Real Estate Glossary

Call Option - Provision in a mortgage that gives the lender, or mortgagee, the right to demand full payment of the loan for any reason or at any time.

Cap - Provision of an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments can increase or decrease over a specified period of time. See also, lifetime payment cap, lifetime rate cap, periodic payment cap, and periodic rate cap.

Cap Rate - See recapture rate.

Capacity - (1) In lending, a borrower's estimated ability to repay a loan, based on a review of the prospective borrower's employment history, income, assets, debts and other factors. (2) In law, a person's authority or competency to enter into contracts. A person may lack capacity, for example, because he is of unsound mind, or because he is a minor.

Capital - (1) Money used to create wealth. (2) Money or assets owned or used by a person or business. (3) In accounting, the net worth of a business; amount by which assets exceed liabilities.

Capital Expenditure - Amount spent to extend the useful life of real property and to add to the property's value.

Capital Improvement - Any structure or fixture installed as a permanent improvement to real property and that adds value and extends the useful life of the property.

Cash Flow - Actual income received by an investor after deductions for operating expenses and debt service.

Cash-Out Refinance - Mortgage loan transaction to replace existing mortgage financing, and where the amount of the new loan exceeds that of all of the existing financing, plus all loan closing costs, so that the borrower receives at closing of the new loan cash to be used for any purpose. Also called a "cash-out refi."

Casualty Insurance - Protection against financial harm in the event of loss or damage to a property from dangers or disasters such as fire, wind, flood, earthquake, vandalism, burglary, etc.

CD-Indexed ARM - Adjustable-rate mortgage where changes in payments or interest are tied to the certificate of deposit index.

Certificate of Completion - Written certification from a government agency that work specified in a permit has been inspected and judged to have been completed according to code. Not required by all municipalities. See also, certificate of occupancy.

Certificate of Deposit (CD) - Document evidencing deposit of a specific sum of money in a bank or other savings institution that earns interest at a higher rate than a regular or passbook account, but which must remain on deposit for a specified period of time. Also called a "time certificate."

Certificate of Deposit Index - Indicator sometimes used to determine changes in interest rates for adjustable-rate mortgages; index reflects weekly average interest rates for six-month negotiable certificates of deposit on the secondary market.

Certificate of Eligibility (COE) - Certificate issued by the federal Department of Veteran's Affairs (VA) that certifies a veteran's or service member's eligibility to use the VA's home loan guarantee program. The certificate must be presented to a VA-approved lender prior to making loan application.

Certificate of Occupancy - Written document issued by a government agency upon completion of a new building that shows that the agency has fully inspected the building, that the building meets all current code requirements, and that the building is fit for habitation. See also, certificate of completion.

Certificate of Reasonable Value (CRV) - Document issued by federal Department of Veteran's Affairs (VA) subsequent to appraisal of a home by a VA-approved real estate appraiser. Document evidences the VA's estimate of the maximum value of the property, and establishes the maximum amount of the VA's loan guarantee.

Certificate of Title - In real estate, a statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner; not commonly used in Oregon.

Chain - Unit of measurement in surveying, especially used in the 19th and early 20th centuries, equal to 66 feet; commonly found in legal descriptions on deeds. One chain is comprised of 100 links of 7.92 inches each.

Chain of Title - History of documents showing the transfer of ownership to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Frequency - How often, in months, that changes to interest rate and/or payment amount are made in an adjustable-rate mortgage.

Change Order - Part of the construction process whereby discretionary changes made by the buyer are put in writing (signed by all parties), and an amount specified in the building contract is set aside to pay for the previously unexpected work and materials. If a project is lender-financed, change orders may require lender approval.

Chattel - Movable item of personal property, such as a car, furniture or head of livestock; same origin as cattle—Old French, "chatel," used to describe personal property, farm animals and slaves.

Chattel Real - Legal term used to describe an interest in real property that is less than freehold (full ownership), such as a lease. Chattel real is considered personal property.

