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[ Dictionary of Terms ]

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DATE OF APPRAISAL The day, month, and year as of which the opinion of value, as expressed in the appraisal, is based. Since changes in the value of property can occur very quickly, the date of appraisal is an important part of the appraisal form or report. The inclusion of the date makes it clear to anyone examining the appraisal that the value estimate is as of a specific date.

DATUM A level surface to which the elevations of points used in legal descriptions are referred. Besides the mean sea level datum some arbitrarily chosen datum such as a bench mark is often used in surveying work.

DEALER One who holds property for sale to customers. If a person is classified as a dealer for federal income tax purposes, any gain or loss on the exchange or sale of property is treated as ordinary gain or loss and not as capital gain or loss. Dealers also may not take advantage of tax-free exchange rules which can be used by non-dealer investors.

DEAD END STREET A street with only one entrance, the other end being closed.

DEBENTURE (BOND) A long-term bond or note issued by corporations and governments and not secured by a mortgage or lien on any specific property. Since there is no specific property securing the debenture, the ability to repay the debt is based solely on the financial strength of the issuer.

DEBIT An amount due or owing, as compared to a credit which is an amount due or to be received. Debit entries are made on closing statements to reflect charges made to both parties.

DEBT An obligation of money, goods, or service either in the present or in the future from one person to another.

DEBT COVERAGE RATIO (DCR) The relationship between the annual net operating income (N.O.I.) of a property and the annual debt service of the mortgage loan on the property. Lenders and investors calculate the ratio to assist them in determining the likelihood of the property generating enough income to pay the mortgage payments. From the lender's viewpoint, the higher the ratio, the better.

DEBT EQUITY RATIO The relationship between the total loan amount owed to the lender(s) and the invested capital of the owner(s). In real estate investments this ratio, also known as the leverage ratio, can be very high due largely in part to the loan security of real estate, thus real estate investments are often highly leveraged. Owner-occupied residential real estate typically has a high debt-equity ratio, particularly homes recently purchased. A $100,000 home purchased with $20,000 cash and an $80,000 mortgage would have a debt-equity ratio of 4:1 ($80,000/$20,000).

DEBT FINANCING The use of borrowed funds, or other people's money, to purchase real estate. Also known as debt capital as compared to equity capital, which is the amount of one's own money used to purchase real estate.

DEBTOR One who owes debt.

DEBT SERVICE The periodic payment (monthly, quarterly, annually) necessary to pay the interest and principal on a loan which is being amortized.

DEBT-TO-INCOME RATIO The relationship between a person's periodic (normally monthly) debt and his or her income. While lenders use various rules of thumb in determining the maximum amount of money a person can borrow, the ratio often used is that the total principal, interest, taxes, and insurance (PITI) due each month should not exceed 25 to 28 percent of the borrowerÕs monthly gross income.

DECEDENT A deceased person. One who is deceased with a will is known as a testator while a deceased person without a will is said to have died intestate.

DECLARATION OF TRUST Acknowledgment by a person who holds legal title to property that he or she is holding the property as trustee for someone else or for a specified purpose.

DECLINING-BALANCE DEPRECIATION An accelerated method of depreciation for tax purposes in which the remaining depreciable balance each year is the base for calculating the subsequent year's depreciation. The result is a faster write-off in the early years than would be possible using a straight-line method of depreciation.

DECREASING ANNUITY A series of periodic payments or receipts that progressively decline over time.

DECREE A court order or declaration announcing the legal consequences of the facts.

DECREE OF FORECLOSURE A court order following the actions of a mortgagee who has a lien against a parcel of real property which states the amount of the outstanding debt and orders the sale of the property with the proceeds being used to satisfy the debt.

DEDICATION A donation of property by a property owner to a public authority such as a local government without payment and for a public use.

DEDUCTION Any ordinary and necessary expense paid or incurred in a taxable year which is related to business or the production of income. Such deductions are in addition to any other deduction Permitted by law and depend upon the accounting method used by the taxpayer. Except where specifically authorized by Congress, expenses for personal or family purposes are usually not deductible. A deduction has the effect of reducing the amount of taxable income and thereby reducing a taxpayer's tax liability. If a person owns a house which serves as his or her personal residence, Congress permits mortgage interest, property taxes, and casualty losses as allowable deductions. In addition to these deductions, owners of real estate held for other purposes may be entitled to deductions for maintenance expenses, minor repairs, insurance premiums, and depreciation.

