Continued from…
Real Estate Glossary R [Part 2]
Release clause
- Mortgages that allow the borrower to seek partial release of particular parcels from the mortgage in exchange for a payment that is greater than the prorata portion of the loan are known as balloon mortgages. The majority of lenders include a provision stating that no partial release will be granted if the borrower defaults on the loan.
For example, a portion of the sales revenues from the developer’s sale of the subdivided lots go toward paying down the mortgage. Upon the mortgagee’s agreement to release the specific portion sold, purchasers of the property will be granted clear title. It’s not uncommon for the release clause to include a formula for calculating release payments, such as paying a sum based on a percentage of the entire amount of land covered by the blanket mortgage. This means that the lender may demand payment of one-fourth of the total loan amount before releasing even one parcel, as an example.
- A condition in a purchase agreement that permits the seller to continue marketing the property and accept alternative bids. First-time homebuyers have a 72-hour window in which they can waive any contingencies, such as their current house sale, or release the sellers from the agreement so they can sell to a second buyer.
A mortgage clause that allows the pledged property to be released when the obligation is paid in full.
Release of liability
Lenders can relieve a borrower from personal obligation on a note by issuing a release form.
Reliction
Recession of a lake or river’s water line, leading to the exposing of more dry ground.
Water line that is receding and leaving dry ground to be added to the property of a nearby landowner.
The water level is slowly dropping below the usual water mark, which means the land is getting bigger. When land that was once under water becomes exposed, it is called alluvion, and the rules of accretion are used to figure out who owns it. Usually, the owner of the land along the river owns this new land.
Relief
The variation in topographic height within a given area.
Relinquished property
The up-leg property is the first property that changes hands in a delayed tax-deferred exchange. The property being traded for is called the replacement property.
Relocation clause
A clause in the lease that lets the landlord move a tenant. When an older building is being renovated or when smaller tenants move out, the landlord may want this right to be able to meet the needs of larger tenants who want to grow.
A provision in a contract that allows the landlord to evict a tenant.
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Relocation company
A business that is hired by big companies to help their workers move from one place to another. One of the main purposes of this service is to buy the transferee’s home so that the transferee has the money to find a new place to live and doesn’t have to worry about selling the old home first. Most of the time, the employer corporation pays all of the costs that the relocation company has when it buys and sells the employee’s current home.
Most of the time, the offer to buy from the relocation company is based on two or more independent fee appraisals. Once the relocation company has bought the property, it wants to make sure it is marketed well by combining the sales price, carrying costs, closing costs, and costs of repairs and improvements with the estimated cost of the company’s services. They expect the listing broker to advertise the property in a number of ways, such as through the Internet and the multiple listing service (MLS).
Relocation option
According to most leasing agreements, the owner of an office or retail mall has the option of transferring an existing tenant to a new location as long as the new location is of comparable size or quality and that the owner pays for any reasonable relocation expenses.
Remainder estate
Following a life estate, the ownership interest becomes a fee of simple absolute interest at the death of the life estate owner.
A future interest in real estate that is created at the same time and by the same document as another estate and can only start when the first estate ends. A reversion is an estate that the grantor keeps when giving away a smaller estate. A remainder, on the other hand, is a future estate that the grantor makes for someone else.
A remainder can be guaranteed or not. It is vested if the only thing that isn’t clear is when the previous estate will end. It is contingent if there are other things that aren’t clear. For example, H gives his farm to his son as a life estate, and the rest goes to his son’s living children. If there are no children, the estate goes to H’s brother J. J., who has a contingent remainder that ends if H’s son dies leaving a child.
Federal gift-tax rules apply to the giving of a “remainder interest” in real estate. The $10,000 annual exclusion does not apply to the remainder interest because it is not a “present interest.” The IRS figures out how much the remainder interest is worth by using tables that are based on how long the donor is likely to live and a discount factor of 6%.
Remainderman
Individual who have a remaining interest in real estate. When a life estate expires, the remainder interest takes effect.
One who has the right to inherit an estate. For example, B owns a property outright and gives it to “C and, when C dies, to D and her heirs.” When C dies, the estate automatically goes to D and her heirs. This is called a “vested remainder estate.” Even though the remainderman only has an interest in the property in the future, he or she still has some rights in the present. For example, the remainderman has the right to sue the current owner for wasting the property.
Remainders
Residual interests that take effect when another person’s life estate expires.
Remediation
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The act of fixing a problem or making it better, like sealing or removing lead-based paint or putting in a radon mitigation system.
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Implementing a plan to clean up a site that has been found to have dangerous substances on it. At the Phase III audit, a plan to fix the problem is made and put into action.
