Glossary - I

Generally speaking, the expression illiteracy denotes the inability to read or write. However, in the context of a contract or agreement, the expression illiteracy refers to the question regarding an illiterate person and whether the contract is obligatory depends on whether the concerned person was aware of what was being signed. This rule is also known as 'non est factum', denoting a plea that the person signed a document without completely realizing its nature, for instance, signing the transfer of a property with the belief that it was only a security for a debt.
In general terms, the expression implied denotes something being expressed or state indirectly. In other words, the term means expressing an intended meaning through suggestions or inferences. In the context of a contract or agreement, the word implied denotes something created by the behavior or words of other parties and not happening owing to precise accords.
Implied conditions may be found in a variety of real estate issues. For instance, there may be an implied agency when an agent, by means of his or her conduct or behavior with a buyer or a seller, indicates that there is a client correlation with him or her. On the other hand, in the event of an implied easement, it is assumed that considering the utility of the property such rights are present regardless of the absence of any official agreement. It is advisable that all brokers and salespersons ought to endeavor to transform express or implies contracts into written agreements that evidently specify the liabilities, anticipations and precise aspects of undertaking any contract.
Implied covenants
The term implied covenant, also called implied condition, refers to a basic condition imposed by courts although it may not be implied in an agreement by the concerning parties. In terms of law, the expression denotes an unrecorded prerequisite that is considered to be significant in the light of the facts and situations of an agreement. In the context of real estate, it is assumed that the covenant or condition is present in a document or mortgage agreement listed as per the proper land registration method, irrespective of the fact whether it is present in any such deed.
Implied dual agency
In the context of real estate, the term implied dual agency refers to a situation when a brokerage unintentionally representing two parties or is unsuspectingly put in a situation where he or she may be working for two different principals, generally the seller and the buyer. Such a situation will possibly crop up when a seller has registered with a brokerage in a conventional agency relationship. In such an instance, the brokerage firms as well as all persons engaged by it or its representatives have creditable responsibilities towards the sellers by means of a direct contract and specified in the listing agreement. Nevertheless, it is possible that any one of the representatives of the brokerage may unintentionally help the buyer by providing him or her some counseling or guidance.
Such a situation may usually lead the seller as well as the buyer to have wrong assumptions. While the seller would be under the impression that the brokerage is operating only for his or her interest, having obtained some counseling or advice from one of the brokerage's representative, the buyer may be of the view that that there is an implied agency relationship with the brokerage and the concerned salesperson or representative is working for his or her benefit. The outcome of such a situation is called an implied or unintended dual agency.
Impossibility of performance
The phrase impossibility of performance generally denotes a situation, condition or fact that is outside the control of the concerned parties and in such a situation they may excuse themselves form initiating any action or performance. In this case it may denote that the measures of action are not accessible either due to its descent or obliteration, any existing or new law may be thwarting the performance, any ailment or death turning it to be impracticable and/ or imbursement or deliverance is not possible for some reason or unanticipated situations. Although virtually impossible, such situations may happen in an association between an agent and principal, usually the buyer or the seller.
Improved land
Also called 'developed land', the term improved land refers to a raw land that has been taken out of the state of nature owing to someone's or some organization's labor and efforts. An improved land denoted the opposite of the term 'raw or vacant land'. An improved land includes the establishing of municipal services, roads, street lighting, constructions and rough grading on a raw land with the objective of developing it. Usually, the expression 'improved land' is related to residential as well as commercial developments where the land is made suitable for erecting constructions.
Improvements on site
The phrase 'improvements on site' actually refers to any improvements or developments undertaken on a piece of land. Although there is no distinct delineation between the terms 'improvements on site' and 'improvements at site', the term 'improvements on sites' is generally restricted to enclosed constructions like buildings, garages and shed to be found on a site with a view to make the land usable for a particular purpose. During the evaluation of residential properties, the improvements on site are usually confined to the main building and any noteworthy accessory constructions, for instance, a separate garage or a permanent garden shelter.
Improvements to site
In the context of real estate, the phrase 'improvements to site', also called 'improvements to land', denotes any additions or improvement outside the buildings or lots that enhance the value of the property at the time of its sale. In other words, improvements to site comprise items that are either added to or taken away from the exterior part of a real property. For instance, improvements to site may include landscaping, fencing, cemented driveway, deck, and patio, vehicle parking areas, outdoor swimming pool and outdoor lighting arrangements. It may be noted here that while an outdoor swimming pool is considered to be an improvement to site, an indoor swimming pool constructed in an enclosed building is deemed as an improvement on site.
