Oscar Castillo
"Residential" Real Estate

L

    - Glossary

 

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Land   the earth's surface, extending downward to the center of the earth and upward infinitely into space, including things permanently attached by nature, such as trees and water.

Land contract   a land contract is a real property sales contract.

Landlocked - referring to a parcel of real property which has no access or egress (entry or exit) to a public street and cannot be reached except by crossing another's property.   In such a case there is an "implied easement" over the adjoining lot from which it was created (carved out).

Landlord   the lessor or the owner of leased premises. The landlord retains a reversionary interest in the property, so that when the lease ends the property will revert to the landlord.

Land trusts   a few states permit the creation of land trusts, in which real estate is the only asset. As in all trusts, the title to the property is conveyed to a trustee, and the beneficial interest belongs to the beneficiary. In the case of land trusts, however, the beneficiary is usually also the trustor. While the beneficial interest is personal property, the beneficiary retains management and control of the real property and has the right of possession and the right to any income or proceeds from its sale.  One of the distinguishing characteristics of a land trust is that the public records usually do not name the beneficiary. A land trust may be used for secrecy when assembling separate parcels.

Latent defect   a hidden structural defect that would not be discovered by ordinary inspection and that threatens the property's soundness or the safety of its inhabitants. Some states impose on sellers and licensees a duty to inspect for and disclose latent defects. Buyers have been able to either rescind the sales contract or receive damages when a seller fails to reveal known latent defects. The courts have also decided in favor of the buyer when the seller neglected to reveal violations of zoning or building codes.

Law of agency   a fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.

Leach Lines - also known as leach fields, drain fields, or leach drains. They are used to remove "contaminants and impurities" from the liquid that emerges from a septic tank.  The (1) septic tank, the (2) septic drain fields, and the (3) associated piping -  together are the "makeup" of a complete septic system.

Leach Line "Reserve" - every new home or building served by a septic system is required to have a designated "replacement or reserve" area. This is a designated area suitable for a new drainfield if necessary. (A "reserve" area should have been designated as part of the permit process for any sewage system installed since 1980.)  Once a septic system has failed, it is too late to solve the problem by pumping your tank. A new drain field will have to be installed at a different location - which will be installed and/or connected at the designated RESERVE area. This is why it is important to know where the replacement area is located.

Lead   is an element that was once used as a pigment and drying agent in paint. An elevated level of lead in the body can cause serious damage to the brain, nervous system, kidneys and red blood cells. The degree of harm is related to the amount of exposure and the age at which a person is exposed. The Federal government estimates that lead is present in about 75 percent of all private homes in the United States built before 1978

Lease   an agreement, written or unwritten, transferring the right to exclusive possession and use of real estate for a definite period of time. To create a valid lease, the lessor must retain a reversionary right; that is, the lessor (landlord) must grant the right of possession to the lessee (tenant) but retain the right to retake possession after the lease term has expired.

Lease option   a lease under which the tenant has the right to purchase the property either during the lease term or at its end.

Leasing agent   a Real estate salespeople who specialize in leasing rental properties. Skilled at telephone techniques, on-site customer qualifying and closing.

Legacy   a disposition of money or personal property by will.

Legal description   a description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it.

Legally competent parties  individuals who are recognized by law as being able to contract with others; those of legal age and sound mind.

Legal life estate   a legal life estate is not created voluntarily by an owner. Rather, it is a form of life estate established by state law. It becomes effective automatically when certain events occur.

Lender's escrow instructions   a lender's written instructions to the escrow company stating the conditions which must be met before the deed of trust can be recorded.

Lessee   the person to whom property is rented or leased; called a tenant in most residential leases.

Lessor    the person who rents or leases property to another. In residential leasing, he or she is often referred to as a landlord.

Letter of Demand - (also known as a "Demand for Payoff " or "Payoff Statement") is a statement prepared by a lender showing the remaining terms on a mortgage or other loan. The payoff statement shows the remaining loan balance and number of payments and the rate of interest. It also states the amount of interest that will be rebated due to prepayment by the borrower.  Payoff statements are prepared whenever a borrower considers paying off a loan early. Although payoff statements can apply to any type of loan, they are most commonly prepared for mortgages.

