Real Estate Glossary S [Part 1]

Terms Beginning With - S

Property Development & Investment Glossary, Terms & Definitions

S corporation

A corporate ownership arrangement with minimal liability. It is not, however, a separate taxable company; so, income and losses are taxed through stockholders.

A small domestic corporation that has chosen to pay taxes more like a partnership (designated IRS Form 2553). The S corporation, which used to be called a subchapter S corporation, lets a business run in the form of a corporation without having to pay a corporate tax. This way, the double taxation that comes with corporate ownership can be avoided. Stockholders have to pay taxes on their share of the company’s income, whether or not they get any of it. In the same way, stockholders can report and deduct their share of the ordinary losses of the company on their own personal tax returns. Even though a S corporation can make as much money as it wants, it can’t have more than 100 shareholders.

S corporations are not subject to the corporate alternative minimum tax or the rule that requires most corporations to report their gain or loss on liquidating sales and distributions as if the assets had been sold. Other major benefits of a S corporation include limited personal liability, easy transferability of ownership shares, centralized management, and relative ease of formation.

The main problem with it is that losses can only be passed on to shareholders in an amount equal to the cash paid for the stock plus any loans made to the company. So, the best way to use a S corporation to own real estate investments is for projects that aren’t meant to be tax shelters.

S&P

Shelf as well as pole

Sack mix

The volume of Portland cement contained in one cubic yard of concrete mix.

Sacking

Removing flaws from a concrete surface by applying a sand-cement slurry to a damp surface and rubbing with a coarse cloth such as burlap.

Saddle

A little second roof constructed behind the back side of a fireplace chimney to redirect water away from the chimney.

Safe harbor rule

  1. An area that is safe. For instance, the IRS has given real estate brokers certain rules to follow if they want to treat their salespeople as independent contractors. As long as brokers meet these conditions, they are in a “safe harbor” and the IRS can’t go after them for not taking taxes out of their employees’ paychecks.

  2. IRS rules for a delayed 1031 exchange, in which an intermediary can hold title until the replacement property is found and bought within a set amount of time.

Safe rate

An interest rate comparable to what one would earn on a highly liquid, low-risk investment.

Safety glass

Glass that can withstand breaking into huge jagged shards and is frequently tempered and laminated.

Sale

The custody and right of use of a particular object of value to both parties is transferred from one entity to another for a fee.

Sale and lease back

An investor purchases a property and leases it back to the seller, which is becoming more common.

Sale by the acre

The exact size of the land for sale is written in the sales contract and the instrument of conveyance (for example, 269 acres). Under a “sale-by-the-acre” contract, neither the buyer nor the seller has to worry about having too much or too little.

When selling a large amount of land, it is sometimes easier to say “269 acres more or less” instead of the exact amount (i.e., a sale in gross). In this case, if the exact number of acres conveyed was just a little bit different, neither party would get any money. But if there is an unusually large surplus or deficit, a court could give the person who was hurt equitable relief.

The real estate sales contract and all documents that follow must have a correct legal description.

Sale cost

All fees and commissions paid to the broker, as well as any other selling-related expenses.

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Sale leaseback

A commercial financing approach in which the property owner sells it to an investor, who subsequently leases it back to the original owner.

A way to get money for real estate in which the owner sells the property to an investor or lender and then rents it back. Most of the time, a full-net lease is used, which lasts for a long enough time for investors to get their money back and make a fair profit on the investment. The arrangement lets the original property owners “pull out” their equity from the property, and the rents paid to the investors are fully deductible expenses in the year they are paid.

So, a seller/lessee gets many benefits, such as keeping possession of the property while getting the full sales price and, in some cases, keeping the right to buy the property back at the end of the lease; getting the money that was stuck in equity; keeping an appreciating interest in real estate that can be used to make money by subleasing or mortgaging the leasehold; and getting a tax deduction for the full amount of the rent, which is the same as taking depreciation. A lease also shows up as an indirect liability on a company’s balance sheet, while a mortgage shows up as a direct liability and makes it harder for the company to get financing in the future.

The investor-landlord gets a fair return on their investment in the form of rent during the lease term. They also get to own a depreciating asset that is already being used by a reliable tenant. The investor is buying a stream of guaranteed income that may be protected by using depreciation allowances correctly, and the risk can be managed by the amount of rent the investor needs.

A sale-leaseback-buyback is a type of lease that gives the renter the option to buy the property at the end of the lease term. But care must be taken to set the buyback price at the fair market value at the time of sale. If not, the arrangement will be seen as a long-term installment mortgage, and the Internal Revenue Service will not allow any tax benefits that might have been enjoyed during the lease term.

