Ethical and Legal Considerations
Expert-defined terms from the Real Estate Negotiation Strategies course at Stanmore School of Business. Free to read, free to share, paired with a professional course.
Absolute Assignment refers to the transfer of all rights and interests in a prop… #
This concept is related to conditional assignment, which is a type of assignment that is subject to certain conditions or requirements. Absolute assignment is often used in real estate transactions to ensure that the buyer has complete ownership and control of the property. For example, in a sale-leaseback transaction, the seller may make an absolute assignment of the property to the buyer, while retaining a leasehold interest in the property.
Acceleration Clause is a provision in a contract that requires the borrower to p… #
This concept is related to debt acceleration, which is the process of requiring a borrower to pay the entire amount due on a loan immediately. Acceleration clauses are often used in real estate financing to protect the lender in case the borrower fails to make payments. For instance, if a borrower misses a mortgage payment, the lender may invoke the acceleration clause and require the borrower to pay the entire amount due on the loan.
Acknowledgment is a declaration or confirmation that a document or agreem… #
This concept is related to execution, which refers to the act of signing or executing a document. Acknowledgments are often used in real estate transactions to verify that a document has been signed and executed by all parties. For example, a notary public may acknowledge that a deed has been signed and executed by the grantor.
Ad Valorem Tax is a type of tax that is based on the value of a property #
This concept is related to property tax, which is a type of tax that is levied on real estate. Ad valorem taxes are often used to fund local government services and infrastructure. For instance, a county may levy an ad valorem tax on real estate to fund schools and public services.
Agency Disclosure is a document that discloses the agency relationship be… #
This concept is related to fiduciary duty, which refers to the duty of a real estate agent to act in the best interests of their client. Agency disclosure is often required by law to ensure that clients are aware of the agency relationship and the duties of the real estate agent. For example, a real estate agent may be required to provide an agency disclosure form to a client before entering into a representation agreement.
Amortization is the process of reducing a debt or loan through regular pa… #
This concept is related to debt repayment, which refers to the process of paying off a debt or loan. Amortization is often used in real estate financing to calculate the amount of each payment that is applied to the principal and interest of a loan. For instance, a borrower may make monthly payments on a mortgage, with a portion of each payment applied to the principal and interest.
Annual Percentage Rate (APR) is the rate of interest charged on a loan or… #
This concept is related to interest rate, which refers to the rate of interest charged on a loan or credit product. APR is often used to compare the cost of different loans or credit products. For example, a borrower may compare the APR of different mortgage products to determine which one is the most cost-effective.
Appraisal is an evaluation of the value of a property by a licensed appra… #
This concept is related to property valuation, which refers to the process of determining the value of a property. Appraisals are often used in real estate transactions to determine the value of a property for financing or tax purposes. For instance, a lender may require an appraisal of a property before approving a mortgage loan.
Appreciation is an increase in the value of a property over time #
This concept is related to property value, which refers to the value of a property. Appreciation is often used in real estate investing to refer to the increase in value of a property over time. For example, a real estate investor may purchase a property with the expectation that it will appreciate in value over time.
Arbitration is a process of resolving disputes between parties through a… #
This concept is related to dispute resolution, which refers to the process of resolving disputes between parties. Arbitration is often used in real estate transactions to resolve disputes between buyers and sellers or between landlords and tenants. For instance, a buyer and seller may agree to arbitrate a dispute over the sale price of a property.
As #
Is Condition refers to the current condition of a property, without any warranties or representations. This concept is related to property condition, which refers to the current state of a property. As-is condition is often used in real estate transactions to indicate that the buyer is purchasing the property in its current condition, without any warranties or representations. For example, a seller may sell a property in as-is condition, with the buyer assuming all responsibility for any repairs or renovations.
Assignment of Lease is the transfer of a leasehold interest in a property… #
This concept is related to lease agreement, which refers to a contract between a landlord and tenant. Assignment of lease is often used in real estate transactions to transfer a leasehold interest in a property from one party to another. For instance, a tenant may assign their lease to a new tenant, with the consent of the landlord.
Attorney #
in-Fact is a person who has been authorized to act on behalf of another party. This concept is related to power of attorney, which refers to a document that grants authority to act on behalf of another party. Attorney-in-fact is often used in real estate transactions to grant authority to act on behalf of a party who is unable to act for themselves. For example, a property owner may grant power of attorney to an attorney-in-fact to manage their property.
