTIAL SPECIALIST (CRS) – A professional designation awarded by the RESIDENTIAL SALES COUNCIL, based on education and experience in residential sales. Candidates must hold the GRADUATE REALTORS INSTITUTE (GRI) designation.
CESSION – Amount of the INSURANCE ceded to a REINSURER by the original INSURING COMPANY in a REINSURANCE operation.
CESSION DEED – A DEED which CEDES or returns REAL PROPERTY ownership from an individual to a political unit.
CHAIN – A unit of measurement sixty-six feet or four rods long.
CHAIN OF TITLE – The written history of ownership, conveyance, and encumbrance affecting the title to a PARCEL of REAL PROPERTY, usually from the original granting of the PATENT by the federal government or as far back as records are available.
CHANGE – The APPRAISAL principle, which maintains that certain social economic, political, and physical forces (externalities) are constantly at work, affecting the VALUE of the
PROPERTY to be APPRAISED.
CHANGE OF OCCUPATION CLAUSE – Provision in a HEALTH INSURANCE POLICY stipulating that if the insured changes to a more hazardous occupation, the benefits are reduced based on the amount of benefits the premium would have purchased for the more hazardous occupation.
CHARGE – Also known as DEBT – An accounting term identifying money paid or payable.
CHARTERED FINANCIAL CONSULTANT (CHFC) – An individual who has attained a high degree of technical competency in the fields of financial planning, investments, and LIFE and HEALTH INSURANCE and has passed ten professional examinations administered by The American College.
CHARTERED LIFE UNDERWRITER (CLU) – An individual who has attained a high degree of technical competency in the fields of LIFE and HEALTH INSURANCE and who is expected to abide by a CODE OF ETHICS. Must have minimum of three years of experience in LIFE or HEALTH INSURANCE sales and have passed ten professional examinations administered by The American College.
CHARTERED PROPERTY AND CASUALTY UNDERWRITER (CPCU) – Professional who has attained a high degree of technical competency in property and LIABILITY INSURANCE and has passed ten professional examinations administered by the American Institute for Property and Liability Underwriters.
CHATTEL – Any items of PERSONAL PROPERTY.
CHATTEL MORTGAGE – Formerly a MORTGAGE secured by PERSONAL PROPERTY, this document has been replaced with the SECURITY AGREEMENT.
CHATTEL REAL – A reference to the LEASEHOLD estate of a LESSEE; the personal ownership of the real property rights of possession and quiet enjoyment.
CHOICE NO-FAULT – Allows auto INSUREDS the choice of remaining under the TORT system or choosing no-fault at a reduced PREMIUM.
CHRONOLOGICAL AGE – Also known as ACTUAL AGE – The number of years since the improvements were built.
CIVIL LAW – The portion of law that deals with interactions between individuals. The two branches of civil law are CONTRACT LAW and TORT law.
CIVIL RIGHTS ACT OF 1866 – Drawn from the Fourteenth Amendment to the U.S. Constitution, this law specifically prohibits any type of DISCRIMINATION in REAL PROPERTY transactions based on race.
CLAIM – A request for payment of a loss which may come under the terms of an INSURANCE CONTRACT.
CLAIMANT– A person who wants disbursements of BENEFITS from a written INSURANCE POLICY.
CLAIM-MADE POLICY – A LIABILITY INSURANCE POLICY under which
COVERAGE applies to CLAIMS filed during the POLICY period.
CLAIMS ADJUSTOR – Person who settles CLAIMS: an AGENT, COMPANY ADJUSTOR, independent ADJUSTOR, ADJUSTMENT BUREAU, or public adjustor.
CLASS (OF PROPERTY) – A subjective division of buildings by desirability among TENANTS and investors. Criteria include age, location, construction quality, attractiveness of style, level of maintenance, and so on.
CLASS RATING – Also known as MANUAL RATING – Rate-making method in which similar INSUREDS are placed in the same UNDERWRITING class and each is charged the same RATE.
CLAYTON ACT – A federal act which forbids certain actions believed to lead to MONOPOLIES, including (1) charging different prices to different purchasers of the same product without justifying the price difference and (2) giving a distributor the right to sell a product only if the distributor agrees not to sell competitors’ products. The Clayton Act applies to insurance companies only to the extent that state laws do not regulate such activities.
CLEAR TITLE – A MARKETABLE TITLE; one free of CLOUDS and disputed interest.
CLIENT – 1) The one who engages a BROKER, lawyer, accountant, APPRAISER, etc; 2) also known as also known as PRINCIPAL – the person who authorizes another to represent him or her.
CLIFF VESTING – A PENSION design in which an employee becomes entitled to full retirement benefits after participating in the plan for the specified period, e.g., five years.
CLOSE-END MORTGAGE – A MORTGAGE loan whose PRINCIPAL amount cannot be increased during the payout period; contrast with OPEN-END MORTGAGE.
CLOSING 1) – Also known as ESCROW CLOSING, especially in states where DEEDS OF TRUST are used instead of MORTGAGES – The act of transferring ownership of a PROPERTY from seller to buyer in accordance with a SALES CONTRACT; 2) the time when a CLOSING takes place.
CLOSING COSTS – Various fees and expenses payable by the seller and buyer at the time of a
REAL ESTATE CLOSING.
CLOSING DATE – The date on which the seller delivers the deed and the buyer pays for the
PROPERTY.
CLOSING STATEMENTS – The statement that lists the FINANCIAL SETTLEMENT between the buyer and seller and the costs that each must pay.
CLOUD ON TITLE – An ENCUMBRANCE or CLAIM, real or imagined, that impairs the validity of a title or renders the TITLE suspect.
