Glossary of Real Estate Terms

 For Terms Beginning with the Letter C

Call Option - A clause in a loan agreement that allows a lender to ask for the balance at any time. 

Cancellation Clause - a contract provision that gives the right to terminate the obligations upon the occurrence of specified conditions or events.

Cap - An interest cap limits how high the interest rate on an ARM can go, so a borrower will understand the maximum he or she might be required to pay. Payment caps prevent a borrower’s monthly payment from rising above a set limit.

Capital - (1) money used to create income, either as an investment in a business or an income property. (2) the money or property comprising the wealth owned or used by a person or business enterprise. (3) the accumulated wealth of a person or business. (4) the net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure - the cost of an improvement made to extend the useful life of a property or to add to its value, such as adding a room. The cost of repairing a property is not a capital expenditure. Capital expenditures are appreciated over their useful life; repairs are subtracted from income for the current year.

Capital Improvement - any structure or component erected as a permanent improvement to real property that adds to its value and useful life. (See Capital Expenditure).

Capital Gains - Profit earned from the sale of real estate or other investments.

Capitalization - The addition of amounts to the outstanding principal balance. Often associated with a workout where the borrowers are unable to pay the delinquent amount.

Capitalization (Cap) Rate - rate of return used to derive the capital value of an income stream, divide annual income by net operating income.

Carrying Charges - expenses necessary for holding property, such as taxes and interest on idle property or property under construction.

Cash flow - The amount of cash left over after all monthly payments are made.

Cash Flow Basis - this calculation shows when your monthly payment savings exceed your estimated closing costs and discount points. It does not consider the tax impact or differences in principal balance reduction between your current loan and the refinance suggestions. You can use the Amortization Schedule Calculator to compare principal reduction

Cash flow analysis - An analysis of cash flow to determine if one has a positive or negative cash flow. Often used in loss mitigation to determine if one can afford the mortgage payments.

Cash Out - Cash given to the borrower from the proceeds of a loan. While relatively common as part of a refinance, it is uncommon, but not impossible, as a benefit of a small percentage of non-conforming loans used for a purchase.

Cash-Out Refinance - a refinance transaction in which the new loan amount exceeds the total of the principal balance of the existing first mortgage and any secondary mortgages or liens, together with closing costs and points for the new loan. This excess is usually given to the borrower in cash and can often be used for debt consolidation, home improvement, or any other purpose. The borrower effectively borrows against the home equity.

Caveat emptor - Often referred to as ‘Buyer beware.’ The buyer must examine the property and buy at own risk. Properties are often sold in “as-is” condition with no expressed or implied guarantee of quality or condition.

CCRs (Covenants, Conditions and Restrictions) - The basic rules establishing the rights and obligations of owners of real estate within a condominium, town house, planned unit development (PUD) or subdivision. An association (see “homeowners association”) typically is organized for the purpose of operating and maintaining property commonly owned by the individual owners and for establishing standards of maintenance and aesthetics for the community. The association normally is made up of property owners.

Ceiling - The maximum interest rate that can be charged on an ARM loan according to the Cap provisions of the loan.

Certificate of eligibility - The document issued by the Department of Veterans Affairs to those who qualify for a VA loan. Certificates of eligibility may be obtained by sending the form DD-214 to the local VA office along with VA form 1880.

Certificate of Insurance - a document issued by an insurance company to verify the coverage.

Certificate of reasonable value (CRV) - An document certifying appraisal performed by a VA-approved appraiser that establishes the property’s current market value. This value establishes the maximum VA mortgage loan principal.

Certificate of occupancy - A document issued by a local government agency stating that a property meets the local building standards for occupancy and is in compliance with public health and building codes. This document normally is required by a lender before closing the loan.

Certificate of  Sale - A document indicating that a property has been sold to a buyer at foreclosure, subject to a right of redemption for a set period after the foreclosure sale. In an IRS, the redemption period is 180 days. The redemption period is different in other types of foreclosure. Many foreclosures take place without any certificate sale. Instead, if the sale is final, or near final, the buyer gets a deed rather than a certificate of sale

Certified Commercial Investment Member (CCIM) - a designation awarded by the Realtors National Marketing Institute, which is affiliated with the National Association of Realtors.

Certified Residential Broker (CRB) - a designation awarded by the Realtors National Marketing Institute, which is affiliated with the National Association of Realtors.