Breach of Contract is a violation of the terms of a contract #
This concept is related to contract law, which refers to the laws governing contracts. Breach of contract is often used in real estate transactions to refer to a failure to perform under the terms of a contract. For instance, a buyer may breach a contract by failing to make a payment or complete a purchase.
Building Code is a set of regulations that govern the construction and ma… #
This concept is related to zoning regulations, which refer to laws governing land use. Building codes are often used in real estate development to ensure that buildings are constructed and maintained in a safe and healthy manner. For example, a city may have building codes that require all new construction to meet certain energy efficiency standards.
Buyer's Agent is a real estate agent who represents the buyer in a real e… #
This concept is related to seller's agent, which refers to a real estate agent who represents the seller. Buyer's agent is often used in real estate transactions to provide representation and guidance to the buyer. For instance, a buyer's agent may help a buyer to negotiate the purchase price of a property.
Capital Gain is a profit made from the sale of a property #
This concept is related to capital loss, which refers to a loss made from the sale of a property. Capital gain is often used in real estate investing to refer to the profit made from the sale of a property. For example, a real estate investor may sell a property for a profit, resulting in a capital gain.
Cash Flow is the income from a property, minus the expenses #
This concept is related to net operating income, which refers to the income from a property, minus the operating expenses. Cash flow is often used in real estate investing to evaluate the financial performance of a property. For instance, a real estate investor may calculate the cash flow of a rental property to determine its profitability.
Certificate of Occupancy is a document issued by a government agency, ind… #
This concept is related to building permit, which refers to a permit issued by a government agency, authorizing the construction of a building. Certificate of occupancy is often used in real estate development to ensure that a property is safe for occupancy. For example, a city may issue a certificate of occupancy for a new construction project, indicating that it meets all safety and health standards.
Chain of Title is the record of all previous owners of a property #
This concept is related to title search, which refers to the process of researching the ownership history of a property. Chain of title is often used in real estate transactions to verify the ownership history of a property. For instance, a title company may research the chain of title to ensure that the seller has clear title to the property.
Closing is the final step in a real estate transaction, where the buyer a… #
This concept is related to settlement, which refers to the process of completing a real estate transaction. Closing is often used in real estate transactions to refer to the final step in the process. For example, a buyer and seller may attend a closing meeting to sign the final documents and transfer ownership of the property.
Commission is a fee paid to a real estate agent for their services #
This concept is related to brokerage fee, which refers to a fee paid to a real estate broker for their services. Commission is often used in real estate transactions to compensate real estate agents for their services. For instance, a real estate agent may earn a commission on the sale of a property.
Condemnation is the process of taking private property for public use, wi… #
This concept is related to eminent domain, which refers to the power of the government to take private property for public use. Condemnation is often used in real estate development to acquire property for public projects. For example, a government agency may condemn a property to build a new highway.
Contingency is a condition that must be met before a contract is binding #
This concept is related to contract contingency, which refers to a condition that must be met before a contract is binding. Contingency is often used in real estate transactions to provide a way out of a contract if certain conditions are not met. For example, a buyer may include a contingency in a contract that allows them to back out of the purchase if they are unable to secure financing.
Contract for Deed is a type of contract where the seller finances the pur… #
This concept is related to installment sale, which refers to a type of sale where the buyer pays the purchase price in installments. Contract for deed is often used in real estate transactions to provide a way for buyers to purchase a property without going through a traditional lender. For instance, a seller may finance the purchase of a property through a contract for deed.
Conventional Loan is a type of loan that is not insured or guaranteed by… #
This concept is related to non-conventional loan, which refers to a type of loan that is not traditional or conventional. Conventional loan is often used in real estate financing to provide a type of loan that is not insured or guaranteed by the government. For example, a lender may offer a conventional loan to a borrower who does not qualify for a government-backed loan.
Counteroffer is a response to an offer, where the terms are changed or mo… #
This concept is related to offer and acceptance, which refers to the process of making and accepting an offer. Counteroffer is often used in real estate negotiations to provide a way for parties to negotiate the terms of a contract. For example, a seller may make a counteroffer to a buyer's offer, changing the terms of the sale.