Leverage   using someone else's money to purchase a property. Refers to the ability to use the investment as collateral for a loan.

Levy   to assess, seize or collect. To levy a tax is to assess a property and set the rate of taxation. To levy an execution is to officially seize the property of a person in order to satisfy an obligation.

Liability   Can be regarded as (1) Legal responsibility for an act or   (2) A debt.

License   (1) A privilege or right granted to a person by a state to operate as a real estate broker or salesperson. (2) The revocable permission for a temporary use of land—a personal right that cannot be sold.

Lien     the tie that binds property to a debt or claim for its satisfaction.  The legal process of seizing the real or personal property of a defendant in a lawsuit by levy or judicial order, and holding it in court custody as security for satisfaction of a judgment. The lien is thus created by operation of law, not by private agreement. The plaintiff may recover such property in any action upon a contract, express or implied.

Lien Release   written report of the settlement of a lien. It is recorded in the public record as evidence of payment. The homeowner and listing agent must identify all liens and seek release. The seller and the seller’s agent are responsible for identifying all liens and obtaining a release of any liens.

Lien stripping - results when a homeowner files for bankruptcy, and the second lien holder (recognizing that there is not a slight chance that they will get any money) decides to release their lien. The result being sellers may now be finding equity that thought they had lost.  Without lien stripping available, many homeowners who participated in a Chapter 7 bankruptcy will and/or could now be in a situation where they can consider short selling.

Lien waiver   documents signed by subcontractors and suppliers, indicating they have received payment in full. Basically it is a document that releases a homeowner (or other consumer) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.

Life estate   any estate in real or personal property that is limited in duration to the life of its owner or the life of some other designated person. Although classified as a freehold estate because it is a possessory estate of indefinite duration, a life estate is not an estate of inheritance. For example, Bob Smith conveys his home to his son John and reserves a life estate for himself. Bob (the life tenant) has a life estate, and Hohn has a reversionary interest in the property. When Bob Smith dies, the fee simple property reverts to John.

Life tenant   a person in possession of a life estate.

Lifting clause   a provision in a junior mortgage that allows the underlying senior loan to be replaced or refinanced so long as the amount of the new senior loan does not exceed the amount of the first lien outstanding at the time the junior loan was made.

Like kind   a term relating to the nature of a property rather than its quality or quantity. Only like kind properties qualify for a real estate exchange and the resulting tax benefit.

Lime   Lime is a general term for calcium-containing inorganic material.  It is also the name of the natural mineral (native lime).  The word "lime" originates with its earliest use as building mortar material and has the sense of "sticking and adhering".  More commonly known as a bonding agent when water is added.  This lime material are used in large quantities as a building and engineering materials (including limestone products, concrete and mortar)....Lime production process - Limestone is extracted from quarries or mines. Part of the extracted stone, selected according to its chemical composition and granulometry, is calcinated at about 1000°Celsius (or 1,832 degrees in Farenheit) in different types of lime kilns.  A lime kiln is used to produce quicklime through the calcination of limestone (calcium carbonate). The quicklime bonding agent is mixed in building products such as concrete, stucco and mortar cement (generally used to bond bricks or stones)

Limited liability company (LLC)   LLCs are a relatively recent form of business organization. An LLC combines the most attractive features of limited partnerships and corporations. The members of an LLC enjoy the limited liability offered by a corporate form of ownership and the tax advantages of a partnership. In addition, the LLC offers flexible management structures without the complicated requirements of S corporations or the restrictions of limited partnerships.

Limited partnership   consists of one or more general partners as well as limited partners. The business is administered by the general partners and funded, for the most part, by limited or silent partners. Each limited partner can be held liable for business losses only to the extent of his or her investment.

Line of credit   is a pre-established amount of credit extended to a borrower by a lender that the borrower can draw against as needed. There usually aren’t any rules that dictate how the borrower can or should use the line of credit however the line should never be used frivolously. An individual can apply for and receive a line of credit and so can a business. There are several ways a line of credit differs from a loan. First of all, the line of credit application process is simpler and approval usually takes days rather than weeks. When you obtain a loan, you are given a lump sum of money. With a line of credit, you have a maximum amount of money (or credit) available to you, but you use only what you need.

