Real Estate Glossary S [Part 6]

CONTINUED-FROM

Continued from…

:point_right: Real Estate Glossary S [Part 5]

Submarket

A market segment or part in which all of the properties are regarded as near substitutes by a reasonably homogeneous group of potential buyers; properties that provide equal utility or satisfaction.

A geographical area surrounding a property that will supply a significant share of the clients for a real estate project.

A submarket is a specific subset of a larger geographic market that has been identified and differentiated by virtue of one or more distinguishing characteristics.

Submittal notice

Notification in writing from a broker to a seller, noting that the broker has showed the seller’s property and specifying the prospect’s name, address, and the selling price suggested. The broker and seller have a listing agreement with the broker. Such a warning is especially crucial in open listing situations in order to avoid difficulties in obtaining a cause of action.

Subordinated ground lease

A ground lease in which the owner subordinates his rights to the structure to those of others, such as the construction or permanent mortgage loan holder.

Subordinated sale-leaseback

A financing device used by developers to finance the purchase or ownership of unimproved land. To raise funds, the developer sells the land to an investor, who leases it back to the developer. After that, the developer seeks funding for the improvements, and the lessor-investor agrees to subordinate the lease to the mortgage.

Subordination

Being secondary means that a mortgagee or lien holder is ready to take payment after another creditor under terms of a mortgage.

Subordination agreement

A phrase in a mortgage or lease that states that the holder’s interest is secondary or subordinate to a future encumbrance.

A contract in which the owner of a mortgage with a higher priority agrees to give up that priority to a current or expected future lien. Subordination agreements are often used in development projects where the seller of the land to be developed takes back a purchase-money mortgage and agrees to subordinate the mortgage or become subject to a construction loan. This allows the developer/buyer to get a first mortgage loan to improve the property. So, the subordination agreement changes the normal rule that the first recorded mortgage has the most weight. So, even though it was recorded after the purchase-money mortgage, the construction mortgage is now the first mortgage.

Many interim lenders won’t lend any money if all previous loans and other agreements don’t have a subordination clause. So, most contracts to buy condos before they are built have a clause that says the buyer’s right to buy the condo (called an “equitable lien”) comes after any interim construction mortgage given by the developer. So, if the borrower didn’t pay, the lender could cancel the purchase agreement if it wanted to.

A person who wants to build on a leasehold property will usually try to get the fee owner to put the fee behind a construction loan. In this case, the word “subordinating” is misleading because you can’t put a fee below a leasehold mortgage. In reality, what the fee owner is doing is agreeing to put a burden on the fee. When a fee owner partially subordinates the fee, the landlord or owner is telling the lender that no ground rent will be due if the property goes into foreclosure. In this case, the owner is not risking the fee, just the ground rent.

Some states have laws that say subordination agreements have to be in a certain way and tell you certain things. If a broker writes a subordination clause, they might be doing something that is against the law.

Subordination clause

A clause that lets the owner of a mortgage let another mortgage come before it. Giving up priority is the act of subordinating. This clause says that if a previous mortgage is paid off or renewed, the junior mortgage will stay in second place and won’t become a higher or first mortgage automatically. Most junior mortgages have a subordination clause because the junior mortgagee gets a higher interest rate and usually doesn’t care that the mortgage is in a lower position. A sample subordination clause might say: “This mortgage shall be and remain subordinate to the present first mortgage or any renewal thereof, or in the event of its payment, to any new mortgage, provided that the excess, if any, of said mortgage over the amount of the present first mortgage be applied to reduce the principal of this mortgage.”

A broker should make sure to explain to a client what any subordination clauses in the mortgage documents mean for all parties and suggest that the client hire an attorney to make sure that the preliminary subordination language in the contract of sale between the buyer and seller is clear, certain, and not open to interpretation.

A mortgage clause that prevents a mortgage from being recorded at a later date that would take precedence over an existing mortgage.

