Real Estate Glossary I [Part 1]

Terms Beginning With - I

Property Development & Investment Glossary, Terms & Definitions

Ibeam

An L-shaped cross-sectional steel beam. For longer spans, it is employed on wide wall openings (such as a double garage door) or basement beams when the roof and wall loads bear down over the opening.

Idem sonans

Having the same sound. Legally, misspelt names don’t have to make an instrument invalid as long as the written name sounds the same as the correct name and there is no proof that the misspelt name was meant to trick someone. An important rule in title insurance practice.

Identity theft

The purposeful act of assuming another person’s identity in order to acquire access to their credit by using that person’s information, such as birth date, Social Security number, address, name, and bank account information. On average, the theft occurred more than 14 months ago, and victims must usually prove that they did not commit the fraud in order to reclaim their identity and excellent credit ratings. The Fair Credit Reporting Act (FCRA) gives victims certain rights, such as putting “fraud alerts” in their files and having unfettered access to all information.

Ijoist

Structural building component in the form of a “I” manufactured by a manufacturer. Floor joists and rafters are made from it.

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Illiquid

It is difficult to convert into cash.

Illiquidity

It’s hard to sell an asset quickly for its full value. Because there aren’t enough assets that can be quickly turned into cash.

Illiterate

Someone who has never learnt to read or write. Contracts can still be entered into by an illiterate.

Imbalances

Unstable or unsustainable conditions resulting from a mismatch between supply and demand for commercial real estate in any and all subcategories across one or more geographic submarkets over a specified time period.

Immediate family member

In the eyes of the lender, the borrower’s spouse, parent, stepparent, legal guardian, grandparent, brother, sister, or child.

Impact fees

A tax levied by a community and paid by a developer that is proportionate to the externalities caused by a development. Intended to cover the impact of the growth on items like roads, sewer systems, tools, and police and fire protection.

A municipal charge levied against new residential, industrial, or commercial development projects to pay for the increased expenses of public services caused by the new development. Such indirect service obligations would cover the price of connecting water and sewer lines.

Imperfect market

A market where buyers and sellers may exert undue influence due to product differentiation and a lack of transparency. An imperfect market governs the purchase and sale of commercial real estate.

Impervious cover

Any hard surface material, such as concrete or asphalt, that reduces stormwater infiltration and causes high runoff rates.

Implicit transfer costs

Indirect expenses of transporting products or persons between linked locations. Although they are sometimes more difficult to discover than explicit transfer costs, they may also be greater.

Implied agency

Actual agency that can be deduced or inferred from other facts and circumstances, including what the parties say and do (i.e., implied in fact through behavior).

Implied contract

An unwritten contract derived from the parties’ behavior. Such an agreement is inferred from the parties’ actions rather than formed by word or writing. A contract in which the terms have been understood and agreed to but are not fully mentioned in the agreement. It should be noted that, for obvious reasons, this is not a particularly businesslike or effective way of conducting real estate transactions.

A contract implied by law is one that is not regarded to have been intended by the parties but is created by the law in the interest of justice and equity. Also known as a quasi-contract.

Actions generate a contract that isn’t always written or stated.

Implied easement

A right of use that is not created by an express deed or an express provision in a deed. It is frequently made when a subdivision map is released in the public domain.

An implied easement is one that is created by the actions or inactions of one or both parties. People who buy mineral rights to land also get an implied easement to enter the land and take what they want from it.

An encroachment on property that has gone unnoticed for a long time. Long and consistent use reveals one.

Implied listing

A listing that is implied by the actions of the parties. In some states, a listing that is implied by the actions of the broker and the seller may be legally binding even if it is not in writing. In many other states, however, listing contracts can only be enforced if they are written and everyone who signs them gets a copy. No listing agreement can be assumed.

Implied warranty

A legal warranty that is not recorded but exists.

Implied warranty of habitability

A legal concept that says the landlord has to make the rented space ready to live in and keep it in good shape for the whole length of the lease. This is the opposite of the common-law caveat emptor doctrine, which said that the landlord had no responsibility and the tenant had to take the place “as is,” regardless of whether it was safe to live in.

Many state landlord-tenant laws say that the landlord must make and keep the place in a habitable condition by making all repairs and arrangements that are needed. The landlord has to protect the tenant from all latent defects, which are problems that aren’t obvious and that the tenant couldn’t be expected to know about.

Recently, it was decided that the implied warranty of habitability applies to both the seller and the builder of a new home. This means that the seller or builder can be held responsible for any flaws that make the home unfit to live in. For example, courts have said that the implied warranty of habitability protects people who buy new condos with broken air-conditioning systems.