A property owner/user simultaneously sells the property to a buyer and leases it back from the buyer as a manner of financing needed real estate.

Strategy for financing and leasing real estate in which the owner first sells to an investor and then leases the property back. By using this method, money that would have been stuck in equity can be released.

Sale of leased property

A deal in which the owner of a property who has rented it to someone else can sell it to someone else. The buyer, on the other hand, has to follow the terms of the existing lease. The sale deed usually says, “Subject to existing leases and rights of current tenants.” This means that the seller cannot give the buyer actual possession of the property. Unless the seller has reserved the lease rents, the buyer has the right to collect rent due after the sale and to use any right of forfeiture for nonpayment of rent given in the lease.

Sale price

The sale price, also known as the purchase price, is the amount of money paid by the buyer to the seller.

Sale(s) proceeds before tax

The amount remaining on a mortgage loan after deducting the selling price and other fees.

Sales associate

Working for a broker as a licensed salesperson or broker.

Sales comparison approach

The sales comparison approach is an assessment tool used to estimate the worth of a property by comparing it to other similar properties that have recently sold.

A technique for estimating a property’s worth by looking at how other similar homes are priced.

Sales comparison value

An opinion of value based on a comparison of the subject property to recently sold similar properties, using appropriate units of comparison, and adjusting the sales prices of the comparable properties to account for differences in location, size, condition, and other relevant factors. [National Research Council]

Sales contract

A contract between a buyer and a seller in which the conditions of a sale are agreed upon.

An agreement between a buyer and seller that should cover what the purchase involves, what guarantees are provided, when the buyer can move in, the closing expenses, and the parties’ remedy.

Sales kit

A collection of information about available property. The kit is chosen and organised to acquaint the salesperson with the property being presented to a prospect as well as to assist the prospect in visualizing the property. The sales kit could be a small loose-leaf book with typewritten pages, a large loose-leaf book with maps and pictures, or an elaborate zippered briefcase containing photographs, building plans, maps, and other statistical data. Licensees are increasingly packaging the information into a slide presentation that is emailed to the buyer or placed on a Web site with a special access code for the prospective buyer.

Sales per square foot

The amount of money made from retail space on a per-square-foot basis.

Sales potential

Sales that a store could make if it opened today, given the state of the local market and the level of competition there.

Sales price point of indifference

A property’s future reversionary value (sales price) is defined as the amount of money needed to buy the property at today’s prices, making the cost of leasing equal to the cost of owning.

Sales proceeds after tax

The amount of money made from a sale before taxes are deducted from the amount of money owed in taxes.

Sales volume

The sum of money made at a retail location over a specific time frame.

Sales-assessment ratio

The relationship between how much a property is worth and how much it sells for.

Salesperson license

A state-granted license to work in real estate brokerage as an employee or agent of a real estate broker.

Salesperson(s)

Any licensed individual who, for compensation or valuable consideration, is directly or indirectly employed by a licensed real estate broker to perform the following acts: sell, offer to sell, buy, offer to buy; negotiate the purchase, sale, or exchange of real estate; lease, rent, or offer to rent any real estate, or negotiate leases thereof or improvements thereon. There are rules governing the licensing of those who sell, rent, or manage real estate in all fifty states. Multiple states have done away with the salesperson’s license and now require all licensees to be broker-qualified. Most states, although not all, require the salesperson to work for a certain period of time under the supervision of a licensed real estate broker or other authorized individual.

A salesperson’s license is granted based on the applicant’s character, honesty, and ability, which must include an adequate understanding of real estate law, conventions, and usage. In addition, a number of states now mandate a criminal record check and/or fingerprinting.

In general, license rules differentiate between the real estate broker and the salesperson and limit the activities of the latter. A salesperson cannot, for instance, serve as an agent for another party, nor may they list or advertise property under their own name. Only those obligations allocated to them by the supervising broker may be carried out by salespeople.

Brokers may hire salespeople as either employees or independent contractors. The agreement between broker and salesperson should be documented in a formal contract that outlines their respective obligations and responsibilities. Whether a broker employs a salesperson or the salesperson operates as an independent contractor under the broker influences the broker’s relationship with the salesperson and the broker’s obligation to pay and withhold taxes on the salesperson’s earnings.

Salvage value

  1. For pre-1981 property, the estimated amount for which an asset can be sold at the end of its useful life. Because it provides a floor below which the improvement cannot be depreciated, the salvage value of an asset (improvement) limits the total amount of claimable depreciation.