Certified Residential Specialist (CRS) - a designation awarded by the Realtors National Marketing Institute, which is affiliated with the National Association of Realtors.

Certificate of title - An opinion rendered by an attorney as to the status of title to a property according to the public records. This certificate does not provide the same level of protection as title insurance.

Chain of title - The chronological order of conveyance of a parcel of land from the original owner to the present owner. Theoretically, a title can be researched back to the date when the property became part of the United States.

Chapters - The divisions of the Bankruptcy Code governing the various types of bankruptcy cases that may be filed.

Chapter 7 - The Chapter in the Bankruptcy Code that governs the liquidation of a debtor’s assets. In a Chapter 7 filing, a trustee is appointed to collect and liquidate assets and distributes the proceeds in accordance with established priorities.  Chapter 7 is liquidation bankruptcy in which a debtor's nonexempt assets are gathered together and given up or sold for the benefit of creditors in order of their priority. Priority creditors get much of the cash, if any. Their debts are not discharged. Secured creditors receive continued payments or the asset that served as collateral for the loan. Unsecured creditors are usually given little or nothing in a Chapter 7 bankruptcy.

Chapter 7 trustee -  One of the chapters in the federal Bankruptcy Code. Chapter 7 is liquidation bankruptcy in which a debtor's nonexempt assets are gathered together and given up or sold for the benefit of creditors in order of their priority. Priority creditors get much of the cash, if any. Their debts are not discharged. Secured creditors receive continued payments or the asset that served as collateral for the loan. Unsecured creditors are usually given little or nothing in a Chapter 7 bankruptcy. Representative of the estate responsible for administering and liquidating the bankruptcy estate.

Chapter 9 - Bankruptcy Code Chapter that governs the filing of bankruptcy by a municipality or public agency.

Chapter 11 - The Chapter of the Bankruptcy Code in which a debtor seeks to rehabilitate and reorganize its financial status. In a Chapter 11, the debtor proposes a plan, which is then voted on by the creditors.

Chapter 12 - The Chapter of the Bankruptcy Code that relates to family farmers; Similar in nature to a Chapter 13.

Chapter 13 - The Chapter of the Bankruptcy Code that allows an individual with debts below certain limits to propose a plan of reorganization. Under an approved plan, the debtor is able to repay creditors over an extended period of time, while permitting some debts to be discharged without full payment.

Charge-off - The process of writing off sums that have been deemed to be uncollectible.

Chattel - Personal property, such as household goods or fixtures..

Chattel mortgage - A pledge of personal property as security for a mortgage.

Chronic delinquent - A payment pattern where the borrower habitually violates the terms of the note by paying late.

Chunking - A swindler holds a seminar promising to show investors how to get rich buying property with no money down. Using the investors' personal information, the swindler submits multiple mortgage applications, pocketing the loan proceeds.

City Planning - The effort on the part of the city to coordinate, direct and control the type of development taking place, so as to ensure maximum benefits to the populace.

Civil Rights Act of 1866 - A law which prohibits discrimination in all real estate transactions based on race - commercial and residential.

Clear title - A marketable title, free of clouds and disputed interests. Most lenders require a clear title prior to closing.

Closing - The formal meeting where loan documents are signed and funds disbursed. Note, however, that Federal law requires that funds not be disbursed for three business days on certain loans where personal residences serve as the security. (See definition of "recission" below).  The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing are about 3% to 6% of the mortgage amount

Closing costs - All fees, taxes, charges, commissions and other costs paid by the buyer and/or seller at the closing of a real estate or mortgage transaction.

Closing Date - the date on which the seller delivers the deed and the buyer pays for the property.

Closing statement - The statement that lists the financial settlement between buyer and seller and also the costs each must pay. A separate statement for buyer and seller sometimes is prepared.

Cloud on title - An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title. (Compare with “clear title.”)

Coinsurance Clause - a provision in a hazard insurance policy stating the minimum amount of coverage that must be maintained - as a percentage of the total value of the property - in order for the insured to collect the full amount of a loss.

CMA - Competitive Market Analysis; Comparative Market Analysis (See “BPO”)

Collateral - Property pledged as security to assure the repayment of a loan.