DEED A written instrument, usually under seal, conveying some property interest from a grantor to a grantee. A grantor is the person who conveys the property interest; the grantee is the person to whom the grant is made. In order for a deed to be effective in transferring title, it must be in proper legal form and executed as specified by the law in the state in which the property is located. 7le title is actually transferred the moment the deed is properly delivered to and accepted by the grantee. In order to protect the validity of the title from subsequent innocent third parties purchasing the same property from the original grantor, the deed must be recorded as required by the particular state's recording statute. This also gives assurance to third parties that no one else has good title unless the title has been recorded. This gives constructive notice to third parties. When a deed is delivered, all prior oral and written agreements are merged into the deed and are collateral. This means that when a deed is delivered and accepted all prior agreements which are inconsistent with the deed are superseded and have no legal effect. An exception to this rule occurs in cases of fraud and mutual mistake. Another exception exists when the contract specifically provides that the obligations will survive the closing.

DEED BOOKS Part of the public records found in the county clerk's or recorder's office in which copies of deeds transferring real property in that jurisdiction are recorded. These books are also known as libers.

DEED IN LIEU OF FORECLOSURE A special purpose deed used by a borrower (mortgagor) who is in default to convey the property to the lender (mortgagee) in order to eliminate the need for a foreclosure.

DEED IN TRUST A special purpose deed for carrying out fiduciary purposes in which the real property is conveyed to a trustee in a land trust. The power to sell, lease, mortgage, and so forth are given to the trustee under the provision of the trust agreement.

DEED OF RECONVEYANCE A deed used to transfer title from the trustee back to the trustor (borrower) after the outstanding debt has been paid in full.

DEED OF RELEASE A special purpose deed given by lien holders, remaindermen, or mortgagees to relinquish their claims on the property.

DEED OF SURRENDER A special type of deed used to merge a life estate with a reversion or remainder.

DEED OF TRUST A deed to real property which serves the same purpose as a mortgage but instead of two parties, three parties are involved. The third party holds title for the benefit of the lender. The borrower under a note secured by a deed of trust or trust deed is called the trustor or in some states the grantor. The lender is called the beneficiary. When a loan is made the borrower conveys naked title to a third party called the trustee who holds the title for the benefit of the lender although the instrument itself may remain in the lender's possession. A states deed of trust act specifies who may act as a trustee. Some states have created the office of public trustee, while others allow individuals such as attorneys or brokers or entities such as title insurance companies or savings and loan associations to serve in that capacity. As with mortgages, states have title theory and lien theory deeds of trust.

DEED POLL A deed made by only one party who binds only himself or herself to the deed.

DEED RESTRICTION DEFAULT The failure to perform a contractual obligation or duty. Since each party to a contract has a duty to perform as promised, the non-defaulting party has a number of alternative remedies from which to choose. Quite often real estate contractssuch as sales agreements, leases, and mortgages specify the act(s) that will result in default as well as the remedies available to the innocent party.

DEFAULT JUDGMENT A judgment entered by a court against a person who falls to answer a complaint or appear in court at an appointed time.

DEFAULT RATIO A ratio used in financial analysis that compares the effective gross income (the rent collected from a project) to the operating expenses plus the debt service.

DEFEASANCE CLAUSE A provision found in a mortgage which "defeats" the passing of title to the lender (mortgagee) had the borrower (mortgagor) not met the terms and conditions specified in the mortgage. When the debt is repaid this clause nullifies any interest the lender may have had in the property. Typical wording of a defeasance clause would be as follows: "Provided, however, if the said mortgagor, his heirs, personal representatives, or assignees, shall make or cause to be made the payments, and perform and comply with the covenants and conditions herein mentioned on his part to be made and done, then this mortgage shall be void."

DEFEASIBLE Subject to be revoked or defeated upon the occurrence of a future event or the performance of a condition subsequent, generally used in regard to rights and interests in real estate.

