Continued from…
Real Estate Glossary R [Part 1]
Recital of consideration
A list of the things that make up the “consideration” for a certain transaction. Even though a deed doesn’t technically need consideration to transfer ownership of real property, it is a good idea to list some consideration, especially to back up any promises or covenants in the deed. The “consideration” listed in the deed doesn’t have to be the real “consideration.” Often, it’s just a number, like “for $10 and other good and valuable consideration.”
Reclamation
The process of reclaiming arid land through irrigation or filling in swampland that would otherwise be a waste of natural resources.
Recognition
A specific tax term that means the transaction is taxable. If a gain or loss is “recognised,” the gain is taxed and the loss is deducted. Most of the time, recognition takes place when the sale or exchange takes place. Some things that don’t count as exceptions are forced conversions and sales between related parties.
Recognition clause
Some blanket mortgages and contracts for a conveyance used to purchase land for subdivision and development have this condition. In the event that the developer defaults on the blanket mortgage, the clause protects the interests of the buyers of individual lots. Essentially, it is a non-disturbance condition in a mortgage for an office complex.
Recognized gain
The taxable share of a gain in an exchange.
Reconciliation
The practice of combining two or more numbers to generate a single point estimate. It is commonly utilized in the assessment process. For example, in the sales comparison technique, a single indicated value is derived from numerous final adjusted selling prices of comparables, but in final reconciliation, a final estimate of value is derived from two or more indicated values.
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The last step in the appraisal process, where the appraiser combines the estimates of value from the direct sales comparison, cost, and income approaches to come up with a final estimate of the property’s value. Before, this was known as correlation.
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Making sure that each entry in a double-entry accounting system adds up to zero.
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Reconstructed operating statement
A property revenue and spending statement structured for appraisal and investment research. The treatment of some expenditures, including management fees, mortgage payments, and vacancy and collection losses, differs from that of a standard management operating statement.
Reconveyance
The act of giving ownership of a property back to the person who bought it. As security for a debt, the trustor (the borrower or mortgagee) gives title to a third-party trustee through a deed of trust. With a reconveyance deed, the trustee gives the property back to the trustor when the debt is paid off.
Record owner
If you look at the records, you can tell who owns a piece of property. This person has a record title.
Record title
From what the public records show, this is the title.
Recording
Formal notification of a sale or legal contract by filing a paperwork with a government agency or office.
The act of putting written documents that affect the title to real property, like deeds, mortgages, contracts for sale, options, and assignments, in the public record book. Other than the real estate recording system, there are a lot of public records that can affect the quality of a title. These include probate, marriage, tax, and judgment records. All documents must be written and signed in a way that follows the rules for recording in the state where the property is located.
Each state’s recording laws say that all written documents that affect an estate, right, title, or interest in land must be recorded in the county where the land is. Recording gives everyone who has an interest in the title to a piece of land notice of the different interests of each party. Also, the recording acts give those interests that are recorded first legal priority.
The system of recording creates a hierarchy of claims against a piece of property. The order in which the claims are recorded determines the priority of the claims. Except for certain government tax liens, which automatically take first priority, the order of recorded priority will not change unless a subordination or release is recorded. Property tax liens, mechanics’ liens, and special assessment liens don’t get their priority based on when they were recorded because they are public records. Other tax liens, like those for income tax and payroll tax, must be recorded in order to take precedence over interests that have already been recorded.
The act of recording creates a (refutable) presumption that the instrument has been delivered properly and is real. Proper recording protects both the buyer who doesn’t know about an unrecorded document and the person who gets the deed if it is changed or lost. Any transfer that isn’t properly recorded is usually invalid against any subsequent buyer, lessee, mortgagee, donees, or beneficiaries under a will, as well as dower, courtesy, and homestead rights, prescriptive and implied easements, title by adverse possession, and interests that arise by operation of law rather than by a recordable document. (In the case of adverse possession, however, the adverse possessor’s physical possession of the property would usually have given constructive notice to the subsequent buyer of the possessor’s interest in the property, so the possessor would not be acting in “good faith.”)
Even if a document is not recorded, it is still valid between the people who signed it and anyone else who knows about it. But if a contract that is written down is invalid for some reason, the fact that it is written down won’t make it valid. Under the Torrens system, on the other hand, documents must be registered correctly for them to be valid.
