Agent
An individual/entity who transacts, represents, or manages business for another individual/entity. Permission is provided by the individual/entity being represented.

Cancellation Clause
A provision in a contract (e.g., lease) that confers the ability of one in the lease to terminate the party's obligations. The grounds and ability to cancel are usually specified in the lease.

Capital Improvement
Any major physical development or redevelopment to a property that extends the life of the property. Examples include upgrading the elevators, replacement of the roof, and renovations of the lobby.

Certificate of Occupancy (CO)
The government issues this official form, which states that the building is legally ready to be occupied.

Contract
A legal agreement between entities that requires each to conduct (or refrain from conducting) certain activities. This document provides each party with a right that is enforceable under our judicial system.

Deed
A signed, written instrument that conveys title to real property.

Escrow
A written agreement among parties, requiring that certain property/funds be placed with a third party. The object in escrow is released to a designated entity upon completion of some specific occurrence.

Exclusive Agency
An agreement in which one broker has exclusive rights to represent the owner or tenant. If another broker is used, both the original and actual broker are entitled to leasing commissions.

Fixtures
Personal property so attached the land or building (e.g., improvements) it is considered part of the real property.

Grace Period
Additional time allowed to complete an action (e.g., make a payment) before a default or violation occurs.

Instrument
A written legal document created to secure the rights of the parties participating in the agreement.

Lease
A contract whereby the landlord grants the tenant the right to occupy defined space for a set period at a specific price (i.e., rent).

Listing
An employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.

Market Price
The actual selling or leasing price of a property.

Market Value
The expected price that a property should bring if exposed for lease in the open market for a reasonable period of time and with market savvy landlords and tenants.

Multiple Listing
An arrangement among Real Estate Board of Exchange Members, whereby each broker presents the broker's listings to the attention of the other members so that if a lease results, the commission is divided between the broker bringing the listing and the broker making the lease.

Notary Public
A public officer who is authorized to witness and verify certain documents (e.g., contracts, deeds, mortgages). Also, an affidavit may be sworn before this public officer.

Obligee
The person who will receive the outcome of an obligation.

Obligor
An individual who has engaged to perform an obligation to another person (i.e., obligee).

Open Listing
A listing given to any broker without liability to compensate any broker except the one who first secures a buyer who is ready, willing, and able to meet the terms of the listing, or secures the acceptance by the landlord of a satisfactory offer; the lease of the property automatically terminates the listing.

Option
A right given to purchase or lease a property upon specified terms within a specified time. If the right is not exercised, the option holder is not subject to liability for damages. If the holder of the option exercises it, the grantor of option must perform the option's requirements.

Personal Property
Any property which is not real property. Examples include furniture, clothing, and artwork.

Power of Attorney
A written instrument duly signed and executed by an individual which authorizes an agent to act on his behalf to the extent indicated in the document.

Principal
The employer (e.g., landlord) of an agent or broker. This is the agent's or broker's client.

Real Property
Land and any capital improvements (e.g., buildings) erected on the property.

Square Feet
The usual method by which rental space is defined. It is the area of that space, calculated by taking length times width. For example, a room 30 feet by 60 feet has an area of 1,800 square feet.

Statute
A law established by an act of a legislature.

Statute of Limitations
A law barring all right of redress after a certain period of time from the moment when a cause of action first arises.

Tort
A wrongful act or violation of a legal right for which a civil action will lie.

Variance
Government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.

Violation
Act, condition, or deed that violates the permissible use of property.

Void
Something that is unenforceable.

Voidable
A situation which is capable of being unenforceable but is not so unless direct action is taken.

 

 

 

 

What is a Deed of Trust?

 

A deed of trust contains three parties:

 

  • The Trustor, which is you, the borrower

     

  • The Trustee, which is an entity that holds "bare or legal" title

     

  • The Beneficiary, which is the lender
The deed of trust is an instrument that identifies the following:
  • Original loan amount

     

  • Legal description of the property being used as security for the mortgage

     

  • The parties

     

  • Inception and maturity date of the loan

     

  • Provisions of the mortgage and requirements

     

  • Late fees

     

  • Legal procedures

     

  • Acceleration and alienation clauses

     

  • Riders, if any, regarding such clauses as prepayment penalties or terms of an adjustable rate mortgage

 

What is a Trustee?

Because mortgages do not contain a trustee, many borrowers are confused between a mortgage and a deed of trust. Deeds of trust contain a trustee, an independent third party that does not represent the borrower nor the lender.

 

  • The trustee is an entity, generally a title company, that holds the "Power of Sale" in the event of default.

     

  • The trustee also reconveys the property once the deed of trust is paid in full.
  • In the event of a default, the trustee files a Notice of Default; however, in most instances, the trustee will substitute another trustee to handle the foreclosure under a Substitution of Trustee.

     

  • After the 90-day period in the public records, and a 21-day publication period in the newspaper, the trustee then has the power to sell the property on the courthouse steps without a court procedure.
  • During the three months following recordation of the Notice of Default, the borrower can redeem the property by making up the back payments and paying the trustee's fees.
  • Once the trustee sells the property at a Trustee's sale, it is final.

 

What is a Promissory Note?

Whereas the deed of trust is security of the debt, secured by the property, the promissory note is secured by the deed of trust and is the evidence of the debt.

 

  • The promissory note is a promise to pay, signed by the borrower in favor of the lender.

     

  • It contains the terms of the loan such as the interest rate and payment obligations.
  • The promissory note is generally not recorded.

     

  • When the loan is paid, the promissory note is marked "paid in full" and returned to the borrower, along with a recorded Reconveyance Deed.
  • During the term of the loan, the lender retains the promissory note.

 

Before Signing a Promissory Note and Deed of Trust

Read both documents, including the pre-printed portions. You might ask the closer to send you a blank deed of trust and promissory note beforehand. Because preparers are human and can make mistakes, here are the important items to review:

  • Spelling of trustors' names

     

  • Principal balance of the loan

     

  • Interest rate (and the rider, if adjustable)

     

  • Payment amount

     

  • Prepayment penalties, if any

     

  • Address of property