Glossary of Real Estate Terms L - Q

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

L

Land. The earth's surface in its natural condition, extending down to the center of the globe, its surface and all things affixed to it, and the airspace above the surface.

Land capitalization rate. The rate of return, including interest, is on land only.

Land development method. (See subdivision development method)

Landlocked parcel. A parcel of land without any access to a public road or way.

Landlord. One who owns the property and leases it to a tenant.

Land residual technique. A method of capitalization using the net income remaining to the land after return on and recapture of the building value has been deducted.

Land trust. A trust originated by the owner of real property in which real estate is the only asset. Because the interest of a beneficiary is considered personal property and not real estate, a judgment against the beneficiary will not create a lien against the real estate. Thus land trusts are popular when multiple owners seek protection against the effects of divorce, judgments, or bankruptcies of each other.

Latent defect. Physical deficiencies or construction defects not readily ascertainable from a reasonable inspection of the property, such as a defective septic tank or underground sewage system, or improper plumbing or electrical wiring.

Lease. A written or oral contract for the possession and use of the real property for a stipulated time, in consideration for the payment of rent. Leases for more than one year generally must be in writing.

Leased fee. The lessor's interest and rights in the real estate being leased.

Leasehold estate. The lessee's right to possess and use real estate during the term of a lease. This is generally considered a personal property interest.

Legal description. A statement identifying land by a system prescribed by law. (See also lot and block system, metes and bounds description, and rectangular survey system)

Lessee. The person to whom property is leased by another; is also called a tenant.

Lessee's interest. An interest has value only if the agreed-on rent is less than the market rent.

Lessor. The person who leases property to another is also called a landlord.

Lessor's interest. The value of lease rental payments plus the remaining property value at the end of the lease period.

Letter of opinion. Report of property value that states the appraiser's conclusion of value or a range of values and provides only a summary of the supporting data and appraiser's analysis.

Letter of transmittal. The first page of a narrative appraisal report, in which the report is formally presented to the person for whom the appraisal was made.

Levy. To impose or assess a tax on a person or property; the amount of taxes to be imposed in a given district.

License. (1) The revocable permission for temporary use of land--a personal right that cannot be sold. (2) Formal permission from a constituted authority (such as a state agency) to engage in a certain activity or business (such as real estate appraisal)

LID Land improvement district. special tax or assessment passed on to home buyers to pay for roadwork and improvements. can last up to 17 years or more, can be billed, monthly, quarterly, or annually. Usually becomes a lien on the property and is passed down to future owners until paid off.

Lien. A right that is given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually through a court sale.

Life estate. An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons.

Living trust. An arrangement in which a property owner (truster) transfers assets to a trustee, who assumes specified duties in managing the asset. After the payment of operating expenses and trustee's fees, the income generated by the trust property is paid to or used for the benefit of the designated beneficiary. The living trust is gaining popularity as a way to hold title and avoid probate of trust assets.

Lot and block system. Method of the legal description of an individual parcel of land by reference to tract, block, lot numbers, and other information by which the parcel is identified in a recorded subdivision map. Also called a lot, block and tract system, and subdivision system.

M

Maintenance expenses. Costs incurred for day-to-day upkeep, such as management, wages, and benefits of building employees, fuel, utility services, decorating, and repairs.

Marital property. (See community property and tenancy by the entirety)

Markers. (See monuments)

Market. A place or condition suitable for selling and buying.

Market comparison method of depreciation. (See sales comparison method of depreciation)

Market extraction method of depreciation. (See series comparison method of depreciation)

Market price. (See sales price)

Market rent. The amount for which the competitive rental market indicates property should rent. An estimate of a property's rent potential.

Market value. The most probable price real estate should bring in a sale occurring under normal market conditions.

Mean. The average of all items included within a group is calculated by dividing the sum of the individual items, or variates, by the number of variates.

Mechanic's lien. A lien created by statute that exists in favor of contractors, laborers, or material men who have performed work or furnished materials in the erection or repair of a building. meridian. (See principal meridian)

Metes and bounds description. A method of a legal description specifying the perimeter of a parcel of land by use of measured distances from a point of beginning along specified boundaries, or bounds, using monuments, or markers, as points of reference.

Mile. A measurement of distance, being 1,760 yards or 5,280 feet.

Mobile home. A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation system; does not include a recreational vehicle. Also called a manufactured home.

Monuments. Natural or artificial objects used to define the perimeter of a parcel of land using the metes and bounds method of legal description.

Mortgage. A conditional transfer or pledge of real property as security for the payment of a debt; also, the document used to create a mortgage lien.

Mortgagee. The lender in a loan transaction is secured by a mortgage.

Mortgagor. An owner of real estate who borrows money and conveys his or her property as security for the loan.

N

NAR. National Association of Realtors

Narrative appraisal report. A detailed written presentation of the facts and reasoning behind an appraiser's estimate of value.

Neighborhood. A residential or commercial area with similar types of properties, buildings of similar value or age, predominant land-use activities, and natural or fabricated geographic boundaries, such as highways or rivers.

Neighborhood life cycle. The period during which most of the properties in a neighborhood undergo the stages of development, equilibrium, and decline. decline. Properties require an increasing amount of upkeep to retain their original utility and become less desirable. development (growth). Improvements are made, and properties experience rising demand. equilibrium. properties undergo little change; also called stability.

Net income ratio. The ratio of net operating income to effective gross income.

