BC

Home Based Business Opportunities From Around The World Plus Candid Opinions On More Than 250 Different Opportunities.

40 Years Of Business Experience To Help You!

$69.95

Every Thing You Wanted To Know About Investing

In Real Estate

But Was Afraid To Ask

By:

Jan H. Gaudina

An AmeraDream Publication

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form, or by any means, photocopying, electronic, mechanical, recording, scanning or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA. 01923, (978) 750-8400, fax (978) 750-4744. Requests to the Publisher for permission should be addressed to the Permissions Department, AmeraDream Corporation, 400 Lakeshore Drive, Boulder, CO. 80302

Getting Started

Mistakes People Make

Locating Properties

Talking To Sellers

More Mistakes

Telephone

Negotiation

Monthly Cash Flow without Any of Your Own Money

How to Create a Money Machine

Little or No Down

Down Payment Assistance

Applying for Government Money

How to Find Information

State Money

Federal Money

Calculating Settlement Needs

Costs shared by Buyer and Seller

The Basis of Foreclosures

Locating a Good Deal

Direct Mail

Making Offers

Lease Purchase

Investment Property Analysis

Determining Market Value

How to Select a Realtor

Homeowners Insurance

For Sale by Owner FSBO

Alternative Financing

Rent vs. Own

What is a Mortgage?

The Real Estate Contract

Security Instruments by State

The Full Time Investor

What Type of Property is Right for You?

The “Help Program”

Glossary

Getting Started

We know that many people want to buy their first home, but lack the knowledge and therefore are fearful of the process. After all, buying your home will most likely be the biggest investment you will ever make, and real estate is still one of the best investments you could make. We are here to help eliminate the fear and help you take action NOW!

There are many good reasons to become a homeowner; here are some of the reasons moving from a tenant to an owner make total financial sense.

Appreciation/Equity

Unlike when you purchase a car, chances are, your home will appreciate. If you stay in your home long enough, it is very likely that it will become worth more in value. Of course, you will realize your appreciation when you sell your home. We will show you how to buy a home with equity, like real estate investors do when they buy homes, but even if you don't, you should still have a good equity position when you sell based on your payments and appreciation. Equity is the difference between what your home is worth, and what is owed. For example, if you have a home worth $100,000 and you owe $60,000, you have $40,000 in equity.

Leverage/OPM

Another great thing about buying a home is you can use leverage, which is also sometimes called, OPM, using Other Peoples Money. You will not be required to come up with $100,000 to buy a home worth $100,000. This is where you can put a small down payment to make an investment in real estate; the balance is in the form of a mortgage loan. We will show you how to use little or maybe even in some cases, no money down to buy your first home. It will all depend on your goals for your home.

Tax Benefits for Homeowners

Uncle Sam wants everyone to become Homeowners and will even give you incentives in the form of tax benefits for doing so. For example, the interest on your mortgage is deductible and so are real-estate taxes. If you are renting or leasing, you do not get the same benefits. Here are some more ideas that will help "jump-start" your real estate investing career.

Surround Yourself With Like-Minded People

"Creative" real estate investing is non-traditional, which means that most people don't do it this way. Thus, most people you speak with will tell you it won't work. If you tell them you heard it in a seminar or a course you bought from a late-night television "guru," they will laugh and call you "gullible." Attorneys and other professionals will denounce it, because it sounds unusual. Keep in mind that these people are either threatened by their own lack of success or are looking to protect their own backside.

The first thing you should do its join a local real estate investors association. These associations will help you keep your thoughts in the right place and prove to your subconscious that it really does work, despite the opinions of the 20/20's, Datelines, 60 Minutes and other self-proclaimed "consumer watchdogs." If you cannot find a group, form a "mastermind" group that meets for breakfast once a week. If you don't know what a mastermind group is, you should read "Think and Grow Rich" by Napoleon Hill. If you already read it, read it again.

Have a Team

Don't wait until you have a deal ready to close to find the help you might need. You need to find the following people or companies to help you:

Attorney - preferably one that does real estate deals for himself as well as others

Title or Escrow Co - stay away from the big name companies; find one that caters to investors. Make sure they understand double closings, land contracts etc.

Insurance Agent - find one that understands land contracts, landlords, etc

CPA - find one that is aggressive and owns real estate

Contractor - one that will give you free estimates and knows how to "cut corners" in the right places

Mortgage Broker - one that is savvy, creative and experienced with investors

Partner - in case you need it for money or experience

Mentor - someone you can call to smooth out the rough spots

Don't Talk to Unmotivated Sellers

This is the biggest mistake I see beginning real estate investors make. They waste time talking to sellers who are marginally motivated. Even worse, they drive by the house and look for comps without even talking to the seller first! Never visit a house before speaking with the seller over the phone.

Be Persistent

Anyone who has ever been in sales will tell you that few deals are ever made on the first try. In fact, most deals are made after contacting a prospect for the fourth or fifth time.