Clear Title - Ownership, or title, that is without legal questions, such as liens or encumbrances.

Closing - In real estate, time of completion of a transaction where final documents, including the deed and/or deed of trust, are executed and recorded; sometimes confused with signing, the process where buyer and seller sign their final transaction documents. See also settlement.

Closing Agent - Person or company who coordinates and conducts the various activities to complete a real estate transaction, including the preparation, signing and recording of documents, and the disbursement of funds. In Oregon, closing services usually are provided by an escrow company, but also can be provided by an attorney or a real estate broker.

Closing Costs - Fees or amounts, other than the price of the property, that are paid by a buyer or seller to complete a real estate transaction. Closing costs normally include fees for loan origination, document processing, real estate commission, escrow services, title insurance, courier services, document recording and government surcharges. Closing fees also may include charges for contractor repairs, attorney services and pro-rated amounts for property taxes and casualty insurance reserves.

Closing Date - Date of completion of a real estate transaction, including the recording of the new deed and other final documents; in a purchase contract, the date by which the entire transaction must be completed, including recording of documents and disbursement of funds by the lender.

Cloud (on Title) - Any condition revealed by a title search that adversely affects title to real estate. A cloud on the title to a property usually cannot be removed except by execution of a release or a quitclaim deed, or by court action.

Co-Maker - Person who signs a promissory note along with the borrower. A co-maker's signature provides additional security to the lender because the co-maker is equally responsible with the buyer for repayment.

COE - See Certificate of Eligibility.

Coinsurance - A sharing of insurance risk between more than one party; insurance coverage provided by more than one insurer, or risk shared between the insurer and the insured.

Coinsurance Clause - Provision in a legal document that provides that insurance risk will be shared, either between an insurer and the insured, or between others. In health insurance, a coinsurance clause specifies that an insurer will pay a specified percentage for each claim, while the insured will be responsible for any amount above that specified percentage. (Common coinsurance splits in health insurance are 80/20, 70/30 and 90/10.)

Collateral - Asset used to guarantee repayment of a loan. Borrower risks forfeiting the asset if the loan is not repaid according to the terms of the loan contract.

Collection - Efforts to bring a delinquent mortgage current and, when necessary, to file necessary notices to proceed with foreclosure.

Commercial Bank - See bank.

Commission - Fee charged by a broker or agent for negotiating a transaction. A real estate commission is generally a percentage of the final price paid for a property.

Commitment - See loan commitment.

Commitment Letter - Formal letter from a lender offering to make a mortgage loan, usually if certain conditions are met. See also, loan commitment.

Common Area - Portion of a building, land or amenity owned in common by the individual owners in a condominium development or planned unit development. Includes such things as hallways, walkways, streets, parking lots, swimming pools, etc.

Common Area Assessment - Charge or levy against individual unit owners in a condominium or planned unit development for additional capital to defray costs to repair, replace, maintain, improve or operate the common areas of the development.

Common Law - General body of legal precepts originating in England that were later adopted in the United States and are based on precedent rather than written statute; that which derives its force and authority from the universal consent and immemorial practice of the people.

Community Property - Classification of property ownership peculiar to certain states where property owned by a man or woman who is married is automatically presumed to be the joint property of the couple unless it can be proved that the property was acquired before marriage or that the written intentions of the spouses were to acquire the property separately. Community property is not recognized in Oregon. See also, tenancy by the entirety and tenancy in common.

Comparable Property - Also called a "comparable" or "comp," the term is used to describe a property used for a comparison in establishing an estimate of value for another property. In order to be useful, comparables must be reasonably similar in location, functional age, size and amenities.

Compound Interest - Interest paid on the principal balance plus any accrued interest.

Condemnation - (1) Process of taking the private property of another under the doctrine of eminent domain. See also, eminent domain. (2) Act of declaring a building unfit for use or service.

Condition - Some limiting restriction written into a deed or other conveyance of property stating that upon some act or event, or lack thereof, that the ownership of the property shall change in some way.