Subpoena

A court order requiring a witness to testify under pain of perjury. Anyone who defies a court order is subject to arrest.

Subpoena duces tecum

An order from the court to show books, records, and other papers.

Subprime loan

A loan given to people with lower credit scores than normal loans will allow. This is because lenders can negotiate the interest rate and discount in order to make a lot of money. But the risk is higher, and it takes careful underwriting to make it work. Recent changes to how credit scores and appraisals are done have given lenders the tools they need to make these loans.

Loans offered to homeowners who do not meet the requirements for conventional (prime) mortgages. Subprime loans can include hefty fees and costly prepayment penalties, thereby “locking” the borrower into a high interest rate.

Subrogation

In relation to a legal right, interest, or duty, the act of replacing one individual with another. Substituting, for example, an insured ceding claim rights to the insurance provider in exchange for immediate loss payment.

The process of putting a third person in place of a creditor whose rights the third person takes over. For example, if a title company pays for a loss that is covered by its policy, the buyer can’t sue the seller for that loss. Most insurance policies have clauses about subrogation. When a judgment is paid with money from a state real estate education, research, and recovery fund, the fund takes over the rights of the person who was hurt.

If the Department of Veterans Affairs makes advances to the mortgagee because the veteran-mortgagor is behind on payments, the VA takes over the mortgagee’s rights against the mortgagor up to the amount of the advances.

Subscribe

Putting one’s name at the bottom of a document. Most documents don’t need to be signed up for. For example, it’s enough to write “I, George Smith, promise to pay Tash Lee $100,000” on a promissory note. Some laws, on the other hand, require subscribing witnesses, which are people who sign at the end of the document after the main signer. In many states, a will is only valid if two people who have no interest in it sign it as witnesses.

Lead-Capital_Logo

Property Finance Made Easy

We specialise in Development funding | Commercial finance | Construction loans | Portfolio refinancing & Property investment loans in Australia.

:arrow_heading_down:

Click Here to strategise with Amber

Subscription

Agreement to purchase a newly-issued security

The signing of a legally binding contract to buy a syndicated security interest.

Subscription agreement

In a limited partnership structure, a document that outlines the relationship between the limited partners and the sponsoring general partner.

Subsequent bona fide purchaser

One who buys a stake in a piece of real estate without being aware, either directly or indirectly, of any other rights that come before theirs. The laws about recording are meant to protect people who buy property for money without knowing about other, unrecorded interests in the property. So, a transfer that isn’t recorded isn’t valid against any later buyer (lessee, mortgagee) who records another transfer without knowing about the one that wasn’t recorded. Possession of property under a deed that hasn’t been recorded gives notice to a buyer who later records a deed. The second buyer wouldn’t be a real one, so the recording act wouldn’t protect them. A later donor or someone who gets something from a will are also not protected because they are not buyers.

Subsidized housing

Private landlords who rent to low-income families get help with their housing costs. The U.S. Department of Housing and Urban Development is in charge of running the Housing Choice Voucher Program.

Subsidy

  1. Money given by the government or another organization to lower the cost of one or more of the parts of housing (land, labor, management, or materials) so that the cost of housing for the person living there is lower.

  2. If it’s a buyer’s market, a seller or developer might offer a subsidy to make the deal more appealing.

Subsidy rent

The gap between the developer’s cash out-of-pocket annual expenses allocated to a specific tenant space and the tenant’s minimum rental. In an effort to attract more customers, some shopping centre developers subsidize the rent of some specialist tenants, such as banks and post offices. In actuality, both the developer and the other tenants subsidize the rent, as the financial deficit of one tenant must be covered by other tenants before the developer can generate any profit.

The Housing and Urban Development Act of 1968 and its following amendments, the Housing Act of 1969 and the Emergency Home Finance Act of 1970, contain a number of programmes that enable low-income families to rent or purchase housing through subsidized programmes. These statutes indicate Congress’s interest in fulfilling the housing demands of a growing population, establishing an urban policy, and encouraging and supporting healthy real estate development, including new community and intercity development.