Collectors Deed - If the Property has not been redeemed during the one-year redemption period, the holder of the Certificate of Purchase may apply for and receive a Collectors Deed to the property

Color of Title - An apparent, invalid, title

Combined loan to value (CLTV) - All loans outstanding (i.e. ₁st & 2^nd) / Value of property.

Commingling - Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).

Commission - The percentage of the home’s sale price that is paid to the listing and selling agents.

Commitment - The notification that a lender has approved a loan. Virtually all commitments are issued conditionally; that is, subject to some list of conditions that must be satisfied prior to funding actually taking place. Typical conditions include appraisals of a certain value, clean title, verification of representations by the borrower, etc.  A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Common Elements - Property jointly owned on a pro-rata basis with other unit owners in a condominium regime.

Common Law - (1) a body of legal rules derived from accepted customs and procedures in England. Serves as the foundation for most laws in every state except Louisiana, which uses the system of civil law; (2) system of judge-made law (“case law”) as opposed to codified or statutory law.

Community Property - Any property acquired in certain states by purchase, or as compensation by either spouse during the period of marriage, is considered to be owned in an undivided half interest by each.

Comparable Sales - As part of the appraisal process, those relatively recently sold properties which will be compared to the subject property (the property being appraised) for the purpose of forming an opinion of value for the subject property. The facts and details of the comparable properties will be compared to those of the subject. In an urban setting, to be of credible assistance in this process, comparable sales must have the same use as the subject, have many similarities to the subject in terms of size of house, size of lot, construction, bedroom count, room count, floor plan, amenities, street traffic and be in the same neighborhood and have been sold in the recent past (preferably no more than six months) by way of an "arms length" transaction (i.e., not sold to a relative or friend and not sold due to a forced sale or distress sale) and be within one mile of the subject property. More liberal standards will apply for rural property and some suburban properties but the basic premise holds, the more similar the comparable sales are to the subject property, the more accurate the value assigned to the subject property will be. Lenders will often compensate for the less precise nature of rural appraised values by allowing only lower loan-to-value ratios than those in urban settings, usually 10% lower. (See definition of "loan-to-value" below.)

Comparative Analysis - A method of determining the value of property in which the selling prices of similar properties are used as the basis for estimating the value of the subject property.

Competent Parties - Those who are legally capable of entering into contracts.

Complaint - The original or initial pleadings by which an action is commenced in a judicial action such as a judicial foreclosure, usually filed in Circuit or Superior Court and served on the opposing party, which commences a lawsuit. The Complaint consists of a series of allegations (“causes of action”) describing how the actions of the defendant(s) have damaged the plaintiff(s).

Compromise sale - A VA approved Short Sale.

Condemnation - The acquisition of private property for public use, with fair compensation to the owner.

Conditional commitment - A written document provided by a lender agreeing to make a loan provided certain conditions are met prior to closing.

Conditions, Covenants, and Restrictions (CCR's) - promises written into deeds and other instruments agreeing to performance or nonperformance of certain acts, or requiring or prohibiting certain uses of the property.

Conditional Sales Contract - A contract for the sale of property stating that, although delivery is to be made to the buyer, the title is to remain vested in the sell until the conditions of the contract have been fulfilled.

Condominium (condo) - Real estate ownership in which a property owner has title to a specific unit but shared interest in the common areas. “Condominium” defines a type of ownership, not a type of home. Most condos are apartment-style homes, but they also can be town houses.

Confirmation hearing (bankruptcy) - A hearing where the debtor’s proposed Chapter 11 or Chapter 13 plan is reviewed and either approved or denied by the bankruptcy judge.

Confirmation hearing (foreclosure) - A hearing held subsequent to the Sheriff’s Sale to confirm the sale and transfer title to the successful bidder.

Conforming Loan - A loan which has underwriting criteria consistent with (i.e., conforming to) those strict guidelines of Fannie Mae, Freddie Mac, FHA or VA. These are typically the lowest interest rate loans with very good terms. (See definitions of "Fannie Mae", "Freddie Mac", "FHA", "VA" and "underwriting" below).

Conservatorship - A state of affairs in which a bank or savings and loan association has been taken over by the FDIC or RTC and is being managed by these federal institutions, either directly or through hired managers. The institution will be reserved in its existing form until it can be sold complete or broken down into its major components. The institution is run on a caretaker basis until it can be sold.

Consideration - The inducement to a contact. The cause, motive, price or impelling influence which induces a contracting party to enter into a contract.

