Continued from…
Real Estate Glossary R [Part 3]
Resources
Project operations are assigned to human and physical units.
Respondeat superior
A principle of agency law that says an employer (the principal) is responsible for the wrongdoings of an employee (the agent) that happen while the employee is on the job, as long as those wrongdoings happen within the agent’s authority.
Restraint of trade
Contracts or groups that try to get rid of or slow down competition, create a monopoly, control prices, or do anything else to stop or slow down the free flow of business. Most of the time, federal and state antitrust laws make it illegal to stop people from doing business.
Restraint on alienation
A restriction or condition on the right to sell or give away property. Restrictions can be things like conditions and covenants in deeds or limits on how the property can be used. The rule against perpetuities says that contingent interests must be vested, if at all, within the period of lives-in-being plus 21 years. This means that an estate can’t be fully vested until a long time from now.
The right to sell is one “stick” in the bundle of rights that come with owning real property. Because of this, the courts will not enforce any unreasonable restrictions put on this right by the grantor. For example, a clause in a deed that says the grantee can only sell to tall people is an unreasonable restriction on alienation. The clause, but not the deed, is therefore void. Antidiscrimination laws say that people can’t be held back because of their race, religion, sex, disability, family status, or ancestry.
Some state courts have said that a mortgagee’s automatic use of a “due-on-sale” clause when a property it owns is sold is an illegal restriction on alienation. Some courts have said that the due-on-sale clause can’t be enforced because the lender must show that its security has been hurt in order to use the clause.
Restricted appraisal report
A brief description of the evaluation is provided, with numerous references to internal file material. A restricted report may be sufficient if the client only wants to know how much the property is worth and does not intend to give the assessment to anybody for use or reference.
Restriction
A rule about how property can be used. Covenants, conditions, and restrictions (CC&Rs) are written into real estate documents like deeds and leases to create private restrictions. Most of the time, court orders are used to make sure that rules are followed. A quitclaim deed signed by all the right people can get rid of restrictions. If you want to know who needs to sign the deed, it is always best to ask a title company. Restrictive covenants that make it hard for people of a certain race, colour, sex, religion, disability, family status, marital status, or ancestry to get something or use it are illegal.
Private restrictions can be found in deed restrictions, mortgage restrictions, and/or declarations of restrictions. These are used in developments like subdivisions, PUDs, shopping centres, and industrial parks. Some CC&Rs limit the number and size of buildings that can be put on the land, the cost of buildings, fence heights, setbacks, and whether or not the property can be used to sell alcohol, among other things. Language about limits should be clear because people often have different ideas about what it means.
Zoning laws set limits on what people can do in public. Unlike private rules, they must tend to help the health, welfare, and safety of the public. Most restrictive agreements that could lead to a monopoly or less competition in any line of business are illegal. For example, a restriction that says the grantee can’t run any business on the deeded property except a funeral home may be against the law.
A restriction imposed on the usage of a property.
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Restrictive covenant
Promise not to use land or buildings for the purposes specified in the clause establishing the covenant.
Perhaps the land is sold with the condition that just one home be built on it, or that the home be built at a certain cost or height.
A private agreement, usually in a deed or a lease, that limits how real property can be used and who can live there (sometimes caIIed private zoning). People say that this kind of agreement stays with the land and binds all future buyers, their heirs, and assigns. It also usually talks about things like the size of the lot, the building lines, the type of architecture, and what the property can be used for.
Most restrictive covenants can be ended by getting quitclaim deeds from all owners who benefit from them. But this may not be possible because the termination must be agreed upon by everyone, and the mortgagees may also need to agree. The covenants can also be ended if the same people keep breaking them and if the properties that are burdened and benefited by the covenants are bought together. Often, subdividers say that deed restrictions will end after a certain amount of time, or the state law may say that they will end after a certain amount of time. This is done so that land use won’t be held up unnecessarily in the far future. People who want to enforce restrictive covenants have to take them literally. Then, all ambiguities are ruled against the restriction and in favor of the person who wants to use the property freely and without restrictions.
Resulting trust
A trust that is implied by law because of what the parties do or how they relate to each other. For example, if M gives P the money to buy a high-rise apartment building, but the title is put in P’s name for ease of use, the result is a trust in which P holds the property for M.
Resyndication
A resale partnership.
Retainage
A portion or percentage of payments held back by the landowner until the construction contract has been completed satisfactorily and the time for filing mechanics’ liens has passed (or when the lien has been released by the contractor and subcontractors). In the same way, the contractor holds back a portion of its payments to subcontractors until the subcontractor’s work is done and a waiver of any mechanics’ liens has been obtained.