Imply

To hint, suggest, or communicate anything by conduct or acts that lead to a logical conclusion rather than an express assertion. Most real estate transactions must be expressed, rather than assumed, and in writing.

Impound account

A trust account, also known as an escrow account, is one that is set up to save money for future needs related to a piece of real estate. To safeguard their security from defaults, tax liens, and catastrophes, most mortgage lenders require an impound account to cover future payments for taxes, assessments, private mortgage insurance, and hazard insurance. When the property is sold and the buyer takes over the seller’s mortgage, the lender normally does not refund the escrow account balance to the owner. The lender retains the funds, and it is the buyer’s and seller’s responsibility to prorate the balance between them. FHA loans necessitate the establishment of impound accounts. The amount of reserves in the impound account is limited by RESPA to 1/s of the expected amount of taxes and insurance due in the 12-month period beginning at settlement.

Part of the purchase price owed to the seller may be detained or set aside by escrow to cover post-closing expenses such as clearing title or fixing the structure.

The usage of reserve fund interest is a frequently disputed topic. Some states, although not all, compel lenders to pay borrowers interest on money retained as reserves.

A federal agency established in 1965 to aid in the construction of housing in the United States.

Improved land

As opposed to bare land, real property whose value has been increased by the addition of on-site and off-site amenities such as roads, sewers, utilities, and buildings.

Improvements have been made to the land.

Improved property

Developed land

Improved value

  1. The part of a property’s current market value that is more than what it cost to buy and is likely to stay the same. The expected permanence of the excess is due to an expected rise in either the value of the land or the cost of building a new one, or both. Most of the time, this happens in areas that are new or are growing quickly.

  2. The total value of a piece of land and all of its improvements, as opposed to each one’s separate value.

Improvements

Buildings, roadways, and utilities are examples of additions to bare land that tend to improve its value.

Additions made to property that are more than just repairs and cost time and money. They are meant to increase the value of the property or extend the time it can be used. Land can be made better by grading, building sidewalks, sewers, streets, utilities, and other things. Land can be made better by adding buildings, fences, rooms, new roofs, and other structures. A change to the surface of the land, like an irrigation channel, could also be an improvement.

Modern methods of valuing things say that the value of an improvement is usually based on what it adds to the land in terms of income or conveniences. There should be a reasonable connection between a site and the kind of improvement that is put on it. The value of a lot and the building on it goes down if the improvements are too many, too few, or in the wrong place.

For income tax purposes, most improvements must be capitalized, and the costs must be deducted over a period of years. On the other hand, maintenance and repairs that do not increase the value of the property can be deducted as business expenses in the year they are made.

In relation to land, includes all works actually done or material used on and for the benefit of the land, but only to the extent that the effect of such work done or material used increases the value of the land and the benefit thereof is unexhausted at the time of valuation; but excludes work done or material used for the benefit of the land by the Crown or any statutory public body. Buildings, fences, driveways, retaining walls, and other structures are examples of improvements.

Improvements on the land

Buildings, fences, walls, and decks are examples of permanent structures.

Improvements to the land

Curbs, sidewalks, roadways, lighting, and sewers are often publicly owned infrastructure that are built to allow the development of privately held land.

Infrastructure that is required to make the land appropriate for building development or other purposes, such as streets, pathways, utilities, storm water drainage systems, and other systems that may be required for land usage.

Imputed interest

Legal interest is suggested. When an installment contract, such as a land contract or a mortgage note, fails to indicate an interest rate or sets an unreasonable low rate, the IRS imputes, or assigns, interest at a predetermined rate ( computed semiannually). The applicable federal rate is established by the IRS and published monthly, depending on the period of the note. This regulation does not apply to installment sales that are less than $3,000.

Section 483 of the Internal Revenue Code, “Interest on Certain Deferred Payments,” and Sections 1271 through 1274, original issue discount standards, prohibit the seller from recognising the portion of the selling price that truly represented interest on deferred payments as capital gain. They prohibit deferred payments from being considered entirely as principal. Prior to the passage of these sections, parties to a real estate installment transaction would routinely exclude interest from the contract and raise the purchase price to compensate.

Buyers may deduct the imputed interest per annum on unpaid accounts for tax purposes even if no interest is paid. The buyer may not only carve out an interest deduction but also reduce the basis of the property acquired by reallocating the face amount of the note to part interest and part principal (buyer and seller agreement).

Imputed notice

Because of their agency relationship, an agent’s information is binding on the principal. If, for example, the buyer’s agent is advised of the seller’s acceptance of the buyer’s offer, the buyer cannot later withdraw the offer even if the buyer has not received actual notice of the contract’s acceptance.

