Real Estate Glossary "C"

capital gain - (loss) The profit (or loss) from the sale or exchange of an asset. It is computed as the difference between an asset's adjusted basis and the net selling price.

capitalization rate - The rate of return or yield from a property that is expected by an investor. The rate is used in the income approach to estimating value and is determined by dividing a property's net income by its sales price.

carryover provision - A clause in a listing agreement that provides that the broker may be entitled to a commission after the listing contract has expired.

cash flow - The dollars remaining from income after all expenses have been paid. Cash flow can be either positive or negative.

caveat emptor - A Latin phrase meaning let the buyer beware. Under this concept buyers make purchases at their own risk.

certificate of eligibility - Issued by the VA to qualified veterans and includes the maximum loan amount guarantee for the veteran, which is set by the VA based on eligibility period and prior use.

certificate of occupancy - A certificate of occupancy must be issued before a building can be legally occupied. It is issued only after the building is inspected to make sure it complies with building codes.

certificate of reasonable value (CRV) - Sets the maxi­mum VA loan amount for a property after it is appraised by a VA appraiser and the appraisal is reviewed by the VA.

certificate of sale - Given to the winner at a foreclosure sale. It entitles the winner to a deed after the redemption period is over.

certificate of title - A document signed by a lawyer or title examiner that states that the seller has marketable title on a property. Unlike a title insurance policy, it does not provide protection against title defects not found in the public records.

chain of title - A chronological history of all the convey­ances of a property. Includes who purchased and sold the property and the dates. This information is obtained from the public records.

change - A principle of value used in appraisal. States that real estate conditions, both physical and eco­nomic, do not remain constant, thus affecting the value of real estate.

chattel - Another name for personal property.

closing - The consummation of a real estate transaction. Includes delivery of the deed, signing of forms and disbursement of funds to complete the transaction.

closing agent - The party that schedules and coordinates the closing process. Usually a representative of a title company or lender or the lawyer for the buyer or seller.

closing statement - A document used for detailing the financial information (funds received and paid) in a closing.

cloud on title - Anything that impairs the marketability of a title. Clouds include liens, easements and deed restrictions on the title.

codicil - An amendment or addition to a will.

coinsurance clause - A clause in the insurance policy whereby the owner may take on some of the risk if the house is insured for less than a certain percentage (usually 80 percent) of the replacement cost stated in the policy.

collateral - Property pledged as security for a debt.

color of title - A claim to title that is defective.

commercial banks - Banks that are either federally or state chartered and that make mortgage, construction and home improvement loans.

commercial easement - The right given to utility companies to go onto the land to maintain their equipment. A type of easement in gross.

commercial property - Property used for businesses, such as stores and office buildings.

commingling - Mixing the broker's personal or operating money with the client's, usually by placing both in the same account. This is illegal under real estate licensing laws.

commitment fee - A fee paid by a potential borrower to the lender for the lender's promise to lend money at a specified rate within a certain time period.

commitment to insure - A binder issued by an insurance company stating its intention to grant a policy to an applicant.

commitment to lend - See loan commitment.

common elements - In condominiums, the parts of the property used by all residents of the condominium building.

common law - A body of laws based on custom and usage.

Community Bank Reinvestment Act - A law passed to ensure that banks meet the lending needs in the communities where they are located and to prevent redlining.

community property - Property acquired by a husband and wife after marriage. Property acquired prior to the marriage or obtained by gift or inheritance while they are married is owned separately.

comparable property - Comparable properties are recently sold properties that are similar to the subject property. Used in the sales comparison approach to estimating value.

competent parties - Parties who have legal capacity.

competition - A principle of value used in appraisal. States that if substantial profits are being made competition will be attracted. The increased competition may reduce profit and property value.

competitive market analysis (CMA) - A simplified version of the sales comparison approach used by brokers to help sellers set a likely selling price for property.

conciliation agreement - The successful result of mediation between the parties in a discrimination complaint.

condemnation - The legal process for taking of title to property under the government power of eminent domain.

condominium - A form of property ownership in which each occupant of a multiunit building owns his or her dwelling unit separately and an undivided interest with other owners in the property's common elements (lobbies, hallways, etc.).

condominium bylaws - Rules passed by the condominium owners' association that are used to administer the property.

condominium owners' association - An association of all the owners in a condominium. They may elect a Board of Directors to oversee the administration and management of the condominium.

conforming loans - Loans that follow the established guidelines of the secondary mortgage market.

conformity - A principle of value used in appraisal. States that the value of property is maximized if it conforms to the surrounding land use.

consideration - Anything of value given by parties to a contract.

construction loan - A loan that provides funds for real estate projects. The lender usually disburses the money as work is completed (called draws).

constructive eviction - Occurs when a tenant is forced to leave because the property becomes uninhabitable.

constructive notice - Information that has been made public. The law presumes a person knows all information made available to the public.

contingency - A provision in a contract requiring certain acts to be done before the contract is binding.

contract - An agreement among competent parties to do or not to do some legal act(s) and supported by legal considerations.

contract for deed - See installment sales contract.

contribution - A principle of value used in appraisal. States that an improvement's value is equal to the value added to the property.

conventional life estate - A life estate created by the acts of the parties rather than by statute.

conventional loan - A loan that is not insured or guaran­teed by a government agency. The lender assumes the full risk of default in a conventional loan.

cooperatives - A form of property ownership in which a corporation owns the building and the tenants purchase shares in the corporation that give them a right to occupy a unit in the building.

corporation - An artificial entity created by a corporate charter and run by a board of directors. A corporation can hold title to real estate.

correction lines - Used in the rectangular survey method to compensate for the convergence of range lines due to the curvature of the earth.

cost In appraisal - The total in dollars of the value of the land and constructing the improvements on the property.

cost approach - An approach to estimating the value of property through the concept of substitution. The value of the subject property is found by (1) estimating the cost of construction, (2) subtracting depreciation and (3) adding the land value.

covenants - Guarantees given in deeds by the grantor. Covenants include seisin, encumbrances, further assurance, quiet enjoyment and warranty forever.

credit report - A report issued by a service bureau detailing an individual's credit history.

credit unions - Associations that maintain savings accounts for their members while providing prima­rily home improvement and home equity real estate loans.

curable depreciation - Depreciation that is worth fixing. That is, the cost of fixing does not exceed the value of the property.

curtesy - The husband's legal life estate in his wife's property.

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