Substantial improvement

A building improvement may be considered for tax purposes if it is made at least three years after the building was put into service; over a two-year period, the amount added to the building’s capital account (not repairs) must be at least 25% of the building’s adjusted basis on the first day of that period;

Substitute basis

Substitute basis is the adjusted basis of an asset acquired through a Section 1031 Exchange. Realized gain equals $125,000 if the market value of the property surrendered is $200,000 and the basis in that property was $75,000. The substitute basis for property acquired through a tax-deferred exchange would be $225,000 if the market value of the property was $350,000 and the unrecognized gain was $125,000. This basis adjustment has the effect of incorporating the $125,000 gain that was postponed into the purchase price of the asset. In this scenario, the gain would be $125,000 if the new property were sold the following day for $350,000.

The original tax basis of property obtained through a like-kind exchange. The substitution basis accounts for any postponed gain or loss on the property exchanged.

Substitution

A value principle that says the maximum value of a property is usually set by how much it would cost to buy or build another property that is just as desirable and valuable. This is assuming that there won’t be any expensive delays in making the switch.

Substitution clause

The section of the work letter that states what materials may be substituted for the landlord’s standard building materials.

Substitution of collateral

It’s possible to get a release of the original collateral in a mortgage by substituting it with another appropriate security.

Subsurface easement

An easement authorizing the use of belowground space for purposes such as power lines, sewers, and tunnels; also known as a subsurface right.

Suburb

A town or city that is close to a central city and has economic ties to it.

Successors and assigns

Limiting words that are used in deeds to talk about the third parties to whom the rights to the property can be given later.

Sum of the years’ digits depreciation method (SOVD)

A depreciation technique that allows depreciation based on the inverted scale of the sum of digits for the years of the useful life, resulting in a larger depreciation than straight line depreciation.

The Economic Recovery Tax Act of 1981 made it illegal to use a method of accelerated depreciation that was meant to give the most depreciation in the first few years of ownership.

Summary appraisal report

The findings of the appraisal are summarized in this report. The majority of the data and methodologies utilized in the appraisal are saved in the appraiser’s work file. The “form” reporting option is used for the majority of summary appraisal reports. Forms reports are far shorter than narrative reports, and their regular standardization promotes efficiency and ease. Mortgage lenders typically need form reports when a household buys or refinances a single-family home.

Summary possession

Landlords can utilize this legal process to reclaim their property from a tenant who has breached the terms of the lease or who is still using the property after the tenancy has ended. If a landlord-tenant relationship occurred, and the tenant is wrongfully hanging on to the deeded property after tenancy has terminated due to forfeiture or termination under the lease’s terms, then summary possession proceedings can be brought against the tenant.

Nonpayment of rent, abandonment, prolonged tenancy, and violations of governmental or landlord use laws are among the most common reasons for summary possession. Without prior notification and demand for rent, the summary procedure cannot be started for nonpayment.

Summation approach

When you add the estimated value of the improvements to the estimated value of the site as of the date of the appraisal, you get the value.

Summation technique

A technique for calculating capitalization rates that is based on the premise that investors must be rewarded in order to invest their money, and that additional compensation is necessary for risk bearing and illiquidity.

Summons

A legal notice that a lawsuit has been filed against a defendant and that a default judgment will be made against the defendant if the defendant doesn’t answer the complaint within a certain amount of time (usually 20 days).

Sump

A big plastic bucket or barrel is put inside the house to collect ground water from a drain system around the outside.

A hole or reservoir that is used to collect and hold water (or another liquid) before it is drained, usually with a pump.

Sump pump

A sump pit has a submersible pump that pumps any extra ground water away from the house.

Sun Angle

The angle created by an incoming solar radiation beam and a plane on the earth’s surface.

