Oscar Castillo
"Residential" Real Estate

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    - Glossary

 

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Indemnify  To protect against damage, loss, or injury; insure.  Also can be looked at as:  to make compensation to for damage, loss, or injury suffered.

Indemnity   Compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability for damages. The concept of indemnity is based on a contractual agreement made between two parties, in which one party agrees to pay for potential losses or damages caused by the other party..... Indemnity may be paid in the form of cash, or by way of repairs or replacement, depending on exactly what is spelled out in the indemnity agreement.

Identification period   the period during which the exchanger must identify replacement property in a 1031 tax deferred exchange. The identification period starts on the day the exchanger transfers the first relinquished property and ends at midnight on the 45th day thereafter.

Illusory contract   an apparent contract that is not a contract because the parties have not agreed to be bound.

Imminent default    is a term that refers to a borrower who is current on his or her mortgage loan but is at risk of not being able to continue to pay the monthly home loan payments due to a financial hardship or an upcoming interest rate increase or payment reset that will cause the monthly payments to become unaffordable.

Implied agency   an agency agreement created by the actions of the parties, and not a stated (written or verbal) agreement.

Implied easement   when the owner of two or more adjacent properties sells a part thereof, he or she grants by implication all those apparent and visible easements which are necessary for the reasonable use of the property granted.

Implied warranty   a theory in landlord/tenant law in which the landlord renting residential property implies quiet enjoyment of the property or that the property is habitable.

Impound account  a trust account established to set aside funds for future needs relating to a parcel of real property. Many mortgage lenders require an impound account to cover future payments for taxes, assessments, private mortgage insurance and insurance in order to protect their security from defaults and tax liens. In the case of FHA loans, many lenders require a tax reserve of six months and an insurance reserve of one year.

Improvement   (1) Any structure, usually privately owned, erected on a site to enhance the value of the property--for example, building a fence or a driveway. (2) A publicly owned structure added to or benefiting land, such as a curb, sidewalk, street or sewer.

Incentive zoning   zoning that offers incentives to developers, such as retail shops on the first floor of multistory office buildings if a plaza for public use is included.

Inclusions    a section of the offer to purchase designed to exhibit any extra items the buyer or seller would like to be included with the real estate (i. e. personal property).

Income and expense report   a financial report generated by a property manager that details the income and expenses from a property and the amount remitted to the owner.

Income approach   the process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life.

Income ratio   the relationship between a person's total income and the amount needed to make one month's mortgage payment.

Incorporeal right   a “non-possessory”  right in real estate; for example, an easement or a right of-way.

Increasing and diminishing returns   the addition of more improvements to land and structures which increases value only to the assets' maximum value. Beyond that point, additional improvements no longer affect a property's value. As long as money spent on improvements produces an increase in income or value, the law of increasing returns applies. At the point where additional improvements do not increase income or value, the law of diminishing returns applies.

Indemnify   to make payment for a loss.

Independent   a brokerage firm operating on-its-own without an affiliation with a regional or national franchise.

Index   used to set interest rates, such as the six month Treasury bill rate.

Index lease   a lease containing an escalation clause that is tied to an index.

Index method   the appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs.

Index rate   the rate to which the interest rate on an adjustable rate loan is tied  to at set adjustment periods, the borrower's interest rate will move up or down as the index rate changes.

Individual Retirement Account (IRA)   an Individual Retirement Account (IRA) is an IRS-approved way for any working individual to set aside savings for retirement each year in a tax-deferred account. The individual is not taxed for accumulated earnings in an IRA until benefits are withdrawn (usually after retirement when the person may be in a lower income tax bracket).

Industrial property/industrial parks   a property primarily used for the production or manufacture of goods or products.

Industrial revenue bonds   bonds issued for the development of an industrial park or the construction of a building for lease to commercial tenants.

Inflation   the gradual reduction of the purchasing power of the dollar, usually related directly to the increases in the money supply by the federal government.

Ingress   a way to enter a property .- Access to property.

Inheritance taxes   an "estate" tax imposed by the state on heirs for their right to inherit property. The tax is not levied on the property itself, but rather on the heirs for their right to acquire the property by succession or devise. Therefore, the rates or the deductions may vary depending on the degree of the relationship.  At the time of a person's death, a statutory lien usually attaches to all real property interests owned by the decedent, which lien remains in effect until the inheritance taxes have been paid and a "tax clearance" is issued. This applies even if property was held in joint tenancy with right of survivorship.

Initial rate   the inital rate charged to a borrower for the first adjustment period of an adjustable rate mortgage.

Inspections   the analysis of the home to find defects that may exist.

Installment contract   a contract for the sale of real estate whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until a future date, which may not be until final payment.  Also called a contract for deed or articles of agreement for warranty deed.

Installment note   a promissory note with payments of principal and interest made at designated intervals. (See promissory note)

Installment sale   an income tax method of reporting gain received from the sale of real estate when the sales price is paid in installments

Institutional lenders   Savings and loan associations, banks, life insurance companies and mutual savings banks.

Insurance Loan   when cash value of a life insurance policy is borrowed by the insured.

Insurance companies    accumulate large sums of money from the premiums paid by their policyholders. While part of this money is held in reserve to satisfy claims and cover operating expenses, much of it is free to be invested in profit-earning enterprises, such as long term real estate loans. Although insurance companies are considered primary lenders, they tend to invest their money in large, long-term loans that finance commercial and industrial properties rather than single-family home mortgages.