DEFECT OF RECORD Any lien, claim or encumbrance on a particular piece of real estate that has been properly recorded in the public records. Recorded defects impair clear title and may result in the title being unmarketable.

DEFENDANT The person against whom a lawsuit has been brought or against whom recovery is sought by the plaintiff.

DEFERRED ANNUITY A series of periodic payments or receipts that begin at some point in the future.

DEFERRED CHARGES In accounting, expenditures for intangible assets, such as mortgage placement fees or property leasing commissions, that are to be written off over the life of the service provided.

DEFERRED INCOME Income to be received in the future.

DEFERRED INTEREST MORTGAGE A financing technique in which a lower interest rate and thus a lower monthly mortgage payment is charged. Upon the selling of the property the lender receives the deferred interest plus a specified fee for postponing the interest that would normally have been paid each month. This type of mortgage is particularly aimed at those people who only plan to keep the property for a short period of time.

DEFERRED LIABILITY A debt that need not be paid currently. Accelerated depreciation frequently causes a deferred income tax liability for income- producing property.

DEFERRED MAINTENANCE Inadequate repair and upkeep of a building which results in physical depreciation and loss in value.

DEFICIENCY The lack of an item or its inadequate capacity.

DEFICIENCY JUDGMENT A personal claim based on a court order against a borrower (mortgagor) for difference between what is owed the lender (mortgagee) and the amount realized following a foreclosure on the property. The deficiency occurs when the prop fails to sell at foreclosure for a price which covers the outstanding mortgage amount. Some mortgages, particularly commercial loans, are written so that the lender recourse only against the property (non- recourse mortgage) and thus, if the prop fails to sell at foreclosure for the amount owed, no personal judgment can brought against the borrower.

DEFLATION A decline in the general level of prices.

DEGREE A land surveying measurement denoting 1/360th part of a circle. The term used in metes and bounds method of surveying and is denoted by the symbol ... in 90'.

DELINQUENCY DATE A specific time after which a penalty is incurred for nonpayment of a debt. real estate lending, promissory notes normally have a due date, typically the first of each month, and a delinquency date, normally sometime between the tenth the fifteenth.

DELINQUENCY RATIO A ratio used by commercial banks and other lenders to denote the number of overdue loans relative to the total loans being serviced.

DELIVERY The formal surrender of control or ownership of something to someone else. Legal documents such as deeds and mortgages do not become valid until they have been delivered and accepted. What constitutes delivery depends upon the intent of the parties. For a deed, there must be an objective intent on the part of the grantor to give up present control of the deed.

DEMAND An economic term commonly used to denote a qualified buyer(s) who is ready, willing, and able to make a purchase.

DEMAND DEPOSIT Funds on deposit with banks which are subject to immediate withdrawal by the depositor(s). Commonly known as checking accounts, demand deposits are different from time deposits, commonly referred to as savings accounts, which require the depositor to wait a specified period of time before withdrawing or else pay a penalty for early withdrawal.

DEMAND LOAN A loan which permits the lender to call the loan due and payable at any time. Normally, real estate loans are not demand loans.

DEMISE A conveyance of an estate to someone for life, for a certain number of years, or at will by means of a lease. The word demise is synonymous with "lease" or 'let' and use of the word in a lease implies a covenant for quiet enjoyment which means the landlord (lessor) guarantees that the tenant (lessee) will not be disturbed by someone having superior claims against the property.

DEMISED PREMISES The part of a property which is leased to a tenant.

DEMOGRAPHY The study of populations with respect to density and distribution. Demographic information is of particular importance to people involved in market analysis and highest and best use analysis in determining potential land uses of a particular site.

DEMOLITION COSTS The total expenses incurred in tearing down and removing the improvements on a parcel of land.

DEMOLITION LOSS A tax deduction which may be taken under certain circumstances when an improvement is voluntarily demolished. No deduction may be taken if there was an intent to demolish the building at the time the property was acquired. If the building is used in trade or business or for production, and a decision is made to demolish the building after acquisition, then the taxpayer will ordinarily be entitled to the demolition loss deduction.

