Continued from…
Real Estate Glossary D [Part 1]
Deed of trust
A legal document in which ownership to property is transferred to a third-party trustee as security for a debt owing to the beneficiary by the trustor (borrower) (lender). Also referred to as a trust deed. The fundamental distinction between a deed of trust and a mortgage is that it involves three parties. When a borrower repays a note secured by a deed of trust, the trustee must use a deed of reconveyance, also known as a release deed, to return title to the borrower.
A court foreclosure action is avoided in some areas (such as California) when the trustee can sell the property by a power of sale after giving the trustor a legally stipulated period of time to reinstate the outstanding loan. In some states, the borrower-trustor is granted a limited time (such as three months) to repay the loan balance plus a designated reinstatement charge and have the loan reinstated. As a result, if the trustor defaults, the trustee must wait the statutory period before accelerating the entire note.
For numerous reasons, lenders in many states prefer to issue residential property loans through a trust deed: (1) In states that allow it, a trustee may be given the authority to sell property after it has fallen into default without having to go through the lengthy judicial foreclosure procedure. (2) In a mortgage transaction, the statute of limitations may preclude an action on the note; however, this is not the case with a deed of trust with a power of sale, because the trustee technically owns the property and can sell it at any time after failure to repay the debt. (3) Trust deeds can be used to secure several notes. (4) An anonymous lender does not have to be specified in the deed of trust. (5) There is usually no statutory right of redemption after a power of sale sale.
One downside of naming a non-institutional trustee in a deed of trust is that it can be difficult to locate such a trustee after the debt has been paid and a reconveyance obtained. A corporate trustee should ideally be designated in the document.
As a security measure, the deed of trust is an alternative to the mortgage agreement. A deed of trust may be legally enforceable even if there is no promissory note in some areas; this is not the case with a mortgage.
A mortgage that transfers real estate to a third party by holding the deed in trust until the loan is paid off.
A deed that transfers ownership of property from an owner to a trustee, who holds the property as collateral for a mortgage loan advanced by another. A trust deed or trust indenture is another name for a trust deed or trust indenture.
In certain states, this instrument is used instead of a mortgage. The borrower transfers a trust deed to a trustee, who keeps the deed on behalf of both the borrower and the lender. The trustee delivers the deed to the borrower if the loan obligation is paid off in line with the terms of the note. If the borrower (trustor) fails to make payments, the trustee uses his power of sale to dispose of the property on behalf of the lender.
A deed that gives legal ownership of real property to a trustee, who holds it as security for a loan between a borrower and a lender.
Deed poll
Only the grantor signs the deed. An indenture deed, signed by both the grantor and the grantee, had a wavy or indented edge and could be confirmed by matching the edges of both copies. The grantee is bound by the deed poll (like a lease) upon acceptance of any covenants specified in the deed, even if the deed is not signed by the grantee.
Deed restrictions
A provision in a deed that restricts the use of the property conveyed.
Clauses in a deed place restrictions on the usage of land and constructions.
Deed provisions that limit how the property can be used in the future.
Deeds in lieu of foreclosure
A legal instrument created by failing debtors that conveys to the lender all rights to a property. This may not always imply a clean title. Only the defaulting borrower’s interest at the time of transfer is considered.
Default
Debt payments were not made by the due date.
The failure to carry out a contractual responsibility or obligation. A default is typically considered a violation of contract, and the non-defaulting party may seek legal recourse to recoup any losses. Nonpayment of money when due, failure to renew insurance policies, failure to pay real estate taxes, property damage, and so on are all examples of defaults in long-term leases or contracts for deed.
It is important to note that a buyer’s good-faith inability to obtain financing under a purchase agreement contingency provision is not considered a default (the contract’s performance is contingent on the buyer getting the property financed), and in this case, the seller must generally return the buyer’s deposit.