In-house sale

A sale in which the listing broker is the sole broker participating; no outside brokers are involved, as in a cooperative sale. The buyer is found by either the listed salesman or another salesperson working for the listing broker. The issue of dual agency arises if the buyer is a client of the broker.

In-migration

What happens when people move into a certain area from elsewhere (i.e., when there is an influx of people into a particular area).

In-parallel activity

Activities that take place concurrently.

In-series activity

Activities that occur one after the other in a straight line.

In-service loan

Under Section 222 of the National Housing Act, this is a programme that allows the departments of Defense, Transportation, and Commerce to pay the HUD mortgage insurance premium on behalf of active-duty military personnel under their control. Mortgages can be used to pay for single-family homes and condos that are covered by standard HUD mortgage insurance programmes.

In-the-door approach

Using estimates for the share of traffic that stops at or patronizes a retail establishment or shopping centre and the share of foot traffic that converts to sales, one can get a good idea of the trade area (and sales/revenue potential) for a particular location.

Inactive license

A real estate license that is no longer active. In several states, a real estate licensee can deactivate their license. During this time, the licensee may not conduct any real estate business, including splitting referral money with active licensees. The licensee is normally required to continue paying license costs, albeit many jurisdictions charge a lower fee than an active license.

Incandescent lamp

Using an electrically charged metal filament that emits white light.

Inchoate

An unfinished, defective interest, began but not finished. In most places where dower is recognized, a wife’s stake in her husband’s lands during his lifetime is considered an inchoate dower interest. A husband’s curtesy right, on the other hand, is normally not an inchoate right; it takes effect only upon the death of the wife. Also refers to a mechanic’s lien that has not yet been filed but will take effect once filed and is related to the visible start of work.

Inclusionary zoning

A land-use idea in which local zoning laws require residential developers to build a certain number of homes for low-income and moderate-income families as a condition of getting government approval to build the project. In some places, developers can pay a fee instead of setting aside space for low-income or moderate-income units. Some communities have even tried to make resale price controls a requirement for developers to get a permit.

Income

All money received from any source, unless explicitly excluded by provisions of the Internal Revenue Code, is considered for purposes of assessing federal income tax liability.

The income that an investment property generates.

Income and expense report

A monthly financial report that shows how much money the property makes, how much it costs to run, and how much money goes to the owner.

Income approach

A way to figure out how much a piece of real estate is worth by looking at how much net income it will make over the rest of its economic life. With this method, the market value is equal to the present value of the net income that will be made in the future. When using the income approach to value, there are four main steps.

  1. Estimate the potential gross annual income, or the money that would be made if all of the units were rented out at their market value.

  2. Figure out the effective gross income by subtracting an amount for vacancy and collection loss from the gross income.

  3. Take the annual operating costs and subtract them from the annual net operating income.

  4. Take the annual net income and multiply it by the right capitalization rate.

The hardest part of this process is figuring out what the right capitalization rate is. This rate must be chosen so that it accurately shows how much of the original investment will be recouped over the useful life of the improvement, giving the investor a good rate of return on the original investment and allowing for the return of any borrowed money. Note that an income property with a lot of risk usually needs a higher rate of return than an investment that is “safe.” The appraiser must use residual methods to figure out how to get back the money spent on the improvement, but not on the land, which is not a wasting asset.

The main benefit of this method is that it comes closest to what a typical investor in income-producing property who wants to make money on their investment hopes for. It is rarely used in homes with only one family living in them.

When the revenue is capitalized at the current market rate for the kind of property, an appraisal technique is utilized to evaluate value based on the income generated.

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Income averaging

A means of lowering income taxes, particularly for those who earn a disproportionately large amount of money in compared to the previous four tax years.

For most taxpayers, income averaging has been eliminated, while it remains applicable to farmers and fishermen.

Income capitalization

The process of transforming recurring revenue into an estimate of value.

Income capitalization approach

A technique for estimating the worth of an income property based on its expected future net operating income. For the estimated price, the cap rate is applied to the NOI. Valuation formula: NOI multiplied by the capitalization rate

Income multiplier analysis

A method of expressing the connection between pricing and gross or net income.

Income property

Real estate has the potential to generate money.

Property that is bought mostly for the income it will bring in and for some tax benefits. Commercial, industrial, or residential property can be used to make money.

A property whose income is derived from commercial rentals or whose returns attributable to real estate can be separated so that direct estimation is possible. Income can be generated in a variety of ways, such as commercial rents, business profits attributable to real estate other than rents, and so on.