Covenant is a promise or agreement to do or not do something #
This concept is related to restriction, which refers to a limitation or restriction on the use of a property. Covenant is often used in real estate development to provide a way for developers to restrict the use of a property. For instance, a developer may include a covenant in a deed that restricts the use of a property for certain purposes.
Credit Report is a document that provides information about a person's cr… #
This concept is related to credit score, which refers to a numerical score that represents a person's creditworthiness. Credit report is often used in real estate financing to evaluate a borrower's creditworthiness. For example, a lender may review a borrower's credit report to determine their eligibility for a loan.
Deed is a document that transfers ownership of a property from one party… #
This concept is related to title, which refers to the ownership of a property. Deed is often used in real estate transactions to transfer ownership of a property. For instance, a seller may execute a deed to transfer ownership of a property to a buyer.
Default is a failure to perform under the terms of a contract or agreemen… #
This concept is related to breach of contract, which refers to a failure to perform under the terms of a contract. Default is often used in real estate financing to refer to a failure to make payments on a loan. For example, a borrower may default on a mortgage loan by failing to make payments.
Deposit is a payment made by a buyer to secure a property #
This concept is related to earnest money, which refers to a payment made by a buyer to demonstrate their commitment to a purchase. Deposit is often used in real estate transactions to secure a property and demonstrate a buyer's commitment to a purchase. For instance, a buyer may make a deposit on a property to secure it while they complete the purchase process.
Disclosure is the process of providing information about a property or tr… #
This concept is related to transparency, which refers to the openness and honesty of a transaction. Disclosure is often used in real estate transactions to provide information about a property or transaction. For example, a seller may be required to disclose certain information about a property, such as its condition or any known defects.
Due Diligence is the process of researching and investigating a property… #
This concept is related to investigation, which refers to the process of gathering information about a property or transaction. Due diligence is often used in real estate transactions to research and investigate a property or transaction. For instance, a buyer may conduct due diligence on a property to research its condition, value, and potential for investment.
Easement is a right to use someone else's property for a specific purpose #
This concept is related to right-of-way, which refers to a right to use someone else's property for a specific purpose. Easement is often used in real estate development to provide a way for parties to use someone else's property for a specific purpose. For example, a utility company may have an easement to use a property for the purpose of installing and maintaining utility lines.
Encroachment is a violation of someone else's property rights, where a pa… #
This concept is related to trespass, which refers to the act of entering someone else's property without permission. Encroachment is often used in real estate development to refer to a violation of someone else's property rights. For instance, a neighbor may encroach on someone else's property by building a fence that extends onto their property.
Encumbrance is a limitation or restriction on the use of a property #
This concept is related to lien, which refers to a claim or security interest in a property. Encumbrance is often used in real estate development to provide a way for parties to restrict the use of a property. For example, a lender may have an encumbrance on a property in the form of a mortgage lien.
Environmental Hazard is a condition or substance that poses a risk to the… #
This concept is related to environmental risk, which refers to the risk of environmental hazards or conditions. Environmental hazard is often used in real estate development to refer to conditions or substances that pose a risk to the environment or human health. For instance, a property may have an environmental hazard in the form of contaminated soil or groundwater.
Equity is the value of a property, minus any debts or liabilities #
This concept is related to net worth, which refers to the value of a property, minus any debts or liabilities. Equity is often used in real estate investing to refer to the value of a property, minus any debts or liabilities. For example, a real estate investor may have equity in a property that they can use to secure a loan or finance a new investment.
Escrow is a account or fund that holds money or documents until certain c… #
This concept is related to trust account, which refers to an account or fund that holds money or documents until certain conditions are met. Escrow is often used in real estate transactions to hold money or documents until certain conditions are met. For instance, a buyer may deposit money into an escrow account to secure a property, with the funds being released when the sale is complete.
Eviction is the process of removing a tenant from a property #
This concept is related to unlawful detainer, which refers to the act of remaining in a property without the permission of the owner. Eviction is often used in real estate development to refer to the process of removing a tenant from a property. For example, a landlord may evict a tenant who has failed to pay rent or has violated the terms of the lease.