Junior mortgages typically include a provision that allows the holder of the junior mortgage to advance funds to the mortgagor to rectify any default on a preceding mortgage. If the original mortgage remains in default and the lender forecloses, the junior mortgage would be wiped out.
Failure to fulfill a contract’s agreed-upon obligations.
Failure of a mortgagor to meet any of the agreed-upon requirements in a security arrangement.
The failure of a borrower to satisfy the terms and conditions of a note as a result of continuous delinquency.
Breaking the terms of the mortgage agreement or failing to make the due instalments.
Default judgment
A court order that goes in favor of the plaintiff because the defendant didn’t respond to a complaint or show up in court to defend the action.
Defeasance
The process of laying away cash or a portfolio of high-quality assets to pay off a debt’s remaining interest and principal installments.
Defeasance clause
A provision used in leases and mortgages to defeat or cancel a specific privilege if a certain event occurs. A defeasance provision, which is commonly featured in mortgages, states that if the borrower pays the obligation on time (by the “law day”), the terms of grant are nullified and the mortgage is canceled, reinvesting title in the mortgagor. By common law and in title theory jurisdictions where title is transferred under a mortgage, automatic defeasance was crucial. The borrower must first secure and then record a satisfaction, reconveyance, or release deed to remove the lien of a paid mortgage or trust deed from the public records.
If a deed or sale-leaseback contract contains a defeasance language allowing reconveyance back to the grantor upon full payment of a debt, the courts may treat it as a mortgage.
A provision that allows the mortgagor to redeem the property after paying the mortgagee his debt.
Mortgage clauses designed to render a nominal transfer void upon fulfillment of the mortgagor’s obligation.
A condition that may be included in commercial mortgages to protect lenders from prepayments during a period of dropping interest rates. Defeasance requires a borrower who prepays to acquire for the lender a set of US Treasury securities with coupon payments that perfectly mirror the cash flows the lender would lose as a result of the mortgage prepayment.
Mortgage loan language that allows a borrower to pay off their loan in full before defaulting and reclaiming their title and the mortgage lien that accompanies it at any time.
Defeasible fee
A title that can be taken away if certain things happen.
Defect in title
Any document that inhibits a seller from transferring clear title to an asset.
Defect of record
Any encumbrance on a title that has been made public record. Judgments, trust deeds, mortgages, other liens, and easements are examples of recorded flaws.
Defendant
The defendant in a case who is being sued by the plaintiff; the person accused of wrongdoing and from whom restitution is sought.
Deferral benefits
The taxpayer’s benefit by deferring payment of income taxes until the property is sold. The yearly depreciation deduction generates this advantage.
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Deferred commission
A commission earned but not fully paid; sometimes known as a residual. In a real estate transaction, for example, a broker earns a commission when the buyer signs and the seller accepts the purchase agreement. However, by prior agreement between seller and broker, the fee may be paid in part upon the down payment and in full-the residual-upon closing, which may be as much as 18 months away with a new project under development.
Deferred establishment fee
Some lenders charge a fee if the borrower has tried to get a new loan from another lender in the first few years of the loan.
Deferred income
Potential rent hikes as a result of a lease.
Deferred maintenance
Building deterioration or value loss due to neglected maintenance. Curable physical depreciation refers to deterioration that can be reversed by making the appropriate repairs and modifications.
A prospective buyer of a building with a considerable amount of deferred maintenance should pay special attention to the expected repair and replacement expenses when evaluating the property’s financial potential.
The lack of routine maintenance will have a detrimental impact on the property’s usage and value.
When an issue is found, routine maintenance is not done.
Deferred payment
Taking a promise to pay to pay a debt that will be reimbursed over time.
Deferred payment method
Also known as the cost-recovery approach or the return-on-capital method. Under the deferred-payment approach, no gain is taxable to the seller until payments received from the buyer exceed the basis of the property plus the cost of sale. This approach can only be utilized when the seller receives a portion of the sales price in the year of the sale, but the remainder of the payment is not demonstrated by a promissory note with a fair market value.