  2. The worth of a structure that will be relocated to another location. Typically used in highway condemnations to clear large areas.

The sum realized at the end of an asset’s useful life when it is sold for the last time.

Sample

A collection of observations selected from a larger body of data (referred to as a population or universe) that are assumed to be representative of the larger body.

A statistically significant portion of the whole (typically selected randomly).

Sampling

Sampling is the process of drawing a representative sample from a larger statistical group.

Sand float finish

Lime that has been combined with sand to create a textured surface on a wall.

Sandwich lease

A sublease arrangement in which the original lessee collects payment from the new lessee and pays rent to the landlord in accordance with the terms of the previous lease agreement.

A leasehold estate in which the sandwich party rents the property from the fee owner or another lessee and then sublets it to the tenant in possession. This gives the sandwich party a middle, or “sandwich,” position. The sandwich party rents from one party and gives rent to another. Because of this, the sandwich party is neither the free owner of the property nor the person who uses it in the end. It’s a lease that is part of three or more leasehold interests in a piece of property.

When a lessee sublets his space, he becomes a lessor and has a lease.

Sanitary sewer

A sewage system meant to collect waste water from bathroom, kitchen, and laundry drains and is not normally equipped to manage storm water.

Sanitary sewer system

A sewer system that only transports domestic water, typically using an underground pipe or tunnel to transport wastes and effluents.

Sash

One-light frames with one or more glass lights.

Sash balance

A mechanism that is usually powered by a spring and is used to keep a single-hung window vent up and in position.

Satellite city

A rare term referring to independent municipalities that are distinct from the larger city and are commonly referred to as suburbs.

Satellite tenant

A smaller shopping centre tenant who is relatively reliant on the ability of a larger anchor or prime tenant to attract business into the centre, such as a small shoe repair shop in a centre with a major department store.

Satisfaction

A debt or obligation, such as a judgment, must be paid. Satisfaction or fulfilment occurs when the vendee pays in full under a contract for deed and the vendor transfers legal title.

Satisfaction of mortgage

When a mortgage is paid in full, the mortgagee issues a certificate. The mortgage is “satisfied” when the debt secured by it is paid in full. This is a mortgage discharge or release, or a satisfaction piece. It describes the mortgage, specifies where it is recorded, certifies that it has been paid, and agrees to the discharge of record of the mortgage. Clear record title is almost as important as clear actual title, and in some real estate transactions, it may be more important. As a result, evidence of satisfaction must be documented.

The satisfaction of mortgage indicates that a mortgage has been paid in full.

Saturated felt

A felt which is impregnated with tar or asphalt.

Save harmless

To protect someone from loss, harm, or third-party claims by indemnifying them.

Savings and Loan Association (S & L)

A finance company that accepts deposits from members and makes real estate loans.

A savings association is a type of financial organization whose main goal is to encourage people to save money and buy their own homes. Depositors get interest on their money, and the interest rate is often higher than what commercial banks offer. Some of these deposits are put into mortgage loans for homes, which helps more people buy or fix up their homes. Savings associations take part in the market for home loans and mortgages.

The federal government or the state where the savings association is located must give all of them a charter. The Federal Reserve Board is in charge of setting rules for associations on a national level. All deposits at federal savings and loan associations and federal savings banks are covered by the Federal Deposit Insurance Corporation (FDIC).

Most savings associations are local because they are usually owned and run by the people who use them. Some capital stock and mutual associations, on the other hand, are big, statewide groups with hundreds of offices and billions of dollars in assets.

Even though savings associations have moved from a regulated savings market to a deregulated savings market, their main goal is still to give loans for real estate as well as repairs, construction, and improvements to homes. Associations offer many new savings accounts and services, such as consumer loans, trust services, debit and credit cards, and checking accounts that pay interest.

Historically, a depository institution specializing in residential mortgage loans. S&Ls today range in personality from mortgage lending experts to being extremely comparable to commercial banks.

Savings association insurance fund (SAIF)

A fund that used to protect the money that people put into savings and loan associations. In 2005, SAIF and the Bank Insurance Fund (BIF) were combined to make the Depositors Insurance Fund, which is an insurance fund (DIF).

Savings banks

Historically endowed with greater investment authority than S&Ls, the two institutional structures are now nearly indistinguishable.