Exclusive Agency Listing is a type of listing agreement where the seller… #
This concept is related to exclusive right to sell, which refers to a type of listing agreement where the seller grants exclusive rights to a real estate agent to sell the property. Exclusive agency listing is often used in real estate transactions to provide a way for sellers to grant exclusive rights to a real estate agent to sell the property. For instance, a seller may grant an exclusive agency listing to a real estate agent, giving them the exclusive right to sell the property.
FHA Loan is a type of loan that is insured by the Federal Housing Adminis… #
This concept is related to government-backed loan, which refers to a type of loan that is insured or guaranteed by the government. FHA loan is often used in real estate financing to provide a type of loan that is insured by the government. For example, a borrower may qualify for an FHA loan to purchase a primary residence.
Foreclosure is the process of taking possession of a property due to a bo… #
This concept is related to default, which refers to a failure to perform under the terms of a contract or agreement. Foreclosure is often used in real estate financing to refer to the process of taking possession of a property due to a borrower's default on a loan. For instance, a lender may foreclose on a property if the borrower fails to make payments on a mortgage loan.
Gross Income is the total income from a property, before expenses or taxe… #
This concept is related to net operating income, which refers to the income from a property, minus the operating expenses. Gross income is often used in real estate investing to evaluate the financial performance of a property. For example, a real estate investor may calculate the gross income of a rental property to determine its potential for investment.
Hazard Insurance is a type of insurance that protects against losses due… #
This concept is related to liability insurance, which refers to a type of insurance that protects against losses due to liability or negligence. Hazard insurance is often used in real estate development to provide a way for property owners to protect against losses due to natural disasters or other hazards. For instance, a property owner may purchase hazard insurance to protect against losses due to earthquakes or floods.
Home Inspection is a process of evaluating the condition of a property #
This concept is related to property inspection, which refers to the process of evaluating the condition of a property. Home inspection is often used in real estate transactions to evaluate the condition of a property. For example, a buyer may hire a home inspector to evaluate the condition of a property before completing the purchase.
Homeowners Association (HOA) is a organization that manages and maintains… #
This concept is related to property management, which refers to the process of managing and maintaining a property. Homeowners association is often used in real estate development to provide a way for communities to manage and maintain their properties. For instance, a homeowners association may be responsible for maintaining common areas, enforcing community rules, and managing finances.
Installment Sale is a type of sale where the buyer pays the purchase pric… #
This concept is related to contract for deed, which refers to a type of contract where the seller finances the purchase of a property. Installment sale is often used in real estate transactions to provide a way for buyers to purchase a property without paying the full purchase price upfront. For example, a buyer may purchase a property through an installment sale, making monthly payments to the seller over a period of time.
Inspection Contingency is a condition that allows a buyer to back out of… #
This concept is related to due diligence, which refers to the process of researching and investigating a property or transaction. Inspection contingency is often used in real estate transactions to provide a way for buyers to back out of a contract if the property inspection reveals certain issues. For instance, a buyer may include an inspection contingency in a contract, allowing them to back out of the purchase if the property inspection reveals significant defects or issues.
Interest Rate is the rate at which interest is charged on a loan or credi… #
This concept is related to annual percentage rate (APR), which refers to the rate of interest charged on a loan or credit product over a year. Interest rate is often used in real estate financing to evaluate the cost of a loan or credit product. For example, a borrower may compare the interest rates of different loan products to determine which one is the most cost-effective.
Joint Tenancy is a type of ownership where two or more parties own a prop… #
This concept is related to tenancy in common, which refers to a type of ownership where two or more parties own a property together, but with different interests or shares. Joint tenancy is often used in real estate development to provide a way for multiple parties to own a property together. For instance, two or more parties may own a property as joint tenants, with equal rights and interests in the property.
Land Contract is a type of contract where the seller finances the purchas… #
This concept is related to contract for deed, which refers to a type of contract where the seller finances the purchase of a property. Land contract is often used in real estate transactions to provide a way for buyers to purchase a property without going through a traditional lender. For example, a seller may finance the purchase of a property through a land contract, with the buyer making monthly payments to the seller over a period of time.
Lease is a contract between a landlord and tenant, where the tenant has t… #
This concept is related to rental agreement, which refers to a contract between a landlord and tenant, where the tenant has the right to use a property for a specified period of time. Lease is often used in real estate development to provide a way for landlords to rent their properties to tenants. For instance, a landlord may lease a property to a tenant for a specified period of time, with the tenant having the right to use the property for that period.