Let me give you an example. I contacted a person in June 1992 who had a nice house he was thinking of selling. I met with him once and made him an offer. He didn't like it. Did I stop there? No way! I called him twice a month for the last year. I mailed him two more offers he rejected. We finally came to an agreement and closed.

Use a follow up system like Symantec ACT! 4.0. It allows you to schedule follow ups and keep a running history of calls and conversations.

Keep Educated

”If you think education is expensive, try ignorance." I am not sure who first said it, but I give him credit. You can lose more money with a mistake than you can learning how to avoid one. Even if you have been at this business for years, you need to keep up with current trends and laws.

Have a Plan

Don't just wander around looking for real estate deals. Have a plan. Make X number of phone calls a week. Spend $X a month on advertising. Make X number of offers per week. Pass out X number of business cards each day. Eventually, you start to get "lucky." I mean that facetiously, because luck always happens to those who are at the right place at the right time. If you plan and persist, you get lucky.

Treat This as A Business

People are lured to real estate investing because of the quick buck that it promises. Don't hold your breath, you won't get rich quick. An "overnight sensation" usually takes about five years. I would guess that 90% of the people who take a real estate investing seminar quit after three months. This is a business like any other. It takes months, even years to cultivate customers and have a life of its own. You need to treat it like any other business. Give it time, effort, attention and professionalism, and it will flourish before you know it.

Mistakes People Make That Keep Them From

Getting RICH in Real Estate Investing

How to Get Rich the Right Way

Real estate investing is an exciting way to make money. It is one of the best ways to make money without tying yourself down to a regular job. There you have it: wealth and freedom, in a single package! Truth is, throughout recorded history, more fortunes and more wealth have been founded on real estate than on any other wealth-builder. Land is a lot more stable than the stock market, a lot more dependable than e-commerce, and a lot less time-consuming than everyday traditional commerce.

What is not to like?

Yes, there is money to be made. That means you can't afford to keep hitting your head against the wall when the gateway to riches is 10 simple steps away! With our 10 points, you will enable yourself to avoid mistakes, pitfalls and obstacles that try to pull you down away from success.

These 10 things remove roadblocks to success, both the imagined roadblocks and the real roadblocks. Make no mistake, both can trip you up. Imagine the increased sense of confidence and assurance as you see how easy these roadblocks are to overcome!

Avoid the myths of investing: It's so easy to fall for the myths, those untruths that people accept as fact, that keep you from succeeding because they keep you from trying. The myths are lies, but worse, they prevent you from taking action to change your life. In our 10 Things, we will explode these myths for you, such as:

It takes money to make money - all right, it takes money, but not your money! We'll show you

ways to get the money for whatever you need.

The only way to make money is to buy rental units, but they're expensive, so I can't afford it -

starting out, it is more important to you to turn properties quickly to make a profit; the profit capitalizes your business so you can afford the rental properties - which do provide a nice long-term, residual cash flow.

Investing is something I need to do on my own, and that means a big time investment and a lot of

work for me - you won't go anywhere without help, and that's why we will teach you how to assemble a team of professionals and specialists - your own Professionals - to make sure it gets done and gets done correctly.

The only way to invest in property is avoid Realtors and go after “Sold By Owner” deals - some

FSBO (For-Sale-By-Owner) deals are great, but they might make up only 10% of the possible deals out there; we teach you to broaden you field and go after those sellers who want to sell badly, whether they use a Realtor or not; the more deals you have to consider, the greater the likelihood that one of them will make you a ton of money!

Buying houses well below market value is dangerous because the house is probably not structurally sound and I'll go broke fixing it up - clearly you need to select the right house to

buy, but that's what we show you in how to judge a property, what to look for, what needs fixing and what doesn't, so you do only enough to make the property desirable but don't spend your profit down the rat hole.

Things That Are Keeping You From Getting Rich in Real Estate will help you see things as they really are, not as they “appear” to be to the untrained eye. Once you learn to see things from a successful investor's point of view, you can erase the feelings of risk and the lack of confidence that hold you back. These principles put you in the confident frame of find of the educated and experienced professional.

What scares most people as they consider real estate investing as a moneymaking opportunity is that it seems so mysterious, and besides, the stakes seem so high. We're talking about hundreds of thousands of dollars here.

Of course, just as the dawn helped us allay our childhood fears of monsters in the closet, the light of day-good, relevant and accurate information, helps us overcome those feelings that keep us from taking action with real estate investing. The following information does just that. We will look at things that you might perceive as problems, show you how many other people in the past have dealt with that and overcome it. We work from this viewpoint:

"It's good to learn from your own mistakes.

"It's better to learn from the mistakes of others (it's less painful).

"It's best to learn from the success of others.

What follows is information that focuses on the success of the most successful real estate investors.

No one person knows everything, so we have gathered good information from a variety of sources and present here as a whole - a whole lot of good stuff that will get you off to a good start and help you avoid the mistakes that cost you money. Remember this, you lose money if you invest foolishly, but you also lose money (that would rightfully be yours) if you fail to act upon opportunity.