CLUSTERING – The grouping of houses in a subdivision on less-than-normal-size home sites, with the remaining land becoming COMMON AREAS.
CODE – See BUILDING CODE, CODE OF ETHICS, HOUSING CODE.
CODE OF ETHICS – A statement of PRINCIPLES concerning the behavior of those who subscribe to the CODE.
COINSURANCE – 1) A CLAUSE in an INSURANCE POLICY stating the minimum percentage of VALUE to be INSURED in order to collect the full amount of loss; 2) a provision under which an INSURED who carries less than the STIPULATED percentage of
INSURANCE to VALUE, will receive a loss payment that is limited to the same ratio which the amount of INSURANCE bears to the amount required; 3) a POLICY PROVISION frequently found in MEDICAL INSURANCE, by which the INSURED PERSON and the INSURER share the covered losses under a policy in a specified ratio, i.e., eighty percent by the INSURER and 20 percent by the INSURED. See also PERCENTAGE PARTICIPATION.
COLD CANVASS – The process of contacting homeowners in an area in order to solicit LISTINGS.
COLLAPSIBLE CORPORATION – A term that applies to some corporations that are dissolved within three years. The IRS treats gain on the sale or LIQUIDATION of the corporation as ordinary INCOME to the STOCKHOLDER.
COLLATERAL – Also known as COLLATERAL SECURITY – PROPERTY acceptable as SECURITY for a LOAN or other obligation.
COLLATERAL SECURITY – Also known as COLLATERAL. – PROPERTY acceptable as SECURITY for a LOAN or other obligation.
COLLATERALIZED MORTGAGE OBLIGATION (CMO) – A SECURITY backed by a POOL of MORTGAGE LOANS that may be separated into various CLASSES with varying MATURITIES. Note that REMICS are the standard vehicle for investing in MORTGAGE instruments.
COLLATERAL SOURCE RULE – Under this rule, the DEFENDANT cannot introduce any evidence that shows the injured party has received compensation from other collateral sources.
COLLISION INSURANCE – Protection against loss resulting from any DAMAGE to the POLICYHOLDER’S car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the insured’s fault or not.
COLONNADE – A series of columns placed at regular intervals.
COLOR OF TITLE – The condition under which the TITLE to REAL PROPERTY appears to be good, but is really not good because of an underlying defect.
COMBINED RATIO – Basically, a measure of the relationship between dollars spent for CLAIMS and expenses and PREMIUM dollars taken in; more specifically, the sum of the ratio of LOSSES incurred to PREMIUMS earned and the ratio of COMMISSIONS and expenses incurred to PREMIUMS WRITTEN. A ratio above 100 means that for every PREMIUM dollar taken in, more than a dollar went for LOSSES, expenses, and COMMISSIONS.
COMMERCIAL BANK – A financial institution authorized to provide a variety of financial services, including consumer and business loans, checking services, credit cards, and savings accounts. Certain deposits at most commercial banks are insured by the FEDERAL DEPOSIT
INSURANCE CORPORATION. Commercial banks may be members of the Federal Reserve System.
COMMERCIAL BROKER – One who LISTS and sells commercial PROPERTY, which may include shopping, office, industrial, and APARTMENT projects.
COMMERCIAL GENERAL LIABILITY POLICY (CGL) – Commercial LIABILITY POLICY drafted by the INSURANCE SERVICES OFFICE containing two coverage forms: 1) an OCCURRENCE form and 2) a CLAIMS-made form.
COMMERCIAL INVESTMENT REAL ESTATE INSTITUTE – An affiliate of THE NATIONAL ASSOCIATION OF REALTORS whose members are mainly concerned with COMMERCIAL and INVESTMENT PROPERTIES.
COMMERCIAL LINES – INSURANCE for businesses, organizations, institutions, governmental agencies, and other commercial establishments.
COMMERCIAL MULTIPLE PERIL POLICY – A package of INSURANCE that includes a wide range of essential COVERAGES for the commercial establishment.
COMMERCIAL PACKAGE POLICY (CPP) – A COMMERCIAL POLICY that can be designed to meet the specific INSURANCE needs of business firms. PROPERTY and LIABILITY COVERAGE forms are combined to form a single POLICY.
COMMERCIAL PROPERTY – PROPERTY designed for use by retail, wholesale, office, hotel, or service users.
COMMINGLE – To mingle or mix, such as the deposit of another’s money in a BROKER’S personal account.
COMMISSION – 1) The amount paid to the AGENT by the PRINCIPAL as
COMPENSATION for the AGENT’S services. The COMMISSION is usually a percentage of the sales price or LEASE amount; 2) the part of an INSURANCE PREMIUM paid by the INSURER to an AGENT or BROKER for his services in procuring and servicing the INSURANCE
COMMISSIONER – 1) A state officer who administers the state’s INSURANCE laws and REGULATIONS. In some states, this regulator is called the director or superintendent of INSURANCE; 2) the head administrator of the State REAL ESTATE COMMISSION.
COMMISSION SPLIT – The arrangement of sharing COMMISSIONS earned between a sales AGENT and sponsoring BROKER, or between the selling BROKER and LISTING BROKER.
COMMITMENT – A pledge or promise; a firm agreement.
COMMITMENT FEE – A charge required by a LENDER to lock in specific TERMS on a LOAN at the time of APPLICATION.
COMMITMENT LETTER – An official notification of a borrower from a lender indicating that the borrower’s loan APPLICATION has been approved and stating the terms of the prospective LOAN.
COMMON AREAS – AREAS of a PROPERTY that are used by all owners or TENANTS.