The amount of retainage is often 10 percent of each progress payment. Instead of taking the retainage out of the progress payments, the owner may just put the last one or two payments into escrow and release them when the lien period is over. Retainages can also be called holdbacks.
Amount of money kept back in a building contract until the contractor has met all of the contract’s requirements.
Retaining wall
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Any wall that is built to hold back or support a hill of earth.
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Any wall that is built to hold up against the side pressure of internal loads.
Retaliatory eviction
The process by which a landlord kicks out a tenant because the tenant has made a complaint. The Uniform Residential Landlord and Tenant Act and many state laws say that a landlord can’t evict a tenant, raise the rent, or cut services for tenants for any of the following reasons:
- If the tenant has made a good-faith complaint to the right authorities about conditions that break a health law or regulation;
- If a tenant complains about a health or building code violation and the authorities file a notice or complaint; or
- If the renter has asked for needed repairs in good faith.
Usually, the tenant would be able to get money for this kind of eviction. But even if a tenant files a complaint, a landlord can still evict a tenant for a good reason, like not paying rent or breaking the rules of the building.
Retention
A stormwater management approach in which rainwater is kept on-site in basins, underground, or discharged into the soil.
Retire a mortgage
To be able to pay off a loan.
Return
Profit from an investment.
Return of capital
The original investor’s capital contribution is returned, however it is not immediately taxed.
Return on equity
The amount, stated as a percentage, that is returned to the investor on his initial investment.
Revenue bonds
Securities used to fund revenue-generating initiatives, the proceeds of which will be utilized for interest payments and the retirement of securities.
Revenue sharing
Profit and tax advantages are distributed between general and limited partners.
Reverse annuity mortgage (RAM)
A mortgage designed for the elderly with significant equity, in which the lender gives the borrower a sum on a regular basis, resulting in negative amortization.
A type of mortgage that lets older people borrow against the value of their homes so they can get the money they need each month to pay for living expenses. In this plan, the way money comes in and goes out is the opposite of a normal loan.
The homeowner gets regular payments, which don’t have to be the same amount each time. These payments are made by the lender directly or by buying an annuity from an insurance company. Most of the time, interest is added to the principal, so the borrower doesn’t have to make any mortgage payments. The loan is due on a certain date or when a certain event happens, like when the property is sold or when the borrower dies.
Reverse leverage
Financing is too expensive when the total return on an investment of cash is less than the interest rate on borrowed money. Web site: www.reversemortgage.org
When the financial benefits of ownership accumulate at a faster rate than the interest rate on the mortgage.
Reverse mortgage
A loan agreement in which a lender agrees to pay money to an elderly homeowner on a regular or irregular basis and is reimbursed from the homeowner’s equity when the home is sold or other financing is obtained.
Reversion
After a holding term, a property’s final selling or re-leasing (this can be a theoretical sale).
Term used to express a person’s desire in receiving title provided a conditional fee is waived.
The transaction proceeds in cash.
The part of the estate that still belongs to the grantor or to the estate of a person who has given away a smaller part of their estate. A future right to use real property that is created by the law when a grantor gives away less of his own property rights than he has. Since a reversion is created by the way the law works, no words are needed to make it happen. The part of an estate that stays with the person who gave it or left it to them is called a “reversion,” and it starts to be used in the future when the estate is over, whether it is freehold or not. For example, Adam grants Eve a life estate. After she dies, the estate goes back to Adam.
A grantor can put a condition in a deed that would give the property back to the grantor if the condition isn’t met. For example, Adam gives Eunice his land, and in the deed, he says that Eunice can’t run a restaurant there. If she does, title goes back to the person who gave it to her. This kind of situation gives the grantor what is called a “possibility of reverter.” In some states, the courts won’t enforce a “possibility of reverter.” They would, however, tell Eunice not to break the condition, and if she did, they could even punish the grantor by giving them money. In practice, the courts tend to look at the condition as more of a promise.
Common-law rules say that all improvements made by the lessee to the leased property would go back to the lessor when the lease is over. Some laws, on the other hand, say that when a residential lease ends or the lease term is up, the lessee can remove all improvements on the lot that the lessee built or paid for without having to pay the lessor anything as long as the lessee doesn’t damage the property.
When a lease expires, a landlord has the right to take possession of the leased property.
Reversionary Cap Rate
The cost of capital applied to a property’s estimated sale price after a period of holding. This will be greater than the cap rate at the start.