Liquidated damages   an amount predetermined and agreed by the parties to an agreement as the total amount of compensation an injured party should receive if the other party breaches a specified part of the contract.

Liquidity   refers to the time it takes to convert an asset to cash that is a reflection of its market value.

Lis Pendens   Lis pendens means a notice of pending action, "a suit pending". A lis pendens is a written notice that a lawsuit has been filed involving the title to real property or some interest in that real property.  The title to certain property is in litigation, and that they are in danger of being bound by an adverse judgment. Notice to the defendant who owns the property and potential buyers or financiers is given by filing the lis pendens with the clerk of the court, certifying that it has been filed, and then recording it with the County Recorder.

Listing Agent   the real estate agent who obtained a listing contract from a property owner that authorizes the broker for whom the agent works to market and solicit offers to buy the owner's property on specified terms and conditions. A listing agreement obligates the real estate professional (or his or her agent) to seek qualified buyers, report all purchase offers and help negotiate the highest possible price and most favorable terms for the property seller.

Listing agreement   a written employment agreement between a property owner and a real estate broker authorizing the broker to find a buyer or a tenant for certain real property. Listing can take the form of open listings, net listings, exclusive-agency listings, or exclusive-right-to-sell listings. The most common form is the exclusive-right-to-sell listing.

Listing broker   the broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the cooperating broker, from whose office negotiations leading up to a sale are initiated. The listing broker and the cooperating broker may be the same person.

Listing Office Commission (LOC)   is the brokerage commission paid by the seller to a real estate broker to compensate the broker(s) involved in the sale for their services in marketing the property, finding a buyer, and assisting in the negotiations. Brokerage commissions are usually computed as a percentage of the sale price and are established in a listing agreement between the seller and the listing broker.

Littoral rights   the rights of a landowner whose land borders a pond, lake or ocean shore-line where the body of water is non-flowing. Littoral rights extend to the mean high watermark of ocean or tidal waters.

Living trust   an arrangement in which a property owner (trustor) transfers assets to a trustee who assumes specified duties in managing the asset. After payment of operating expenses and trustee's fees, the income generated by the trust property is paid to or used for the benefit of the designated beneficiary.

Loan application   a lender's initial source of information on a borrower/applicant and the collateral involved; stipulates the amount of money requested and repayment terms.

Loan commitment   a lender's agreement to lend a specified amount of money which must be exercised within a set time limit. A final loan commitment is given after a more detailed review of your credit report plus verification of all the information you provided on your application, all documentation and underwriting requirements and conditions are met and your mortgage lender receives an acceptable property "appraisal and a clear title report".  When all of the just mentioned requirements are met, your mortgage lender  will be able to turn your Preapproval Letter into a final commitment and move your loan to the closing stage.

Loan Commitment Letter  is the document an underwriter sends to the loan officer/originator once a loan is approved. This is the real thing!  A commitment letter will detail every aspect of the mortgage. It will include the terms and interest rate. It will itemize the “Conditions” (the items that must be provided or explained for final approval). The commitment letter will be dated and it will have an expiration date. It may be signed by the underwriter. The Loan Commitment Letter is a formal, legally binding document.  So, if you want to be sure your pre-approval letter is really an approval, place a request with your loan officer/originator to see a Commitment Letter from the underwriter! If by chance you are unfamiliar with anything in the loan commitment letter, have your loan officer explain the unfamiliar portions. It is after all, your loan commitment letter and there is no reason you shouldn’t see it!  If the home seller has a savvy Listing Agent, the List Agent will and can verify the validity of the Pre-Approval Letter by requesting a Loan Commitment Letter. The Buyer Agent can also request the same to make sure the loan is going smoothly and all loan “Conditions” have been met.