Super-regional center

A method of depreciation that uses an inverted scale of the sum of digits for the years of usable life, resulting in a higher depreciation than straight line depreciation.

Superadequacy

An upgrade or structural component that costs more than it is worth, leading to functional obsolescence, is referred to as a “over improvement” (for example, gold faucets in a kitchen; high ceilings in an office).

Superannuation

Amounts set away by an employer for their employee’s future retirement are known as superannuation, or simply “super.”

Superfund

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as changed by the Superfund Amendment and Reauthorization Act of 1986, is often called “Superfund” (SARA). Superfund’s main goal is to clean up places where dangerous substances have been dumped. It puts owners, landlords, and sometimes lenders in a lot of legal danger because of strict liability.

Superregional malls

These shopping malls house up to five or six main tenants as well as hundreds of minor tenants.

Superregional shopping center

A shopping mall that attracts customers from a very vast geographic region and houses a huge concentration of retail establishments. Superregional malls often have retail space ranging from 500,000 to 750,000 square feet. As anchor tenants, they could have up to four major department stores.

Supply

Quantity of goods to be made available at a specified asking price or rental period.

The relationship between the price and quantity of a product that suppliers place on the market during a specified time period, at all possible prices.

YouTube-Subscribe-LD

:rotating_light: You are missing out if you haven’t yet subscribed to our YouTube channel.

Supply and demand

The idea states that when a product’s supply is reduced, prices will rise, and when there is an overabundance, prices would fall.

A principle of economics that says the market value of something is based on how the forces of supply and demand work in the market at the time of the appraisal. This principle says that price goes up when demand goes up and down when supply goes up (i.e., supply is low, price is high). On the other hand, when there is a lot of supply and not much demand, the price is low.

Supply to sell

Desired reduction in a market participant’s inventory of a product at a certain price.

Support deed

A deed used to transfer property that says the buyer will take care of the grantor for the rest of his or her life as payment. If the right kind of support stops, the courts will not let the deed stand.

Surcharge

  1. Extra rent is charged to tenants who use more gas, water, or electricity than the lease allows.

  2. An extra fee that the Federal Reserve Bank charges member banks that borrow too much money.

Surety

There are those who take on the role of “guarantor.” The most common form of a surety bond is a contractor’s completion and performance bond. Because a surety company would not bond a contractor if they were not financially and professionally sound, the owner’s assurance is that the contractor will be able to complete the project in a timely manner and to a high standard. The principal is the contractor, the obligee is the owner, and the surety is the bonding company.

Rather than a savings fund, the bond premium is more like a service charge. The surety of a completion bond will step in if the bonded contractor fails to finish the job to the customer’s satisfaction. A surety under a performance bond would have similar defenses if the owner defaulted, and thus might not be compelled to complete the contract, as the contractor.

To put it simply, in an assumption of mortgage the grantee of the mortgagor takes on the role of a surety, making him personally and principally liable to the mortgagee for any deficiency judgment that results from a foreclosure sale Under an assigned lease arrangement, the lessee serves as a guarantee.

The state real estate commission in some states requires brokers to post surety bonds.

One who ensures another’s performance.

Surface water

Unlike a stream, which has a concentrated flow, storm water spreads out. Most of the time, property owners have the right to let water flow through their yard and onto the lot below, as long as the water flows in sheets and is not concentrated on the lot below by the property owner. Under common law, landowners can do anything (like regrading or paving) to protect their land, even if it hurts a neighbor’s land in the process.

Surge

A massive and frequently devastating wave created by high air pressure and strong winds.

Surmortgage

To prevent a mortgagee from foreclosing, certain states require that the defaulting mortgagor present evidence as to why the mortgagee should not proceed.

Surrender

A premature conveyance of a possessory estate to a person with a future interest, such as when a lessee surrenders a leasehold interest to the owner of the reversion interest, the lessor, prior to the lease’s normal expiration - as opposed to a lease abandonment.