COMMON ELEMENTS – In a CONDOMINIUM, those portions of the PROPERTY not owned individually by UNIT owners but in which an invisible interest is held by all UNIT owners. Generally includes the grounds, parking areas, recreational facilities and external structure of the building.
COMMON LAW – 1) The rules and principles founded on custom, usage, decisions, and opinions of the courts.; 2) the law that has evolved over time as a result of previous court decisions, rather than having been enacted by a legislative body.
COMMON STOCK – SECURITIES that represent an ownership interest in a corporation.
COMMUNITY ASSOCIATION – General name for any organization of PROPERTY owners to oversee some common interest. In a CONDOMINIUM or PLANNED UNIT DEVELOPMENT, the association has the responsibility of managing the COMMON ELEMENTS in the PROJECT. A HOMEOWNERS’ ASSOCIATION may be established in a subdivision to enforce DEED COVENANTS.
COMMUNITY ASSOCIATION INSTITUTE (CAI) – A not-for-profit educational and research organization concerned with the problems of managing HOMEOWNERS’ ASSOCIATIONS and other COMMUNITY ASSOCIATIONS. CAI sponsors educational seminars and publishes various handbooks and brochures.
COMMUNITY PROPERTY – A form of CONCURRENT OWNERSHIP available only to a married couple in a COMMUNITY PROPERTY STATE, in which each spouse has an equal undivided interest in the PROPERTY acquired by the efforts of either spouse during the marriage; a special ownership form requiring that one-half of all PROPERTY earned by a husband or wife during marriage belongs to each. Community PROPERTY laws do not generally apply to PROPERTY acquired by gift, by WILL, or by DESCENT
COMMUNITY PROPERTY STATE – Any state that subscribes to the system of PROPERTY ownership based on the theory that each spouse has an equal interest in the PROPERTY acquired by the efforts of either spouse during the marriage.
COMMUNITY REINVESTMENT ACT – A federal law that requires federal regulators of lending institutes to encourage lending within the local area of the institution, particularly to low- and moderate- income residents and those residing in inner city neighborhoods.
COMMUTATION FUNCTION – A notation as defined by actuaries to combine various elements of an actuarial computation in a manner that makes a formula look simpler.
COMMUTATION TABLE – A table that combines elements (e.g., INTEREST and
MORTALITY) into a single value to facilitate further computations.
CO-MORTGAGOR – One who signs a MORTGAGE CONTRACT with another party or parties and is thereby jointly obligated to repay the LOAN. Generally a CO-MORTGAGOR provides some assistance in meeting the requirements of the LOAN and receives a share of ownership in the encumbered PROPERTY.
COMPANY ADJUSTOR – CLAIMS ADJUSTOR who is a salaried employee representing only one company.
COMPARABLES – PROPERTIES that are similar to the one being sold or APPRAISED.
COMPARATIVE MARKET ANALYSIS (CMA) – An estimate of the value of property using only a few indicators taken from sales of comparable properties, such as price per square foot. The value estimates are not appraisals and do not meet the standards of appraisal as defined by USPAP.
COMPARATIVE NEGLIGENCE – Under this concept a PLAINTIFF (the person bringing suit) may recover DAMAGES even though guilty of some NEGLIGENCE. His or her recovery, however, is reduced by the amount or percent of that NEGLIGENCE.
COMPARATIVE UNIT METHOD – An APPRAISAL technique to establish relevant UNITS as a guide to APPRAISING the subject PROPERTY.
COMPARISON METHOD – Also known as COST COMPARISON METHOD – A method of estimating construction costs in which the total improvement cost is based on an average cost per square foot or cost per cubic foot of constructing similar IMPROVEMENTS.
COMPENSATION – 1) Payment for work performed, by salary, wages, COMMISSION or otherwise. It can include giving goods rather than money; 2) the amount received to “make one whole” (or at least better) after an injury or LOSS, particularly that paid by an INSURANCE COMPANY either of the party causing the damage or by one’s own INSURER.
COMPETENT PARTIES – Person legally capable of entering a CONTRACT. Must be of legal age, not be insane or a drunkard.
COMPETITION – The APPRAISAL principle, which maintains that the opportunity to generate profit breeds COMPETITION, and that excessive profit potential breeds cutthroat or ruinous COMPETITION.
COMPLETE APPRAISAL – A professional estimate of VALUE without invoking the departure provision of USPAP. May be a SELF-CONTAINED APPRAISAL REPORT, SUMMARY APPRAISAL REPORT, or RESTRICTED APPRAISAL REPORT.
COMPLETED OPERATIONS – LIABILITY arising out of faulty work performed away from the PREMISES after the work or operations are completed. Applicable to CONTRACTORS, plumbers, electricians, repair shops and similar firms.
COMPLETION BOND – A legal instrument used to guarantee the completion of a development according to specifications. More encompassing than a PERFORMANCE BOND, which assures that one party will perform under a CONTRACT on condition that the other party performs. The COMPLETION BOND assures production of the development without reference to any CONTRACT and without the requirement of payment to the CONTRACTOR.
COMPONENT DEPRECIATION – Dividing REAL ESTATE IMPROVEMENTS into various parts such as the roof, plumbing, electrical system, and shell, then DEPRECIATING each component separately for tax purposes. Eliminated by the 1981 Tax Act for acquisitions after 1980.
COMPOUND AMOUNT OF ONE PER PERIOD – The amount that a series of deposits of $1.00 per period would grow to if left on deposit with INTEREST allowed to COMPOUND.
COMPOUND INTEREST – INTEREST paid on accumulated INTEREST as well as on the PRINCIPAL.
COMPREHENSIVE AUTOMOBILE INSURANCE – Protection against loss resulting from damage to the insured auto, other than loss by collision or upset.
COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND
LIABILITY ACT (CERCLA) – Federal law, known as SUPERFUND, passed in 1980, reauthorized by SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT (SARA) in 1986. The law imposes strict joint and several liability for cleaning up environmentally contaminated land. Potentially responsible parties include any current or previous owner, generator, transporter, disposer, or party who treated hazardous waste at the site. STRICT LIABILITY means that each and every party is liable for the full cost of remediation, even parties whom were not contaminators. JOINT AND SEVERAL LIABILITY makes each party LIABLE for the full cost of cleanup. A DE MINIMIS SETTLEMENT is an agreement with the EPA to allow a party who had a minor role in contamination to pay a small amount to be released from the litigation.
COMPREHENSIVE MAJOR MEDICAL INSURANCE – A POLICY designed to give the protection offered by both a basic and A MAJOR MEDICAL HEALTH INSURANCE POLICY. It is characterized by a low DEDUCTIBLE amount, a COINSURANCE feature, and high maximum benefits.
COMPREHENSIVE MEDICAL EXPENSE INSURANCE – A form of HEALTH
INSURANCE which provides, in one POLICY, protection for both basic hospital expense and MAJOR MEDICAL EXPENSE COVERAGES. The major medical part of a comprehensive policy is characterized by a DEDUCTIBLE amount, COINSURANCE, and high maximum benefits.
COMPREHENSIVE PERSONAL LIABILITY INSURANCE – Protection against loss arising out of legal LIABILITY to pay money for damage or injury to others for which the insured is responsible. It does not include automobile or business operation liabilities.
COMPRESSED BUY-DOWN – A BUY-DOWN loan for which the extent of rate reduction is changed at 6-month intervals. Many buy-downs feature a deep discount in the first year that is reduced gradually each year. The compressed buy-down is a variation of this type with accelerated gradations.
COMPS – APPRAISAL term, short for Comparables.
COMPULSORY AUTO LIABILITY INSURANCE – INSURANCE laws in some states required motorists to carry at least certain minimum auto COVERAGES. This is called
COMPULSORY INSURANCE.
COMPULSORY INSURANCE – Any form of insurance which is required by law.
COMPULSORY INSURANCE LAW – Law protecting accident victims against irresponsible motorists by requiring owners and operators of automobiles to carry certain amounts of LIABILITY INSURANCE in order to license the vehicle and drive legally within the state.
COMPUTERIZED LOAN ORGANIZATION (CLO) – A computer-based network of lenders that allows affiliated REAL ESTATE BROKERS, builders, or advisors to originate LOANS at the site of the home. Provides a streamlined process whereby a person can buy a home and apply for a LOAN at the same place and time.
CONCEALMENT – Deliberate failure of an applicant for INSURANCE to reveal a material fact to the INSURER.
CONCESSIONS – Also known as RENT CONCESSION – Benefits granted by a seller/LESSOR to induce a SALE/LEASE.
CONCURRENT CAUSATION – Legal doctrine that states when a property loss is due to two causes, one that is EXCLUDED and one that is COVERED, the POLICY provides COVERAGE.
CONCURRENT OWNERSHIP – Also known as CO-OWNERSHIP – Ownership by any two or more NATURAL or LEGAL PERSONS.
CONDEMNATION – The legal proceeding for a political unit to take private PROPERTY under EMINENT DOMAIN.
CONDITION – 1) PROVISION inserted in an INSURANCE CONTRACT that qualify or place limitations on the INSURER’S promise to perform; 2) PROVISION in a CONTRACT that some or all terms of the CONTRACT will be altered or cease to exist upon a certain event.
CONDITIONAL COMMITMENT – The preliminary agreement by a lender to make a LOAN for a specified amount and on specified terms, usually CONTINGENT on the APPRAISAL of the PROPERTY.
CONDITIONALLY RENEWABLE – Continuance provision of a HEALTH INSURANCE POLICY under which the company cannot cancel the POLICY during its TERM but can refuse to renew under certain conditions stated in the CONTRACT.
CONDITIONAL OFFER – PURCHASE CONTRACT tendered to the seller that
STIPULATES one or more requirements to be satisfied before the purchaser is obligated to buy.
CONDITIONAL RECEIPT – A receipt given for PREMIUM payments accompanying an APPLICATION for INSURANCE. If the APPLICATION is approved as applied for, the COVERAGE is effective as of the date of the PREPAYMENT or the date on which the last of the UNDERWRITING requirements, such as a MEDICAL EXAMINATION, has been fulfilled.
CONDITIONAL SALES CONTRACT – A CONTRACT under which the TITLE to PROPERTY or goods remains with the seller until the purchaser has fulfilled the terms of the CONTRACT, usually payment in full.
CONDITIONAL-USE PERMIT – Also known as SPECIAL USE PERMIT – The written permission from a political unit allowing a special use of PROPERTY in the public interest, such as a medical facility in a RESIDENTIALLY zoned area to provide medical care for the residents.
CONDITIONS, COVENANTS, AND RESTRICTIONS (CCRS) – Often found in a
CONDOMINIUM or a subdivision, these are rules written into the DEEDS or BYLAWS that define how PROPERTY may be used. They prevent PROPERTY owners from making changes to their individual PROPERTIES that could result in an unattractive or inharmonious setting, which could adversely affect other owners.
CONDOMINIUM – The individual ownership of an individual UNIT in a multi-unit development, and the common ownership of the COMMON ELEMENTS, such as walls, stairways, parking, recreational facilities, etc. CONDOMINIUMS are not restricted to only RESIDENTIAL use, but may exist as a form of ownership for any type of REAL PROPERTY.