Conditional Commitment - Loan commitment given by a lender before a borrower is identified; commitment is subject to approving the buyer, once found. See also, firm commitment and loan commitment.

Condominium - Form of dwelling ownership where the owner of each dwelling unit owns only the interior of his unit, and all other areas of the development (including the land) are owned in common with the owners of the other dwelling units. Not the same as, but similar, to a planned unit development.

Condominium Conversion - Changing of the form of ownership for an existing rental property from being wholly-owned to being owned as a condominium.

Condominium Hotel - Condominium development that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services, and which is operated as a commercial hotel, even though the units are individually owned.

Conforming Loan - Real estate loan meeting the underwriting standards of the primary issuers of conventional mortgage-backed securities, Fannie Mae and Freddie Mac.

Construction Contract - See building contract.

Construction Loan - Short-term, interim financing for the cost of construction; may include the cost of land or just the building and improvements. Typically, the lender makes payments directly to the builder at periodic intervals as the work progresses.

Construction-Perm Loan - Construction loan that automatically converts to a long-term, "permanent" mortgage upon completion of construction. See also, take-out loan.

Constructive Eviction - Any act of a landlord, which is not an actual eviction, but that substantially interferes with a tenant's use and enjoyment of the leased property, especially for the purpose of causing a tenant to move. (Constructive eviction is illegal in Oregon.)

Contingency - Condition that must be met in order to keep a contract in force; the contract's enforceability is contingent, or subject to, some act or event taking place. A number of contingencies are commonly found in contracts for the sale of real estate. See also, contingency, financing; contingency, inspection; and contingency, repair.

Contingency, Financing - A financing contingency is a clause in a purchase contract that specifies that the buyer's obligation to purchase the property is dependent upon his being able to obtain financing. The clause may also obligate the buyer to make a good-faith effort to obtain financing, and may allow a seller to provide financing if the buyer is unsuccessful.

Contingency, Inspection - An inspection contingency is a clause in a purchase contract that gives a buyer the right to a more thorough examination of a property's condition. Depending on the exact language of this clause, the buyer may be able to cancel the contract if the condition of the property is not satisfactory.

Contingency, Repair - A repair contingency is a clause in a purchase contract stating that certain repairs to the property must be completed by a certain date prior to the closing of the transaction. The contingency also often states in what manner the repairs must be completed (e.g., workmanlike manner, subject to inspection, manner satisfactory to the buyer, etc.) If the repairs are not completed as prescribed, the buyer is not obligated to complete the purchase.

Contingency Reserve - Additional percentage of total cost for a renovation project required by a lender to be set aside in an account to pay for unforeseen repairs or deficiencies. Lenders using a contingency reserve often require 10 percent of the projected cost for the project.

Contract - (1) Agreement between two or more parties to do, or not to do, a certain thing. State laws require contracts for certain purposes to be in writing in order to be legally valid. (2) Shortened expression for the term "land sales contract," an instrument by which an owner may personally finance a property he is selling. See also, land sales contract.

Contractor - Person who oversees and is responsible for some aspect of a construction project. In Oregon, there are four main types of contractors: general, electrical, plumbing and landscape. Contractors must be licensed with the Oregon Construction Contractors Board or the Oregon Landscape Contractors Board. See also: general contractor.

Conventional Loan - Real estate loan that is not insured, guaranteed or obtained through a government program. A conventional loan may be (though is not necessarily) a conforming loan.

Conventional Mortgage - See conventional loan.

Convertibility Clause - Provision in certain adjustable-rate mortgages that allows the borrower to change the mortgage to a fixed-rate loan under specified conditions and at specified times after loan origination.

Convertible ARM - Adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions. See also, adjustable-rate mortgage.

Conveyance - Transfer of ownership to land; includes the written instruments by which an interest in real estate is created or assigned, such as a deed, a mortgage or a deed of trust.

Cooperating Broker - Real estate broker who finds a buyer for a property that is listed for sale by another broker, where the listing broker has agreed to share his professional fee with the buyer's broker.