Income multiplier
The term income multiplier denotes the price (generally the current price) of a real property divided by the net income it produces during a fixed period of time. The income multiplier is a useful measure for evaluating how effective a real property is in generating income vis-à-vis the market price of the asset. In other words, the term denotes the relationship between the monthly rent generated by a property and its selling price. In the market place, there are usually two types of income multipliers and they are commonly referred to as the monthly rental factor (MRF) and the gross rent multiplier (GRM). These income multipliers are used in assessing the residential or income properties when the rent earned from them is identified.
The utility of both the MRG and the GRM is usually classified under the income approach to value. Before an evaluator uses any of the two multipliers, he or she should be cautious that the properties being evaluated possess the same features. In the event of assessing an apartment building, it is essential that the comparable properties ought to be in similar price range and of the same size and location. On the other hand, if the real property is an office building, then the evaluator needs to use real properties having similar operating expense quotients and residual economic lives. It is essential to use genuinely analogous properties as these income multipliers are attained from the real earnings generated by the real properties at the time of their sale.
Using these multipliers is advantageous for the real estate appraisers as they provide speed in calculation and owing to the simplicity of their application. However, they have their shortcomings too as they do not take care of any disparities among the properties, have no condition for variation in net incomes at a time the gross incomes may be similar and are simply applicable when there is enough comparable data. It is advisable that commercial real estate practitioners should be cautious while applying any of the two income multipliers and look for substantiating proof by means of adopting other modus operandi.
Income rate
The term income rate is generally related to the real estate evaluators and refers to the association between the projected income from a property during a single year and the value of the property. It may be noted here that the income rates are in no way rates of return, but to a certain extent normal procedures that are made use of while approximating values of real properties. In fact, the overall capitalization rate and the equity capitalization rates are instances of income rates. It needs to be noted that the income rates ought to be evidently distinguished from the yield rates. The yield rates signify the return to an investor depending on all future benefits occurring from the ownership of a property, for instance, cash flows received from operations as well as sales earnings. In addition, while yield rates are related to yield capitalization procedures, income rates associate with direct capitalization.
Income source verification
It is common fact that different lenders require different types of evidences from the borrowers to support their mortgage funding applications. In this context, a usual Income Verification Form that is filled in by the employer of the applicant offers all information regarding the dependability as well as the stability of the applicant's income flow. The questions in the Income Verification Form are prepared in such a manner that they not only reveal information regarding the present income of the applicant, but also include the future prospects of the applicant. In some cases, the lender may ask for other documents as evidence regarding the applicant's credit worthiness, but each of them has their respective restrictions.
Incurable depreciation
Incurable depreciation refers to an extensive obsoleteness or physical depreciation of a property that its repair is not economically viable. Real estate appraisers define this term as a situation when the expenses to rectify a defect in a property would exceed the benefit gained from it. In other words, the term incurable depreciation is pertinent to parts of a construction that are not prepared to be restored to their previous condition, that cannot be repaired or the repair of which is not reasonably feasible as the money required for undertaking the restoration job would be would be much greater than the benefits availed from it or the expected enhancement in the value of the property. Although the restoration of a condition may well be possible physically and/ or technically, the fact remains that whether the money and time spent on the job is actually viable economically. In fact, incurable depreciation is one facet of approximation of decrease in the value of a property through the observed condition or breakdown technique. The other method of estimating the decline in a real estate asset's value is the curable depreciation.
In simple terms, indemnify refers to a sort of insurance coverage that protects one from lose, damage or physical harm and offers recompense for any of the above casualties suffered by the individual. In other words, indemnity denotes an undertaking provided to reimburse or to offer security against any damage, loss, incurred penalties or any type of conditional accountability.
The term indemnity may be defined as a commitment by one party to indemnify the other by providing financial recompense or repair to make up for any loss or damage suffered or may be endured by the second party. In brief, indemnity may also be said to be one party's right to claim compensation from the other for the losses or damages suffered by him or her. The particulars of an indemnity are usually provided in detail in an indemnification agreement between the two parties. Alternately, they are mentioned in a clause specified in the body of the agreement between two parties.
In matters pertaining to real estate, an indenture refers to an agreement or a legal document that defines the precise objects executed by the parties to that particular contract. However, in business matters, indenture is broadly defined as a written agreement between the issuer of a bond or debenture and his or her bondholders generally denoting the interest rate, maturity date, convertibility and other stipulations. In brief, it is written note providing proof of indebtedness. However, in the context of real estate, an indenture is usually associated with the transfer of property ownership between two parties. At the same time, it may also denote an indenture of mortgage. It may be noted here that the use of term indenture is gradually waning vis-à-vis mortgages and deeds in the provincial listing arrangements.
The term index is a numerical data providing a clue of the trends associated with an economic or financial condition in the market. An index also provide an account of the worth of the securities that comprises it and regularly serve as indicators for any given market or industry as well as the standards against which financial or economic operations are gauged. Some of the major indexes for stock trading in stocks are the Dow Jones, the Toronto Stock Exchange, S&P 500 and NASDAQ. For the purpose of real estate, the Consumer Price Index (CPI) is usually utilized as a price index.