CONDOMINIUM OWNER’S ASSOCIATION – An organization of all UNIT owners in a CONDOMINIUM to oversee the COMMON ELEMENTS and enforce the BYLAWS.
CONDUIT TAX TREATMENT – Income passing through an ENTITY without taxation. Certain ENTITIES are preferred as REAL ESTATE ownership vehicles because they pass income and losses through to underlying owners without paying a tax or changing the nature of their earnings.
CONFINING SICKNESS – An illness that confines an INSURED person to his home or to a hospital.
CONFORMING LOAN – A MORTGAGE LOAN that is eligible for purchase by FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) or FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC).
CONFORMITY – The APPRAISAL PRINCIPLE that maintains that the maximum VALUE of a PROPERTY is realized when a reasonable degree of similarity is present in the area where the PROPERTY is located.
CONSENT DECREE – A judgment whereby the DEFENDANT agrees to stop the activity that was asserted to be illegal, without admitting wrongdoing or guilt.
CONSEQUENTIAL LOSS – Financial loss occurring as the consequence of some other loss. Often called an INDIRECT LOSS.
CONSERVATION – The attempt by the INSURER to prevent the LAPSE of a POLICY.
CONSIDERATION – 1) One of the elements for a BINDING CONTRACT. Consideration is acceptance by the insurance company of the payment of the PREMIUM and the statement made by the prospective policyholder in the APPLICATION; 2) anything used to induce a person to enter into a CONTRACT. Consideration differentiates a CONTRACT from a gift.
CONSIDERATION CLAUSE – The CLAUSE that stipulates the basis on which the COMPANY issues the INSURANCE CONTRACT. In HEALTH POLICIES, the consideration is usually the statements in the APPLICATION and the payment of premium.
CONSIGNMENT – In REAL ESTATE finance, the process in which the FSLIC replaces the management of an INSOLVENT SAVINGS AND LOAN ASSOCIATION, but allows the association to continue operating.
CONSOLIDATED METROPOLITAN STATISTICAL AREA (CMSA) – An area with two or more PRIMARY METROPOLITAN STATISTICAL AREAS. A CMSA must also include at least one million people. See also METROPOLITAN STATISTICAL AREA (MSA)
CONSTANT ANNUAL PERCENT – Same as MORTGAGE CONSTANT – The percentage ratio between the annual DEBT SERVICE and the LOAN PRINCIPAL.
CONSTANT PAYMENT LOAN – A LOAN on which equal payments are made periodically so as to pay off the DEBT when the last payment is made.
CONSTRICTIVE NOTICE – Notice given through recordation or publication, which may LEGALLY NOTIFY the parties but not actually notify them.
CONSTRUCTIVE EVICTION – The action or lack of action by a LESSOR which interferes with the LESSEE’S rights of possession and QUIET ENJOYMENT, thus forcing the LESSEE to ABANDON the PROPERTY without any further LIABILITY under the terms of the LEASE.
CONSTRUCTIVE LOAN – One that finances subdivision costs and/or improvements to REAL ESTATE.
CONSTRUCTIVE NOTICE – The law presumes that everyone has knowledge of a fact when the fact is a matter of PUBLIC RECORD.
CONSTRUCTIVE RECEIPT – For tax purposes, the right to receive money that would be taxable and is taxable, even if receipt is postponed; in REAL ESTATE EXCHANGES, the receipt of cash or other non-LIKE–KIND PROPERTY or the acquisition of the right to use or benefit from such cash or PROPERTY during an EXCHANGE transaction.
CONSTRUCTIVE TOTAL LOSS – An INSURANCE CLAIM where the VALUE to REPAIR the PROPERTY exceeds the MARKET VALUE of that PROPERTY.
CONSULTING – The act of providing information, analysis, and recommendations for a proposed REAL ESTATE decision.
CONSUMER PRICE INDEX (CPI) – The most widely known of many such measures of PRICE LEVELS and INFLATION that are reported to the U.S. government. It measures and compares, from month to month, the total cost of a statistically determined TYPICAL MARKET BASKET of goods and services consumed by U.S. households.
CONTEMPORARY HOUSE – Also known as FUNCTIONAL MODERN – A post World
War II style house with an exterior style that is an integral part of the overall design. Its function is to enclose some living areas with modern materials while integrating the indoor and outdoor space into one unit.
CONTIGUOUS – Actually touching; contiguous PROPERTIES have a common boundary.
CONTINGENCY CLAUSE – Also CONDITION: 1) PROVISIONS inserted in an INSURANCE CONTRACT that qualify or place limitations on the INSURER’S promise to perform; 2) PROVISIONS in a CONTRACT that some or all terms of the CONTRACT will be altered or cease to exist upon a certain event.
CONTINGENT ANNUITY OPTION – An OPTION under which an employee may elect to receive, under certain conditions, a reduced amount of ANNUITY with the same income, or a specified fraction, to be paid after his death to another person designated as his contingent ANNUITANT, for that person’s lifetime. The CONTINGENT ANNUITANT is usually the husband or the wife. See also JOINT AND SURVIVOR ANNUITY.
CONTINGENT BENEFICIARY – The person or persons designated to receive the benefits of a POLICY or plan if the PRIMARY BENEFICIARY dies while the INSURED is living.
CONTINGENT EMPLOYERS LIABILITY INSURANCE – Provides payment on behalf of the employer for bodily injury to an employee if that person is ineligible to receive WORKERS COMPENSATION BENEFITS, e.g., an occasional employee.
CONTINGENT INTEREST – Payment on a LOAN that is due only if certain conditions are met.