Income return

The difference between the value at the start of the measurement period and the net rent or net operating income (NOI) obtained throughout the measurement period.

The money that is created on a regular basis as a result of an investment.

Incompetent

A person who doesn’t have the legal right to do something, or who doesn’t have the power to do something legally. This could be because of mental illness, a physical disability, drugs, old age, or something else. A person who doesn’t have enough understanding or capacity to make or communicate responsible decisions about himself. So, people who are crazy or, in some cases, drunk can’t make legally binding contracts. A corporation that isn’t allowed to buy real estate by its articles of incorporation can’t sign a contract to buy real estate. In the same way, a company officer can’t sell corporate real estate if the board of directors hasn’t given them permission to do so. A person who can’t read or write, on the other hand, can still sign a contract as long as she knows what she’s doing. If a person is found to be incompetent, the court usually appoints a guardian to do business with everyone who does business with the incompetent person. incorporate

Incorporate

To create a corporation, you need to write up the articles of incorporation and file them with the state’s business registration division.

Incorporation by reference

A means of incorporating all of the provisions of one document into another simply by reference. A sales contract, for example, may refer to an addendum or Exhibit A and incorporate the terms of such addendum to the same extent as if it were fully set forth.

A short-form mortgage or lease may relate to a previously recorded lengthy agreement that contains several “boilerplate” mortgage or lease clauses.

Incorporeal interest

In property investment, a non possessive right.

Incorporeal rights

Ownership of intangible rights in real property like easements and licenses; no physical body to speak of. Future rents and future profits are examples of these rights.

Increment

An increase in number or size. Often used to describe how large subdivisions are built in stages, or in increments.

Most of the time, people use the word “increase” to talk about how the value of land goes up when the community’s population and wealth grow. In this case, the term “unearned increment” is used because values should go up without the owner having to do anything.

Incubator buildings

Multitenant structures that are relatively small in size, in which new or tiny but growing businesses rent space on an interim basis until their expansion necessitates the need for larger quarters.

Incubator space

A building in an industrial park that is broken up into small units of different sizes to help young, growing businesses that want to combine office and industrial space in one place.

Incurable depreciation

A flaw that cannot be fixed or is not economically feasible to fix.

Incurable obsolescence

An appraisal term that means an improvement is no longer useful from the outside or inside and can’t be fixed or fixed economically. If the value drop is due to functional obsolescence, it is considered incurable if it would not be worth the cost to fix it. Most external obsolescence can’t be fixed.

Indemnification

An agreement to pay someone back or make up for a loss. For instance, a buyer of commercial property might want the seller to protect the buyer from claims that come from finding dangerous substances on the property.

Indemnify

To safeguard another person against harm or loss.

Indemnity insurance

Insurance that a member of a profession or industry body (like a prescribed building practitioner or conveyancing solicitor) carries to protect the buyer or buyers from loss caused by the professional’s negligence or criminal actions.

Indenture deed

A deed in which both the grantor and the grantee agree to do things for each other. Usually, only the grantor needs to sign a deed, which is called a “deed poll.” However, a “indenture deed” also needs to be signed by the grantee, who may agree to take over the mortgage or agree to certain rules. The word “indenture” comes from an old practice in which each party’s contract was written on a single sheepskin and then torn apart along an uneven line. They could later show that they were real by matching their contracts. Many leases that both the lessor and the lessee have to sign start with “This Indenture…”

Independent appraisal

An evaluation done by a qualified person with no vested interest.

Independent contractor

One who is hired to do something, but who is controlled and directed by someone else only in terms of the end result and not in terms of how she does the thing. The main difference between an independent contractor and an employee or agent is how much control the employer has over the activities of the independent contractor. According to how the FICA and income tax laws are written or interpreted, an employer must pay income tax and Social Security taxes on commissions paid to an employee but not to an independent contractor, who must pay FICA and taxes on their own.

Under IRS Section 3508, real estate licensees have been able to keep their status as independent contractors since 1982, but only for income tax purposes. There are three things that must be in place for a salesperson to be considered an independent contractor: (1) a written contract, (2) a real estate license, and (3) payment based on performance, not the number of hours worked.

Most of the time, the person who hires an independent contractor is not responsible for injuries that the independent contractor causes because of their own carelessness. On the other hand, an employer is responsible for what an employee does in the course of their job. So, an employer would be responsible for an employee’s car accident that happened while the employee was driving on company business. Because figuring out whether a real estate salesperson is an employee or an independent contractor is a complicated process, most brokers carry public liability insurance that covers all of their salespeople and office staff. Also, many brokers ask their salespeople to put the broker on their personal auto policies as a “additional insured.”

