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Real Estate Glossary C [Part 3]
Commingling
To mix or mingle, as in depositing customer monies in the broker’s personal or general account. If a licensee is found guilty of commingling money, the state licensing office may suspend or revoke their license. Some instances of commingling are clear; others, such as a broker serving as a property manager and deducting a fee from the tenant’s security deposit, are more complicated.
When a broker fails to deposit trust monies into escrow, a client trust, or an earnest money account at a bank or authorized depository within the time range required by law or regulation, commingling can occur.
When the broker retains a minimal amount of his or her own money in the client trust account to keep the account open, there is no commingling. The quantity is frequently governed by law or regulation. When ordered by the buyer (offeror), it is permitted in many states (but not all) to retain an uncashed check until acceptance of an offer; however, before the seller accepts the offer, the broker must clearly disclose the fact that the check is being kept in an uncashed form.
Not paying checks before an offer is accepted as a policy may help the broker avoid difficulties. A personal check is frequently used as an earnest money deposit when a buyer files an offer. If the broker deposits the check in the client’s trust account and the offer is rejected, the broker may be forced to repay the earnest money deposit before knowing whether or not the buyer’s check has cleared. The buyer will be annoyed and their business relationship will be lost if the broker takes too long to refund the earnest money deposit. The broker, on the other hand, is out of money if the deposit is returned and the check bounces.
Conversion, which is the real misuse of client funds, is a more severe violation than commingling.
Commission
The fee paid to a real estate broker for services given in connection with the sale or exchange of real property (typically by the seller). To be eligible for a commission, a broker must be licensed in the state, have a documented employment agreement (listing) with the seller, and sell the property or execute a legitimate contract of sale.
Any attempt by a group of brokers to establish brokerage rates would be a violation of antitrust laws. The commission is often expressed as a percentage of the total sales price, a flat charge, or even an hourly rate, and the precise cost is open to negotiation. “Commission rates are negotiable and are not established by law,” many listing contracts now declare. Before a broker may collect a commission, certain states need a documented employment agreement (listing). Some states require a notification in the listing agreement that commissions can be negotiated.
A broker will frequently split the commission with another broker who assisted in the transaction. Except for deferred commissions earned under a previous broker, a broker must process money via the salesperson’s employing broker to divide a commission with a salesperson linked with another broker. Only via the employing broker may a salesperson take payment directly from a customer.
Regardless of whether the buyer completes the transaction, once the seller accepts an offer from a ready, willing, and able buyer, the seller is theoretically accountable to the broker for the entire commission. However, in cases where the broker knew or should have known that the buyer was unable to complete the transaction, the courts have a tendency to restrict the broker from pursuing the seller for the whole compensation. Naturally, if the offer is conditional, the broker will not be able to receive a commission until the condition is met. Also, because the broker did not negotiate the transaction, the broker normally does not get a commission if a property is marketed and then taken under condemnation or sold at a foreclosure sale.
If the deal is not completed for any of the following reasons, a broker who has generated a ready, willing, and able buyer on the listed terms is typically still entitled to commission:
→ The owners (sellers) reconsider and refuse to sell.
→ The purchaser defaults and declines to purchase. When the buyer fails due to no fault of the seller, several state courts are refusing to enforce the commission arrangement.
→ The spouse of the property owner refuses to sign the contract or deed.
→ There have been no corrections to the owner’s title defects.
→ In relation to the transaction, the owner commits fraud.
→ The owner is unable to provide possession in a timely manner.
→ The owner insists on clauses not included in the advertisement, such as the right to limit the property’s usage.
→ The seller and buyer agree to cancel the agreed purchase contract.
A broker cannot share a commission with someone who is not a licensed salesperson or broker, according to most license regulations. Certain pieces of physical property (a broker gifting a new TV to “a friend” for producing a valuable lead) and other premiums (vacations, etc.) have been included in the commission, as well as finder’s fees and real percentages of the commission.
Payment of the commission is not the deciding element in whether the vendor pays the fee, the buyer pays the fee, both pay the charge, or neither pay the fee in an agency arrangement. To avoid any confusion that the broker must have represented the person who finally paid the broker’s fee, sensible brokers should clarify and document who they represent and who is paying for their services.