There is a public recorder’s office in every county. This office is sometimes called the county recorder’s office, the county registrar’s office, or the bureau of conveyances. People usually call the person in charge the recorder, registrar, or commissioner of deeds. When a copy of the deed is recorded, the recorder puts both the grantor and the grantee’s names on it. Anyone can look at these files. Most of the time, the registrar charges a flat fee per document or page.
Filing a legal agreement in a county’s public records.
Recording statutes
Statutory requirements for maintaining permanent records of all real estate transactions.
State regulations requiring papers conveying an interest in real estate must be recorded in public records in order for them to be binding on the public.
Recourse loan
In the case of a default on a loan, the borrower is personally accountable for the debt.
Personal liability loans in which the borrower is personally liable and the lender has legal recourse against the borrower in the event of failure.
Recourse note
A debt instrument that allows the lender to take legal action against the borrower or endorser as well as the property that covers the lender’s mortgage.
Recovery fund
Funds set aside from real estate licensing fees to compensate clients who have suffered losses as a result of the actions of a licensed salesperson or broker. The availability of such funding varies by state.
A state-run fund that is generally defined and described in the state’s real estate license law. This fund is used to pay buyers and sellers of real estate who have lost money because of a real estate licensee’s misrepresentation or fraud (usually not negligent acts). The recovery fund pays for court judgments against real estate licensees that would be impossible to collect otherwise.
Most of the time, a person who has been hurt must first get a court judgment and then try to get money from the recovery fund by finding and seizing the licensee’s assets. If the licensee can’t be sued or doesn’t have enough money to pay the judgment, the person who was wronged can file a verified claim in the court where he got the judgment and ask the court to pay out of the recovery fund. The court could then order the commission to pay from the recovery fund up to a certain amount per person or transaction that was wronged. When the wrongdoer gets paid from the fund, their license is usually taken away.
It has been decided that a real estate licensee is not a person who is owed money from the fund if the claim is based on an unpaid judgment against another licensee in a case of a fraudulent real estate transaction.
Recovery property
Property subject to the cost recovery allowance provisions, which were originally included in the tax system with the 1981 modification of the Internal Revenue Code.
Recreational lease
A contract in which a lessor (usually a developer) rents out recreational facilities like tennis courts, gyms, and swimming pools to a lessee for a certain amount of time and rent. Recreational leases are most common in residential condominium projects, but they can also be found in townhouse developments and subdivisions. Most of the time, these leases are long-term, triple-net leases where the rent goes up when the consumer price index goes up. Recreational leases in condos have led to a lot of lawsuits from unhappy renters, especially when rents went up sharply in a short amount of time. Many leases have been overturned because they were unfair, and both federal and state laws have been proposed to stop developers from being unfair in this area.
Recreational property
Homesites having recreational amenities, such as campsites and RV parks, or properties with fishing, boating, skiing, hunting, or other outdoor activities.
Rectangular survey system
Using a grid-like layout to identify land in a branch area by referencing a single geographic location.
Recycling
The process of recovering a historic structure for adaptive reuse.
Red flag
A condition that alerts a reasonably aware person to a possible problem, suggesting that they look into it further. If a broker sees uneven floors or water stains on the ceiling, that’s a sign that the soil is shifting or the roof is leaking.
Red herring
A preliminary securities prospectus is a document that must be filed to and authorized by the Securities and Exchange Commission before any advertising for a public offering can begin.
A preliminary prospectus is a document for selling a security that has been filed with the Securities and Exchange Commission but is not yet registered. The term comes from the red print on the left side of the prospectus that says a registration statement has been filed, but it could change, and that the securities in the prospectus can’t be sold before the registration statement goes into effect.
The Securities and Exchange Regulator (SEC) or a state securities commission have not authorized a proposed prospectus.
Reddendum clause
A clause in a deed that gives the grantor something, like rent from a lessee or an interest in a life estate from a remainderman.
Redemption period
A period of time set by state law during which a property owner can buy back their property after a foreclosure or tax sale by paying the sales price, interest, and costs. This is a right that some states give to property owners. During the redemption period, which could be a year or longer, the court may appoint a receiver to take care of the property, collect rents, pay operating costs, and so on. If the owner who hasn’t paid can get the money to redeem within the time limit, the redemption money is given to the court.
In history, the right of redemption comes from the ancient chancery proceedings in England, which ended the equitable right of redemption when the court sold the property. In many states, there is a statutory redemption period that starts after the sale and gives the person whose land was sold another chance to get it back.