We want to look at mistakes you might make and fears you might experience, then consider the right way to do it. Most often our fears are based on misinformation, so here we will look at the myths that some people believe. These myths are based on untruths, but they can paralyze you to inaction if you believe them. Fear of making mistakes is one of the most dangerous of fears, but knowing how to do it right means you not only avoid the mistakes but the fears, as well.

You see, every successful Investor has learned to overcome these 10 things - every successful investor has to identify and avoid these 10 “perceived” roadblocks. Finally, you can have the RIGHT roadmap to success. It's here, in one package, for you.

We'll tell you the TRUTH about real estate investing, and you will learn the TRUTH about becoming wealthy in real estate.

Learn what the REAL RISKS are!

You'll know you're doing it right when:

"You know what to do

"You know what not to fear

"You know what to avoid

"You know what to ignore

Here are mistakes that could prevent your success:

1. Trying to do it all by yourself

Myth: This investing thing is something I do best on my own

Why would you want to? You only make it harder on yourself.

No man is an island - no woman is, either. There are experts whose expertise allows you to work on finding deals rather than wasting time learning things that make you an unneeded expert. There are people to whom you can delegate simple tasks to so you can focus on tasks that make you more money.

Here are people who should make up your real estate team:

Real Estate Agent - an agent has access to the Multiple Listing Service (MLS) that contains details on at least 90% of all the houses for sale in your area. Using an agent gives you access to many more deals than you could find on your own - sellers who are motivated enough to sale that they are willing to pay for help - as well as data on past sales so you can figure out how properties really are worth.

Mortgage Brokers - a broker is different from a mortgage lender. The broker doesn't make the loans, he or she has dozens of contacts with lenders and can tailor your financing package to your needs, whether a mortgage, a piggyback combination or hard money (don't worry about the terminology - we get to it later).

A Real Estate Attorney - This is all about asset protection; you don't want to amass your empire only to lose it to frivolous lawsuits. In certain states, attorneys rather than title companies do the closings, so you want your own on your team.

An Accountant - The accountant should know real estate and tax law. This is not just to get your taxes done at the end of the year, this is so you can strategize with someone who understands the impact of income taxes and capital gains on what you want to do.

An Appraiser - Appraisers compute the market value of a property, usually for the lenders. Although you will use comparable sales reports to figure the future market value of projects for yourself, the appraiser can help you get a buy-fix-&-sell project moved quickly by getting the information you need for FHA financing for your buyers.

A Banker - This is not just the manager of a local branch. This should be a vice president level executive with lending authority. If borrowing a quick $10,000 on your signature allows you to take advantage of a great opportunity, you will be grateful for the time it took to cultivate this relationship.

A Title Company - A title company can provide you with property reports on properties you are looking at so you know in advance if there are problems with the title. In return, you let them handle your closings in most states.

A Handyman - The handyman will act as the general contractor for your rehab projects, someone you have tested and can trust to do good quality, honest work in a timely fashion. He can do estimates of costs for you to save you time on the front end and to ensure profitability. He can also oversee the sub-contractors.

Sub-Contractors

A painter

A flooring (carpet, tile & linoleum) person

A roofer

If you get them on your team, you can work it so that they get paid when the property sells - when you get paid, rather than at completion of the job.

A Mentor - You should always expand your network of other investors. Find a local real estate investors organization and join. These can be great allies for quick contract flips, joint ventures, funding, and other deals. Plus, you can learn a lot from people who have been doing it successfully. Modeling the actions of a Mentor how you learn from the success of others.

2. Going after the wrong properties

(Property Evaluation)

Myth #1 - You have fewer problems if you look for nice properties in good neighborhoods

We'll never tell you to spend your time in urban war zones amongst all the crack houses, but there are a few basic facts to keep in mind:

If you want to turn properties over quickly (meaning fewer costs to you), consider this.

What will sell quicker, a 4-plex or a single-family residence? Obviously, the single family house. More people are buying them, creating higher demand. Now, what kind of single family house sells quicker, a luxury home on a lakefront with 2 wooded acres, or a simple 3-bedroom starter home in a modest blue-color neighborhood? Clearly, the latter. There are many more people who can afford the modest home. In any community there are more car mechanics and carpenters than doctors and lawyers.

Besides, high-priced homebuyers tend to be pickier. Everything has to be just right. A young couple buying their first house is just happy to be there. It's a lot easier to get it sold that way.

Starting out, stay away from the upscale neighborhoods. The properties in your middle to lower-middle income areas retain their value very well because of the demand, and it's actually easier to find distressed situations or ugly houses there, too.

One word of advice: don't get emotionally attached to the process. You won't be living in these houses or neighborhoods, so don't turn up your nose. On the same token, don't let the cute charmer with the white picket fence seduce you into paying too much.

Myth #2 - If a house is ugly, it will be hard for me to turn it around quickly

In fact, this would be true, but for one thing. You won't let it remain ugly. It should be ugly only when you buy it. The people who will buy it want a pretty house. But the law of supply and demand states that products in high demand (like pretty houses) go up in price. You need to buy low and sell high.