Many licensing laws make brokers responsible for what their salespeople do, even if they are considered independent contractors. Because of this, many brokers want to have a lot of control over what their salespeople do. But state licensing laws don’t stop someone from being an independent contractor for tax purposes, as long as the relationship is set up carefully so that the person can’t be mistaken for an employee. In these situations, a broker should always talk to a tax lawyer.

A freelancer or self-employed contractor.

Independent variable

A variable in regression or correlation analysis whose value is assumed to be determined by factors other than those under consideration, but which is thought to influence the value of one or more other variables (the dependent variables) in the analysis.

Variables in a regression equation that are thought to explain a portion of the variance in the dependent variable.

Index

A metric that indicates the present state of the economy or finances.

An adjustable-rate loan’s monthly payment adjustments are based on an interest rate or adjustment standard.

Index rate

An interest rate decided by the market that serves as the “moving portion” of an adjustable interest rate.

The rate that a loan’s interest rate is tied to when the rate changes. As the index rate goes up or down, the borrower’s interest rate goes up or down at set times. The interest rate on one-year U.S. Treasury securities, the Treasury constant maturity series, and the LIBOR are all popular indices (London Interbank Offered Rate).

Indexed lease

Rent can be adjusted based on a price index such as the Consumer Price Index in a lease agreement. Tenant-related factors should be taken into consideration while creating the escalation index. The CPI (consumer price index) and WPI (wholesale pricing index) are the two most widely utilized indices. The index lease is also known as an escalation lease because of the escalator clause that links the rent to the index. LIBOR stands for the London Interbank Offered Rate, an abbreviation of the name.

Rent increases in an indexed lease are linked to changes in a regularly published index. For example, if the consumer price index (CPI) climbed 4% in the first year of the lease, the rental rate on a lease linked to the CPI may rise 4% in the second year of the lease.

A contract in which the lease rate can rise or fall at predetermined intervals depending on a predetermined index.

The rent in a rent-to-index lease is calculated based on the change in an index, usually the consumer price index, over the term of the lease.

Indexed loan

A loan whose interest rate can rise or fall at predetermined intervals based on a predetermined index.

Indicated value

The final amount estimate for the subject property as a consequence of one of the key methodologies used in the appraisal process.

The value of a property based on recent sales of similar properties, the cost of the property now minus depreciation and the value of the land, and the capitalization of the annual net operating income.

Indifference curve

A graphical representation of two-variable value combinations that represent the preferences of an individual who will be indifferent to the various combinations.

Indirect costs

To create a corporation, you need to write up the articles of incorporation and file them with the state’s business registration division.

Indirect lighting

The light that bounces off the ceiling or something else outside of the fixture.

Individual metering utility system

Each renter has their own utility metre in this metering scheme.

Individual retirement account (IRA)

A programme for saving for retirement that can be either a “individual retirement account” or a “individual retirement annuity.” There are different kinds of IRAs, including traditional, Roth, SIMPLE, and SEP. Individual taxpayers can set up traditional and Roth IRAs, and they can put up to 100% of their pay (or 100% of their self-employment income if they are a sole proprietor or partner) into them. Since Roth contributions are not tax-deductible, qualified withdrawals are not taxed. Both SEPs and Simples can be set up by employers.

First-time homebuyers (those who haven’t owned a home in the last two years) can take up to $10,000 from their own, their parents’, or their grandparents’ retirement accounts without having to pay a 10% penalty or taxes. This money can be used for the down payment and closing costs.

Indoor air quality

When there are pollutants in the air inside a building. Tobacco smoke, biological contaminants, formaldehyde, carbon monoxide, organic gases (paint, solvents), radon, and asbestos are the main things that pollute the air inside.

As part of their due diligence when buying a commercial or industrial building, buyers should think about hiring outside experts to do air-quality surveys inside the building. The survey could include questionnaires for tenants and employees, ventilation studies, and sampling of certain contaminants.

When buildings are sealed to save energy, they can also keep in pollution. Indoor air quality problems are caused by things like buildings being used in a way that was not intended, old and dirty ductwork, new materials that give off formaldehyde fumes, and damp and dirty areas. Some experts call the problem “sick building syndrome,” and headaches, tiredness, and trouble breathing are some of the signs.

Inducement

Points in a lease or sales contract agreement that can be negotiated in the tenant’s/favor buyer’s and utilized to persuade them to sign the contract.

Industrial agent

A commercial real estate agent who specializes in listing, selling, and leasing industrial properties.

Industrial broker

A commercial real estate broker who focuses on industrial properties.

CONTINUED-AT

Continued at…
:point_right: Real Estate Glossary I [Part 2]