Loan condition - when underwriting reviews a borrower's loan, if underwriting feels it is missing an item pertinent to perfecting the loan for the borrower, the underwriter will call for a condition to be fulfilled prior to funding the loan. A  loan condition could be a variety of things relative to loan approval.  The underwriter could require that the borrower submit the last 12 months of bank statements, asking the borrower to find three more credit references and/or making sure the appraisal of home is within the underwriter guidelines, to potential buyer to account and explain recent large bank deposits if any.

Loan documents   documents prepared by a lender in conjunction with granting the loan to the borrower; may include a promissory note, deed of trust, and required loan disclosure documents.

Loan fees   also called loan origination fees. Costs charged by a lender for giving out a loan; may include points, tax service fees, an appraisal fee, etc.

Loan funding conditions - these are items that must be delivered to the mortgage underwriter before the loan can be "funded". An example of a funding condition would be proof that the buyer has a fire insurance policy ready to immediately take effect upon closing.

Loan Officer - is the real name for a person more commonly called a Loan originator. A loan originator/officer does exactly what the title implies. He or she creates (or originates) mortgage business. A loan officer/originator’s primary job is to supply a flow of new loan clients to lending institutions.  This includes coordinating a Title Company, an Appraisal Company, a mortgage processor, Escrow, in most all cases 2-Realtors® (one for the buyer and one for the seller) and of course, the borrower. A key note and important to know is that a loan originator/officer does not approve loans. (also refer to loan originator)

Loan origination fee   the processing of a mortgage application is known as loan origination. When a mortgage loan is originated, a loan origination fee, or transfer fee, is charged by most lenders to cover the expenses involved in generating the loan. These include the loan officer's salary, paperwork and the lender's other costs of doing business.

Loan Originator - is the real name for a person more commonly called a Loan Officer. A loan originator/officer does exactly what the title implies. He or she creates (or originates) mortgage business. A loan originator’s primary job is to supply a flow of new loan clients to lending institutions.  This includes coordinating a Title Company, an Appraisal Company, a mortgage processor, Escrow, in most all cases 2-Realtors® (one for the buyer and one for the seller) and of course, the borrower. A key note and important to know is that a loan originator/officer does not approve loans. (also refer to loan officer)

Loan Servicer   the company that collects monthly mortgage payments and disperses property taxes and insurance payments. Loan servicers also monitor nonperforming loans, contact delinquent borrowers and notify insurers and investors of potential problems. Loan servicers may be the lender or a specialized company that just handles loan servicing under contract with the lender or the investor who owns the loan.

Loan-to-value ratio  (LTV) the relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.

Loan Underwriter  - is an employee of the bank/Lending institution. The underwriter’s job is to make sure the borrower (represented by the Loan Originator/Officer) fits the Lenders Guidelines for loan approval. The underwriter is ultimately the person who actually approves the mortgage loan. Upon loan approval,  the “underwriter” will issue a Loan Commitment  Letter.  By the way, just so you know, very few borrowers/potential home buyers ever speak with a Loan Underwriter.

Lock-in clause   a condition in a promissory note that prohibits prepayment of the note.

Lockout   a scheduled meeting at the subject property with the local sheriff to execute a writ of possession and forcibly remove the occupants.

Loss Payable Clause   a provision added to a Fire and Casualty Policy which says any loss will be paid to two or more parties as their interest may appear. Usually the owner and the mortgage lender.

Loss Mitigation   the process of a homeowner and a servicer working together to come up with a solution for avoiding foreclosure when possible. Includes home-retention options, as well as short sale or deed-in-lieu of foreclosure.

Lot    a part of a subdivision or block having fixed boundaries ascertainable by reference to a plat or survey. 

Lot-and-block (recorded plat) system   a method of describing real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as specified on a recorded subdivision plat.

Loyalty   the duty of loyalty requires the agent to place the principal's interests above those of all others, including the agent's own self-interest. The agent must be particularly sensitive to any possible conflicts of interest. Confidentiality about the principal's personal affairs is a key element of loyalty.

Low/doc or no/doc loan   loans that require little or no documentation regarding the borrower's income, assets or liabilities. Because of the higher perceived risk, these loans will usually require a larger down payment, higher interest rate and high credit score for borrowers. Conventional qualifying ratios do not apply

 

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