Legal Description is a description of a property's location and boundarie… #
This concept is related to property survey, which refers to the process of measuring and mapping a property's boundaries. Legal description is often used in real estate transactions to identify and describe a property's location and boundaries. For example, a legal description may be used to identify a property's location and boundaries in a deed or title report.
Lender is a party that provides financing for a property purchase #
This concept is related to borrower, which refers to a party that receives financing for a property purchase. Lender is often used in real estate financing to refer to a party that provides financing for a property purchase. For instance, a bank or mortgage company may be a lender that provides financing for a property purchase.
Liability Insurance is a type of insurance that protects against losses d… #
This concept is related to hazard insurance, which refers to a type of insurance that protects against losses due to natural disasters or other hazards. Liability insurance is often used in real estate development to provide a way for property owners to protect against losses due to liability or negligence. For example, a property owner may purchase liability insurance to protect against losses due to slip-and-fall accidents or other types of injuries.
Lien is a claim or security interest in a property #
This concept is related to encumbrance, which refers to a limitation or restriction on the use of a property. Lien is often used in real estate development to provide a way for parties to secure their interests in a property. For instance, a lender may have a lien on a property to secure their interest in the property.
Loan #
to-Value Ratio is the ratio of the loan amount to the value of the property. This concept is related to debt-to-equity ratio, which refers to the ratio of debt to equity in a property. Loan-to-value ratio is often used in real estate financing to evaluate the risk of a loan. For example, a lender may require a lower loan-to-value ratio to reduce the risk of a loan.
Mortgage is a loan that is secured by a property #
This concept is related to deed of trust, which refers to a document that secures a loan with a property. Mortgage is often used in real estate financing to provide a way for buyers to purchase a property without paying the full purchase price upfront. For instance, a buyer may secure a mortgage to purchase a property, with the property serving as collateral for the loan.
Multiple Listing Service (MLS) is a database of properties for sale, wher… #
This concept is related to real estate brokerage, which refers to the business of buying and selling properties. Multiple listing service is often used in real estate transactions to provide a way for real estate agents to list and search for properties. For example, a real estate agent may list a property on the MLS to market it to potential buyers.
Net Operating Income is the income from a property, minus the operating e… #
This concept is related to gross income, which refers to the total income from a property, before expenses or taxes. Net operating income is often used in real estate investing to evaluate the financial performance of a property. For instance, a real estate investor may calculate the net operating income of a rental property to determine its potential for investment.
Note is a document that evidences a loan or debt #
This concept is related to mortgage, which refers to a loan that is secured by a property. Note is often used in real estate financing to provide a way for lenders to document a loan or debt. For example, a lender may require a borrower to sign a note to document a loan, with the note serving as evidence of the loan.
Open House is a marketing event where a property is open to the public fo… #
This concept is related to real estate marketing, which refers to the process of promoting and advertising properties for sale. Open house is often used in real estate transactions to provide a way for buyers to view properties and for sellers to market their properties. For instance, a real estate agent may host an open house to market a property and attract potential buyers.
Option is a contract that gives a party the right, but not the obligation… #
This concept is related to lease option, which refers to a contract that gives a party the right, but not the obligation, to lease a property. Option is often used in real estate transactions to provide a way for buyers to secure a property and for sellers to market their properties. For example, a buyer may purchase an option to buy a property, with the option giving them the right, but not the obligation, to purchase the property at a specified price.
Owner Financing is a type of financing where the seller finances the purc… #
This concept is related to land contract, which refers to a type of contract where the seller finances the purchase of a property. Owner financing is often used in real estate transactions to provide a way for buyers to purchase a property without going through a traditional lender. For instance, a seller may finance the purchase of a property through owner financing, with the buyer making monthly payments to the seller over a period of time.
Partition is the process of dividing a property among multiple owners #
This concept is related to joint tenancy, which refers to a type of ownership where two or more parties own a property together. Partition is often used in real estate development to provide a way for multiple owners to divide a property. For example, multiple owners of a property may partition the property to divide it among themselves.
Plat is a map or survey of a property, showing its boundaries and feature… #
This concept is related to property survey, which refers to the process of measuring and mapping a property's boundaries. Plat is often used in real estate development to provide a way for parties to visualize and understand a property's boundaries and features. For instance, a plat may be used to identify a property's location and boundaries in a deed or title report.