Even if the commission is indicated as a discount (or a “contra”) against the purchase price, courts have found that real estate brokers or salespeople buying property via their own brokerage business for personal use must nonetheless be truced on the commission they would have gotten for the sale. Commission revenue is considered “personal service” or “earned” income, regardless of whether it is received by an employee or an independent contractor.
After the broker receives the commission, it is normally split between the brokerage agency (“the house”) and the salespeople participating in the transaction according to a predetermined formula.
Because commission splits differ so much from business to firm, salespeople must have a clear agreement (ideally in writing) with their employing broker on how, when, and what percentage of the total commission earned they will be paid. Some offices are 100% offices, meaning the linked licensee gets the whole commission and pays a monthly fee to support office expenditures.
Leasing commissions are often calculated as a percentage of the whole lease duration. For time and expenditures spent on showings that do not result in sales, the broker normally receives no monetary remuneration.
The commission paid to a real estate or mortgage broker for services done, which is based primarily on a percentage of the cost.
Payment received by a real estate salesperson for services done, generally represented as a percentage of the sale price of the property and not normally paid until the deal is finalized.
A real estate agent’s fee for services rendered, such as completing a property sale. The amount is a predetermined percentage based on the contract or agreement’s consideration.
Commissioner
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A state real estate commission member.
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In a partition case, a person appointed by a court of equity to advise the court on the best manner of splitting a property among cotenants.
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A court-appointed supervisor of a mortgage foreclosure sale.
Commitment
A pledge or promise to do something, such as a lending institution’s guarantee to loan a particular amount of money to a qualifying buyer at a set rate of interest if the loan is made by a given date. Unlike a contract for sale, a party bound by a promise, such as a lender, cannot be required to expressly perform by a court; nonetheless, an unhappy party may seek money damages if the pledge is refused.
A traditional loan pledge might be unconditional or conditional. The borrower submits an application to the lender directly, generally on a standard form. The lender provides the borrower a commitment letter after examining the applicant’s intent and financial ability to repay the loan.
In effect, this commitment letter is a formal offer to lend money on certain terms. The lending institution creates the required mortgage documents if the borrower accepts the commitment and meets any criteria imposed by the lender, such as producing sufficient appraisal and credit reports. The lending institution will allow the mortgage funds to be used for the purposes for which the loan was made, such as refinancing, once the mortgage documents have been completed and the title has been approved.
A conditional commitment for FHA loans is an agreement to lend a certain amount of money on a specific property, subject to FHA approval of an unknown borrower whose credit and eligibility must be examined. A solid FHA commitment is an agreement to insure a loan in a specified amount for a specific borrower on a specific property. When the loan is ultimately made, the conditional loan commitment fee is normally deducted from the closing fees. Conditional commitments from the FHA are valid for six months and can be renewed for another six months for an extra charge.
In major developments, developers may pay for or “buy” a permanent takeout finance commitment.
A title insurance company’s commitment to issue a policy in behalf of a potential insured upon the acquisition of a certain property is also known as a commitment. Unlike a binder, however, it is not a contract for temporary insurance.
The commitment is for a limited time and specifies the kind of policy to be provided, the insured’s estate or interest, title vesting, legal description of the property covered, and any coverage limitations.
The act of committing to fulfill a commitment.
Commitment fee
A fee given to a lender in exchange for a loan.
Commitment letter
A letter to a prospective borrower in which a lender specifies the terms and circumstances under which the requested cash will be provided. Typically, a specific time period is mentioned during which the commitment stays in force. Promise letters often indicate the terms under which the lender may cancel the commitment and any further stipulations on which the commitment is reliant.
Common area
Numerous-party zones are areas of a property that are used or available for use by multiple parties. Lobbies, stairwells, corridors, restrooms, and courtyards are all common areas in office buildings. They would include community rooms, clubhouses, lobbies, fitness facilities, and rooftop social spaces in an apartment complex.
Hallways, lobbies, restrooms, and stairwells are examples of space that is not used or occupied by tenants.
For the purposes of a lease, the parts of a building (and its land) that can be used by all tenants, but not just them. This includes things like lobbies, hallways, and parking lots. (Standards for Real Estate Information)
Common area maintenance (CAM)
Fees levied by property owners to renters for the upkeep of common facilities. Tenants are charged for landscaping, snow removal, and utilities in common areas of retail centres, for example.