When looking for a house, remember the old Clint Eastwood movie, The Good, the Bad and the Ugly. As a rule, good houses cost too much for you to invest in. Bad houses have structural problems and become hugely expenses. Ugly houses just need some paint, maybe a couple of new doors, new carpet, and they're good to go. Now you can fetch a good-house price for what you paid an ugly-house price to buy.

Myth #3 - I can figure out how much a property by looking at what other properties are selling for now

It might be a good idea to evaluate property the way you drive your car defensively: figure that all other sellers don't know what they're doing. The only way to know how much a property is worth is to see how much it just sold for. The fact that you might be looking at properties that are for sale right now means you simply pick some proxies to stand in for your “subject” house: houses that are just like it, same size, in the same neighborhood, same style, approximate same age. If you know what these houses sold for within the past 6 months or so, your subject house will likely sell for about the same price. This information is available as comparable sales reports. Your real estate agent can supply you with these “comps.”

An analysis of comparable sales reports results in a figure that we refer to as the “Future Market Value (FMV).” This is what you logically will be able to sell the house for after you have made a few minor improvements.

3. Forgetting that the money is earned when you acquire (How to Make an Offer)

Myth #1 - Your profit comes from selling the property

A very basic principle of real estate investing states:

You make your money in real estate when you acquire; you may collect it later, but you earn it when you get it, or in the way you get it.

This means that you are most careful while evaluating and analyzing the property before you ever buy. The point is, if you acquire the property correctly, you will always be able to make money. Even if the market goes stagnant, even if interest rates go way up, you can make money. Sometimes acquiring it correctly means you don't even pay for it, but you still make money. It would be hard not to make money if it costs you nothing, right?

Myth #2 - If you find the right house, the rest takes care of itself

The truth is, it is much better if instead of looking for a particular property, you look for highly motivated sellers. If the seller is motivated enough, no matter what property you are dealing with, you stand a chance at a good deal. If the seller has little motivation, we suggest it would save time and effort to find a brick wall to beat your head against, rather than trying to negotiate with the non-motivated seller.

Let's look at motivated sellers a moment.

1. The seller may be in distress. There could be a divorce going on, someone may have died, they may have tax or general financial problems. Maybe the company transferred the primary wage earner to Philadelphia or Boise and if they don't sell the house now they are stuck. Distress simply means that the person is in trouble

and has to sell quickly.

2. Sellers can be motivated without distress. You might find an investor who wants to divest himself of a couple of properties in order to free up capital for a larger project. Or it might be some guy who's retiring after 30 years at the plant, and he has a couple of rentals around town, but he also has the Winnebago all packed up and ready to hit the highway, and he doesn't want to be stuck in town babysitting the rentals. They are both motivated, but not distressed.

3. The motivation may come from the house. It might be distressed - might be shabby, ugly. Why do you suppose someone might be trying to sell a house that needs work before it looks good? Maybe they can't afford to do anything, or they don't have time, or they don't care, or they're simply lazy. Point is, if the house is ugly, they have to sell if for less. That's market economics, the law of supply and demand - most people want to buy a pretty house.

Myth #3 - If your offer is $10,000 less than the house is worth, you could make a $10,000 profit

First of all, which worth are we talking about here? Is it how much it may be worth in the mind of the owner? Is it the market value as the house sits right now? In reality, the only value you are concerned with at this point is how much the house will be worth when you sell it. By then, with a little rouge and lipstick (cosmetic touches) it will be worth more than now. It might even be worth more than the current owner thinks, but, as you might recall, you never trust that any seller knows what he or she is doing.

Second of all, let's not forget all the expense associated with buying a house. You have closing costs, and you'll need to pay for insurance, utilities and property taxes while you hold the house, to say nothing of the cost of the rouge and lipstick. Since we don't recommend using your own money, there will be an interest expense, as well. Be sure to subtract these costs from the expected future market value (FMV) before you set an offer amount.

4. Not making enough of the right kind of offers (Performance Goals)

Myth #1 - You don't need to mess with goals, just get out there and do it.

Let's understand clearly what a goal is. A goal is simply a statement of what you really want. At its best, it's an expression of your burning desire. If you don't know clearly what you want, it's not likely you'll expend enough energy to get it.

Here is a good definition of success: “Success is the progressive realization of a worthy goal.” This simply means that you make progress toward making real a valuable desired achievement or state of being. Then you are successful.

Quite often, we hear people enter into real estate investing expressing goals like: “I plan to be making $10,000 a month within six months and be a millionaire within a year.”

Our response is, “OK, those are worthy goals, but how are you going to get there. It's not going to happen just because you make a wish. What are you going to do to make it happen?”

Describing what you will do to make it happen is a performance goal. With good, valid performance goals, you know in advance what you should be doing to achieve what you desire most.

Here is a possible performance goal: 4+10+2+2. Now here's what that means:

Over the next 4 weeks, gather information about 10 properties each week, then inspect two of those 10 each week, then make at least two offers on properties you have seen.