DENSITY The number of buildings or persons occupying a certain area of land, generally an acre.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) A federal agency actively engaged in housing programs and related activities including urban renewal, model cities, block grants, public housing and subsidy programs. The Federal Housing Administration (FIL4), the Government National Mortgage Association (GNMA), and the Office of Interstate Land Sales Registration are all under HUD's jurisdiction.

DEPARTMENT STORE A large store divided into sections or departments selling a wide range and variety of products. Local department stores are often used as anchor tenants in shopping centers.

DEPENDENCY, PRINCIPLE OF An economic principle which states that the use and thus the value of a particular parcel of land can change as a result of modifications of other parcels or other changes in the land-use pattern or environment.

DEPLETION A tax deduction which may be taken by taxpayers who own property interests in extractive industries such as mines, oil, gas, or other natural deposits.

DEPOSIT Money offered by a prospective purchaser to indicate his or her good faith in entering into a sales contract. If the sale is completed then the deposit is credited to the purchaser and applied towards the purchase price. However, if the purchaser defaults then the deposit is normally kept by the seller as liquidated damages. Depending upon the terms of the listing agreement, the seller may split the deposit with the listing broker. Default by the seller results in all of the deposit being returned to the purchaser, with the broker having no legal claim to any of the money.

DEPOSIT INSURANCE ACT A federal act enacted during the Great Depression creating the Federal Deposit Insurance Corporation (FDIC) to insure deposits of member commercial banks.

DEPOSIT OF TITLE-DEEDS The placing of title-deeds to land in the hands of a lender for the purpose of securing a loan.

DEPOSITION The testimony of a witness taken outside of court for the purpose of using the testimony during a trial.

DEPOSITORY INSTITUTIONS DEREGULATION AND MONETARY CONTROL ACT (1980) A federal act that resulted in significant deregulation of federally chartered commercial banks and savings institutions. Included in the legislation were provisions to phase out ceilings on interest rates being paid by lenders (Regulation Q) and limitation over the type of loans savings institutions could make. The act also overrode state usury laws for all federally insured institutions.

DEPRECIABLE BASIS The amount on which depreciation deductions are based for income tax purposes. Allocation must be made between land and improvements, since ordinarily only the improvements to and on the land may be depreciated.

DEPRECIABLE LIFE The estimated economic useful life of a depreciable asset such as a building. Depreciable life is not a measure of how long the building will remain standing, but rather how long the improvements are expected to provide an economic return. As an analogy, automobiles may last for decades, but the cost and annoyance of repairs and the modern equipment of newer cars gives most automobiles a short useful life. Improvements to real estate are long- lasting, but without renovation, they steadily march to the junkyard.

DEPRECIATED COST In taxation, the cost new minus any depreciation taken.

DEPRECIATION (ACCOUNTING) A method of allocating the cost of a wasting asset over its estimated useful life. For income tax purposes, depreciation is a provision for the estimated wear and tear of an asset. Depreciation deductions can be claimed as a tax deduction on real estate improvement (not land), regardless of whether the market indicates an increase or decrease in the value of the property. To claim depreciation on an income tax return, a bookkeeping entry is required, not a cash payment. In many real estate investment situations, depreciation deductions are of significant value. The deductions reduce income taxes without a cash payment. However, there will be a day of reckoning. Ultimately, the tax implications catch up with the real economic situation. Depreciation deductions serve to reduce the adjusted tax basis of property, so, upon a resale, there will be a greater capital gain on which a tax is due. Most investors prefer to enjoy substantial amounts of current depreciation deductions in the face of a future tax because of (1) the time value of money, and (2) the possibility of lower tax rates upon resale. Lower tax rates may be due to more favorable capital gains rates, or planning the sale to occur in a tax year when there are off-setting losses. The time value of money implies that taxpayers would rather pay taxes later than now. It is like getting an interest-free loan from the Government.

DEPRECIATION/AMORTIZATION RATIO The relationship between depreciation deductions and mortgage payments for income-producing property. Depreciation claimed for income purposes allows a tax deduction without a cash payment. Mortgage payments that apply toward principal reduction require an actual cash payment but are not deductible for income tax purposes, so they have an opposite effect. Since all other operating expenses such as maintenance and property tax are tax- deductible, the difference between the depreciation claimed for tax purposes and the mortgage payments is clearly reflected in taxable income. Thus, any excess of depreciation over mortgage principle payments in a taxable year will cause some of the before-tax cash flow (cash throw-off) to be tax-free.