CONTINGENT LIABILITY – LIABILITY arising out of work done by INDEPENDENT CONTRACTORS for a firm. A firm may be LIABLE for the work done by an INDEPENDENT CONTRACTOR if the activity is illegal, the situation does not permit delegation of authority, or the work is inherently dangerous.
CONTINGENT OWNER – The person to succeed as owner of a LIFE INSURANCE
POLICY if the original owner dies.
CONTOUR MAP – 1) A map that displays the topography of the SITE; 2) a map with CONTOUR lines that indicate various elevations.
CONTRACT – 1) A legally enforceable agreement, either oral or written, between COMPETENT PARTIES to do something or not to do something for consideration; 2) a BINDING AGREEMENT between two or more parties for the doing or not doing of certain things. A CONTRACT of INSURANCE is embodied in a written document called the POLICY.
CONTRACT FOR DEED – Also known as LAND CONTRACT, LAND SALES CONTRACT and INSTALLMENT CONTRACT – An INSTALLMENT CONTRACT for the sale of REAL PROPERTY. The seller has LEGAL TITLE (the DEED) until paid in full. The buyer has EQUITABLE TITLE (an EQUITY INTEREST) during the CONTRACT term.
CONTRACT HOLDER – The group, entity or person to whom a GROUP ANNUITY CONTRACT is issued.
CONTRACT LAW – The portion of CIVIL LAW that interprets written agreements between parties and resolves disputes between them.
CONTRACT OF ADHESION – Occurs when one party to the CONTRACT writes it and offers other parties only the option of acceptance or rejection. In such a circumstance the law interprets any ambiguities in the contract against the party writing it.
CONTRACT RENT – Also known as ACTUAL RENT and OBLIGATED RENT – The amount of consideration paid as RENT under the terms of a LEASE – in contrast to economic rent.
CONTRACTOR – One who contracts to supply specific goods or services, generally in connection with development of a PROPERTY.
CONTRACT PRICE (TAX) – In an INSTALLMENT SALE, for tax purposes, generally the selling price less existing MORTGAGES assumed by the buyer.
CONTRACTUAL LIABILITY – Legal LIABILITY of another party that the business firm agrees to assume by a written or ORAL CONTRACT.
CONTRACTUAL RISK TRANSFER – A major method of loss financing through which a legal agreement is used to transfer RISK to another party.
CONTRIBUTION – The APPRAISAL principle which maintains that the VALUE of any component of a PROPERTY depends on how much it contributes to the VALUE of the whole PROPERTY, or how much it detracts form the VALUE of the whole PROPERTY.
CONTRIBUTION BY EQUAL SHARES – Type of other INSURANCE provision often found in liability insurance CONTRACTS that requires each company to share equally in the loss until the share of each INSURER equals the lowest limit of LIABILITY under any POLICY or until the full amount of loss is paid.
CONTRIBUTORY – A group INSURANCE plan issued to an e Carpenter Gothic Style mployer under which both the employer and employee contribute to the cost of the plan. Seventy-five percent of the eligible employees must be insured. See also NONCONTRIBUTORY.
CONTRIBUTORY NEGLIGENCE – NEGLIGENCE of the DAMAGED person that helped to cause the ACCIDENT. Some states bar recovery to the PLAINTIFF if the PLAINTIFF was CONTRIBUTORILY NEGLIGENT to any extent. Others apply comparative negligence.
CONTROLLED BUSINESS ARRANGEMENT (CBA) – A REAL ESTATE
BROKERAGE office that provides related services through SUBSIDIARY COMPANIES that operate within the BROKERAGE office. The arrangement allows a BROKER to provide financing, TITLE and HAZARD INSURANCE, and other ANCILLARY SERVICES without violating the REAL ESTATE SETTLEMENT PROCEDURES ACT.
CONTROL PREMIUM – An amount paid to gain enough ownership to set POLICIES, direct operations, and make decisions for a business.
CONVENTIONAL LIFE ESTATE – Also known as LIFE ESTATE – Based on custom or common practice, an interest in REAL PROPERTY for the lifetime of a NATURAL PERSON. At that person’s death, the PROPERTY automatically reverts to the GRANTOR of the ESTATE (REVERSION) or passes to and remains with a third person (REMAINDER).
CONVENTIONAL LOAN – A LOAN not INSURED or guaranteed by the federal government; a FIXED-RATE LOAN, fixed-term mortgage loan.
CONVENTIONAL WILL – Also known as FORMAL WILL – The type of WILL prepared by an attorney and properly witnessed.
CONVERSION – 1) Usually a reference to the changing of an APARTMENT into a CONDOMINIUM or TIME-SHARE project; 2) the taking away of PROPERTY that belong to another person; 3) a change in the ownership form of a SAVINGS AND LOAN ASSOCIATION.
CONVERSION PRIVILEGE – 1) A privilege granted in an INSURANCE POLICY to convert to a different plan of INSURANCE without providing EVIDENCE OF
INSURABILITY. The privilege granted by a group policy is to convert to an individual policy upon termination of group coverage; 2) the right given to an insured person to change INSURANCE without EVIDENCE OF MEDICAL INSURABILITY, usually to an individual policy upon termination of coverage under a group contract.
CONVERTIBLE ARM – An ADJUSTABLE RATE MORTGAGE that offers the borrower the option to convert payments to a FIXED-RATE schedule at a specific period within the TERM of the LOAN. Conversion is made for a nominal fee and the INTEREST RATE on the FIXED-RATE LOAN is determined by a rule specified in the ARM LOAN AGREEMENT.
CONVERTIBLE BOND – A BOND that offers the holder the privilege of converting the BOND into a specified number of shares of stock.
