The appraisal principle that states that the greatest value in a property will occur when the type and size of the improvements are proportional to each other as well as the land.
• Balance sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.
• Balloon mortgage
A mortgage where the final payment is considerably larger than the preceding payments. Contrast with amortized mortgage.
• Balloon payment
A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.
• Bank draft
A payment method where your loan payment is automatically deducted from your checking or savings account, so you don't have to mail in your payment each month.
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.
• Bargain and sale deed
A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title. The grantor may add warranties to the deed at his or her discretion.
• Base line
The main imaginary line running east and west and crossing a principal meridian at a definite point, used by surveyors for reference in locating and describing land under the rectangular (government) survey system of legal description.
The financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. This new basis is called the adjusted basis.
• Before-tax income
Income before taxes are deducted.
• Bench mark
A permanent reference mark or point established for use by surveyors in measuring differences in elevation.
(1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn.
(2) A lender in a deed of trust loan transaction.
To transfer personal property through a will.
• Best faith estimate
An estimate of the total costs for securing a real estate loan, that is given to borrowers prior to closing.
An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.
• Bilateral contract
A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.
• Bill of sale
A written instrument given to pass title to personal property.
An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser's good faith and intent to complete the transaction.
• Biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower’s bank account. The result for the borrower is a substantial savings in interest.
• Blanket insurance policy
A single policy that covers more than one piece of property (or more than one person).
• Blanket loan
A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt.
• Blanket mortgage
One mortgage on a number of parcels of real property.
The illegal practice of inducing homeowners to sell their properties by making representations regarding the entry or prospective entry of persons of a particular race or national origin into the neighborhood.
• Blue-sky laws
Common name for those state and federal laws that regulate the registration and sale of investment securities.
• Bona fide
In good faith, without fraud.
(1) A written agreement purchased from a bonding company that guarantees a person will properly carry out a specific act, such as managing funds, showing up in court, providing good title to a piece of real estate or completing a construction project. If the person who purchased the bond fails at his or her task, the bonding company will pay the aggrieved party an amount up to the value of the bond.
(2) An interest-bearing document issued by a government or company as evidence of a debt. A bond provides pre-determined payments at a set date to the bond holder. Bonds may be "registered" bonds, which provide payment to the bond holder whose name is recorded with the issuer and appears on the bond certificate, or "bearer" bonds, which provide payments to whomever holds the bond in-hand. Mortgage interest rates are closely related to long term bond interest rates.
• Bond market
Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.
• Bonus to selling agent (BTSA)
Compensation, above and beyond the sales commission, offered to the real estate agent who brings the buyer to the transaction. A BTSA is used to provide an extra incentive for real estate agents to show a particular listing. Often the bonus is tied to closing within a certain time period or the property selling for a certain price. A buyer's agent should not consider the BTSA a factor in any negotiations between buyer and seller. Realistically, most BTSA's tend to disappear during initial negotiations, even though they should never be considered as negotiable after they have been offered. Any bonus to selling agent should be contained in a written agreement between the seller and listing broker. The BTSA is technically offered by the listing broker, not the seller, and thus should not be a subject of negotiation.
Money or property given to make up any difference in value or equity between two properties in an exchange.
• Branch office
A secondary place of business apart from the principal or main office from which real estate business is conducted. A branch office usually must be run by a licensed real estate broker working on behalf of the broker.
A violation of any legal obligation.
• Breach of contract
Violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due.
• Bridge loan
A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as "swing loan."
One who acts as an intermediary on behalf of others for a fee or commission.
The bringing together of parties interested in making a real estate transaction.
Acronym - bonus to selling agent.
A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.
• Budget category
A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category. "Salary" is a typical income category.
• Buffer zone
A strip of land, usually used as a park or designated for a similar use, separating land dedicated to one use from land dedicated to another use
(e.g., residential from commercial).
• Building code
An ordinance that specifies minimum standards of construction for buildings to protect public safety and health.
• Building line or setback
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be set by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.
• Building permit
Written governmental permission for the construction, alteration or demolition of an improvement, showing compliance with building codes and zoning ordinances.
• Bundle of legal rights
The concept of land ownership that includes ownership of all legal rights to the land--for example, possession, control within the law and enjoyment.
• Buy down
A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.
• Buy down account
An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buy down plan is in effect.
• Buy down mortgage
A temporary buy down is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buy down reduces the interest rate over the entire life of a mortgage.
• Buyer-agency agreement
A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer. The broker represents the buyer under the law of agency.
• Buyer agent
An agent who represents the buyer in a real estate transaction. A buyer agent may be paid by the buyer, seller, or listing agent at closing, provided all parties consent.
• Buyer's broker
A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split. Some brokers conduct their business by representing buyers only.