Reversionary factor
A number found in tables of present value that is used to convert a single, lump-sum future payment into its value at the present time, given the right discount rate and time period. Often used to figure out how much the lessor’s leased fee interest is worth.
Reversionary Value
The projected reversion value of a property
The amount of money a property is expected to be worth at the end of the expected holding period. Present worth tables are used to figure out how much a reversion is worth right now.
Reverter
A contingent interest held by the former owner (or heirs) in exchange for a conditional fee.
Review appraiser
An appraiser who looks at the written reports of other appraisers to see if the data and conclusions are accurate. Review appraisers usually work for a bank, an insurance company, or the government.
Revisions
Work changes that necessitate the architect providing alternative drawings or revising the original working drawings.
Revocation
The act of ending, canceling, or nullifying an offer, like when a seller cancels a listing to end a broker’s agency. The license of a broker or salesperson can be taken away for a good reason. It’s important to know the difference between an agent’s ability to break a contract and their right to do so. Unless the agency is tied to an interest, the principal always has the power to revoke it. However, if the principal has no good reason to revoke, the principal could be held financially responsible. Take back an offer or get out of a contract.
Revoke
The process of putting an offer to an end, canceling it, or rescinding it.
RevPAR
The revenue generated by a hotel per available room is derived by multiplying annual occupancy by the average room rate.
Rezoning
a planning word referring to the ability of a local government to change a planning scheme to allow, for instance, commercial rather than residential construction.
Rider
A change, addition, or endorsement that is attached to a document and made part of its terms is called a “special endorsement.” Riders are often added to insurance policies, usually to give more coverage. For example, a comprehensive personal liability policy might have a rider for fire liability coverage. In a contract of sale, buyers often ask for a rider to be added to the seller’s insurance policy so that the buyer is also covered (called a contract of sale rider clause). Usually, it’s a good idea to have both parties sign a rider addendum to a sales contract to prove that it is real.
An addendum to a contract.
Ridgeboard
At the apex of the roof, a heavy horizontal board set on edge to which the rafters are attached.
Right of contribution
The right of a person who has paid off a shared obligation to get back his or her proportionate share from another party with the same obligation. For example, one cotenant who pays taxes or other liens against the whole property has a right of contribution. The cotenant (also called a “tenant in common” or “joint tenant”) has a legal right to a lien on the other cotenants’ shares. The cotenant can use foreclosure to make sure this lien is paid off.
Right of first refusal
A commercial lease condition that gives the tenant first dibs on leasing space in a facility if space becomes available.
The right of a person to be the first person to buy or rent a piece of real estate. The owner of a right of first refusal, on the other hand, can’t buy the property until the owner actually puts it up for sale or considers an offer to buy from someone else. The holder can then choose to match the offer. If the owner first offers the property to the person who has the right of first refusal and this person turns it down, the owner is free to offer it to any third party at that price or higher.
In a lease situation, a right of first refusal might give the tenant the right to buy the property if it is put up for sale, to renew the lease, or to rent the space next door. This right of first refusal clearly helps the tenant more than it helps the landlord, since this property is harder to sell than one that doesn’t have this right. But it might make the tenant want to make changes that he or she wouldn’t have made otherwise.
With an option to buy, the tenant has a certain amount of time to decide whether or not to buy the property at a fixed price. In a right of first refusal, however, the holder can only use the right if the property owner has offered to sell or rent the property or if the owner has accepted a real offer from a third party to buy or rent the property. One of the most important ways to tell the difference between an option and a right of first refusal is to look at who has the right to start the sale or lease. In both an option and a right of first refusal, until the option or right is used, the holder has no interest in the land or equitable estate.
In some condos, the association of unit owners has the right to buy back any unit that is being sold. Some state laws say that a tenant whose apartment is being turned into a condo unit has the right to buy it first. But restrictions like a right of first refusal are not allowed in condos that are regulated by HUD and FHA or that can get financing from Fannie Mae. Right of first refusal clauses are common in contracts between partners, shareholders, joint owners (where the end result is to give up the right to split the property), landlords, and tenants.
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Right of prepayment
The ability to pay off a mortgage before it matures. The right to prepay is determined by the law of the state in which the property is located as well as the specific mortgage contract.