Remise
To stop; to give up. This is typical of a quitclaim deed.
Remodeling
Actions that result in alterations to a structure’s floor plan, shape, or style in order to rectify functional or economic problems.
Rendering
Perspective drawing by an artist or architect of a finished building or area, usually in colour or ink.
Renegotiable rate mortgage (RRM)
A short-term loan that is backed by a long-term mortgage with an adjustable interest rate. The interest rate is renegotiated when the loan automatically renews. Even though the RRM is based on the Canadian Rollover Mortgage, there is a big difference: Under the Canadian plan, the mortgage itself is renewed instead of short-term interest adjustments to a long-term mortgage. Since the adjustable-rate loan came out, many of the rules that used to apply to RRM no longer do.
Mortgage having an interest rate that is subject to redetermination at set intervals, as indicated in the mortgage body or the accompanying promissory note.
Renegotiate
To change the terms of a contract legally.
Renegotiated rate mortgage (RRM)
A mortgage with a variable interest rate that changes over the life of the loan.
Renegotiation of lease
The process of renegotiating the terms of a lease after a certain amount of time has passed. The most common reason to renegotiate a lease is to set a new annual rent for an extra year because the economy has changed. Many leases say that renegotiating rent should be done by mutual agreement or, if that doesn’t work, by an independent appraisal based on a rate of return to the fee owner equal to a certain rate set when the lease was first negotiated. A different method uses outside factors to decide when the rent should go up (e.g., U.S. Labor Department cost-of-living indicator). A broker should make sure to check the renegotiation period and terms, if there are any, before putting a leasehold on the market.
Renewal option
Lease provision in which the tenant has the option, but not the responsibility, to renew the lease.
A clause in a lease that lets the lessee extend the lease for a certain amount of time and on certain terms, as long as the tenant is not in default. Most of the time, though, a landlord can’t use an automatic renewal clause against a tenant without also giving the tenant notice of the renewal. If the lease is sold, the covenant should say if the option to renew is also sold.
Renewal of a lease for a specific duration and rent.
Renovation, repair, and painting rule (RRP)
An EPA rule says that companies that renovate, repair, or paint homes built before 1978, child care centres, or schools and may disturb lead-based paint must be certified by the EPA. Such renovators must get training from an EPA-approved training provider on how to work in a way that is safe for lead, such as containing the work area, keeping dust to a minimum, and cleaning up well. The pamphlet Renovate Right: Important Lead Hazard Information for Families, Child Care Providers, and Schools must be given to the owners and people living in child care facilities, as well as to the parents and guardians of children under the age of six.
Rent
the expense of leasing a property that is paid to the owner by the renter.
The payment is received from a lessee in exchange for the use of an occupied area.
Rent is a set amount of money that a tenant or occupant of a property pays to the owner on a regular basis for the right to stay there and use it. This is usually agreed upon in advance by both parties. Most leases say that the rent is due before the lease starts. Unless the lease says otherwise, you have to pay the rent to the landlord at the place you’re renting. If the landlord says or implies that the rent money can be mailed to her, delivering it to the post office is the same as paying it, and the landlord is responsible for any delay or loss that might happen after that.
Rent concessions
Agreements between a landlord and a tenant to lower real rental payments or revenues below those indicated in a contract. For example, a landlord may provide one month of free occupancy, lowering the effective rental rate throughout the whole tenancy time. Concessions are sometimes referred to simply as concessions.
Rent control
In some areas, state or local authorities put limits on the amount of rent a landlord can charge.
Regulation of the amount of rent or the rental increase by state or local governmental agencies; such regulation has been upheld as a valid exercise of the state’s police power in jurisdictions that currently employ rent controls.
Two major themes in rent control have emerged across the country:
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The use of rent control to regulate the quality of rental dwellings, with controls applied only to units that do not comply with applicable building codes, as in New York City.
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The use of rent control across the board to alleviate high rents caused by a gross imbalance in housing supply and demand, as seen in Massachusetts and California.
In New Jersey, where the enabling statute is heavily weighted toward quality control, local jurisdictions have enacted rent control ordinances to deal with emergency housing shortages and inflated rents in Fort Lee and other towns near New York City.
The amount of rent a lessee can charge tenants is regulated by a local governing board.
Rent escalation
An increase or decrease in rent made by the landlord to account for increases in the cost of living or maintenance expenses.
Rent escalator clauses
Lease conditions that force tenants to pay all operational expenditures in excess of the amounts indicated in their leases.
Rent roll
A list of all renters, together with the rent they pay.
A list of tenants with the unit they live in and how much rent they pay. Certified rent rolls are checked by a third party, and lenders sometimes need them.