Myth #2 - If you make the right kind of offers, you never get turned down

If you subtract all the costs of obtaining and fixing the house up from the FMV (future market value), you will end up with a figure that is no more (and probably less) than 75% of FMV. That being the case, expect that 19 out of 20 offers will be rejected. Then if 1 out of 10 is accepted, you will be pleasantly surprised.

Remember this about your offers. If everybody accepts your offer, you are being far too generous. You will also lose money, because those costs you subtract out are real -they have to be paid. Besides, you don't want to depend on being able to sell the house for more than it's worth.

5. Stretching yourself too thin until you are cash poor (Quick Turns For Capital)

Myth #1 - You want to focus on rental units first to build a long-term

Income stream

The obvious choice when you buy a house is to either sell it for a profit or hold on to it and rent it out for long-term cash flow. Both of these choices are good. You should really do both.

But here is a bit of information about rental properties: they require overhead. You pay for the purchase, but then you have ongoing expenses for taxes, insurance, a share of utilities, maintenance, repairs, upgrades, and advertising. Overhead requires cash. If your business has the cash to pay for these expenses, then you have no worries.

Otherwise, it will have to come out of your pocket. That might just make you prisoner to a job you don't enjoy so you can afford to hold onto the rental properties until they can support themselves.

A smart alternative would be to focus first on activities, techniques and projects that make you money up front. Do a few contract flips, a couple of lease-options (read all about these in our program, Big Money Real Estate, buy, fix and sell a house from a highly motivated seller, and put all your profits back into the business. A half dozen such deals should net you about $40,000.

With $40,000 at your disposal, now you could find a nice 4-plex that brings in $600 per unit ($2,400 total) a month in rent. The seller wants $240,000, because that is market value, but is motivated enough to accept your $210,000 offer. You put $40,000 down, finance $170,000, which will require monthly mortgage payments of less than $1,300.

Add to that $250 a month for property taxes, $50 for insurance, $50 for water and sewer (you let the tenants pay electric and gas), and your total monthly outlay is $1,650 or less, depending on the interest rate you get. In other words, you just added nearly $800 a month to your cash flow. If you discover that the going rate on rent is really $650 for this size apartment, you can make that an even $1,000 a month - acquired without a long wait and with normal rent rates!

Myth #2 - You'll never make money unless you buy properties

In reality, you can make money on a property without owning it, so long as you have control of it. Our program, Big Money Real Estate, focuses on various techniques of doing this. Without going into a lot of details, it all stems from the type of contract you use to acquire the right to buy the house. That right to buy gives you control. With that right, you can now assign that right to someone else for a fee, or you can tie up the house over time until someone wants to buy it from you. Since you don't own it until they give you the money for it, you really never bought it. Yet you still made money!

6. Using too much of your own money (Funding Sources)

Myth #1 - The biggest obstacle to overcome in buying property is the down payment

You would be surprised how many people believe that you have to pay 20% of the price of the house as a cash down payment. In an area where the average home price is $100,000, that means people would have to accumulate $20,000 in their savings account before they could even think of buying a house. Given that the U.S. has the lowest personal savings rate in the developed world, that would be highly unlikely. The good news for you when you want to sell a starter home to newlyweds Jim and Suzy is that various first-time homebuyer plans make the down payment a minor issue for many people.

First time buyer plans don't work for an investor, however, so we need to consider their strategies. Fortunately, investors have available a variety of options: certain lenders provide a percentage of what the property is worth rather than the purchase price, so if you can negotiate a price below that percentage, the lender provides everything you need; sometimes the seller is so motivated that you can get seller financing for at least enough to cover the down payment.

You see, the down payment is simply the difference between what the lender disburses and what you are paying for the property. The seller is going to get the full sales price at closing, so the down payment doesn't matter to the seller. It matters to the lender for two reasons:

a. The lender wants the borrower to have something at stake in the transaction, so in case times get tough down the road, the borrower is less likely to say, “I don't care about the house” and walk away from it without making any more payments. A $10,000 out-of-pocket down payment from the borrower's own hard-earned funds creates a real commitment.

b. The lender wants to reduce its exposure. Exposure is the amount the lender stands to lose if the loan goes bad and the house goes into foreclosure. As a rule, a house in foreclosure becomes worth about 80% of what it was worth before. Everyone knows the bank needs to get rid of it.

Whatever is paid down lessens the potential loss. However, many mortgage lenders are more liberal than a commercial bank and are willing to go easy on your out-of-pocket commitment if they can lessen their exposure. If the seller takes back a second mortgage for 75% of the sales price, the lender's exposure is minimal. If you buy the house for 75% of what it's worth, the lender's exposure is likewise minimal.

Myth #2 - It takes money to make money

All right, this is actually true. But it doesn't have to be your money! We operate on the principle of OPM, which stands for other peoples' money. Everywhere you go, there are lots of people with money - more money than they really need to live, really.

These people with money invariably want more money (you don't think they suddenly become content just because their cash in the bank reaches a certain level, do you?).

How do you get your hands (legally) on other people's money? What do people who have lots of money really want? Among other things, they want more money. Now think a minute. Would these people who have money but want more rather keep working to get more money, or would they rather put their money to work for them?