Right of re-entry
The interest in the property’s future left to the person who gave it away when an estate on condition subsequent was transferred. If the condition is not met, the person who made the transfer has the right and ability to end the estate. Unlike a possibility of reverter, however, the person who transferred the property must take action to end the estate, such as filing a lawsuit in court, or the condition may be discharged. For example, Adam gives Alice some land on the condition that Alice doesn’t use it to raise pigs. If Alice raises pigs, Adam will have to come back and take over the premises. There is no automatic reverter.
Right of redemption
The ability to reclaim property that has been conveyed through a mortgage or lien by repaying the obligation before or after a foreclosure.
Right of survivorship
A right that is exclusive to joint tenancy. If one of the joint tenants dies, the remaining joint tenants inherit his or her interest.
Surviving partners in a joint tenancy have the right to divide the interests of a deceased partner.
What makes a joint tenancy (also called tenancy by entirety) unique is that the surviving joint tenant(s) take over all of the rights, titles, and interests of the deceased joint tenant(s) without having to go through probate.
When one owner of a jointly owned property dies, the other owner has the right to acquire title to the property.
Right to rescind
Individual’s right to terminate an agreement, reverting all parties to their pre-agreement legal status or relationship.
Right-of-Way (R/W)
A strip of land that is or will be occupied by a street, one or more sidewalks, utility lines, or other special uses.
An easement is the right or privilege to travel through another’s land.
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The right or privilege, gained through common use or by contract, to cross a certain part of someone else’s property. A right-of-way can be private, like when a neighbor is given an access easement, or it can be public, like when the public has the right to use the highways or streets or to get to public beaches safely. For example, a gas company might send out one of its “right-of-way” agents to talk to the owners of land that needs to be crossed to get to gas lines about buying easements from them.
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Land that a railroad either owns or has a right to use in order to run its tracks in accordance with government safety rules and industry standards.
Right-to-use
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The legal right to use or live on a piece of land.
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A license, vacation lease, or club membership that gives you the right to live in a time-share unit.
Right, title, and interest
A term that is often used in conveyance documents to mean the transfer of everything that the grantor or assignor can transfer. In a quitclaim deed, the grantor gives up all rights, titles, and interests in a piece of property without saying how big those rights, titles, and interests are, if any.
Riparian
The habitat along a stream’s banks; typically referred more generally to the greater lowland corridor on the stream valley floor.
Riparian lands
Lands that border a body of water or a body of water. Depending on whether the river is navigable, title may extend to the water’s edge or to the middle of the water.
Riparian lease
A contract that says how to lease land between the high-water mark and the low-water mark.
Riparian rights
Adjacent landowners’ rights to bodies of non-navigable water.
The rights and responsibilities that come with owning land next to or touching a body of water, like a lake or stream. Some examples of these rights are the right to water, to swim, to boat, to fish, and to the alluvium that the water deposits. Riparian rights don’t exist unless there is a water boundary on one side of a piece of land that is said to be riparian. This kind of real property right in water is called a right of use or a usufructuary right. The right to make reasonable use of the water that flows by is shared with other riparian owners, as long as the use doesn’t change the flow of the water or make it dirty. A person who owns land next to a stream that can’t be crossed by boat also owns the land under the stream up to its centre.
The owner next to a moving body of water, like a stream or river, is called a “riparian owner.” If the water is still, like in a pond, lake, or the ocean, the owner next to it is called a littoral owner. The word “riparian” means “riverbank” in English.
Water rights are governed by a legal doctrine. It asserts that the water belongs to the natural users, particularly those who live near it.
Riparian Wetland
Wetlands that grow along the border of a body of water, such as a lake or stream.
Riser
The part of the step that is vertical and holds up the tread. The riser is the part of the step that faces the person going up the stairs.
Risk
Measurable likelihood of deviation from a predicted outcome. Risk is commonly expressed as variance or standard deviation.
Potentially favorable and/or negative occurrences that may have an influence on a project.
The chance that actual results would differ from those anticipated when the asset was purchased.
The potential that the expected profits on an investment or loan will not be realized.
The potential that an investment’s financial return may not be as expected.
Risk averters
Refers to the economic principle that people prefer less risk to higher risk at the same level of reward. Most people shun risk and will only take on extra risk if it is accompanied by the anticipation of a higher return.
Risk capital
Capital put into a risky business venture, which is the least safe and has the highest chance of loss. But capital that is risky often gives the best rate of return. When deciding if an offering is a security or not, people often talk about the idea of risk capital.
Risk factor
The portion of an investment’s rate of return that is assumed to cover the risk of that investment. The higher the risk, the higher the rate of capitalization.