A balance statement for each tenant’s account, including the tenant’s name, unit number, lease period, and rent.
Rent schedule
The rent levels for the various sorts of units in a property are listed below.
Rent-up
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The procedure of renting out a newly constructed building.
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It is a condition of a permanent lender’s “taking out” an interim construction lender that the borrower (developer/owner) successfully leases out a specified quantity of space in the building. The lender’s servicing agent will verify the developer’s certified rent rolls. Floor loans and gap financing must be sought if the developer fails to satisfy the rent attainment amount.
Rent-up period
The amount of time it takes for a property to become completely rented once it has been completed.
Rentable area
The useable space of the office tenant, plus his or her prorated part of the shared areas.
The number of square feet for which a commercial or industrial tenant will pay rent.
For an office on a multiple-tenancy floor, the area is computed by measuring to the inside finish of permanent outer building walls, or to the glass line if at least 50% of the outer building wall is glass, to the office side of corridors and/or permanent partitions, and to the centre of partitions that separate the premises from adjoining rentable areas, as standardized by the Building Owners and Managers Association International. There are no deductions for columns or projections required for the buildings.
Surface area that may be rented out. The three approaches listed below can be employed.
Rentable area -1
The International Association of Building Owners and Managers is a non-profit organization that brings together building owners and managers from (BOMA). On the partition walls, from the inside of the outside wall (or, in newer structures, the glass line) to the outside of the inner wall (or hall wall), and from centre to centre. There are columns included.
Rentable area -2
Administration of General Services (GSA). The only difference is that all columns, dividing walls, service closets, and other features are incorporated. Only the net useable space is available. This procedure must be utilized when leasing to the federal government.
Rentable area -3
The New York Method is a technique that was developed in New York City Only the elevator shafts and stairwells are taken into account when measuring space across the floor from the glass line. In the event of multiple occupancy on one level, the usable and non-use common space is divided among the tenants based on the size of their individual areas.
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Rentable/usable (R/U) ratio
The proportion of total rentable space to total useable space. In office buildings, it will be larger than one.
Rental agent (leasing agent)
For remuneration or other valuable consideration, anybody who acts or attempts to act as an intermediary between a person looking to lease, sublease, or assign an accommodation and a person looking to acquire such accommodation. Rental agency or property management licenses may be required in several states.
Rental agreement
A written or verbal contract that sets or changes the terms, conditions, rules, regulations, or other provisions for the use and occupancy of a dwelling unit and premises; a lease on residential property. Some states have “plain language” laws that say rental agreements have to be written in clear, everyday language and have the right headings and paragraphs.
Rental concessions
Lessor concessions to the lessee in order to get the lessee to sign a lease.
Rental pool
A way to rent apartments in which the owners agree to have their units available for rent as decided by the rental agent and then share the profits and losses of all the apartments in the pool based on a formula that everyone agrees on. Some plans pay out profits based on how many days the rental unit was available. If a condo is for sale and the offer includes participation in a rental pool, the condo is considered a “investment contract” and is therefore a security. So, the person making the offer must register the condo as a security with the SEC. Once a project has been sold, the owners can put together a rental pool without having to register with the SEC.
Rental Yield
The annual return to the owner from an investment, also known as the rental rate or rental return, is represented as a percentage of the investment’s original price.
Repairs
Current costs to bring the property back to its original state; small changes made to keep the property in good shape rather than to make it last longer. Most of the time, a homeowner can’t deduct the cost of repairs from their taxes.
For properties that bring in money, the cost of repairs is often a business expense that can be deducted from your taxes. Repairs that change the building’s shape or replace a large part of it and extend its useful life can be counted as capital expenditures that raise the property’s value. One example would be adding on to the house or replacing the carpet or roof.
There is no law that says the renter or owner has to make repairs. Unless the lease says otherwise, the landlord is usually not required to make any repairs at all to the rented property. But some states’ landlord-tenant laws say that the landlord has to make sure the place is safe to live in, and the lessee has to return the property in the same condition it was in when they rented it, minus normal wear and tear. So that there are no disagreements, the lease should say who is responsible for each kind of repair. Tenants don’t have to make major repairs, though, unless they caused the damage on purpose or by being careless.
When it’s important, the parties should write in the sales contract what the seller needs to fix before the closing. Sellers of homes that will be bought with a VA or FHA loan should know that the cost of any repairs required by VA or FHA will cut into their net sales proceeds.
Work done to restore property to its previous state without extending its useful life.
Repeat sale analysis
Estimation of the rate of property appreciation based on a statistical evaluation of properties that sold twice during the sample period. Statistical regression is commonly used in analysis.