A time during which a previous owner of a foreclosed property can regain it.
Redemption, equitable right of
By paying down the entire mortgage note before the foreclosure sale, mortgagors who have defaulted can redeem or reclaim their property. If a mortgage is signed but not paid, the equitable right of redemption begins immediately and continues until the mortgage is paid off and the right of redemption is no longer available due to the foreclosure sale. After a foreclosure auction, the mortgagor loses all rights to the property unless the state gives a statutory time of redemption.
Redevelopment
The process of demolishing existing structures in a region and replacing them with new ones.
the renovation of urban property, usually by demolition and reconstruction
Existing properties are redesigned, rehabilitated, or demolished and rebuilt.
Undeveloped or cleared land in an urban redevelopment area is often improved through this process.
Redevelopment agency
A non-government organization whose main goals are to develop property or improve housing in urban renewal areas and to find new homes for people who have to leave because of the changes. Most of the time, the redevelopment agency has the power of eminent domain. This means that it can take smaller parcels and combine them into one big project. The redevelopment agency could sign a development agreement with a professional developer and limit how much money the developer can make from the project.
Rediscount rate
The interest rate that the Federal Reserve Bank charges member banks for loans. This rate is also called the discount rate. The rediscount rate indirectly affects the interest rates charged to the public by member banks and the amount of money available for loans.
Redlining
Term used to characterize certain financial institutions’ refusal to give real estate finance in specific locations; originated from the practice of defining areas with red lines on city maps.
When mortgage lenders ignore particular neighborhoods without consideration for the quality of individual loan applications.
Some lending institutions limit the number of loans they give out or the loan-to-value ratio in certain parts of a community. Most of the time, redlining is done because the lender wants to limit risks in an area that is getting worse. The lender doesn’t choose between individual risks; instead, it picks against a whole group of risks.
A redlining policy that is based on the fact that a certain part of a community is becoming more mixed-race is illegal and goes against Title VIII of the federal Civil Rights Act and the Community Reinvestment Act. For example, it is against the law for a lending company to ask for a higher down payment because the home the borrower wants to buy is in a neighborhood with people of different races. The mix of races in the neighborhood where the loan will be given is never a good thing to look at when deciding whether or not to give a loan.
Under the Home Mortgage Disclosure Act, lenders are required to tell people how they decide how often to lend money in certain areas. Insurance redlining is a related problem that may be covered by the part of the federal fair housing law that says people can’t do things that make housing hard to find.
The Office of Thrift Supervision has also put out a rule saying that redlining is not allowed. It says that refusing to lend in a certain area just because the homes are old or the income level is low may be discriminatory in practice, since minorities are more likely to buy used homes and live in low-income areas.
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Redraw facility
To get the extra money you’ve paid on your loan, you can use this.
Reduction certificate
A piece of paper that shows the current amount owed on a mortgage, the interest rate, and the date it will be paid off. When a buyer wants to take over an existing mortgage or take title subject to an existing mortgage, they usually need a reduction certificate from the mortgagee. So, the mortgagee can’t later say that the amount or terms of the loan were different than what was written in the certificate. A reduction certificate is like a certificate of no defense, except that the mortgagee signs it. The reduction certificate is useful because the public records only show the original amount of the loan. The parties are the only ones who know about any changes to the principal. The instrument is usually recognized, but it doesn’t have to be written down. It can also be called a statement of condition from the lender or a beneficiary statement in the case of a deed of trust.
Referee
A neutral third party who is chosen by a court to settle a dispute, look into something, find the facts, or arbitrate. In bankruptcy, a referee acts as a temporary manager of the bankrupt’s assets, which can be sold to pay off creditors’ claims.
Referral
Referring something to someone else; a sales lead. A client who came to you because of what someone else did or what they said. Most of the time, a broker can only pay or share commissions with someone who sends them a client if that person is also licensed as a broker. If the person is a licensed salesperson, the referral fee must be paid through the person’s supervising broker. A seller can pay a referral fee to anyone, but the person who gets the fee may be seen as acting as a real estate salesperson. If this is the case, that person must have a real estate license.
Referral agency
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One in which licensed sales people undertake to obtain only leads on potential buyers and sellers as part of their brokerage services. A commission is paid to the referral agency when a sale is made via one of these leads.
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A relocation service provider that is part of a national or regional relocation network.