Risk Management
A kind of planning that entails preparing for and responding to dangers such as floods, storms, and hazardous waste spills.
Risk of loss
Who is responsible for damage to improvements? Many states have passed the Uniform Vendor and Buyer Risk Act, which covers the typical real estate sales contract. Unless the contract says otherwise, the seller can’t enforce the contract and the buyer can get all the money back if a big part of the property is destroyed or taken by the government without the buyer’s fault, as long as the buyer hasn’t gotten legal title or possession.
If the house is completely destroyed by a fire, flood, or tornado, and the buyer doesn’t want to back out of the deal and wants the seller to rebuild the house and sell the property as promised, that’s a harder question to answer. Most courts will tell the seller to give the buyer the title to the destroyed property and the money from the insurance. Most of the time, they don’t require the seller to rebuild and pay all of the carrying costs until the work is done.
Most sales contracts should give ownership to the buyer when the deal is closed. When legal title or possession has been transferred to the vendee and all or part of the real estate is destroyed without the seller’s fault or is taken by eminent domain, the vendee cannot get any money back and still has to pay the full price. When either title or possession changes hands, the risk of loss moves to the new owner. The new owner should protect himself by getting the right insurance. If the buyer moves in before the closing date and there is no rental agreement, the buyer may be responsible for any losses. If there is a rental agreement, on the other hand, the buyer would not take on the risk of loss unless the contract says so.
Risk premium
Incremental return is required to persuade investors to take on extra risk.
Risk return relationship
The financial philosophy that acknowledges that if an investor wants a high rate of return, he or she must incur a high risk.
Risk-adjusted discount rate
A discount rate that incorporates the lowest acceptable yield on a risk-free investment as well as a premium to compensate the investor for the perceived risk connected with the endeavor under consideration.
Potential investors use the discount rate to value risky cash flows. The asset/property being appraised must be valued in relation to its riskiness.
Risk-free discount rate
Capital opportunity cost based on risk free alternative investments.
Risk-reward indifference curve
A graphical illustration of the connection between perceived risk and acceptable rates of expected return in which all risk-reward combinations satisfy the investor equally.
Risk-weighted assets
The total of an institution’s portfolio assets weighted by their risk classification, used to calculate regulatory capital requirements for depository institutions.
Road
A main road in a rural area that doesn’t have full improvements like curbs and sidewalks.
Rod
A unit of length that is equal to 1612 feet or 512 yards. It is also the same amount of space.
16 1/2 feet is a linear unit of measurement.
ROI (or Return On Investment)
Net operating income is calculated by dividing the initial building cost by the net operating income.
Rollover
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Refers to tax rules that allow the taxpayer to put off paying taxes in certain situations, such as when real estate is traded or when the taxpayer is forced to change their tax status.
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In finance, the process of rewriting a new loan when an old one ends. For example, a three-year mortgage with a rollover clause lets the borrower get a new loan with different terms at the end of the three years by using a rollover note. Loans with rates that change often have this clause.
Rollover mortgage
A long-term mortgage loan with an interest rate that is modified on a regular basis.
Rollover option
A contract in which the potential buyer has the ability to renew the option one or more times for a fee.
Roof boards
Boards that are nailed on top of the rafters and usually touch each other to hold the roof together and give the roofing material a place to go. Sheets of plywood can also be used to make the boards, which are also called “roof sheathing.”
Roof inspection clause
A clause that is sometimes added to a real estate sales contract that says the seller must give the buyer a certified report about the roof’s type and condition. If the roof is found to be broken, the seller will have to pay to fix it.
Roofing felt
Felt or other densely woven, heavy material placed on top of the roof boards to insulate and waterproof it. Roofing felt, like building paper, is treated with bitumen or another tar derivative to increase its water resistance. Sometimes roofing felt is applied with a bonding and sealing compound or with intense heat, which softens the tar and causes it to adhere to the roof.
Roofing shingles
Roof shingles are thin, small sheets of wood, asbestos, fiberglass, slate, metal, clay, or other materials that are used as the roof’s outer covering. To cover the whole roof, the tiles are put down in rows that overlap. Shingles are sometimes used on the outside of walls as a covering.
Rooming house
A house with rooms that can be rented out to people for money.
Root title
The first document or deed that gives someone the right to own land; the original source of title.
Row house
One of a group of individual homes that all look the same and share a wall. The land in front of, under, and behind the house is owned by a different person. Row houses in older parts of cities like Philadelphia and Baltimore are owned differently than townhouses in newer neighborhoods, which are usually set up as condos.
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