Deferred taxes
A tax-free exchange or installment sale is a legal deferral in paying income taxes under certain provisions of the Internal Revenue Code.
Deficiency judgment
A judgment against a borrower, endorser, or guarantor for the balance of a debt when the security for a loan is not enough to pay off the debt. A deficiency happens when the sale of a property in foreclosure doesn’t bring in enough money to cover the costs of the action and pay off the debt that was secured by the foreclosed mortgage. The shortfall is recorded as a personal judgment against the original mortgage holder and acts as a lien on the judgment debtor’s assets. It can be enforced and paid out just like any other court judgment. If this judgment can’t be paid, the lender probably has the right to take a bad debt deduction on his or her taxes. In the case of a corporate mortgage, this would be a bad business debt that could be fully offset against ordinary income.
In states where mortgages usually include a power of sale, creditors must bring a separate action to get a deficiency judgment because the court does not get involved. If the parties agree that the lender can only go after the collateral (the mortgaged property) if the borrower doesn’t pay, they write that “this note is without recourse,” which keeps a deficiency judgment from happening. In California and other states, the mortgagee can’t get a deficiency judgment on a purchase-money mortgage because these states have passed “anti-deficiency” laws.
When a buyer takes over the seller’s existing mortgage, he or she becomes personally responsible for any shortfall, along with the seller. But when a buyer buys a property “subject to” an existing mortgage, they can’t be held personally responsible for any deficiency. This means that if the buyer defaults on the mortgage, the buyer’s only responsibility would be to lose the property.
The borrower still gives the money on a defaulted debt, according to a court ruling.
A judgment obtained on a debtor’s personal assets in addition to those held on a defaulted debt instrument.
Lenders have the legal authority to sue debtors if the profits of a foreclosure sale do not fully pay off an existing loan, as well as any late fines and penalties.
A mortgagee can get a court judgement for the amount that a foreclosure sale did not bring in to cover the mortgage debt.
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Deflated mortgage
In most cases, salespeople are not compensated by anyone other than their current employing broker. Deferred commissions from a prior job, on the other hand, are normally paid directly to the salesperson by the former employing broker. A cash-basis taxpayer or salesperson would not be required to pay income tax on earnings until they were actually received.
When the seller receives insufficient cash in an installment deal, fees are frequently postponed. For example, in the sale of a pre-construction condominium, the broker may earn a portion of the commission from the deposit and the remaining when the project is completed and the customer pays in full and receives title.
A mortgage in which the parties agree to lower the principal debt while raising the interest rate. The seller receives the same amount of money, but the buyer benefits from a larger interest deduction.
Degree A
A surveying word that refers to 1/360 of a full rotation around a point in a plane.
Degree of operating leverage (DOL)
The percentage growth in operating profit from a change in occupancy level, at any occupancy level.
Dehumidistat
A system that uses the relative humidity of the home to control a mechanical ventilation system.
Delamination
When the layers of a panel come apart because the glue isn’t good.
Delayed exchange
When the “swap” of the properties is not simultaneous, an attempt to qualify a real estate transaction as an IRC Section 1031 exchange is made. Some tax practitioners set up intricate procedures to put the sales proceeds in a trust to be utilized to purchase properties in the future as a result of a small number of federal court judgments (the Starker cases). The current regulations set a 45-day purchase deadline and an 80-day closure date for the second property in the exchange (or April 15, unless the filing deadline is extended, whichever comes first). The exchange accommodator or middleman is the entity that holds the funds in trust and the title to the property.
Delinquency
Failure to pay an obligation when it is due.
Failure to meet a debt obligation by the due date indicated.
Not paying back a loan.
Delinquent
A financial commitment, such as a promissory note, that is past due.
Deliverable
Any quantifiable, tangible, verifiable product, outcome, or item required to finish a project or component of a project. This might also contain process documentation (deliverables).