Interest   a charge made by a lender for the use of money.

Interest factor   in a table, numbers derived from formulas used to determine the present or future value of money. Interest factors are a function of interest rate and time, and can be derived for any combination of the two.

Interest-only    term loan calling for payments of interest only, not to include any amount for principal.

Intermediate theory   some states have adopted an intermediate theory of mortgage based on the principles of title theory, but requiring the mortgagee (lender) to foreclose to obtain legal title as is necessary in lien theory.

Interim Financing   temporary or short term loans. Often used with new construction. Usually replaced with a permanent long-term mortgage.

Interplead   a judicial proceeding by which, when two parties make the same claim against a third party, the rightful claimant is determined. As such, he could require them to litigate their problems between themselves, instead of litigating it with him.

Interpleader   a judicial proceeding where an innocent third party, such as an escrow agent or broker, can deposit with the court property or money that he or she holds and that is subject to adverse claims. The court can then distribute it to the rightful claimant.

Interim financing   a short-term loan usually made during the construction phase of a building project (in this case often referred to as a construction loan).

Interim occupancy agreement   an agreement allowing a buyer to take possession of a property as a tenant prior to close of escrow.

Internal Rate of Return (IRR)   a multi-year analysis of rate of return.  IRRs are the best rate of return indicators, because they require an analysis of the investor's entire holding period, not just a single year. The discounting process takes into consideration the time value of money and thereby produces a more realistic rate of return.

Intestate   the condition of a property owner who dies without leaving a valid will. Title to the property will pass to the decedent's heirs as provided in the state law of descent.

Intestate succession   a succession of a property to the heirs when a person dies without a will.

Intrinsic value   an appraisal term referring to the value created by a person's personal preferences for a particular type of property.

Inverse condemnation   a property owner forcing a government to take a property by eminent domain when that government's actions resulted in the owner's inability to use the property. (See condemnation, eminent domain)

Investment   money directed toward the purchase, improvement and development of an asset in expectation of income or profits.

Investment group financing   large real estate projects, such as highrise apartment buildings, office complexes and shopping centers, are often financed as joint ventures through group financing arrangements like syndicates, limited partnerships and real estate investment trusts.

Investor   (in a Short Sale or Foreclosure) the person or institution that owns the mortgages or mortgage-backed securities, providing the funds that the homeowner is able to borrow to purchase a property. Each investor can set different policies. Many loans have multiple investors.

Investor decision  (in a Short Sale)  when a homeowner wants to sell a property for less than what is owed on the mortgage, the servicer must obtain approval from the owner of the mortgage or mortgage-backed securities. That owner’s “yes” or “no” response to this short sale proposal is the investor decision. Lending institutions/banks are loan servicers and has a fiduciary duty to the mortgage owner (investor)

Involuntary lien   a lien placed on property without the consent of the property owner.

IRS Form 4506 - "Request for Copy of Transcript or Tax Form" . When applying for a mortgage a lender may ask you to sign this form. Upon a borrower signing this form, this in effect will allow the lender to obtain a copy of the borrower's tax returns from the IRS.  Lenders contend that the form is used as a "quality control" method to discover and prevent borrower inaccuracies or mortgage fraud. Before a loan is closed (ie: before Close-of-Escrow), most lenders will require two years' tax returns from borrowers especially if you are self-employed.  The lender will then match these IRS returns with the copies/numbers you provided with your loan application. If the numbers are different, then the borrowers may have provided incorrect and/or fraudulent tax returns to the lender.  Note: The fact that your lender has asked you for a signed IRS form 4506 does not necessarily mean that they suspect fraud or have identified an issue with your loan.  For the most part,  it may simply be part of the lenders routine lending process. Keep-in-mind that during any loan application, it is necessary for any mortgage lender to verify the information you provide to them.  So as a rule, when filling out documents to obtain a loan, always provide the most accurate information.  Ensure that all statements you make are accurate and verifiable to avoid any problems with this step or other verification steps the lender will take.

IRS Form 4506-T  is a request for a transcript of your tax return or other information for specified financial years or periods .  If you have not filed your tax returns, you may want to submit this form. The IRS will provide you with all of the documentation it has received regarding the tax year(s) you have requested in the form.  The package will include and be not limited to your W-2 information, 1099 information, "verification of non-filing".  If you have submitted to the IRS any documentation in the past, they will have the copies and will provide them to you so you can prepare yourself to prepare your tax returns.  Another important use of the 4506-T form is for the IRS to issue the taxpayer transcripts or information of the tax payer to a 3rd-party who is authorized by the tax payer. Usually the 3rd party is a mortgage lender.

IRS tax lien   a federal tax lien, or Internal Revenue Service (IRS) tax lien, results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes. A federal tax lien is a general, statutory, involuntary lien on all real and personal property held by the delinquent taxpayer. Its priority, however, is based on the date of filing or recording. - Recorded Federal Tax Liens (IRS) are attached to all assets the taxpayer owns... It is unlikely that an owner will be able to sell or refinance a property with an existing recorded IRS Lien against the owner/s. The Federal Tax Lien must be paid in accordance to a written demand statement from the IRS in order to clear the IRS Lien.

 

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