DEPRECIATION (APPRAISAL) A loss in utility, and hence value, from any cause. In the cost approach to value, the depreciation factor attempts to make adjustments between the attributes of the selected building, as if it were new, and the subject property's physical condition and economic setting. It is a way of adjusting the hypothetical new structure on which the cost estimate was based and distinguishing it from the subject property. An appraiser may estimate depreciation through observation and/or by applying a formula based on the effective age and remaining life of each component of the property. The indirect method of estimating depreciation is to subtract values for the property, estimated from the market or income approach (or both), from the reproduction cost of the subject property, plus the value of the land. The difference obtained is the total depreciation sustained.

DEPRECIATION METHODS Those methods allowed for depreciating real estate improvements (not the land) as prescribed by the Internal Revenue Code.

DEPRECIATION RECAPTURE A provision contained in the Internal Revenue Code that makes excess depreciation taken on real property subject to income tax upon the sale or disposition of the property.

DEPTH TABLE A table showing the percentage relationship between the depth of a lot being appraised and the value as compared to values indicated by a standard lot in the market. Such tables are sometimes used by appraisers and tax assessors in estimating the value of a particular parcel of land. Several rules of thumb for depth adjustment have been developed. Among the more common are the 4-3-2-1 rule, the Hoffman rule, the Hoffman-Neill rule, the parabolic formula, and the Milwaukee rule. Little reliance can be placed on these rules without first testing market behavior. In some markets very little price differentiation exists between different-sized lots within acceptable rates. In other markets prices may be affected by size. A much preferable approach is the use of linear or multiple regression. This is a statistical technique used to calculate the mathematical relationships between variables. It requires the use of large numbers of data points to provide reliability. Using one of many calculators currently available, the appraiser can use regression to determine the existence of a relationship between lot depth and sales price.

DERELICTION A process by which water gradually recedes, leaving dry land where water previously was.

DERIVATIVE CONVEYANCE A conveyance of property which presupposes that a conveyance of the property has previously occurred. Such a conveyance only serves to alter or confirm the interest originally conveyed.

DESCENT The transfer of title to property upon the death of the owner who has died without a will (intestate) to those heirs related by blood or marriage, whom the law designates. If a person dies intestate the disposition of the person's property will pass as defined by state laws called statutes of descent and distribution. Real estate will pass directly to a person's heirs as defined by the state law in which the real estate is located subject to the debts of the decedent. A court in the state where the decedent lived will appoint a person called an administrator to dispose of the property of the estate. The administrator will collect the assets of the estate, pay debts and distribute the remainder. The administrator is usually required to put up a bond and may sell that real property which is necessary to pay off the estate's debts if the sale of personal property produces insufficient proceeds. The real estate remains charged with debts of the estate until the state's statute of limitations has run. States have different rules as to who receives property of the decedent.

DESCRIPTION The part of a deed, mortgage, sales contract, or other such legal instruments which identifies the real estate involved in the transfer. When land is conveyed one party to another the instrument of conveyance needs to contain a legally sufficient description of the parcel. Courts have interpreted this to mean that property sufficiently described if a competent civil engineer or surveyor could locate subject property given the land description. Since no two parcels of land could be exactly alike in location, each parcel requires a unique description. A legal instrument, such as a deed, which does not have a legally sufficient description is void and not enforceable.

DESIGNATED REAL ESTATE BROKER An officer of a corporation who has been designated by the corporation as its broker of record. The person so designated must meet the minimum qualifications for acquiring and maintaining a broker's license and is responsible for the corporation's real estate brokerage activities.

DESIGNATED REAL ESTATE INSTRUCTOR (DREI) A professional designation awarded by the Real Estate Educators Association to persons involved in real estate education.

DETACHED SINGLE-FAMILY HOME A free-standing structure designed for one family unit.

DETERIORATION A loss in value due to wear and tear by action of either the natural elements or use of the property.