Cooperative - Predecessor to the condominium, a development where residents purchase shares in a corporation that owns all of the real property in the development, and the corporation leases back the individual residential units to individual shareholders; also called a "co-op." Not common in Oregon. It is difficult to finance buying into a cooperative because the borrower has no real property ownership to use as collateral.

Corporate Relocation - Condition where an employer hires or transfers an employee, resulting in the employee having to move his residence. Many employers who engage in this practice offer "relocation benefits" to help defray costs of the move, depending upon the need for the employee's skills or upon his or her position within the company.

Cost of Funds Index (COFI) - Indicator sometimes used to determine interest rate changes for certain adjustable-rate mortgages; index reflects the weighted-average cost of savings, borrowings, and advances of the 11th District members of the Federal Home Loan Bank of San Francisco. See also, adjustable-rate mortgage.

County Clerk - County official often charged with the supervision of the recording of important legal documents of a public nature, including property deeds, mortgage documents, lien notices, marriage licenses, divorce decrees and so on. See also, recorder.

Covenant - (1) A promise; generally any written agreement to do something. (2) In real estate, assurances implied by law or expressed, such as a covenant against encumbrances or to convey title. (3) Clause in a mortgage that obligates or restricts a borrower and that, if violated, can result in adverse action by the mortgagee.

Credit - (1) Tender of goods in the present in exchange for a promise to pay at a later time. (2) Borrower's history of having met past financial obligations. (3) Accounting term referring to money received or receivable, as opposed to a debit, which is money paid or payable.

Credit Bureau - See credit repository.

Credit Grade - Alphabetical representation of a loan applicant's credit history, based on credit score and numbers of late payments in given periods of time, as well as whether the person has had a reportable bankruptcy or foreclosure. Possible letter grades, from highest to lowest, are: A+, A, A-, B+, B, B-, C+, C, C-, D+, D, D-, E. Generally, the lower the grade, the fewer the lenders who are willing to make loans in that grade, and the higher the cost of credit (interest rate) from the lenders who are willing to make loans.

Credit History - Written picture over time of a borrower's success in meeting his financial obligations.

Credit Life Insurance - Life insurance policy that pays certain debts of the insured when the insured dies while the policy is in force.

Credit Report - Formatted, written report of an individual's credit history prepared by a credit bureau or credit reporting agency and used by a lender in determining a loan applicant's worthiness to borrow money.

Credit Report Fee - Charge by a lender or loan broker for the cost of obtaining a credit report. Fees of credit reporting agencies approximately range from $5 to $35 per individual, depending on the agency and the type of report requested.

Credit Reporting Agency - Company that prepares and disseminates credit reports used by lenders to determine a loan applicant's creditworthiness. May also be a credit bureau, or may be a smaller agency that obtains data from several bureaus and/or from other sources.

Credit Repository - Organization, usually private, that gathers, stores and maintains records of information reported by creditors regarding the payment histories of the creditors' customers. There are three main credit repositories in the United States, operated by the companies Equifax, Experian (formerly TRW), and TransUnion, often called "credit bureaus."

Credit Score - Numerical representation of a person's estimated ability to repay a debt. See also credit scoring.

Credit Scoring - System of computing a prospective borrower's estimated ability to repay a loan based on specific algorithms developed by financial experts. Several scoring systems have evolved, primarily based on an original created by Fair Isaac Corp. For more information about credit scoring, click HERE. See also, FICO score.

Credit Union - Non-profit, cooperative financial institution owned and run by its members. Offers savings accounts, checking accounts and loans. May offer other banking-type services like safe-deposit boxes, notary services, check cashing, money orders, etc. Generally offers more attractive fees than banks, but membership in a given credit union is required to be limited to certain classifications of people (e.g., all the people in a specific industry, all people employed by a certain employer, all the people living in a certain geographic area, etc.)

Creditor - Party to whom money is owned; person granting credit.