Indexed mortgage
Indexed mortgage refers to a mortgage in which the interest due to the lender may be adjusted through an index. This is a most common and widely accepted standard of interest rate.
In the context of real estate, the term inducement, also called incentive, denotes a reward, concession, allowance or benefit offered by a landlord to a potential tenant with a view to encourage him or her to sign a lease commitment or renewal. In other words, the term refers to any act of persuasion or influencing the action and/ or approach of other people through promises, demonstration or by offering some substantial benefit like cash.
It may be noted here that the provincial real estate legislations usually specify the prerequisites regarding representations and pledges made by any licensed or registered person regarding the sale, purchase or exchange of real property. Moreover, all members of the organized real estate in Canada are bound by the conditions stipulated in the CREA Code of Ethics.
The term inheritance refers to the practice of passing on titles, property, debts as well as liabilities following the death of an individual to his or her successor/ inheritor. In the context of real estate, the term denotes the passing on of a real property to the heir following the death of the owner. In the event of a person dying without leaving behind a will, the person is considered to die intestate. In such a scenario, the ownership of the real estate passes to the officially authorized heirs or any other character as stipulated by the law. On the other hand, if a will is carried out, the terms contained in it will determine the new owner/ owners of the deceased's real property. In specific cases, such as situations involving minors or mentally debilitated, necessary approvals are required from a court or a suitable government authority while disposing of the dead person's property. Any sensible real estate practitioner will always look for legal guidance while handling estates and issues related to inheritance and the proper disposition of the real property.
In-house management
In simple terms, the phrase in-house management refers to am administrative system created within an organization or business. For instance, the management is entrusted to the employees of a corporation owing a real property instead of hiring professional from outside the organization. In other words, this means that the professional real estate practitioners serve as employees, referred to as property managers, of the landlord. This system is contrary to the process of hiring experts from outside on a contractual basis to provide services as per a management agreement.
Generally speaking, the term instrument refers to cash instruments or derivative instruments. While cash instruments are financial documents whose value is decided openly by markets, derivative instruments are financial documents that obtain their value from the value and features of one or more fundamental assets. In the context of real estate, the term instrument denotes traditionally accepted legal document by means of which the title to land may be transferred, disposed of (sold), mortgaged or affected in any manner in different provincial jurisdictions. In the eastern region of Canada, the term is usually related to the land registry process, but is now neglected following the introduction of more consistent terminology, forms, and form titles.
In general, the term insurance refers to a promise of recompensing for precise probable losses in future in exchange of periodic payments called premiums made by the insured. In other words, insurance is an agreement whereby one party agrees to compensate another party for any losses or damages caused by risks identified in the contract in exchange for the payment of a lump sum or periodic amounts of money to the first party. Insurance has been intended to safeguard the financial well-being of an individual, business or any other entity in the event of any unexpected loss. While some categories of insurances are necessitated by the laws, there are others that are purely optional. In the context of real estate, indemnity offered for an asset is two ambits - the extent of risk covered for a specific real property and the assortment of coverage offered. Even the form of indemnity will differ considerably depending on the precise property and risks incorporated.
Insurance errors and omissions
The phrase insurance errors and omissions refers to an insurance coverage concerning slip-ups or excluded items and related claims coming to pass from the general practice of real estate brokerage that includes listing, marketing, and selling residential as well as commercial real properties. In fact, the extent of coverage differs in the real estate market. The provincial regulatory body may manage the errors and omission insurance or they may be provided through the provincial real estate association.
Interest adjustments date
In matters pertaining to real estate, the phrase interest adjustments date refers to a day or date in a combined payment arrangement before the start of the mortgage tenure. In other words, the term refers to the date on which the borrower is supposed to pay the accumulated interest on the borrowed amount in a mortgage loan. In this case, the date falls one full payment period prior to the first payment date as specified in the mortgage agreement. For instance, if a mortgage is advanced on January 15 to be paid on the first date of every month, February 1 would be the interest adjustment date and March 1 would be the first payment date. The borrower needs to pay the interest that has accumulated on the principal since the date of advance, i.e. January 15, on February 1. Any common mortgage will offer a precise interest adjustment date on which the computation of the interest begins.
Interest bearing account
The phrase interest bearing account refers to an account that is earning money just for being an account. Part of the money held by a landlord, for instance, a security deposit, may be put in such accounts. In the context of real estate brokerages, the utility of interest bearing accounts emphasizes on the interest obtained from deposits normally held in trusts. The provincial authorities set up processes concerning the use of interest bearing account and, more often, issues relating to the deposition, reporting as well as distribution of trust funds together with the interest accumulated on them.