CONVERTIBLE TERM INSURANCE – TERM INSURANCE which can be exchanged, at the option of the POLICYHOLDER and without EVIDENCE OF INSURABILITY, for another plan of INSURANCE.
CONVEY – To transfer the ownership of REAL PROPERTY with a DEED.
CONVEYANCE – A document specifically designed to transfer real property ownership, such as general warranty deed, a special warranty deed, and a bargain and sale deed.
CO-OP – An arrangement between two REAL ESTATE AGENTS that generally results in splitting the COMMISSION between them.
COOPERATING BROKER – Also known as SELLING BROKER. The BROKER who is not the LISTING BROKER, but who agrees to cooperate with the LISTING BROKER in finding a ready, willing, and able buyer.
COOPERATIVE – The common ownership of both an individual UNIT and the COMMON ELEMENTS in a multi-unit development. The ownership of the COOPERATIVE is held by a CORPORATION, TRUST, or PARTNERSHIP and the individual owner receives the right to possess one UNIT by INVESTING in the owning entity and receiving a share certificate and a PROPRIETARY LEASE, which allows the possession. COOPERATIVE ownership does not involve REAL PROPERTY ownership by the individual.
COORDINATION OF BENEFITS (COB) – The mechanism used in GROUP HEALTH INSURANCE to designate the order in which the multiple carriers are to pay BENEFITS and to prevent duplicate payments.
CO-OWNERSHIP – Also known as CONCURRENT OWNERSHIP – Ownership by any two or more NATURAL or LEGAL PERSONS.
CORNER LOT – In a SUBDIVISION, a LOT which has road frontage on at least two sides as opposed to a INSIDE LOT which is surrounded on each side by other LOTS,
CORNICE – 1) A horizontal molded projection that crowns or completes a building or wall; 2) the molding at the top of the walls of a room, between the walls and ceiling; 3) an ornamental horizontal molding or frame used to conceal rods, picture hooks, or other devices.
CORPORATION – An INVESTMENT SYNDICATE with PERPETUAL life under the law. The members are shareholders, who participate in the management and profits of the CORPORATION, but who have LIMITED LIABILITY for the CORPORATION’S LOSSES.
CORPOREAL – Having a body; physical and tangible.
CORRECTION DEED – A DEED used to correct an error in a prior DEED, such as an inaccurate legal description or a misspelled name or word.
CORRELATION – Also known as RECONCILIATION – The process by which the APPRAISER reviews the VALUE estimates indicated by the three APPROACHES TO VALUE and develops a final estimate of VALUE.
CORRIDOR DEDUCTIBLE – MAJOR MEDICAL plan DEDUCTIBLE that excludes benefits provided by a basic plan if both a basic and a supplemental group major medical expense POLICY are in force.
CO-SIGNER – 1) Same as ACCOMMODATION PARTY – One who has signed an agreement without receiving VALUE for it, for the purpose of lending his or her name so that another person can secure a necessary LOAN or other arrangement; 2) a person who signs or endorses the PROMISSORY NOTE of another before it is delivered to the lender. The CO-SIGNER is equally responsible for repayment.
COST APPROACH TO VALUE – Also known as APPRAISAL BY SUMMATION – The APPRAISAL method of estimating the MARKET VALUE of the PROPERTY by determining the reproduction cost new, subtracting the ACCRUED DEPRECIATION and adding the VALUE of the LAND.
COST BASIS – An amount attributed to an ASSET for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the VALUE of a gift.
COST-BENEFIT ANALYSIS – A decision-making process, often used in public finance that forces the decision maker to compare all direct and indirect positive and negative effects of the proposed decision on an objective basis, usually in dollars. Benefits must exceed costs to justify the project or adopt the policy.
COST COMPARISON METHOD – Also known as COMPARISON METHOD – A method of estimating construction costs in which the total IMPROVEMENT cost is based on an average cost per square foot or cost per cubic foot of constructing similar IMPROVEMENTS.
COST CONTAINMENT – The practice of controlling overhead costs to improve profits.
COST ESTIMATING – In construction, the act of predicting the total costs of labor, materials, capital, and professional fees required to construct a proposed project.
COST OF LIVING ADJUSTMENT (COLA) – A change in payments, such as the amount of RENT, based on a change in an index that measures INFLATION.
COST OF LIVING INDEX – An indicator of the current price level for goods and services related to some base year.
COST-OF-LIVING RIDER – BENEFIT that can be added to a LIFE INSURANCE POLICY under which the POLICY owner can purchase one-year term INSURANCE equal to the percentage change in the CONSUMER PRICE INDEX with no EVIDENCE OF INSURABILITY.
COST OF PURE RISK – All costs related to pure RISK which includes, from the perspective of shareholders, retained RISK, LOSS PREVENTION costs, INSURANCE costs, and more.
COST OF RISK – The reduction in BUSINESS VALUE that arises as a result of RISK.
COST-PLUS-PERCENTAGE CONTRACT – An agreement on a construction project in which the CONTRACTOR is provided a specified percentage profit over and above the actual costs of construction. These CONTRACTS are considered poor business practice because the CONTRACTOR has little incentive to hold down costs. A cost-plus-fixed-fee CONTRACT is a better approach.
COST RECOVERY – The Internal Revenue Service phrase for DEPRECIATION.
CO-TENANCY – Any of a number of forms of multiple ownership such as TENANCY in common and JOINT TENANCY.
COUNSELING – The act of advising clients on a variety of REAL ESTATE investment or development matters.
COUNSELOR OF REAL ESTATE (CRE) – A member of the AMERICAN SOCIETY OF REAL ESTATE COUNSELORS (ASREC). Membership is based on experience and professional conduct as a real estate counselor.