If the lessor accepts the surrender, the lessee is no longer obligated to pay rent. If the tenant abandons the premises without a formal surrender, the landlord can usually collect either the rent due for the entire term of the rental agreement, or the rent for the time it takes to rerent the dwelling unit at a fair rental plus the difference between the fair rental and the rent the tenant was paying, plus a rerenting fee.

It should be noted that an oral surrender agreement is generally only valid if the remaining rental period is one year or less. An oral agreement is unenforceable if the balance is for more than one year.

If the lease was recorded, the parties should execute and record a written surrender agreement to clear the title if the lease expires before its normal expiration date.

A lease surrender clause governs what happens to the improvements when the lease expires.

Survey

A survey is a document that shows the size, shape, and boundaries of a property.

the precise measurement and description of a plot of land, frequently with structures and contours shown

The process of measuring boundaries and figuring out the size of land; the on-site measurement of lot lines, dimensions, and the position of houses on a lot, including figuring out any encroachments, easements, party walls, and setback requirements.

At the time of the listing, the broker should look at the property to see if there are any survey stakes that can be seen. If not, the broker should tell the seller that he or she may have to pay for a survey. (Sometimes, the buyer will choose to pay for a new survey of the property.) The survey may find easements and encroachments that are not in the public records. If there are any differences between the original survey and the new survey, the seller should have to fix the problem and pay for the survey.

Before lending money to buy or build on certain properties, lenders often want to see a survey that is accurate. As the building goes up, a “date-down” survey must be done to make sure that the new building doesn’t go past the building or lot lines.

Most surveys fall into three main categories. The geodetic survey is used to figure out how big and what shape the earth is. Cadastral surveys map out the edges of parcels to show who owns them. Topographic surveys are used to measure the shape of the land (hills, valleys) and where roads are. When figuring out what a survey means, “bearings” are compass readings, “distances” are linear measurements, and “courses” are the directions of a line.

A surveyor’s measurement and description of a piece of land.

The process of precisely defining the boundaries of a plot of real estate.

Surveyor

A person who compiles a survey.

Survivorship

Following the death of another joint tenant, a joint tenant or renters have the right to continue to own the property.

Survivorship, right of

The unique part of a joint tenancy in which the title, rights, and interests of a joint tenant who has died in certain property automatically pass to the joint tenants who are still alive, free from claims by the decedent’s heirs and creditors. When a joint tenant dies, that person’s share of the property is taken away, and the remaining joint tenants get an equal share of the property. Under the Uniform Partnership Act, which is used in many states, the partners who are still alive have certain rights to the property they own together. When a tenant in common dies, however, all of their rights, titles, and interests go to their heirs according to their will or the laws of intestacy if they don’t have a will.

Suspension

A time when one is compelled to do nothing. Suspension of a real estate license is possible by the real estate commission following an investigation into a violation of licensing regulations. The licensee is not allowed to work in real estate for the purpose of earning a commission or fee while the suspension is in effect. In order for salespeople to continue working in the real estate industry while their licenses are suspended, they must find new firms to switch to.

Sweat equity

A common term for the equity that a buyer or borrower adds to a piece of property by doing work or labor on it. It makes the property worth more in a direct way.

The equity created by the investor as a result of his or her effort.

Sweetheart contract

This is a slang term for when a developer hires a subsidiary company that is barely disguised to manage the developer’s project. Most state condo laws have rules about sweetheart contracts and say that the homeowners’ association can cancel them.

Swing loan

A bridge loan is a short-term loan that lets someone buy a new home with the equity from the home they are selling.

Switching fee

There is a fee that is charged if someone already has a loan from one type and wants to switch to another type (e.g. variable rate loan to fixed rate loan).

Symmetric probability distribution

A probability distribution with two sides that are mirror images of each other.

