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Lecturer:

Herbert Engle Buot


Appraiser/Realtor/Consultant

REAL ESTATE BROKERAGE


EARNEST MONEY amount accompanying an offer to purchase

to show good faith or genuine desire of the


buyer; it is considered part of the price if
the offer is accepted, but it is returnable if
the offer is rejected.

ESCROW

an agreement where the consideration of a

contract or a portion thereof is entrusted to


a third party known as escrow agent who is
authorized to release payment after
fulfillment of some condition.

HOLD-OVER CLAUSE a provision in a listing which entitles the

broker to the commission even if the


sale is closed after the period of his
authority provided the sale is to a buyer
whom the broker registered in writing
and with whom he has negotiated
during the period of his listing.

LISTING

the authority given by the principal to the

broker for the latter to negotiate the sale,


purchase, lease, exchange, or mortgage
of property within a stipulated period and
at a stated price and terms.

MULTIPLE LISTING a cooperative arrangement among

broker who are members of a realty


association where properties for sale or
wanted are circulated to all members
and commission is shared between the
listing member and selling member with
a nominal percentage going to the
association as service fee.

OPTION

a contract between the seller and the

buyer wherein the seller, for a


consideration known as option money,
binds himself to reserve the property for
the buyer to purchase at a stipulated
price, and within a stipulated period.

PROCURING CAUSE

REAL ESTATE BROKER

the act of the broker which is

instrumental in effecting the


meeting of minds between the
seller and the buyer as to price
and terms.

a natural or juridical person who,

on behalf of a principal and for


or, in expectation of commission,
fee or other valuable
consideration, negotiates the
sale, purchase, lease, exchange,
or mortgage of real property.

FINANCING
ACCELARATION CLAUSE a provision in a promissory note
or financial instrument which
renders the remaining principal
balance of the loan immediately
due and payable upon default in
any stipulated installment.

AMORTIZATION

the periodic installment which

includes principal and interest.

AUTOMATIC REDEMPTION CLAUSE a provision in blanket


mortgage (mortgage covering two
or more properties) which
releases a property from the
mortgage upon payment of its
loan value.
BALLOON PAYMENT

BUYERS EQUITY

is the final payment in an

installment plan which is greater


than previous installments and
which liquidates the entire
obligation.
the difference between contract
price and the loanable amount.

BUYERS FULL DOWN PAYMENT is buyers equity plus the


miscellaneous expenses
such as title transfer,
mortgage registration, fire
insurance, mortgage
redemption insurance, etc.
COMMUNITY MORTGAGE a financing scheme under the
unified lending program to enable
residents in depressed areas to
acquire their lot by organizing
themselves into a cooperative.
ESCALATION CLAUSE

a stipulation authorizing periodic


increase of interest rate or rental.

LOAN VALUE

the value of a property which is a


certain percentage of its fair
market value which the bank is
willing to grant with only
property as security.

the

OWNERSHIP
ABSTRACT OF TITLE

a condensed history of the title

AIR RIGHT

right of landowner to use and control the

CAPITAL PROPERTY

refers to property exclusively own by the

CLOUD ON TITLE

an outstanding claim which, if valid,

consisting of the various links in the


chain of title, together with statement of
all liens, charges or encumbrances
affecting the title.
air space over his hand, subject to the
requirements of aerial navigation and
other laws and regulation.
husband

would impair or adversely affect the


owners title. Example: Mr. A dies and
bequest a parcel of land to B, in his will.
As widow is contesting the validity of the
bequest. During the pendency of the
case, there is a cloud on Bs title.

DOMINANT ESTATE

land which does not have access to a

public road which is given a right of way


through an adjoining land.

EMINENT DOMAIN (EXPROPRIATION) right of the state or

any of its instrumentalities to take private


property for public use upon payment of
just compensation.

ESCHEAT

reversion of private property to the State

FEE SIMPLE

the bundle of rights which are inherent in

due to the intestate death of the owner


who is not survived by any legal heir.

ownership without any limitations or


restrictions other than those provided by
law, annotated on the title, or stipulated by
contract. The bundle of rights include the
right to possess, to use, to dispose, to the
fruits and to vindicate or recover.
SERVIENT ESTATE land through which a right of way is given
in favor of another land.

PARAPHERNAL PROPERTY refers to property owned


exclusively by the wife.
RIPARIAN OWNER

owner whose land abuts a river.