Let's suppose you find a deal that will return 30% on somebody's money in a four month period. That would be a 90% annualized return. Do you suppose some of these people looking to get more money without having to work hard might want a piece of that? With that in mind, let us look at a very important principle:

Money always flows to good deals, and it flows even faster to great deals.

7. Trying to be a plastic surgeon instead of a beautician (How to Make an Ugly House Beautiful)

Myth #1 - House that you can get well below market price have very

expensive problems that must be fixed.

Let's not forget that you're not looking for a particular house, you're looking for a highly motivated seller. We had a client once, who in the space of two weeks picked up two houses at half price. In one case, the seller was under divorce court order to sell the house and split the equity with his former spouse - he figured that if there were no equity, he wouldn't have to give her anything. The second seller had already purchased his retirement condo in Arizona and had no interest in enduring another northern Indiana winter.

This is again the concept of the good, the bad and the ugly. You don't want bad houses. They are money pits. We want to do what Glamour or Cosmopolitan Magazines do - you know the feature? They grab some woman off the street who is having the worst hair day of her life, take a picture of her scowling with no makeup, and then do the makeover. You get the before and after pictures. After, she's smiling and looking like a fashion model. Have you noticed they never bring in a plastic surgeon? It's all rouge, lipstick and hairspray. So the houses you want to deal with are at worst ugly, so that a little rouge and lipstick will take care of it. If you do reconstructive surgery on a house, it costs a lot, it takes time (and time is money when you're paying interest on a loan), and it's a hassle. Go for cosmetic fixes.

Myth #2 - If I want to sell this house, I have to make it good as new

There are certain things that people will not pay more for in a house. Most of these are things not easily seen. If you go through and change over all the plumbing to the latest materials, it will make everything work well, but you will spend a lot of money that will not be reflected on the sales price. Windows are the same way. Sure, who wouldn't like double-pained windows with nice vinyl frames throughout, but that's something a buyer would say about: “I'm glad this house has all new windows,” but the buyer will not be glad enough add $3,000 to the price of the house.

Focus on the things that they see that don't cost much. For example, enough paint to do the whole interior of a 3-bedroom house will cost less than $100, but not only will it get the house sold quicker, but for a better price, too. If the front door is trashy, the whole house looks trashy. Where do they get the first impression from, anyway? A new steel front door with a half-moon window runs about $130, and makes the entrance look like a million bucks. Take a look at the interior doors, too. Vintage 1970s interior doors are ugly, are probably split - maybe the previous occupant's kids punched holes in them too. Nice replacements with 6-panels will cost about $35 a piece. You should get new hardware with them. At $10 a knob, it's money well spent. Dented up knobs with paint splatters on them don't make good impressions. Another minor cost that gives a good bang for the buck is new switch and outlet covers. Buy them by the box and they cost less than a quarter a piece, but it makes every room look better.

Myth #3 - Put most of your fix-up efforts in the living room and bedrooms, since people spend most of their time there

Here is the watchword of fix-up: Kitchen, bath and code. The code part is imposed by your local government. If the wiring is deficient, you have to fix it. The kitchen and bath reflects the priorities of the person who will have the most to say about which house to buy - the wife and mother.

This doesn't mean you have to automatically replace the kitchen cabinets and cupboards. If they are solid, just paint them white or off-white, especially if they came from the `70s and are an ugly and oppressive dark brown. If you want to paint the insides, spring for the rental on a paint sprayer. Otherwise you have a very ugly job ahead of you. Another touch for the kitchen is the faucet. If the kitchen is the heart of the home, the faucet is the heart of the kitchen. Watch the sales at your local home improvement centers. You can get a Delta, Price Pfizer or Moen faucet that normally goes for $160 for $60 in clearance or as last-year's model. Material for kitchen counter tops is not expensive. If the counter tops are ugly but painting the cupboards would help them, go ahead and get tops.

As for the bath, a new vanity would only cost a little over $100. On the other hand, if there is enough storage in the bathroom elsewhere, a pedestal sink will open things up a lot and make it seem roomier. Rather than leaving a big gap or leaving up an ugly shower curtain, invest $50 in a nice curtain rod and quality curtain (with ruffles). You might not guess the wife-and-mother's favorite color, but seeing the curtain will allow her to visualize what she could do with the room.

The final word on any improvements you make on the house: Fix before you replace. It costs a lot less.

8. Not getting started (Letting Your Fears Control You)

Myth #1: If you don't have your business completely organized, you have no business going out to find properties

This is an excellent place to insert a very important fundamental principle of success, whether it be in real estate or another endeavor:

DST = Do Something Today!

Maybe you don't have everything organized the way you would like, but that doesn't mean you can't research the market. Before you have even done a single deal, you don't have to be organized with a corporation, a registered business name, a business license or even a business card. No government entity requires you to get a license or register a fictitious name in order to go out and look at properties. If you go out today and see what's there, your common sense will tell you that certain prospects are better than others. By the time it is time to do something about it, you will have learned what to do be reading further into our information.