Repeat sales
Determining how much a property’s price will change the next time it is sold.
Replacement cost
Appraisal word describing the cost of constructing a facility with utility identical to the one whose value is being appraised. The replacement cost is based on current building standards.
The expense of constructing a new structure that is of comparable usefulness to an existing building but is not a physical reproduction of the old one.
The cost of building a building with current materials and methods that serves the same purpose as the structure being appraised and is designed using current materials, styles, and standards. Most of the time, functional obsolescence is not taken into account because replacing a building means replacing its function according to current building standards.
Replacement cost approach
The expected cost to replace the improvements, less any depreciation, plus the evaluated worth of the land, is used in this assessment approach.
Replacement property
In a tax-deferred exchange, the property that was traded for. The replacement property must be found and bought within a very short amount of time after the sale of the property being given up.
Replacement reserve
A monetary reserve for the replacement of fixed assets in the future.
Replevin
Legal action is taken to get back personal property that was taken illegally, such as when a landlord takes a tenant’s personal belongings because the tenant didn’t pay the rent.
Reporting requirements
There are rules from the Internal Revenue Service that say the settlement agent has to report all sales or exchanges of real estate or a statement of exemption. The settlement agent, who makes the closing statement, is the one who has to file the IRS Form 1099S. If there isn’t a settlement agent, the report must be sent by lawyers, title companies, mortgage lenders, and real estate brokers in that order.
Repossessed property
Repossessed or foreclosed property is a home that has been taken by the lender as a result of the previous owner’s missed payments.
Reproduction cost
The cost of constructing a structure comparable to the one whose worth is being determined in an appraisal.
The cost of constructing a new structure that is identical in every physical aspect to an existing building.
The cost of recreating a property as of a specific date.
How much it would cost to build a copy of the building at the moment, using the same materials and building standards. Most appraisers use the comparative cost method to figure out how much it would cost to make a copy. In this method, estimates are based on how much it costs now to build buildings of the same size, style, and quality. The quantity survey method and the unit-in-place method are two other ways. Most comparisons are made in terms of square feet or cubic feet.
Replacement cost is not the same as reproduction cost. Reproduction cost is the cost of making an exact copy, while replacement cost is the cost of making a building that does the same job but may be different in size, materials, or design. After figuring out how much it would cost to build a new building, subtract the amount of physical, functional, and economic wear and tear to finish the appraisal.
Resale proceeds
After subtracting all sales charges, the profit received by an individual after selling a property.
Rescind
To cancel a contract.
To annul, cancel a contract. One can back out of a deal and take back an offer.
Cancellation is a method of terminating a contract. The Truth in Lending Act gives a borrower the authority to cancel a non-purchase loan arrangement secured by his or her primary property within three days.
Rescission
Legal action that cancels, ends, or nullifies a contract and puts the parties back where they were before; a return to the status quo. Contracts can be broken if there was a mistake, fraud, or misrepresentation. You don’t have to show that you lost money. In order to get out of a contract with a buyer who hasn’t paid, the seller must return all of the money the buyer has paid, less a fair rent for the time the buyer has had the property. In a contract for deed, however, this is not true. Most contracts have a clause that lets the seller keep all payments if the buyer doesn’t pay. Courts, on the other hand, don’t like to enforce this kind of forfeiture clause, especially when it’s in the form of a penalty, and they often order rescission instead.
Buyers are sometimes given a “cooling-off” period during which they can back out of the deal for any reason. For example, a buyer of subdivided land that is or should have been registered with HUD has seven calendar days from the time they get the property report to back out of the deal. Also, with VA and FHA financing, the buyer has the right to back out if the purchase price is higher than what an FHA- or VA-approved appraiser says it is worth. The federal Truth in Lending Act and most state time-sharing laws also give people the right to back out of a deal.
A contract that has been canceled.
Rescission clause
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A clause in a contract for deed that says that if the buyer doesn’t pay, the seller has to return all of the payments, less the cost and a fair rental value. Because this kind of clause might give the buyer too much of an advantage, it is not in many contracts for deed.
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A clause in a contract that tells buyers of their right to back out of the deal according to state law. This is required by some state laws on the sale of land that has been split up.
Reservation
Clause in a deed that restricts some of the grantor’s property rights.
The making of a new right for the grantor that comes from what was granted. So, a reservation is something that didn’t exist before the conveyance as a separate right. For example, Smith gives Jones a ten-acre piece of land while keeping a life estate in it for himself. A right or interest cannot be set aside for someone else.
All of the property is given to the grantee, but the grantor can keep a use for himself. In an exception, the grantor keeps the title to a part.