Typical commercial property expenses include maintenance and repayment charges, the cost of security personnel and alarm systems, and fees for common area management.
Additional expenses that a tenant pays for the upkeep of spaces that are shared by all residents.
Costs that the tenant pays to keep up areas that everyone can use and benefit from. A lot of shopping centres have CAM fees. The tenants pay for the upkeep of the parking lot, the removal of snow, and the utilities.
Common area maintenance (CAM) charge
A clause in a shopping centre lease that requires the tenant to contribute to the common area operating costs.
Common areas
A condominium development’s land or improvements are set aside for the use and benefit of all residents, property owners, and tenants. Parks, playgrounds, and grilling areas, which are also referred to as greenbelts, are typically found in common areas. Parking lots, malls, and traffic lanes are all regular sights in retail malls.
A section of a building that unit owners share, such as a playground, swimming pools, tennis courts, and other recreational amenities.
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Common elements
Parts of a property that are required or convenient for the condominium’s existence, upkeep, and safety, or that are commonly used by all condominium members. The common components are owned by all condominium owners in their entirety. The condominium owners’ association is responsible for maintaining the common elements, and each owner is responsible for paying a monthly maintenance assessment that is prorated based on his or her individual common interest. Elevators, load-bearing walls, floors, roofs, passageways, swimming pools, and other ubiquitous features are examples.
Common expenses
All additional sums defined as common costs by or subject to the condominium declaration or bylaws, as well as the operational expenses of condominium common elements.
Common interest
The proportion of each condominium apartment’s undivided ownership in the common components, as determined by the condominium declaration. The appropriate percentage is commonly calculated as the ratio of a given apartment’s square footage to the total square footage of all apartment units, or as the ratio of a single apartment’s purchase price to the total sales price of all apartment units. A percentage, such as 1.47 percent or 0.0147, is used to indicate the ratio. The proportion of common interest determines an owner’s stake in the common components, the amount assessed for common property maintenance and operation, the real estate tax imposed against an individual unit, and the number of votes that owner has in the condominium owners’ association.
Common law
Judge-made law (“case law”), as opposed to codified or statutory law, is the body of law based on use, popular acceptance, and custom as evidenced in court decrees and judgments ( or civil law as found in a few states like Louisiana). This style of jurisprudence started in England and was subsequently adopted by legislation or tradition in the United States.
Common law title
An English land law-based title system that relies on tracking the ownership of the subject land from the first Crown grant through all subsequent agreements.
Common profits
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After deducting common expenditures, the balance of total income, rentals, earnings, and revenues from the common elements in a condominium.
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Profits generated by a partnership or corporation’s operations.
Common property
Gardens, driveways, and laundries are examples of shared owned areas on a strata-titled unit property.
Land or a tract of land considered public property in which all persons have equal rights. A property that is owned by groups rather than individuals.
The part of the property owned and used in common by all unit or flat owners or occupiers in a home (villa) unit or flat development that is maintained by the Body Corporate.
Common wall
A condominium project’s wall between two living apartments. Traditional party-wall restrictions do not apply since most developers designate the shared walls between two flats to be common components.
Community center
A community centre is a type of retail property that usually has a larger selection of clothing and other soft goods than a neighbourhood centre. Supermarkets, big drug stores, and discount department stores are some of the most common anchors.
Off-price stores that rent space in community centres sometimes sell things like clothes, home improvement/furniture, toys, electronics, and sporting goods. Most of the time, the centre is shaped like a strip, a straight line, or a “L” or “U.”
Community centres have the most different kinds of formats out of the eight types of centres. For example, some places that have a big discount department store as their main store are called “discount centres.” Others that have a lot of space set aside for off-price stores can be called “off-price centres.”
Community development corporations (CDCs)
Institutions that combine public and private resources to assist in the development of socioeconomically deprived communities.
Community development district CDD lien
A quasi-governmental entity with the authority to fund, build, run, and maintain infrastructure and related services inside a specific development or community. The CDD imposes taxes or assessments on landowners and has the authority to issue municipal, tax-exempt bonds. Its board is elected by the community landowners, and its actions are fully open to the public.