COUNTER-OFFER – Rejection of an offer to buy or sell, with a simultaneous substitute offer.
COVENANT – Promise written into DEEDS and other instruments agreeing to performance or nonperformance of certain acts, or requiring or preventing certain uses of the PROPERTY.
COVENANT NOT TO COMPLETE – A clause in an agreement where one party promises not to offer to sell or produce the same goods and services in proximity to the other party.
COVENANT RUNNING WITH THE LAND – A COVENANT restricting or limiting property rights to land, or a DEED RESTRICTION, in which it is specified that ownership of the LAND cannot be transferred unless the new owner agrees to continue to abide by the COVENANT.
COVERAGE – The scope of protection provided under a CONTRACT of INSURANCE; any of several RISKS covered by a POLICY.
COVERAGE FOR DAMAGE TO YOUR AUTO – That part of the personal auto policy insuring payment for damage or theft of the insured automobile. This optional coverage can be used to insure both collision and other-than-collision losses.
COVERED – A person covered by a PENSION PLAN is one who has fulfilled the ELIGIBILITY REQUIREMENTS in the plan, for whom BENEFITS have accrued, or are accruing, or who is receiving BENEFITS under the plan.
COVERED EXPENSES – Hospital, medical, and miscellaneous health care expenses incurred by the INSURED that entitle him/her to a payment of BENEFITS under a HEALTH INSURANCE POLICY. Found most often in connection with MAJOR MEDICAL PLANS, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense which will be considered in the calculation of benefits.
COVERED LOSSES – Any situation or LOSS for which an INSURANCE COMPANY will pay BENEFITS.
COVERED PARTICIPANT – A person covered by a PENSION PLAN is one who has fulfilled the ELIGIBILITY REQUIREMENTS in the plan, for whom BENEFITS have accrued, or are accruing, or who is receiving BENEFITS under the plan.
CRAM DOWN – In BANKRUPTCY, the reduction of various CLASSES of DEBT to a lower amount, with acceptance by the BANKRUPTCY court.
CREATIVE FINANCING – Any financing arrangement other than a traditional MORTGAGE from a THIRD-PARTY lending institution.
CREDIBILITY – A statistical measure of the degree to which past results make good forecasts of future results.
CREDIBILITY FACTOR – The weight given to an individual INSURED’S past experience in computing PREMIUMS for future coverage.
CREDIT – An accounting term identifying money received or receivable.
CREDIT HEALTH INSURANCE – A form of HEALTH INSURANCE on a borrower, usually under an installment purchase AGREEMENT. The BENEFITS cover the obligations of the borrower and are payable to the CREDITOR.
CREDIT INSURANCE – A guarantee to manufacturers, wholesalers, and service organizations that they will be paid for goods shipped or services rendered. Applies to that part of WORKING CAPITAL which is represented by accounts receivable.
CREDIT LIFE INSURANCE – TERM LIFE INSURANCE issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.
CREDITOR – Also known as LENDER – A person to whom money is owed.
CREDIT RATING (REPORT) – An evaluation of a person’s CAPACITY of DEBT repayment. Generally available for individuals from a local retail CREDIT association. Individuals have access to their own files.
CROP-HAIL INSURANCE – Protection against damage to growing crops as a result of hail or certain other named perils.
CROP LEASE – Also known as FARM LEASE – A LEASE under which the LESSEE pays the LESSOR for the privilege of farming the LESSOR’S LAND, paying RENT either in cash in advance (cash rents) or with a share of the crop when the crop is harvested (SHARECROPPING).
CROSS LIABILITY CLAUSE – Obligates an INSURER to protect each INSURED separately.
CROSS PURCHASE AGREEMENT – Specifies the TERMS for the surviving partners or shareholders to buy a deceased’s share of the business’s ownership.
CUBIC YARD – A unit of volume measurement containing twenty-seve cubic feet.
CUL-DE-SAC – A street with an intersection on one end and a closed turning area on the other. Often valued in the design of residential subdivisions for the privacy provided to homes on the street.
CURABLE DEPRECIATION – Item of PHYSICAL DETERIORATION and
FUNCTIONAL OBSOLESCENCE that are economically feasible to cure. If the cost to cure the depreciation is less than the resulting contribution to the PROPERTY VALUE, then the item is curable.
CURRENT ASSUMPTION WHOLE LIFE INSURANCE – NONPARTICIPATING
WHOLE LIFE POLICY in which the cash values are based on the INSURER’S current MORTALITY, investment, and expense experience. An accumulation account is credited with a current INTEREST RATE that changes over time. Also called INTEREST-SENSITIVE WHOLE LIFE INSURANCE.
CURRENTLY INSURED – Status of a COVERED person under THE OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE (OASDI) program who has at least six quarters of coverage out of the last thirteen quarters, ending with the quarter of death, disability, or entitlement to retirement BENEFITS.
CURRENT YIELD – A measurement of INVESTMENT returns based on the percentage relationship of annual cash INCOME to the INVESTMENT cost.
CUSTODIAN – Also known as BAILEE – 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.
CUTESY – The COMMON LAW interest of a husband in the estate of his deceased wife. It has been abolished in most states and replaced with the Uniform Probate Code.
CUSTOM BUILDER – One who builds unique homes; contrast with TRACT HOUSE.
CUSTOMER SERVICE REPRESENTATIVES (CSR) – Support the work of INSURANCE AGENTS with a variety of tasks that must be done within a company or AGENCY to deliver services to and handle requests from CLIENTS.
CUT-THROUGH ENDORSEMENT – An endorsement to an INSURANCE CONTRACT stating that REINSURANCE proceeds will be paid directly to the named payee in the event of an INSURER’S INSOLVENCY.