At first, they were set up by state charters to provide safe deposit boxes for workers who were paid in cash. Most of them were owned by their depositors, who got dividends instead of interest, and most of them stayed in the northeast of the country. By the middle of the 1980s, groups of troubled savings and loan associations were given federal savings bank charters as a way to keep them from going bankrupt. Like commercial banks, banks with federal charters are required to have deposit insurance through the Depositors Insurance Fund and the FDIC. If they are eligible, state charters can join the federal deposit insurance fund.

Savings incentive match plan for employees (SIMPLE)

Self-employed individuals can also benefit from this sort of contribution savings plan, which is designed for those with lower self-employment income. If your company has less than 100 employees, SIMPLEs can be set up as individual retirement accounts (IRAs) or 401(k) plans, depending on your needs. Up to $8,000 in self-employment earnings can be deducted from SIMPLE deposits. The SIMPLE cap was raised to $20,000 in 2005 and then to $30,000 in 2007. When a company matches all of an employee’s remuneration, such contributions are fully vested at the time they are made.

Scale

The link between a distance on a map, chart, or image and its equivalent distance on Earth.

Scale economies

Gains in productivity that come with increasing production output or the scale of an operation or system, resulting in reduced costs and/or increased benefits (as the average cost of production falls with increasing output or size).

Scarcity

A shortage of some kind of real estate that can’t be easily fixed. When demand is higher than supply, value goes up because of scarcity.

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Scenic easement

The right to keep a piece of land in its natural state. For example, the state can get a “scenic easement” over a nice piece of property through a “condemnation proceeding” to protect its beauty and, in effect, stop a developer from building on it. To keep the view, a landowner might buy a scenic easement over a neighbor’s land.

Some owners of large pieces of land with natural or scenic beauty try to give a scenic easement over part of their land to the county or state because their taxes and assessments have gone up so much. If the landowner’s gift is accepted, he or she may be able to get a tax break for being charitable and a lower real estate tax assessment. For income tax purposes, you can get a charitable deduction for giving a scenic easement or other partial interest in real estate that will be used for public enjoyment, preserving history, or keeping wild areas wild. The Federal Highway Beautification Act gives states incentives to buy scenic or open-space easements to protect the view of historical sites or unusual scenery.

Schedule

The scheduled dates for carrying out tasks as well as the dates for meeting milestones.

Schedule (window, door, mirror)

The sizes, numbers, and placements of the windows, doors, and mirrors are listed in a table on the plans.

Schedule A

A listing in the offering plan of all the units for sale in a freshly constructed or undergoing conversion building.

Schedule B

The estimated cost of running a cooperative or condominium during its first year of operation, which is included in the offering plan.

Scheduled gross income

The entire rental space multiplied by the property’s rental rate.

Schematic design

Following a site survey and meetings with the architect’s client, a design for the building programme is created. The client’s demands and specifications, as well as local zoning rules and the anticipated building budget, are thoroughly examined.

Schematics

Preliminary architectural drawings and sketches are often made during the planning stages of a project. They are basic layouts that don’t include all of the final design details. Schematic drawings may include a site plan, a plan with dimensions for each typical unit, elevations, a typical lobby and floor, mechanical facilities, and commercial-use areas. Architects’ plans for a building or development are often the first thing that developers use to get the word out.

Scope

The total value of the items and services to be supplied by the project.

Scope change

Any alterations to the project’s scope. A change in scope nearly always necessitates an adjustment to the project’s cost and/or timetable.

Scope of authority

A principle of agency law that holds principals accountable to third parties for all wrongdoings committed by their agents in the course of conducting the principal’s business. It is not required that the principal actually sanction the act; it suffices if the agent had apparent (ostensible) or implied permission to act on the main’s behalf. The principal is not accountable for conduct of the agent committed beyond the limits of the agent’s authority, and the broker cannot collect for services given outside of that authority.

In certain governments, an act is within the scope of power if it largely served the principal’s interests rather than the agent’s. A third party who knows he is interacting with an agent is obligated to determine the scope of the agent’s authority.

The seller of real property is liable for affirmative misrepresentations made by the broker within the agent’s area of authority, even if the seller was uninformed that the broker made them. For instance, when the broker is aware of a deficient condition in the house (such as a weak foundation), the innocent sellers are typically accountable to the buyer if the broker fails to disclose the fault. This is due to the fact that the sellers are considered as if they were aware of the agent’s knowledge.

Scrap out

After the drywall is “hung out” (installed) in a home, the removal of all drywall materials and trash.

Scratch coat

Plaster that has been scratched off to make a connection with a subsequent coat.

Screed, concrete

During a concrete pour, level off the concrete to the proper elevation.