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Community property
A property ownership system founded on the notion that each spouse has an equal stake in property obtained via either partner’s work throughout the marriage. This system originated with Germanic tribes and spread across Spain’s North and South American possessions. Under English common law, the system was unknown. California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington are among the states that have a community property system in place.
Separate property and community property are the two types of property in community property states. Separate property is property possessed by either the husband or the wife at the time of marriage, or property obtained by one spouse during the marriage by inheritance, bequest, or gift. Separate property is completely free of any claim or interest from the other spouse. All other property is community property, and each spouse immediately owns an equal share of it regardless of whose name is on the title.
If community property is involved, both spouses’ signatures are necessary on a listing contract or any instruments of conveyance. Expert tax counsel should be sought when assessing the necessary tenancy for a buyer to take title.
Spouses can transfer their separate property without the necessity for the other to sign the deed. However, title insurance firms and others prefer both spouses’ signatures to dispel any doubt about whether the property is separate or common property. Prudent licensees understand the need of collecting both parties’ signatures on a conveyance instrument or any other document that may impact the title to real property, among other reasons. It’s a good idea to write whether the grantor is a single individual on the document so that everybody who sees it knows right away that the grantor has no community property interest.
Dower, curtesy, and survivorship rights are not recognized in community states. When one spouse dies, half of the community property goes to the decedent’s heirs, while the remaining spouse keeps his half portion.
A property ownership system based on the notion that each spouse has an equal stake in property gained via either partner’s work throughout the marriage." This system originated with Germanic tribes and spread across Spain’s North and South American possessions. Under English common law, the system was unknown. California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington are among the states that have a community property system in place. Separate property and community property are the two types of property in community property states. Separate property is property possessed by either the husband or the wife at the time of marriage, or property obtained by one spouse during the marriage by inheritance, bequest, or gift.
Separate property is completely free of the other spouse’s interest or claim. All other property is community property, and each spouse immediately owns an equal share of it regardless of whose name is on the title.
If community property is involved, both spouses’ signatures are necessary on a listing contract or any instruments of conveyance. Expert tax counsel should be sought when assessing the necessary tenancy for a buyer to take title.
Spouses can transfer their separate property without the necessity for the other to sign the deed.
However, title insurance firms and others prefer both spouses’ signatures to dispel any doubt about whether the property is separate or common property. Prudent licensees understand the need of collecting both parties’ signatures on a conveyance instrument or any other document that may impact the title to real property, among other reasons. It’s a good idea to write whether the grantor is a single individual on the document so that everybody who sees it knows right away that the grantor has no community property interest.
Dower, curtesy, and survivorship rights are not recognised in community states. When one spouse dies, half of the community property goes to the decedent’s heirs, while the remaining spouse keeps his half portion.
The husband and wife’s natural claim to property obtained by their spouse during the marriage.
A property purchased as a couple during their marriage.
Community reinvestment act of 1977
A federal law that mandates lenders to expand credit to low- and moderate-income persons in order to satisfy the credit requirements of the communities in which they conduct business.
A legislative legislation that encourages mortgage lenders to engage actively in their communities and compels financial institutions to assess the “fairness” of their lending practices.
Community shopping center
A 150,000-square-foot commercial area with 20 to 70 store locations that falls between between a neighborhood centre and a regional centre, supported by more than 5,000 families.
A medium-sized shopping centre with 50 smaller retail establishments and a small department store or supermarket as the anchor tenant. 150,000 square feet is the average size.
A shopping mall that generally draws the majority of its customers within a driving radius ranging from IO to 15 minutes. Anchor tenants in community shopping malls are often a grocery store and a junior department store or a discount store. Retail space can range in size from 50,000 to 100,000 square feet.
This sort of centre is a bigger version of a community retail centre and is frequently anchored by a bargain department store.
Compaction
Extra dirt that has been matted down or compacted and put to a lot to fill up low spots or increase the parcel’s level.
Extra dirt that has been matted down or compacted and put to a lot to fill up low spots or increase the parcel’s level.
Company title
Strata title’s predecessor. For certain older unit blocks, company titles still remain.
In this title, the people who own units in a private company are also owners of the company.
Property rights to occupation in perpetuity based on ownership of shares in a company in which the title to the property is vested Prior to the introduction of strata title ownership, this was the most common method of home unit ownership.