Reservation money
Money put down as a “good faith” deposit to hold a house that is for sale. A potential buyer might ask a broker to hold reservation money until a certain property goes on the market. When the house goes on the market, the broker uses the deposit to make sure the sale goes through.
Reserve for repairs and replacements
Appraisal adjustment is used in the normalization of operating expenses to account for non-annual repairs or replacements.
Reserve for replacements
A cash flow projection allowance that reflects an annual provision for periodic replacements, releasing expenses, or tenant improvements.
A typical entry in an operating statement that sets aside money to replace things that don’t last long, like air conditioners, carpeting, and appliances. This is an allowance that is needed to keep the projected level of income.
Reserve fund
Money that a lender often requires a borrower to set aside as a cushion of capital for things like taxes, insurance, and maintenance that won’t be done right away. A reserve fund is sometimes called a customer’s trust fund or an impound account. Reserves for replacement should be kept, especially if the owner is putting in things that won’t last long, like appliances, furniture, or carpeting in a furnished apartment.
An account set up to cover anticipated capital expenses or cash flow shortfalls.
Reserve price
the lowest amount a vendor is willing to sell a property at auction for.
At auction, the lowest price that the seller is willing to accept for their home.
Residence
The place where someone lives. For tax, license, and education purposes, residence is defined in different ways. A person can have more than one place to live, but only one home. A trailer, a cooperative, a condominium, or even a household can be a residence.
Residence property
Raw land or property that has been built on and has buildings made for people to live in, like single-family homes or condos.
Residence, sale of
The Taxpayer Relief Act of 1997 significantly altered the tax treatment of gain from the sale of one’s primary residence. The act provides a capital gains tax exclusion of up to $500,000 for married taxpayers filing jointly and $250,000 for single filers if the owner has resided in the principal residence for two of the last five years. There is no longer a requirement for taxpayers to purchase another property, and there is no minimum age requirement. Essentially, this provision can be used repeatedly. If the taxpayer occupied the property for a total of two years (need not be continuous), the fact that the taxpayer rented out the property for a portion of the five-year period would be irrelevant.
Once a taxpayer has claimed an exclusion, there is a two-year waiting period. If the taxpayer sells due to unforeseen circumstances such as illness or job relocation, the waiting period can be waived and the exclusion prorated. A taxpayer who sells his or her primary residence before occupying it for the required two years (out of the last five), or before two years have passed since claiming a previous exclusion, must pay tax on any gain. There is no allowable deduction if there is a loss.
Resident manager
A salaried agent hired by the owner to manage a single building. A resident manager is not required to be licensed under state real estate license laws if only acting as custodian or caretaker.
While dwelling in one of the apartment units, an individual monitors the upkeep of an apartment property.
Residential
Land zoning for residential purposes
Residential boundaries
Residential boundaries, often known as property lines, outline a piece of land that is intended for residential use.
Residential member (RM)
The American Institute of Real Estate Appraisers bestows this professional designation on individuals who specialize in residential valuation. The designation denotes completion of the necessary educational and experience prerequisites.
Residential Mortgage-Backed Securities (RMBS)
The phrase is used to describe any cash flow that remains after all security classes in a CMBS have been liquidated.
Residential property
Real estate that is designed to be used as the owner’s primary residence.
Residential specialists
Brokers that specialize in the selling of single-family detached homes, townhouses, condos, or cooperatives.
Residual
The phrase used to describe any cash flow that remains following the liquidation of all security classes in a CMBS.
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What’s left over, like the property’s residual value after its economic life is over.
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Commissions that are earned but for which payment is put off for a certain amount of time.
Residual capitalization
Appraisal method that divides income between land and structure. If the value of the building is known, the remaining revenue is capitalized to estimate the value of the land, and if the value of the land is known, the remaining income is capitalized to estimate the value of the building.
Residual process
An appraisal method used in the income approach to figure out how much the land and/or building are worth based on how much the residual net income attributable to it is worth.
Resolution trust corporation (RTC)
As part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), it was created in 1989 to take over the assets of failed savings associations and sell them. The Savings Association Insurance Fund took over its duties in 1995. One of those duties was to cover deposits in thrift institutions (SAIF).
Resort property
Land that is good for vacations, recreation, or other leisure activities because of its natural resources or beauty (mountains, lakes, or the sea) or because it has been improved (tennis courts, golf courses, man made ski hills).
Resource leveling
Any type of network analysis in which scheduling decisions (start and end dates) are influenced by resource management issues (e.g. limited resource availability or difficult-to-manage changes in resource levels).
Resource planning
Identifying what resources (people, equipment, and materials) are required and in what amounts to carry out project tasks.
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