Net lease. A lease requires the tenant to pay rent and part or all of the costs of maintenance including taxes, insurance, repairs, and other expenses of ownership. Sometimes known as an absolute net lease, triple net lease, or net, net, net lease.

Net operating income. Income remaining after operating expenses are deducted from effective gross income.

Non-conforming use. A once lawful property use that is permitted to continue after a zoning ordinance prohibiting it has been established for the area; a use that differs sharply from the prevailing uses in a neighborhood.

Non-liquidity rate. A penalty is charged for the time needed to convert real estate into cash. risk rate. In addition to the safe rate to compensate for the hazards that accompany investments in real estate.

O

Observed condition depreciation. A method of computing depreciation in which the appraiser estimates the loss in value for all items of depreciation. (See also incurable depreciation and curable depreciation)

Obsolescence. Lessening of value from out-of-date features as a result of current changes in property design, construction, or use; an element of depreciation. (See also external obsolescence and functional obsolescence)

Occupancy. Possession and use of a property as owner or tenant.

Occupancy rate. The percentage of total rental units occupied and producing income.

Operating expense ratio. The ratio of total operating expenses to effective gross income.

Operating expenses. The cost of all goods and services used or consumed in the process of obtaining and maintaining income. (See also fixed expenses, maintenance expenses, and reserves for replacement)

Operating statement. The written record of a business's gross income, expenses, and resultant net income.

Operating statement ratio. Relationship of a property's expenses to income, found by dividing total operating expenses by effective gross income.

Opportunity cost. The value differential between alternative investments with differing rates of return.

Option. A right is given for a valuable consideration to purchase or lease property at a future date, for a specified price and terms. The right may or may not be exercised at the option holder's (optionee's) discretion.

Orientation. Position a structure on its lot concerning exposure to the sun, prevailing winds, privacy, and protection from noise.

Overage rent. Rent paid over a base amount in a percentage lease.

Overall capitalization rate. A rate of investment return is derived by comparing the net income and sales prices of comparable properties.

Overall rate. The direct ratio between a property's annual net income and its sales price.

Over improvement. An improvement to property that is more than warranted by the property's highest and best use and thus not likely to contribute its cost to the total market value of the property.

Ownership in severalty. Individual ownership of the real estate, not to be confused with the use of the word several to mean "more than one"; also called tenancy in severalty, sole tenancy or separate ownership.

P

Paired sales analysis. A method of estimating the amount of adjustment for the presence or absence of any feature by pairing the sales prices of otherwise identical properties with and without the feature in question. A sufficient number of sales must be found to allow the appraiser to isolate the effect on the value of the pertinent factor (also called paired data set analysis and matched pairs analysis).

Parameter. A single number or attribute of the individual things, persons, or other entities in Population.

Partial interest. Any property interest that is less than full fee simple ownership of the entire property.

Partnership. An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law, a partnership is regarded as a group of individuals rather than as a single entity.

Percentage lease. A lease commonly used for commercial property that provides for a rental based on the tenant's gross sales at the premises. It generally stipulates a base monthly rental, plus a percentage of any gross sales exceeding a certain amount.

Personal property. Items that are tangible and movable and do not fit the definition of reality; chattels.

Physical deterioration-curable. Loss of value due to neglected repairs or maintenance that are economically feasible and, if performed, would result in an increase in appraised value equal to or exceeding their cost.

Physical deterioration-incurable. Loss of value due to neglected repairs or maintenance of short-lived or long-lived building components that would not contribute comparable value to a building is performed.

Physical life. The length of time a structure can be considered habitable, without regard to its economic use.

Planned unit development (PUD). A subdivision consisting of individually owned residential and/or commercial parcels or lots as well as areas owned in common.

Plat. A map representing a parcel of land subdivided into lots, showing streets and other details or a single site.

Plottage value. The subsequent increase in the unit value of a group of adjacent properties when they are combined into one property in a process called assemblage.

Point of beginning. Place at which a legal description of land using the metes and bounds method starts.

Police power. The right of the government to impose laws, statutes, and ordinances to protect public health, safety, and welfare. Includes zoning ordinances and building codes.

Possession. The right of the owner to occupy a property. When the property is occupied by a tenant, the owner has constructive possession by right of the title.

Potential gross income. A property's total potential income from all sources during a specified period of time.

Prepaid items of expense. Expense items, such as insurance premiums and tax reserves, that have been paid in advance of the time that the expense is incurred. Prepaid expenses typically are prorated and credited to the seller in the preparation of a closing statement.

Principal. (1) A sum lent or employed as a fund or investment--as distinguished from its income or profits; (2) the original amount (as of a loan) of the total due and payable at a certain date; or (3) a party to a transaction--as distinguished from an agent.

Principal meridian. One of 35 north and south survey lines was established and defined as part of the U.S. government or rectangular survey system.

Profit-and-loss statement. (See operating statement)

Property residual technique. A method of capitalization using the net income remaining to the property as a whole.

Proration. The adjustment of taxes, interest, insurance, and/or other costs on a pro-rata basis as of the closing of a sale. (See also closing statement)

Purchase money mortgage. A note secured by a mortgage or trust deed given by the buyer, as mortgagor, to the seller, as mortgagee, as part of the purchase price of real estate.

Q

Quantity survey method. A method for finding the reproduction cost of a building in which the costs of erecting or installing all of the component parts of a new building, including both direct and indirect costs, are added.

Quit Claim Deed. A conveyance by which the grantor transfers whatever interest he or she has in the land, without warranties or obligations.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z