Comparable properties
In the sales comparison technique, properties similar to the subject property were utilized to determine a single indicative value for the subject property.
Comparable sales, comps
Using the prices of recently sold similar properties in the region to determine the current value of a property.
Comparables
Similar properties that have recently sold or leased and are being evaluated are used to determine a value for the subject property. The “comps” don’t have to be physically identical to the topic or in the same area, but the highest and best use, land-to-building ratio, selling terms, and market circumstances should be similar, or very easy to change for comparison.
Similar properties that have recently sold or leased and are being analyzed are used to determine a value for the subject property. The “comps” don’t have to be physically identical to the subject or in the same location, but the highest and best use, land-to-building ratio, sale terms, and market circumstances should be similar, or very easy to change for comparison.
Properties that are similar in terms of economics.
Similar properties to the subject; used to forecast anticipated prices, rents, or property values.
Comparative advantage
An economic theory created by economist David Ricardo that explains why certain locations prefer to concentrate on manufacturing a small number of commodities while sourcing much of their consumption from other areas.
The idea that cities or regions tend to make things or support activities for which they have the most advantage over other places. These factors include production, demand, supporting industries, and quality of life, as well as human, financial, and physical resources and “opportunity costs,” which are costs that are measured in terms of lost opportunities.
Comparative market analysis (CMA)
An unbiased third party provides property price estimate reports.
Comparative market approach
A method of estimating a property’s value based on recent selling prices of similar properties.
Comparative sales approach
An appraisal technique that examines recent sales data from comparable properties and derives conclusions about the worth of the property under assessment.
Comparative unit method
A method for calculating the cost of replication in which all construction components are summed together on a unit basis, such as cost per square foot. Framing, exterior finish, floor and roof construction are some of the components.
A method of estimating expenses by comparing them to similar structures whose construction costs are known. To make somewhat different-sized structures more directly comparable, expenses are represented in terms of some standardized unit of measurement, such as per square foot or per cubic foot.
Comparison activities
Clustering is the best geographical pattern for goods and services.
Comparison rates
A comparison rate is a tool that helps people figure out the true cost of a loan. In this case, it is a single percentage figure that takes into account both the interest rate and the fees and charges that can be found out about the loan.
Comparison year
Any year that is compared to the base year for the purpose of determining a rise or fall in operational costs during the period of a lease with an escalator clause.
Compass points
The 32 places of a compass used to identify directions while recording a metes-and-bounds description or other legal description.
Compensating balance
A borrower’s funds placed with a lending institution in exchange for the lender making a loan or extending a line of credit to the borrower. This is more common with commercial loans than with residential loans.
Compensation
When a statutory authority compulsorily acquires all or part of a property, money is paid to the property owner. It considers factors such as market value, the impact on the property’s balance, and revenue loss.
Compensatory damages
A court’s award of damages to the plaintiff, designed to cover the plaintiff’s actual injury or economic loss. Punitive damages or damages for gross negligence are not included in this award.
Competent party
A contracting party who has the legal capacity to enter into a legally binding agreement.
Competition (retail)
A situation or market in which many companies compete for a piece of the retail market in a certain area. The word “competition” is also used to mean “rivals” or “competitors.”
Competitive clusters
The collection of office and industrial buildings and sites near heavily frequented regions, such as interstate highways and freight lines, or near activity centres such as airports, universities, and hospitals.
Competitive market analysis (CMA)
A technique used by brokers and salespeople to assist consumers in determining the sale price of a property. It is not an evaluation. The CMA contains information about three sorts of properties identical to the subject property: sold, on the market, and expired prices. The “solds” represent what previous buyers were willing to pay for a comparable property to the subject property and serve as the foundation for the official appraisal. The “expired” represent the price that other buyers were unwilling to pay for a property similar to the subject property. A seller’s agent should advise the seller on how to establish the list price in “competition” with other properties on the market. A CMA performed by the buyer’s agent helps reassure the buyers that their offer is reasonable and comparable to what others have paid.
Complainant
Someone who files a complaint or initiates legal action against someone else (the respondent).
Complements
Goods or services used concurrently with the object under consideration. When the price of one commodity or service changes, the demand curves for its complements adjust.
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