Delivery
The legal process of changing who owns something. Documents like deeds and mortgages must be sent and accepted before they can be used. Legal delivery has to do with the person who gave the document, not the act of handing it to someone else. The grantor must want the deed to be active and valid at the time the title is given to the grantee. The grantor must also want the grantee to become the legal owner. Also, the grantor must be of sound mind when he or she signs and acknowledges the deed, as well as when it is delivered.
For example, a grantor may give a deed to a grantee only so that the grantee’s lawyer can look it over. This would not be a valid delivery because the grantor did not intend to give up all control over the deed.
If the right intent is there, the deed is validly delivered, even though the grantee may not be able to take possession and use the property until a later date. Delivery does not have to be physical or direct.
For instance, if the grantor gives the deed to a third party with instructions to give it to the grantee when a certain condition is met, delivery is made, and the third party holds the deed as the grantee’s agent. In particular, when Juan gives a deed to an escrow agent with the instructions to give it to Sunita “when I die” and no other conditions are put on the delivery, it is a valid delivery and Sunita becomes the owner, even though she won’t be able to take possession and use the property until Juan dies. But if Juan told the agent to give the deed to Sunita “in case I die,” there wouldn’t be a valid transfer of title because Juan didn’t want it to happen right away.
When a grantor gives a deed to a third party, the grantor must give up all control over the deed. If the grantor does not do this, there is no effective delivery. When an escrow agent makes an unauthorised delivery before all of the conditions of the escrow have been met, there is no valid delivery. Once the property has been delivered and accepted, the grantee can’t give back the property or the deed to the original grantor. To do this, the person who got the property must sign a new deed back to the person who gave it to them.
Even though a deed doesn’t usually need to be recorded to be legal, some states say that the settlement agent can’t close a deal and give out the money from the sale until the deed (or, if applicable, the assignment of lease or contract for deed) is recorded. So, the deal is over once the buyer has technically taken ownership of the item. Title to Torrens property is only transferred when the deed is registered with the registrar of titles and a transfer certificate of title is given to the new owner. It is not transferred when the deed is delivered.
If the grantee has the deed or if the deed is recorded, it is assumed that the deed was given to the grantee. On the other hand, a deed that is still in the hands of the grantor is thought not to have been delivered, but this can be proven wrong. This problem can happen when the grantor wants the title to be transferred right away but doesn’t want the transfer to be made public at the same time. So, the grantor will ask the grantee to put off recording until after the grantor dies.
In the past, land title was transferred by livery of seisin, which meant giving the grantee possession of the land. This was sometimes shown by the grantor standing on the land and giving the grantee a stick or a handful of dirt. Sometimes, a witness wrote down what happened on a piece of paper. Today, the transfer of ownership is shown by the delivery of a document that shows the grantor’s intent to give the property to the new owner.
A property is transferred from one person to another.
The legal process of transferring real estate ownership.
An observable, demonstrable intent that the grantor will transmit the deed to the grantee.
Delivery and acceptance
The act of giving a title to someone else through a deed.
Delta
- A land surveying term used in metes-and-bounds descriptions to describe the angle formed by two intersecting lines, represented by the Greek letter 𐤃
- A symbol that reflects the predicted percentage change in property value over a holding period and is used as a variable in the yield capitalization formula.
DEM (Digital Elevation Model)
A topographic surface represented in a data file as a series of uniformly spaced x, y, and z coordinates, with z representing elevation.
Demand
An economic word that refers to the complete spectrum of price-quantity interactions.
- A letter from a creditor demanding payment of a loan or lease balance.
- The desire for economic products that can be purchased at a specific price, in a specific market, at a specific moment; what the market will demand. Effective demand combines a desire to buy with the ability to pay. Demand is a necessary component of greatest and best use and value.
The quantity or volume of a product or service purchased or willing to be purchased in relation to the price.
Demand clause
A right that allows the lender to demand debt payments.