Refinance
To get a new loan to pay off an old one; to use the money from one loan to pay off another. When interest rates go down and/or the value of a property goes up, it is common to refinance it. A buyer may buy a property through a contract for deed when he or she plans to sell the property before the contract for deed balance is due or refinance at better terms and interest rates than were available at the time the agreement of sale was made.
Investors who want more money to buy more investment properties often refinance properties that bring in money. This is called “pyramiding through refinancing,” and it is a common way to get a lot of real estate.
Fannie Mae is a secondary buyer of home loans that is authorized by the federal government. It will refinance a loan it already owns for a new buyer, usually at a lower rate than the market rate. This new loan would replace a second mortgage, which is sometimes used to cover the difference between the purchase price and an assumable mortgage. This is a type of wraparound mortgage.
Refinancing
To move your money from one bank to another. This is called a loan switch.
The process of refinancing an existing debt with a new one.
Refinancing Risk
The possibility that a borrower may be unable to refinance the mortgage before it matures, so extending the life of a security that utilizes the mortgage as collateral.
Reformation
Contracts or deeds that have not adequately expressed the parties’ intentions due to mechanical errors, such as a typographical error in the legal description, may necessitate a legal action. It is possible to get a court order to reform a deed termed a reformation deed in the event one of the parties refuses to perform a correction deed. When a grantor is bound by a warranty deed, he or she often promises to perform any reformation required to fulfill the covenant of additional assurance.
Regional planning
Developing guidelines for the general development of huge geographic regions. Standards pertain to land use, transportation systems, and infrastructure, among other things.
Regional shopping center
A retail mall that attracts the majority of its consumers from a trade region that is 15 to 30 minutes away by car. It typically has 200,000 to 400,000 square feet of retail space and one or two big department shops as anchor tenants.
These shopping malls are primarily centred on fashion and discretionary products, with at least two big department shops as anchor tenants.
A big shopping centre with more than 400,000 square feet of rentable space and 70 to 225 stores.
The most common style of shopping complex, with two to five anchor department stores and 100 to 150 smaller retail establishments. The enclosed centres are usually referred to as “malls.” The size of these facilities varies from 400,000 to over 1,000,000 square feet.
Drive-in developments, which include department stores, supermarkets, and specialized stores, are displacing the ribbons of shops that used to run down both sides of busy roadways.
Registered historic district
Any location that is on the National Register of Historic Places. Includes any area so designated by appropriate local or state statute, provided that the Secretary of the Interior certifies that the statute will substantially achieve its purpose of preservation and rehabilitation and that the district meets substantially all of the requirements for inclusion in the National Registry.
Registered land
The Torrens system is used to keep track of land.
Registrar (recorder)
The person who is usually in charge of keeping accurate official records of all deeds, mortgages, contracts for deed, and other documents related to real estate titles that have been filed for recordation. Often associated with the Torrens system of title registration.
Regression
The idea that when two different kinds of properties are close to each other, the value of the better property goes down because of the presence of the worse property. So, in a neighborhood where most homes are worth around $100,000, a better-built house that would be worth at least $140,000 in another area would probably be worth closer to $100,000. The opposite is true for the principle of progression.
Regression analysis
A statistical approach for determining the relationship between two or more variables.
Regular system (REG)
The unregistered system is a way to keep track of documents that affect land that are not registered in the Torrens system. Even though the fees for recording are usually higher in the regular system than in the Torrens system, the requirements for recording are often less strict.
Regulation
A rule or order made for management or government, like the real estate commission’s rules and regulations. In many states, once the governor approves the commission’s rules after a public hearing, they have the same force as the law.
Regulation A
A special way to avoid having to register a security issue with the SEC when the total amount being sold is less than $1.5 million. Even if the issue meets the requirements of Regulation A, the developer must still file a short-form registration with the SEC regional office and give potential buyers an offering circular with much of the same information as a formal prospectus. So, Regulation A is not really a way to avoid registering, but rather a simpler way to do so.
Regulation B
The Federal Reserve is enforcing the rules of the Equal Credit Opportunity Act, which was passed in 1974.
A rule made by the Federal Reserve System about the Equal Credit Opportunity Act.
Regulation D
A rule from the SEC that says certain limited security offerings don’t have to be registered.
The Securities and Exchange Commission’s (SEC) regulation that lays out the requirements for a private placement exemption.
Regulation Q
A federal rule that was slowly phased out in 1986. It let some federal agencies set different interest rates on savings deposits for commercial banks and thrift institutions.