DEVELOPER One who does whatever is necessary to transform an undeveloped tract of land into parcels ready for construction. This could mean acquiring a 100-acre tract of land from a farmer, subdividing the large parcel into one-half acre tracts, putting in roads, curbs, gutters, sewers, and water mains and then selling the individual lots to either builders or private individuals who in turn construct houses on the lots. I-and development can also involve commercial property such as the development of a large shopping district or industrial property such as an industrial park.

DEVELOPMENT LOAN A loan to fund the cost of converting an undeveloped tract of land into parcels ready for construction. Such loans, intended to be short-term, are normally tied to the prime rate and are made by lenders expecting repayment when the improvements to the land are completed.

DEVELOPMENT RIGHTS The rights to improve or develop land that are sold or given by one property owner to another.

DEVISE Transferring title to real property by means of a will. In order to make a valid formal will a person must be of statutory age, generally eighteen or twenty-one in most states, although some states set the age as low as fourteen. In addition, the person must be of "sound mind' at the time of the execution of the will. A formal will must be in writing, which may be typed, printed, or handwritten. Real estate must be described with sufficient certainty, but it is not required that a complete legal description be included. A formal will must be signed. In addition, states impose a strict requirement that the will be witnessed. Some states recognize non-witnessed wills called holographic wills. A holographic will is one which is entirely handwritten. Such a will is valid only in some jurisdictions and there only if it is free from suspicion of fraud or other defects. In addition many states recognize nuncupative wills. A nuncupative will is an oral will which a terminally ill testator or testatrix declares before qualified witnesses. This will must be reduced to writing within a statutorily prescribed time period in order to be admitted into probate. Unlike a deed which cannot be changed or withdrawn by a grantor after it has been delivered and accepted, a will may be changed or revoked by the testator at any time during his or her lifetime. A will may be changed by making out a new will or by drafting a codicil to a will. A codicil is a supplement or addition to the original will and must be executed with the same formality. Any attempt to modify the original will by crossing out a provision will not ordinarily be effective. The courts may view such as alteration as a revocation of the will.

DEVISEE The person to whom real property is given by will.

DEVISOR A giver of real property by means of a will; also known as a testator.

DIMINISHING RETURNS, POINT OF The point in time or production where returns fail to increase in proportion t additional investments of labor, capital, management, or land.

DINK Double income, no kids. A term used to denote a working couple, often in the market for condominium ownership or other types of real estate investments.

DIPLOMAT CLAUSE A provision included in a lease allowing for immediate termination of the lease when the tenant, who is a diplomat of a foreign government, is transferred to another country.

DIRECT CAPITALIZATION A method of capitalizing income based on dividing net operating income by a rate of return derived by analyzing similar properties and comparing their net income to their selling price. Also known as the overall capitalization rate, this approach takes into account the unique operating characteristics of each property.

DIRECT COSTS Expenditures made in the construction of an improvement that can be directly attributable to the improvement. Also known as hard costs, direct costs include such items as labor, material, contractor's overhead, and profit.

DIRECTIONAL GROWTH The direction towards which a city or area tends to be growing. Land values, and thus the uses to which land is put, are directly affected by the direction the growth takes.

DISAFFIRM To disclaim or refuse consent previously given.

DISASTER LOAN A loan either made or guaranteed by a governmental agency to owners property which has been damaged or destroyed as a result of such natural disasters as floods, riots, or earthquakes.

DISBURSEMENT A cash expenditure for the purpose of settling a debt.

DISCLAIMER Rejection or refusal of a legal claim, power, or property. In real estate, disclaimer would be the refusal by a party to accept an estate which had bee conveyed to him or her.

DISCLOSED PRINCIPAL A kind of principal in a principal-agent relationship whose identity is know the third person before the third person enters into contractual relations negotiated by the agent. Under such a principal-agent relationship the agent is considered liable under the contract in the absence of personal wrongdoing. N real estate transactions involve a disclosed principal.

DISCLOSURE STATEMENT A written statement required under the National Consumer Credit Protection Ac referred to as the Truth-in- Lending Act, to be given by a lender to individual borrowers for certain types of consumer loans. All real estate lending transact involving consumers are covered, as is all credit extended in five or more installments and not in excess of $25,000 for personal, family, household, or agricultural purposes. Two important disclosures included are the finance charge and the annual percentage rate (APR).