Interest expense
Interest expenses refer to an expenditure on a loan made to an individual, corporation or any other entity for a specific period of time. In matters relating to real estate, interest expenses are related to the real estate outlay scrutiny and the calculation of cash flows from the business of an investment property. Usually, commercial real estate practitioners make use of the investment analysis database to evaluate estimated cash flows before as well as after tax deductions, to attain evaluations, to make outlay assessments as well as to compute the internal rates of returns on the real estate investments.
Interest rate
Interest rate may be generally defined as the percentage charged by the lender or paid by a borrower for the use of money taken on loan. In most cases, an interest rate denotes an annual percentage of the principal amount taken as loan. An interest rate is computed by dividing the amount of interest by the amount of principal and they may often change owing to inflation and/ or the policies of the national banks of different countries. In the context of real estate, in order to carry out different mortgage computing, it is essential for the commercial practitioners to differentiate between the nominal or stated interest rate and effective rate or the actual interest rate charged on the principal amount after compounding.
Interest factor
Investment trust
In general, the term investment trust refers to a category of investment firm established for holding securities of other firms and for acquiring its capital from public issues of shares that a traded on stock exchange. Since the investment trusts are able to circulation just a fixed number of shares that are traded at a discount on their net current worth, which the new investors are able to purchase only from the existing shareholders, they are also known as close-end funds.
In the context of real estate, an investment trust is set up to function as an investment channel that facilitates the investors to collect monetary wherewithal and take part in a variety of investments. From the real estate viewpoint, the real estate investment trust (REIT) is the most widespread form of investment trust. This category of trust is particularly intended to obtain income generating real properties and also speculative real estate with the optimism to offer a continuous return on investment to the participating depositors.
Investment value
Generally speaking, the term investment value, also called straight value, refers to the anticipated price at which a convertible security would sell in the open market if it did not have any convertibility. In the context of real estate, the term denotes the worth of a real property to its owner depending on his or her expectations and needs. In other words, the term investment value delineates the worth of an investment property from the particular investor's viewpoint. It is important to distinguish the investment value of a real property from it market value. The market value usually reflects the most likely price the property will fetch in the open market depending on a usual buyer and seller. Several real estate evaluators consider the market value of a property to be its selling price or value in the market place. In fact, the market value as well as the investment value of a real property has their origins in the current value of the property with anticipated benefits in the future. Nevertheless, contradictory theories and situations are able to change the discernment of such future benefits. In fact, the investment value of a real property is somewhat biased to the particular investor's purposes and distinctive situations that are capable of influencing the income. For instance, the marginal tax rates or the regional operating systems are likely to influence the earnings and/ or expenditure forecasts. As a result, the anticipated cash flows will differ depending on the degree and weighting of these aspects and they, in turn, have a bearing on the assessment procedure.
Investor unit financing
The phrase investor unit financing refers to the funding needed to acquire a non owner-occupied single-family that are usually purchased with the intention of real estate investment. In fact, even the mortgage loan lenders have now extended financing plans for investors concerned with separate, semi-separate, row and apartment type residential properties. Individuals who are eligible for this category of funding are basically not whole-time real estate practitioners, but somewhat part-time investors.
The interest of the mortgage lenders in such types of investments basically differ depending on the real estate market situation, the availability of mortgage funds, as well as the competition in the mortgage market. Considering that the lending conditions are encouraging, investor unit financing is offered depending on the personal pledge made by the buyer, the percentage of gross household income that he or she will be using to pay for the mortgage payment including property taxes (GDS) and the percentage of gross annual income of a borrower required to maintain annual payments of mortgage, property taxes, hydro and other debts (TDS) yardstick, as well as issues concerning the consistency and stability of rental earnings and cash flow after meeting expenses and debt service.
Simply speaking, the term irrevocable refers to something that is not able to be undone. In other words, the expression denotes something that cannot be recalled or cancelled, changed or modified. In the context of real estate, the buyer or seller offers an irrevocable date in the agreements or contracts for the sale or purchase of a property on a particular date. If the transaction is not completed on the specified time and date, the offer becomes null and void and the seller is required to refund the entire deposit money to the buyer without making any deductions whatsoever. In addition, the counter offers made by the sellers to the buyers also contain irrevocable dates. In some cases, for instance, in the Province of Manitoba, the constitutional offer to purchase form does not include any stipulation relating to the definiteness of the offer. Nevertheless, in contract laws pertaining to real estate transactions, any person making an offer to purchase a real property enjoys a fundamental privilege to withdraw his or her offer at any point of time before the seller corresponds with the offeror regarding the acceptance of the offer. However, this may not occur if the agreement or contract encloses any clause negating this right of the offeror. It is important to note here that once an offer has been accepted by the seller it becomes legally obligatory on the part of the offeror to abide by it, as the contract now becomes irrevocable.
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