This principle should stay with you from now on. Every single work day, you should do something for your business. Are you working two jobs just to stay ahead? That means you will need to organize yourself, and maybe sacrifice some personal time. If you don't do that, how are you ever going to get out of the two-jobs-just-to-keep-up rut? As a favorite proverb puts it, “He who sits cross-legged with his mouth open waiting for a roast duck to fly in is going to have a long hunger.” In other words, which white knight is going to come along and pull you out of the rut? Even if all you can get together is a half hour a day, use it effectively for your real estate investing, and it will be the best time-investment you ever made, because that half-hour a day

will grow to full days in time.

If you have plenty of time - maybe you're unemployed or retired - you need to organize yourself and discipline yourself to spend much more than a half-hour a day. The law of the harvest states that as you sow, so shall you reap.

Myth #2: You need to know a lot about finance and real property before you can start looking.

One of the most exciting techniques that we teach is how to gain control of a property without owning it. Once you have control of a property, you can make money off it. That certainly requires no knowledge of finance, if you do it right. You just know how to perform a service that others are willing to pay you for.

Of course, if you want to buy a property, you will be getting money to do so from other people. Even then, there is no need to be an expert in financing and real property. One important key here is to focus on what you do know.

You do not need to have a profound knowledge to get started. You will, of course, want to acquire knowledge as you go. In so many ways, knowledge truly is power. But there are many things you can do without a lot of advance knowledge, and many of these increase your knowledge base. Do them and you will know about real property and finance:

1. Check out areas to work in. Your best bet is in middle to lower-middle-income neighbor of homogenous type houses (mostly the same kind). You certainly don't need to look in the war-zone areas, but even in the cities there are neighborhoods surrounding these war-zones (you might call them the `hood) where people live because they can't afford any better. They still need a place to live. If you are not sure about the crime rate in a given area, the police department can give you more information. In essence, the easiest kind of property to turn over - either to sell or to rent, is a modest, no-frills, starter-home-type house.

2. Cruise through modest neighborhoods looking for “For Sale” signs, write down the name, address and phone number, then call about the house. Find out how big it is (square footage and number of bedrooms and bathrooms), how much the seller wants for the house, and how long it has been for sale. This is market research. You will soon have a good idea of values in that neighborhood. Now when a great deal comes along, you will be able to recognize it in contrast to the average!

3. Talk to a rookie real estate agent (less than one year in the business). A rookie is less set in his or her ways, still flexible, and, most important, likely very hungry. You don't want to answer a lot of questions about yourself (you don't have the answers, yet), so if they ask about where you get the money or whether your credit is good enough to finance a property, let them know you represent an investors group - you are the point person assigned to find properties, but that the money will come from private sources within the group.

9. Spending too much in marketing what you sell (Exit Strategies for Quick Sales)

Myth #1: Negotiating is a matter of me taking advantage of someone or someone taking advantage of me.

One of Stephen Covey's Seven Habits of Highly Effective People is the concept that every deal should be a Win/Win situation. Napoleon Hill, of Think And Grow Rich fame, put it this way: “I fully realize that no wealth of position can long endure, unless built upon truth and justice; therefore I will engage in no transaction which does not benefit all whom it affects.”

Both these gentlemen have long been considered gurus of success by many successful people. It appears that the old adage, “what goes around, comes around,” really applies here. As Covey explains it, you don't want a Win/Lose situation, because if you lose enough, you're out of business. A Lose/Win situation means one fewer person who will do business with you in the future, and word does spread.

Negotiating simply means you work toward accomplishing your goals while helping the other party accomplish their goals.

Myth #2 - If I want to sell a house, I should not use a Realtor to save money

If you have a real estate agent or two or three on your team, and one of them helped you find this house you are now selling, it would be a slap in the face not to use the agent to sell it, too. How enthusiastic will the agent be in the future if you cut him or her out of your deals to save some money?

Using an agent to sell the house doesn't mean you have to sign a listing agreement and commit to a 6 or 7% commission. If the property goes on the MLS, the listing agent has to split the commission with the buyer's agent. If it doesn't appear on the MLS, there is no such requirement. Therefore, offer the listing to the agent without putting it on the MLS. You might want to offer 3.5% or 4% for selling it without the MLS. Meanwhile, you will be running a marketing campaign yourself based on putting up a lot of signs and fliers and networking with everyone you can.

Of course, if you bought the house without agent's assistance, you can sell it without the agent, as well.

Myth #3 - To sell a house, all I can do is put up a sign in the front yard

and put classified ads in the newspaper

One of the most productive strategies in terms of getting a good response is to advertise a starter home as for sale on a rent-to-own basis with a set amount showing as a deposit. The deposit reflects what the house would rent for. Any renters who are currently paying about that will respond. The rent-to-own tells them, “hey, I can buy this place. I just have to keep on doing what I've been doing.” The details of this strategy are to be found in our program, Big Money Real Estate,, but they involve you helping the buyer obtain FHA financing, performing sweat equity for a portion of the down payment, and renting for only a brief period before you close the sale. There is a strategy that gets big results quickly with very little expense on your part.