DISCOUNT The amount of money paid at the front end to acquire a loan. This amount deducted from the principal at the time the loan is made and thus represents int4 paid in advance. The discount is normally stated in terms of points or percent.

DISCOUNTED MORTGAGE A mortgage sold below the amount of the remaining principal balance in order to provide a satisfactory yield to the purchasing mortgage investor.

DISCOUNTING The process of converting investment inflows to a present value. Since money has a time value, one dollar to be received in the future is worth less than one now. How much less (the amount of discount) depends on: (1) the time span between the cash outflow and inflow, and (2) the necessary rate of inter discount.

DISCOUNT POINTS A fee charged by a lender at closing or settlement that results in increasing the lenderÕs effective yield (internal rate of return) on the money borrowed. discount point represents a one-time charge by the lender equal to 1% of the principal. Often sellers pay these point to comply with government regulations by law the buyer cannot pay discount points on VA mortgages. Why would third persons want to pay discount points if the loan is actually being given borrower and not to themselves? The third person usually stands to benefit f loan indirectly.

DISCOUNT RATE The rate of interest charged by the Federal Reserve System to banks who money from the Federal Reserve. An increase in the rate not only discourage from borrowing, but it also serves as a signal to the money market that interest rates are probably going to increase. Accordingly, interest rates charged by banks 1 customers usually increase as a result of an increase in the discount rate. The term is also used to explain the compound interest rate used in the in approach to value to convert expected future cash flows into a present value.

DISCOUNT REAL ESTATE BROKER A licensed real estate broker who charges a lower sales commission normally charged in exchange for the seller performing some of the normally performed by the broker. A discount broker may charge as little two percent commission if the seller agrees to, for example, be available to house to potential buyers and pay the advertising expenses normally incurred broker.

DISCRIMINATION Failure to treat all people equally. It is the stated policy of the government to eradicate discrimination in real estate markets.

DISINTERMEDIATION The withdrawing of funds from financial institutions by depositors who in turn invest directly into short-term financial instruments, such as treasury bills and commercial paper. Such activity occurs when the interest rate paid on these short-term instruments is higher than the rate(s) offered by savings and loan associations, mutual banks, and commercial banks. The result is less mortgage money available for loans, since the short-term instruments being purchased are normally not made available for real estate loans.

DISPOSSESS The removal or eviction of someone from real estate through legal action.

DISPOSSESS PROCEEDINGS Legal action undertaken by a landlord to remove a tenant and regain possession of the property for breaking a condition or term of the lease such as nonpayment of rent.

DISTRAINT The taking by a landlord of personal property belonging to the tenant to satisfy past-due rents. Under common law a landlord had the right to seize the tenant's property on the premises and to sell or hold the property to satisfy a claim for rent. Today, a court action is required and the priority of the landlord's lien will depend upon local law.

DISTRESS The common law right of a landlord to seize the personal property of a tenant to satisfy past-due rent.

DISTRESSED PROPERTY Real estate which must be sold due to a pending mortgage foreclosure.

DISTRICT A classification of neighborhoods in which the land uses are similar, such as commercial, multifamily, or industrial.

DOCUMENT An official paper establishing facts or giving instructions.

DOCUMENTARY STAMP A tax levied by some local and state governments at the time legal instruments such as deeds and mortgages are entered into public record. Prior to January 1, 1968, there was a requirement for U. S. revenue stamps on deeds at the rate of $.55 per $500.

DOG A parcel of real estate that is very difficult to sell due to location, condition, or design. Such property normally remains on the market for an extended period of time and may sell at substantially below the listing price.

DOMICILE The legal residence of a person. A person has only one domicile, which is the place to which he or she intends to return, even though he or she may now reside someplace else.

DOMINANT ESTATE The tract of land that benefits as a result of an easement on a servient estate.

DONEE The recipient of a gift.

DONOR The giver of a gift.

DOUBLE-DECLINING BALANCE DEPRECIATION In accounting, an accelerated depreciation method restricted to certain qualified properties. The method calculates depreciation at twice the rate of the straight-line method on a balance that is reduced each year as the depreciation is taken.