Demand curve
A graphical representation of the relationship between price and quantity of a commodity or service that purchasers will purchase from the market. Also known as a demand function.
Demand factors
Things or forces that affect how much people want to buy goods and services in a certain market.
Demand note
A promissory note that allows the holder to call in the loan at any time after receiving notification. A term note, on the other hand, is not due until the date indicated.
Demand schedule
A table that compares the quantity demanded to the price of a good or service at all relevant prices.
Demand to purchase
An increase in a market participant’s inventory of a product at a certain price that is desired.
Demise
- A lease is a transfer of an estate or interest in real property to someone for a set period of time, for life, or at will - most typically for years. The term “demised premises” is frequently used in leases. The term “demise” is frequently used to refer to a covenant of quiet enjoyment, in which the lessor agrees to ensure that the lessee’s use of the premises will not be disrupted by superior claims of others. Don’t mix it up with devise.
- A synonym for the leasing term “let.”
- Another word for death.
Demised premises
Premises or portions of real estate in which a temporary interest or estate has been transferred, such as a leasehold interest.
Demising clause
A provision in a lease in which the landlord rents the property and the tenant takes possession.
Demising wall
A partition or dividing wall that separates the areas rented by one party from those leased by others in a building containing two or more tenants.
Demographics
Data on population and household characteristics by location, including age, employment, incomes, and education.
Information on a region’s population based on statistics.
A population’s size, composition, growth, dispersion, and change are all factors to consider.
Human population characteristics as defined by population size and density of regions, population growth rates, migration, vital statistics, and their impact on socioeconomic conditions
Demography
The study of human populations statistically, particularly in terms of size, density, and distribution. When considering commercial properties or retail centre sites, demographic data is helpful.
Demolition clause
There is a clause in a lease that gives a landlord the ability to terminate the lease after giving adequate notice in the event that the landlord decides to demolish the structure. The clause is typically required solely by owners of older structures who wish to retain the option of constructing a new structure at some unspecified point in the future.
A provision in a lease that states that if or when the ground lease expires, the building shall be destroyed according to the terms of the contract. Before invoking this provision, the landlord must notify the renter within a certain time frame.
Demolition loss
A decrease in value caused by the physical demolition of the premises. If an owner buys a property with the intention of removing the current structure, the demolition loss is a cost that must be applied to the land’s basis. Furthermore, the cost of demolishing a registered historic structure cannot be discounted; instead, such charges must be considered as additional land cost.
Demolition permit
Permission to tear down and destroy an existing building.
Density
A unit of measurement for the number of dwelling units or the quantity of commercial/industrial space contained within an acre. For office and industrial space, the ratio of the building’s floor area to the lot area is frequently stated as a floor/area ratio (FAR).
When referring to zoning requirements, the number of building units per acre or the number of occupants or families per unit of land area (acre, square mile); usually the land area to improvement area ratio.
In a particular space, the average number of people or units.
Density zoning
A subdivision-specific zoning regulation that limits the average maximum number of dwellings per acre that can be erected inside a subdivision. For example, if a subdivision’s minimum lot size is 15,000 square feet, the developer can only build 2.5 houses per acre. If the region is density zoned at a maximum of 2.5 houses per acre, on the other hand, the developer can produce an open, clustered look by modestly reducing individual lot sizes. The sub-divider is in compliance with the ordinance regardless of lot size or the number of units clustered as long as the average number of units in the development is at or below the maximum density. Gross density is the term for this average.
Developers frequently attempt to collaborate closely with zoning officials in order to produce rules and standards that are most advantageous to living comfort and aesthetic qualities.
Dependency exemption
Amount of adjusted income that taxpayers can deduct from their taxable income for each person who is financially dependent on them.
Dependent variable
A variable in regression or correlation analysis whose value is assumed to be influenced by the values of other variables (independent variables) included in the study.
In a regression equation, the variable that is “explained.”