Regulation T
A federal rule that the Federal Reserve Board is in charge of enforcing. It says how securities brokers and dealers can get credit and how it can be used. The Federal Reserve Board makes a list of the securities on which dealers can lend money, and then it uses margin requirements to limit the amount of money that can be lent. The Federal Reserve Board has made it so that condo securities don’t have to follow Regulation T.
Regulation Z
The Federal Reserve is enforcing the terms of the Truth-in-Lending Act, which was passed in 1969.
Regulatory taking
The degree of land regulation that is judged to be an effective seizure of the property under US Supreme Court decisions. If the government reaches this level of control, the property owner must be compensated for the loss of value.
Rehabilitate
To bring back to an old or better state, like when a building is renovated and updated. Rehabilitation can involve new construction, buildings, or additions, but it usually doesn’t change the structure’s basic plan, shape, or style. In urban renewal projects, neighborhood rehabilitation is the process of getting old buildings, neighborhoods, and public facilities back into good shape. It may also include making streets better and adding things like parks and playgrounds.
The Internal Revenue Code says that there are certain tax breaks for fixing up older real estate.
Rehabilitation
Renovating older or physically degraded structures for modern use.
The process of restoring a property to a suitable state without affecting the floor plan, shape, or style of the structure.
Renovating a home for personal use or sales.
Rehabilitation tax credit
A tax credit for non-residential buildings that were in service before 1939 and were rehabilitated. To qualify for this tax credit, the repaired property must be depreciated using the straight-line method.
Reinstatement
To put something back where it was before. For example, to reinstate a lapsed insurance policy or a loan that was not paid off. A borrower with a deed of trust who is behind on payments can avoid a foreclosure sale by reinstating the loan and bringing it up to date before the sale. After that, some states give the borrower a legal right to get out of the debt for a year, but the whole debt would have to be paid, not just the amount in default.
Reinsurance
A contract in which the original insurer (the ceding company) gets insurance from another insurer (the reinsuring company) against losses on the ceding company’s original policy. The ceding company’s rights, duties, and liabilities under the original policy are taken on by the reinsurance company.
Reinvestment Risk
Debt instruments backed by a homogeneous pool of mortgage loans secured by residential real estate.
When borrowers prepay mortgages with above-market rates, lenders face the risk of having to reinvest the remaining loan balance at a lower rate.
Reissue rate
A title insurance company will charge less for a new policy if a policy on the same property was just issued a short time ago.
Related parties
Parties who have a clear relationship with each other. For example, two parties may be related by blood, a fiduciary relationship, or an ownership interest in a business. Under the Internal Revenue Code, you may not be able to deduct a loss from the sale of property between family members. Also, if two people who are related to each other sell or trade depreciable property, the gain may be treated as regular income. The only thing that matters is how close the people are to each other, not how fair the price or rent is. Under the tax law, related parties are all entities that the taxpayer owns more than 50% of, either directly or indirectly.
The tax law does allow installment sales between children, parents, and spouses, as long as the property is not sold or given to someone else within two years of the first sale. Installment treatment, on the other hand, is not allowed if depreciable property is sold to certain related people. For installment sales between related parties where the payments vary in amount but the fair market value can be determined, basis is recovered on a prorated basis, and the buyer can’t increase basis in the property before the seller includes the amount in income.
Relation-back doctrine
An escrow transaction’s ramifications on the grantor’s death are determined by this doctrine. A valid escrow is one in which the executed deed, the purchase money, and the instructions are all placed in escrow and held there until the escrow conditions are met. The grantor’s death does not terminate the escrow or invalidate the agent’s ability to deliver a completed deed under the relation-back concept. There are no probate court approvals required when all escrow criteria are met. The grantor receives full ownership of property when all escrow terms are met. Deeds delivered to their recipients are considered to have been delivered to their recipients prior to the grantor’s death, because the date they were delivered to the escrow agent reflects when they were originally lodged there. Otherwise, the grantor’s heirs would have to be sued for particular performance. Deeds are delivered into escrow, which eliminates the rights of sellers’ creditors, and so clears the title as of the date the escrow was established.
Release
The ending or giving up of a claim, right, or privilege. A formal release is a contract that frees a person from any further legal obligations. Because it is a contract, it must contain something of value. Real estate releases should be acknowledged and written down. The liber and page number of the document being released should also be written down.
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