Consolidation loan - Combining several small loans into a single larger loan. This is usually done to reduce the payment amount each month or to get a lower interest rate.

Constructive Eviction - Occurs when the tenant's use of the premises is substantially disturbed or interfered with by the landlord's actions or failure to act where there is a duty to act. The tenant is effectively forced to move out and terminate the lease without further liability for further rent.

Constructive Notice - Information that a person is assumed, by law, to have simply because it could be ascertained by proper diligence and inquiry, for example, information that is to be found in the public records.

Constructive Service - If one, by exercise of reasonable care would have known a fact, he is deemed to have received notice. Notice with which a person is charged by reason of the notorious nature of the thing to be noticed, as contrasted with the actual receipt of notice of such thing.

Consumer debt - The debt incurred by an individual primarily for a personal, family or household purpose.

Contested matter - A matter that is the subject of a dispute.

Contiguous - actually touching, having a common boundary.

Contingency - Conditions that must be satisfied before the buyer can close on a property. Contingencies generally are outlined in the purchase contract between the buyer and seller. Purchase contingencies are common, requiring that the seller find a home to purchase before settlement. Financing contingencies also are common, requiring the borrower to obtain sufficient financing to purchase the property.

Contract - An agreement between two parties. A valid contract for the sale of real estate typically includes an offer, an acceptance, competent parties, consideration (payment), legal purpose, written documentation, description of the property, and signatures by principals or their attorneys-in-fact.

Contract for deed (Land contract) - A agreement for selling and financing property whereby the buyer obtains possession but the seller retains the title.

Contract of sale - Also known as a “land contract” or a “purchase agreement.”

Contract sale or deed - An installment selling arrangement under which the buyer may occupy the property but the seller retains the title until the sales price is paid.  Also known as an installment land contract.  A real estate installment selling arrangement whereby the buyer may use, occupy, and enjoy land, but no deed is given by the seller until all or a specified part of the sale price has been paid, same as land contract.

Contract sales price - The full purchase price as stated in the contract.

Contractor - one who contracts to provide specific goods or services.

Conventional Loan - A conforming loan with no government guarantee; that is, a Fannie Mae or Freddie Mac loan. (See definition of "conforming loan" above.).

Conventional mortgage - A loan neither insured by the FHA nor guaranteed by the VA.

Conversion - (Bankruptcy) The change to a case under a chapter different than the one originally filed under. The court may convert a case on the request of the debtor or the request of a party in interest. The court may convert a case to a case under Chapter 12 or 13 only upon the debtor’s request.

Conversion clause - A provision in some ARMs that allows the borrower to change the adjustable-rate loan to a fixed-rate loan at some point during the term. Usually the conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate generally is set at a prevailing rate for fixed-rate mortgages. The conversion feature may cost extra.

Convey - to deed or transfer title to another.

Conveyance - The transfer of title of real estate from one party to another. Also, when parts of a home (such as fixtures) are part of the sale, they are said to “convey” to the new owner.

Convertible ARM - Some adjustable-rate loans come with options to convert them to a fixed loan, based on a predetermined formula, during a given time period. For example, the 1-year Treasury bill ARM may be converted to a fixed-rate loan during the first five years on the adjustment date.

Co-op or cooperative - An apartment building or a group of dwellings owned by a community of individuals who are the residents of the dwellings but do not own individual units. In a cooperative, the corporation or association owns the real estate. A resident purchases stock in the corporation that entitles him to occupy a unit in the building or property owned by the cooperative. Although residents do not own the units, they have absolute rights to occupy them as long as they own the stock.

Corporation - An artificial person or legal entity created by or under the authority of the laws of a state. An association of persons created by statute as a legal entity.

Correlation - The final state of the appraisal process in which the appraiser reviews the data and estimates the subject property's value.

Cost approach - Property valuation based on land value plus current construction costs minus depreciation.

Counter claim - A claim presented in a pending lawsuit by a defendant against the plaintiff in opposition to the plaintiff’s claim.

Counteroffer - An offer made by a buyer or seller to the other party, responding to the asking price or another counter offer.

Correlation - The final state of the appraisal process in which the appraiser reviews the data and estimates the subject property's value.