Depletion
A size or quantity reduction. An asset’s exhaustion, such as gas, oil, mineral oil, or lumber. In certain mining programmes, depletion can be deducted, providing considerable tax shelter benefits.
A decrease in the value of an asset caused by the removal of exhaustible material assets or resources, such as removing trees from a forest, extracting minerals from a mine, extracting oil from a well, and so on.
Deponent
Person who prepares an affidavit.
Deposit
There is a fee for the buyer to pay at the time of signing a contract to buy a house. This fee is usually 10% of the purchase price.
Money given in good conscience to ensure contract fulfillment.
Before contracts are written and exchanged, an initial payment is made to secure the lease or purchase of a property.
An amount of money offered by a potential buyer as a show of good faith in entering into a contract to purchase; also known as earnest money; a guarantee that the buyer will fulfil the terms of the contract. It is not essential to make an earnest money deposit in order to create a legitimate purchase contract because the mutual pledges of the parties to buy and sell are sufficient consideration for the contract to be enforced by the court.
Upon completion of the purchase by the buyer, the deposit money is put toward the total purchase price. If the buyer fails to meet his or her obligations under the contract, the seller may be able to retain the deposit money as liquidated damages. As part of the contract, it’s common for the seller to share the deposit money with the broker, up to a maximum sum that does not exceed the broker’s compensation (per the terms of the listing or the contract of sale). If the vendor fails to meet his or her obligations, the deposit should be refunded in full to the buyer.
To protect themselves, sellers frequently require a deposit that is sufficient to cover the broker’s commission, the expense of the title search, as well as the loss of time and the option to sell elsewhere. It is entirely negotiated between the vendor and the buyer as to the amount. Some buyers use a big deposit as a bargaining technique to make their offers appear more compelling. An unsatisfied buyer who claims that the deposit was not properly applied as liquidated damages but rather as forfeiture or penalty may be entitled to a partial refund if the vendor requests an excessively large initial deposit. Some states have specified minimum deposit amounts; if the deposit exceeds the minimum amount, the seller has the duty of demonstrating that the deposit was, in fact, reasonable and not a punishment to the buyer.
A considerable sum of money is frequently deposited as a deposit in an interest-bearing account for the benefit of the buyer.
Sometimes there are disagreements over who owns the deposit. However, even though the money never belongs to the broker, the broker may collect a portion of the deposit if the buyer defaults, and in that case the seller retains the money as liquidated damages. In many places, the deposit money must be placed in a neutral escrow account and cannot be taken until the transaction is completed, or unless both the buyer and the seller have signed a written agreement authorizing the withdrawal of the deposit money.
Unless the sellers give the broker permission to receive deposit money on their behalf, the deposit money becomes the property of the sellers when it is accepted by the broker. If the broker disappears with the deposit money and the sellers had given the broker permission to accept the deposit, the sellers will be liable for the loss of the deposit money. The buyer’s agent is responsible for the money until the sellers accept the buyer’s offer to purchase, assuming the sellers have not allowed the broker to collect the deposit. As a result, if the broker were to take the money, the buyer would incur the consequences. Many exclusive-right-to-sell listing contracts expressly provide for such authorization, which can be found in the fine print.
A large amount of money that has already been paid.
When contracts are signed and exchanged, the buyer pays a non-refundable percentage (usually 10%) of the purchase price. Deposits must be held in a trust account by the estate agency or seller’s solicitor, or held jointly in a trust account by the seller and buyer.
Deposit bonds
A guarantee or bond that serves as a substitute for a financial deposit between contract signature and settlement.
Deposit insurance
A scheme that protects depositors against losses caused by bank failures.
Deposition
The official testimony given before a trial by a witness or a party to a lawsuit (the deponent). Any party may take the testimony of another person in a deposition by employing an oral examination or written questions (called interrogatories) for the purpose of discovery (ascertaining evidence) or use as evidence, or both.
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