STEWARDSHIP CONCEPT OF OWNERSHIP a mandate to


owners to use their property in a
manner that will promote not only
their interest but also the general
welfare and further decrees that
when ones utilization is not
conducive to general welfare or the
extent of his ownership exceeds the
requirements of his needs, then the
State may exercise its power to
regulate and control ownership.
TENANTS RIGHT OF FIRST REFUSAL the priority right of a
lesses of land on which he has build his
house to buy the land provided that 1) he is a
legitimate tenant for at least ten years 2) the
land is located in an urban land reform zone,
and 3) the landowner is selling the land.

TAXATION
FAIR MARKET VALUE the price at which a willing seller will
sell and a willing buyer will buy,
neither being under abnormal
pressure.

ACTUAL USE

the use to which the property is

ASSESSMENT

the procedure or methodology for

actually or predominantly devoted.


arriving at which the assessed value
is set. (Market value x assessment
level= assessed value)

ASSESSMENT LEVEL a percentage of market value

prescribed by law to arrived at by


multiplying market value by
assessment level

ASSESSED VALUE

value of real property for realty tax


purpose which is arrived at by
multiplying market value by
assessment level.

CAPITAL ASSET

property not used by the owner as


inventory for sale or property not used on
connection with trade, business or
source of income.

CAPITAL GAIN TAX a tax payable to the Bureau of Internal


revenue for sale, transfer or other
disposition of capital asset by an
individual, corporation, estate, or
trust.

ORDINARY ASSET property held by the owner as inventory


for sale or used in connection with trade,
business or source of income of the owner.

WITHHOLDING TAX a tax payable to the Bureau of Internal


revenue for sale , transfer or other
disposition of ordinary asset by an
individual , corporation, estate or trust.

APPRAISAL AND ECONOMIC


APPRAISAL

the process of estimating the value

BUYERS MARKET

a condition obtaining in an area at

CONTRACT RENT

the rental stipulated to be paid in a

of real property or any interest


therein as if a given time and for a
specific purpose.

a certain time when there are many


properties for sale while there are
few buyers, in which case price
tends to go down.
lease contract

CORNER INFLUENCE the added desirability or utility of a


COST APPROACH

lot due to its frontage to two or


more streets.
a method of estimating the fair
market value of an improvement
by estimating the present
reproduction cost and deducting
depreciation.

DEPRECIATION

use in value due to physical deterioration

(wear and tear), functional obsolescence


(defective lay-out such as narrow
corridors or high ceilings), or economic
obsolescence (factor outside the property).

ECONOMIC RENT the potential rental which a property can

command, taking into consideration the rate


of nearby or comparable properties.

ENCROACHMENT the displacement of an existing use by non-

conforming use, such as locating a factory in


a residential neighborhood.

ECONOMIC LIFE the period during which a property can be

profitably used, or the period during which a


building is expected to generate more income
than operating expenses.

INCOME APPROACH the process of estimating the value of


an income property by capitalizing its
annual net
income.
INCREASING AND DIMINISHING RETURN, PRINCIPLE OF
states that the application of more
factors of
production will tend to increase
net income up to a certain
point, beyond
which the introduction of more factors of
production will tend to decreases net
income.
INFILTRATION
the displacement of present residents by
people of lower economic status or
different social and
cultural background.
REAL ESTATE
thereon.

land and all permanent improvement

MARKET DATA APPROACH a process in determining

value of a property by comparing it with


nearby or comparable properties which
were subject of recent sales or offerings
and making positive or negative
adjustment depending on whether the
comparative are superior or inferior based
on such factors as location, size and
dimensions, neighborhood, utilities and
facilities, time element, etc.

MULTIPLIER EFFECT OF REAL ESTATE states that real

estate is considered as a spark plug


which triggers activities in allied industries,
creates income opportunities for different
private sectors and enhances the market
for construction materials, furnitures and
appliances.

OVER IMPROVEMENT an improvement which is not

suitable to the sited on which it is placed


because of excessive size or cost.

PROGRESSION, PRINCIPLE OF appraisal principle which


holds that the value of a property tends to
be enhanced by association with superior properties.
REGRESSION, PRINCIPLE OF an appraisal which holds that the
value of a property tends to be adversely affected by
association with inferior properties.
SUBSTITUTION, PRINCIPLE OF an appraisal principle which
holds that the value of a replaceable property is
inferred from the value of a substitute property,
assuming there is no costly delay in acquiring the
substitute property. This is based on the assumption
that no prudent buyer will pay more than what it will
cost him to acquire an equally desirable substitute
property.
UNDER-IMPROVEMENT an improvement which is not suitable to
the site on which it is placed because of deficient size
or cost.

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