CountyRecorder’s Office - The municipal office for the county in which the real property is located. The purpose of this office is to record mortgage documents, deeds, notice of defaults, Lis Pendens, etc, that is required by state law as a matter of public record.

Coupon rate - The rate of interest specified in the Note.

Covenants - Agreements written into deeds and other instruments promising performance or nonperformance of certain acts, or stipulating certain uses or restrictions on the property.

Covenant Against Encumbrances - The assurance that no encumbrances other than those specified in the deed exist.

Covenant of Further Assurance - A promise that the grantor will perform further acts reasonably necessary to correct any defects in the title or in the deed instrument.

Covenant of Quiet Enjoyment - A promise that no one has superior or paramount title to that of the grantor; assures the grantee of peaceful possession without fear of being ousted by a person with a superior claim to the property.

Covenant of Seisin - Gives the assurance that the grantor has the exact estate in the quantity and quality which is being conveyed. "I own and I have the right to sell it."

Coverage - The amount of money an insurance company will pay in response to a claim.

Cramdown - The effect of certain provisions of the Bankruptcy Code that allows the debtor to avoid payment of the unsecured portion of a claim. The unsecured portion is that portion of the debt that exceeds the value of the security.

Creative Financing - any financing arrangement other than a traditional mortgage from a third party lending institution.

Credit - The willingness of a borrower to repay borrowed money. It is usually measured by a borrower's past record of payments on loans and debts, which is kept in a credit report

Cured Default - Correction of a borrower's failure to make payments or meet the terms of a loan to the lender's satisfaction.

Credit Line - A loan that allows revolving use of the credit; that is, after funds have been borrowed and repaid they may be borrowed again without applying for a new loan. Typically, a credit limit is established and some or all of the available funds can be optionally disbursed at closing. Undisbursed funds are available for the borrowers use at any time. Payments are required only on the outstanding balance. They are similar in use to a credit card except that they typically use checks to access the funds. They are inexpensive, effective tools for investors.

Creditor’s meeting - A meeting conducted under Section 341 of the Bankruptcy Code at which the creditors may make inquiries of the bankruptcy debtor regarding assets, debts, condition of the secured property, etc. The debtor answers questions under oath.

Credit lease loan - A loan on the credit of borrower instead of the value of property.

Credit Repair – The legal activity of correcting errors contained on any or all of the three consumer credit bureaus: TransUnion, Equifax, and Experian - which warehouse consumer credit information.

The highly complex nature of storing every American citizen's credit history over the course of no less than ten to twelve years leaves much room for mistakes, errors, and even false information.

Credit fixing has been made easier for the average consumer, and more difficult to sell as a service because of Federal regulations.

Typically, any consumer who writes a letter disputing any inaccurate information can expect to have such information deleted from their credit bureau after having sent two such disputes by mail, or over the internet.

The wording of these letters, and the persistence required to correct any disputed information is where professional services are employed.

Credit Fixing services are like hiring someone to do your taxes, except tax laws are much more complicated, and filing requires much more record keeping. Many of the services, which send too many disputes in order to overload the computer systems of the credit bureaus in order to remove accurate information (derogatory or otherwise) have a temporary effect on your actual credit report, and operate in a quasi-legal manner.

Credit bureaus have free internet websites where every consumer may access their credit report and send in disputes.

Credit repair occurs after all information contained on a report is updated and accurate, time is allowed for derogatory information to "heal," and new credit being paid on time is granted to the consumer.

Credit report - A report detailing a borrower’s credit history, including payment history on revolving accounts (such as credit cards) and installment accounts (such as car loans). A credit report also includes information found from public records, including tax liens and judgments.

Credit scoring - A process that uses recorded information about individuals, their past credit history, and their loan requests in an attempt to predict the future payment of debts.

Curable Depreciation - Depreciation is considered curable if the cost of the repair is less than what the repair adds to the value of property.

Curb appeal - A term used by Realtors for everything a buyer sees from the street, which may induce the shopper to look more closely at the property.

Curtailment - See Partial Claim.

Cured Default - Correction of a borrower's failure to make payments or meet the terms of a loan to the lender's satisfaction.

Current Value - The value at the time of an appraisal. Custodial account - A demand account established for the deposit of funds collected and held on behalf of another.

Custodian - One who holds instruments of value, e.g., mortgage notes, on behalf of another. A custodian holds the key original mortgage documents securing all MBS pools.