Power of Attorney is a document that grants authority to act on behalf of… #
This concept is related to attorney-in-fact, which refers to a person who has been authorized to act on behalf of another party. Power of attorney is often used in real estate transactions to grant authority to act on behalf of a party who is unable to act for themselves. For example, a property owner may grant power of attorney to an attorney-in-fact to manage their property.
Pre #
Approval is a preliminary approval for a loan, based on a borrower's creditworthiness. This concept is related to pre-qualification, which refers to a preliminary evaluation of a borrower's creditworthiness. Pre-approval is often used in real estate financing to provide a way for borrowers to determine their eligibility for a loan. For instance, a lender may provide a pre-approval to a borrower, indicating the amount of loan they are eligible for.
Property Management is the process of managing and maintaining a property #
This concept is related to real estate management, which refers to the business of managing and maintaining properties. Property management is often used in real estate development to provide a way for parties to manage and maintain their properties. For example, a property owner may hire a property manager to manage and maintain their property.
Property Survey is the process of measuring and mapping a property's boun… #
This concept is related to plat, which refers to a map or survey of a property, showing its boundaries and features. Property survey is often used in real estate transactions to identify and describe a property's location and boundaries. For instance, a property survey may be used to identify a property's location and boundaries in a deed or title report.
Purchase Agreement is a contract between a buyer and seller, outlining th… #
This concept is related to sales contract, which refers to a contract between a buyer and seller, outlining the terms of a property sale. Purchase agreement is often used in real estate transactions to provide a way for buyers and sellers to outline the terms of a property purchase. For example, a buyer and seller may enter into a purchase agreement, outlining the terms of the sale, including the price, closing date, and any contingencies.
Quitclaim Deed is a type of deed that transfers the grantor's interest in… #
This concept is related to warranty deed, which refers to a type of deed that guarantees the grantor's interest in a property. Quitclaim deed is often used in real estate transactions to transfer a grantor's interest in a property to another party. For instance, a grantor may execute a quitclaim deed to transfer their interest in a property to a grantee.
Real Estate Agent is a professional who represents buyers and sellers in… #
This concept is related to real estate broker, which refers to a professional who manages a real estate brokerage. Real estate agent is often used in real estate transactions to provide a way for buyers and sellers to receive representation and guidance. For example, a real estate agent may represent a buyer or seller in a real estate transaction, providing guidance and advice throughout the process.
Real Estate Investment Trust (REIT) is a company that owns and operates i… #
This concept is related to real estate investment, which refers to the process of investing in real estate. Real estate investment trust is often used in real estate development to provide a way for investors to invest in real estate without directly managing properties. For instance, a REIT may own and operate a portfolio of properties, providing investors with a way to invest in real estate.
Real Estate License is a license that authorizes a person to practice rea… #
This concept is related to real estate certification, which refers to a certification that recognizes a person's expertise in real estate. Real estate license is often used in real estate development to provide a way for professionals to practice real estate. For example, a real estate agent may be required to have a real estate license to practice real estate in a particular state or jurisdiction.
Rent is a payment made by a tenant to a landlord for the use of a propert… #
This concept is related to lease, which refers to a contract between a landlord and tenant, where the tenant has the right to use a property for a specified period of time. Rent is often used in real estate development to provide a way for landlords to generate income from their properties. For instance, a landlord may charge rent to a tenant for the use of a property.
Renter's Insurance is a type of insurance that protects a tenant's person… #
This concept is related to landlord insurance, which refers to a type of insurance that protects a landlord's property and liability. Renter's insurance is often used in real estate development to provide a way for tenants to protect their personal property and liability. For example, a tenant may purchase renter's insurance to protect their personal property and liability in case of damage or loss.
Restrictive Covenant is a condition or restriction on the use of a proper… #
This concept is related to easement, which refers to a right to use someone else's property for a specific purpose. Restrictive covenant is often used in real estate development to provide a way for parties to restrict the use of a property. For instance, a developer may include a restrictive covenant in a deed to restrict the use of a property for certain purposes.
Sale #
Leaseback is a type of transaction where a seller sells a property and then leases it back from the buyer. This concept is related to leaseback, which refers to a type of transaction where a seller leases a property from a buyer. Sale-