Syndicate

A group of two or more persons who have banded together to make and manage an investment. A syndicate might be organized as a corporation, general partnership, or limited partnership.

A collection of people or legal organizations who join forces to carry out a certain investment activity.

a collection of investors (individuals or corporations) that pool their resources to invest in a financial project that requires more capital than each individual has.

Any general or limited partnership, joint venture, or other type of organization created solely for the goal of profitably investing in real estate.

Syndication

A word that describes a group of two or more people who work together to make and run an investment. A syndication is not a legal way to own something. Instead, it is a term for when more than one person owns an investment. It is mostly a mix of money and management, and it is often thought of as a security for real estate.

A syndication can take the form of a REIT, corporation, general partnership, limited partnership, or even tenancy in common. Some of the parties are involved in making and running the investment, while others are not. Usually, the only thing they do is give money.

Most real estate syndications are set up as limited partnerships, with the syndicator as the general partner and the investors as limited partners. This lets the partnership act as a way to pass through high depreciation deductions directly to the individual investors and avoid the double taxation that comes with corporate ownership. Small investors often have the chance to take part in a real estate investment that will be managed by people with more experience through syndication. The Internal Revenue Code says that you can’t deduct money you spend to set up a partnership or help sell shares.

Syndication is also used to describe the process of putting listings on the Internet with the help of a national syndicator’s services and technology.

The syndicate’s actions in acquiring a property.

Syndicator

A person who makes a living selling real estate partnership investments.

Swing loan

A bridge loan is a short-term loan that lets someone buy a new home with the equity from the home they are selling.

Switching fee

There is a fee that is charged if someone already has a loan from one type and wants to switch to another type (e.g. variable rate loan to fixed rate loan).

Symmetric probability distribution

A probability distribution with two sides that are mirror images of each other.

Syndicate

A group of two or more persons who have banded together to make and manage an investment. A syndicate might be organized as a corporation, general partnership, or limited partnership.

A collection of people or legal organizations who join forces to carry out a certain investment activity.

a collection of investors (individuals or corporations) that pool their resources to invest in a financial project that requires more capital than each individual has.

Any general or limited partnership, joint venture, or other type of organization created solely for the goal of profitably investing in real estate.

Syndication

A word that describes a group of two or more people who work together to make and run an investment. A syndication is not a legal way to own something. Instead, it is a term for when more than one person owns an investment. It is mostly a mix of money and management, and it is often thought of as a security for real estate.

A syndication can take the form of a REIT, corporation, general partnership, limited partnership, or even tenancy in common. Some of the parties are involved in making and running the investment, while others are not. Usually, the only thing they do is give money.

Most real estate syndications are set up as limited partnerships, with the syndicator as the general partner and the investors as limited partners. This lets the partnership act as a way to pass through high depreciation deductions directly to the individual investors and avoid the double taxation that comes with corporate ownership. Small investors often have the chance to take part in a real estate investment that will be managed by people with more experience through syndication. The Internal Revenue Code says that you can’t deduct money you spend to set up a partnership or help sell shares.

Syndication is also used to describe the process of putting listings on the Internet with the help of a national syndicator’s services and technology.

The syndicate’s actions in acquiring a property.

Syndicator

A person who makes a living selling real estate partnership investments.

Systematic risk

Even in a huge portfolio, there are some risks that cannot be mitigated by diversification. Exposure to macroeconomic risk factors leads in this form of risk.

Systems built

This is a word used by luxury home builders to describe factory-built housing in order to avoid the negative connotations associated with prefabrication or manufactured homes.

Systematic risk

Even in a huge portfolio, there are some risks that cannot be mitigated by diversification. Exposure to macroeconomic risk factors leads in this form of risk.

Systems built

This is a word used by luxury home builders to describe factory-built housing in order to avoid the negative connotations associated with prefabrication or manufactured homes.

CONTINUED-AT

Continued at…
:point_right: Real Estate Glossary S [Part 7]