Screed, plaster

A thin piece of wood that is the same thickness as the plaster coat and is used as a guide when putting up plaster.

Scribing

Woodwork is cut and fitted to an uneven surface.

Scupper

A drainage opening in a wall, curb, or parapet.

Seal

A metal die that makes a raised impression on paper. This can be used to prove the authenticity of a document or a signature, like with a corporate or notary seal. The name of the company, the date, and the state where it was founded are all written on the corporate seal. After a signature, the letters L.S. are sometimes used. This stands for “locus sigilli,” which means “under seal” or “in place of seal” in Latin.

In the early days of common law, a seal was used instead of writing out the terms of a contract. In most states, the common-law effect of this seal has been taken away, except as a way to prove who you are. So, if it comes down to it, a party must still show that they paid something. It is a good idea to ask for the seal of a company that is signing a contract. The seal shows that the document was signed by a company’s authorized officers or agents. Under the Uniform Commercial Code, using a seal has no effect on the transaction. It “does not constitute the writing,” and the law about sealed instruments does not apply.

Sealed and delivered

A phrase that means a transferor has been treated well enough, as shown by the transferor’s willingness to hand over the property. The word “sealed” gives the document more weight because, under old conveyancing law, an official seal stood in for “consideration.” Most of the time, the term is just a formality and has no legal weight.

Sealer

A clear or coloured finishing substance that is typically put directly over raw wood to seal the wood surface.

Seasoned loan

A loan obtained by someone who has a stable and consistent payment history under the terms of the loan. The term indicates that the mortgage or land contract is not new and may be a good buy risk.

A mortgage loan with a large number of installments received.

Seasoning

To improve the usage of green wood, it must be dried and moisture removed.

Second

1/60 of a degree or 1/3600 of a circle, as used in a mete-and-bounds legal description. The symbol 11• denotes a second. For example, an angle of 97° 00’ 25" would read “ninety-seven degrees, zero minutes, twenty-five seconds.”

Second mortgage

A second mortgage lien, like a first mortgage lien, is secured by the borrower’s property that has been pledged as security for the loan. The lender holding a second mortgage, on the other hand, is second in line behind the holder of the first mortgage to collect the proceeds of a foreclosure auction. As a result, the second lender is in a riskier situation.

A mortgage or trust deed that comes after a first mortgage. Usually, it’s an extra loan on top of the first mortgage that the borrower takes out when they need more money. The amount of risk is based on the difference between the property’s appraised value and all of its prior liens. This is because any senior mortgage or lien holder, like a mechanic’s lien or a tax lien, can wipe out the second mortgage.

With a second mortgage, the lender is taking on more risk, so the terms are usually stricter, the term is shorter, and the interest rate is higher than with a first mortgage. When closing on a second mortgage, there are usually separate costs for the appraisal, title report, credit check, writing and recording of documents, and other steps.

There may be a clause in a second mortgage that says it will stay behind any new first mortgage as long as the amount of the new mortgage doesn’t go over the amount of the first mortgage. With this kind of lifting clause, the borrower can “lift out” the first mortgage and replace it with a new first mortgage without changing the position of the second mortgage, which is still in second place.

If the first mortgage isn’t paid, the second mortgagee can either pay off the first mortgage and foreclose on the property under the second mortgage, or add the amount advanced to the second mortgage. The second mortgagee should ask to be told if there is a problem with the first mortgage. If the second mortgage is in default, the first mortgagee can also foreclose on the borrower because its security has also been threatened. So, the second mortgagee can put a lot of pressure on the borrower to pay. However, by doing this, it runs the risk that the net proceeds from a foreclosure sale won’t be enough to pay off the second mortgage after the first mortgage note has been paid off.

Before getting a second mortgage, the parties should look into state usury laws and local laws that prevent banks and savings and loan associations from giving second mortgages or limit the amount that can be borrowed or the interest that can be charged.

Second-generation leasing

A term used in the shopping centre business to describe renting space in a building that was already built and lived in by someone else.

Secondary data

Data used in a research study that was previously collected for another purpose.

Secondary financial markets

Markets comprised contracts for the purchase and sale of existing financial instruments.

Secondary financing

A second mortgage on a property that helps pay for the purchase price. For example, a seller might take back a purchase-money second mortgage to help a buyer who can’t make a big down payment.

Most government loan programmes (FHA, VA) let you get a second loan, but there are some rules.

A loan that is backed by a second mortgage on real estate.

Secondary market

Existing securities are retraded on a secondary market (as opposed to a primary market in which assets are originally sold by the entity that made those assets).

CONTINUED-AT

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