DOUBTFUL TITLE A situation in which there exists some doubt as to the validity of title a court will not force a purchaser to accept title. In contrast, a court will compel a purchaser to accept a marketable title when the purchaser has previously agreed to buy the property.

DOWER A legal life estate, recognized in some states, that a wife acquires in her husband's fee simple property. Conventionally, this right was a life estate in one-third of all the property that the husband owned at any time during the marriage. While the husband was alive this right was inchoate or an expectancy. This expectancy could not be defeated by the husband by sale or mortgage. In order to convey property which was freed from the dower interest, the wife had to sign a release. When the husband died, the wife's interest was called consummate, and she was entitled to one-third of the property to be held in life estate, despite any will provisions which sought to dispose of the property otherwise. Most states have abolished dower because of the uncertainty this right has placed on title assurance. Other states have created substitutes such as community property or a statutory share in lieu of dower. Some states give the widow a one-year's support which could conceivably tie up all of the husband's estate until the right was exercised. Other states give the widow 25 percent to 50 percent of the estate. However, if the husband sells his property before his death then there will be nothing for the wife to receive under the statutory share. In some states the husband as well as the wife is entitled to dower rights.

DOWN PAYMENT The amount of cash paid by a purchaser which when added to the mortgage amount equals the total sales price. At the time of closing this is referred to as the purchaser's equity.

DOWNSIDE RISK The probability that an investor may lose the money he or she has invested in a particular venture.

DOWNZONING Action by a local government to reduce the allowable density for a parcel of land, as for example, from apartment to single-family residential.

DRAGNET CLAUSE A clause included in a mortgage instrument which extends the lien of the mortgage to any and all other debts, both past and future, of the borrower.

DRAIN A ditch or other means by which water flows off land. A landowner may not obstruct or divert the natural drain of water to the detriment of another landowner.

DRAW An advance of money, as for example the periodic receipt of money by a builder from a lender under the stipulations of a construction loan to pay for labor and materials. The term also refers to a practice by some brokers to advance money to certain salespersons with the money being repaid from future commissions.

DREI Designated Real Estate Instructor. A designated awarded by the Real Estate Educators Association to persons involved in real estate education.

DRY MORTGAGE A mortgage in which the lender has a lien on the property but does not have any recourse against the borrower in case of default. Such a mortgage is commonly known as a non recourse loan.

DUALAGENCY Action by an agent in a principal-agent relationship resulting in the agent representing the third party and, thus, creating two principals. As such, the agent is in violation of agency law which requires that he or she represent the principal, not the third party. A principal-agent relationship establishes a fiduciary relationship which means that the agent owes his or her loyalty to the principal. In addition, in most states the real estate licensing law prohibits a licensee from representing both buyer and seller in the same transaction.

DUE DATE A date set on which a payment is to be paid. If the payment is not made on or before the due date, then it is past due. Most real estate loans carry with them a first of the month due date as well as a grace period up to fifteen days during which time the payment can be made without penalty. The last day of the grace period is known as the delinquency date and payment after that date normally must also include a past payment charge.

DUE-ON-SALE CLAUSE A clause included in many mortgages permitting the lender to require the borrower to repay the outstanding balance when the property is sold. Also known as a non assumption clause, the effect is that mortgages with such a clause are non assumable unless the lender permits the assumption. The lender may allow the mortgage to be assumed only after adjusting the interest rate to reflect current market conditions. All FHA and VA mortgages are assumable.

DUMMY Someone who buys or holds legal title to property on behalf of someone else. In certain instances, the true buyer wishes to keep his or her true identity hidden and thus someone else is used to purchase the property.

DUPLEX A house divided into two dwelling units with separate living facilities. The units may be side-by-side or one on top of the other.

DURESS The use of force or improper actions against a person or property in order to induce a party to enter into a contract. Examples of duress include blackmail, extortion, unlawful retention of property, a threat to bring criminal action, or threats against family.

DWELLING The building in which a person lives.

DWELLING UNIT Used in zoning ordinances and building codes to denote the room or rooms joined for occupancy by a family and containing a kitchen.