10. Not maintaining the momentum

(Long-Term Strategies, Planning For Success With Goals)

Myth #1 - I can't even get started until I get my business set up and all my ducks in a row

Clearly, there is much for you to learn. However, at the same time, you will never know everything there is to know about real estate, nor should you. To succeed in real estate, you have to go out and make deals. If all you do is keep learning and preparing, nothing will ever happen.

It is clear that knowing what you are doing leads to confidence. However, sometimes we just have to stretch our comfort zone or we never grow. That might involve situations where you fake it until you make it.

This is not the same thing as hypocrisy; you're not pretending to be something you're not. You have simply visualized in your mind what you want to have happen, and then you play your role in what you desire to have happen. To begin with, the best thing to do to get started is to start small. You can then build upon what you already know and continue to progress beyond that. Let's remember the words of perhaps the greatest coach in history, John Wooden, who said: “Don't let what you cannot do interfere with what you can do.” Nobody expects you to go right out and acquire a 100-unit apartment complex or an 8-story commercial building first thing. Simply do what you can do, keep learning, keep your eyes open, and take little actions.

Myth #2 - Don't waste time planning a long-term strategy, you need to get out there doing it

Obviously, we're not going to tell you to sit around planning and never get into the game. But there is no reason not to have a direction while you are doing the work.

Here is a sample long-term plan that would be very productive. Let's say you undertake to acquire 6 new properties a year. In the first year you would struggle to do this and may fall short. Year by year, however, you become more skilled at picking deals, better at negotiating, and you network that brings you deals gets bigger. After 10 years, you might own 60 properties. If during this time, you balanced evenly properties that you sell right away for profit with those you hold on to for the long-term rental cash flow, you would now own 30 rental properties which were partially financed by the profits made by the quick turns. Of course, most of these rental properties will be multiple units, since you flipped most of your single- family homes on quick turns. Besides, multiple units are easier to manage. More tenants in one location. Therefore, let's assume these 30 rental properties represent 60 rental units.

At this time, you could then sell half of your rentals. The income you realize in the sale would then go to pay off all loans on the remaining properties that you keep. Now you own 15 rental properties, 30 units, free and clear. Let's further assume that after you pay insurance, taxes and the water and sewer bill, you receive $500 per month clear cash flow per unit. There are 30 units. $500 times 30 is $15,000. Would you be able to scrape by on $15,000 a month in today's dollars? Yes? Then you can buy a yacht and spend all your time in the Caribbean. No? Well, you don't have to because you can still buy more singles houses to flip on a quick sale and more rentals to increase you monthly cash flow. The point is, now you can afford to. You have plenty of money.

There is a strategy for you. Now you work out for yourself what you want to accomplish. If you don't know what you want, you're not likely to get it. A clear picture of what you want gives you something to work for.

If you acquire real property correctly, you will always make money off it. You don't need to be a super salesman with lots of connections in the local market. You just need to have bought it or acquired control well enough that it is attractive to a lot of people when you offer it.

Is it really that easy?

If real estate investing were all that easy, everybody would be doing it and it would not be so lucrative. We will never tell you this is easy. You will work for everything you make.

However, it is very simple. There are certain principles that just work. If you apply these principles, you are simply imitating or emulating successful real estate investors. Our Real Estate course, describes the techniques, strategies and actions of highly successful real estate investors. All you have to do is replicate what they do, and you should enjoy the same kind of success. This is simple cause and effect. Innumerable investors have gotten started in real estate at a time when they were broke, unemployed and had mediocre credit. Somehow, it was possible.

How so? Here is a concept that has great power for someone lacking money:

“You can have anything desire in life by helping enough other people get what they want.”

What is it that people want? Nearly everybody wants a place to call home. You can help them get that! Many people would like to get their hands on a fixer-upper - a house that needs work - because they can do the work (they are good at it and enjoy it), then sell the house for a tidy profit because it looks so nice. You can help them get what they want. You don't provide them the house; instead you provide them the opportunity to buy the house.

Other people don't want to do any work, but they want to put money into an investment that will make them a profitable return on their money. You put together the deal for them to invest in, and you make money for yourself. That saves you from the need to have any money until you get paid for your service.

In short, don't let a fear of not having any money paralyze you into inaction. There are ways to make money starting from nothing. The key is to know what you want, create a burning desire inside, and then take action. Emerson told us, “Nothing great was ever achieved without enthusiasm.” The clarity of your dream and your goals, coupled with a burning desire, a passion for what you want, will create the enthusiasm you need. In my real estate course “Get Rich by Helping Others” we teach just that. If you haven't read about the course go to: http://ameradream.com/aboutus_moneymachine.htm" http://ameradream.com/aboutus_moneymachine.htm

Locating Properties

In order for you to be successful, it is vital that you build a good relationship with a knowledgeable Real Estate Agent in your area. This person will be a tremendous asset to you. In addition, the agent will be able to make some easy money along the way through the commissions they will earn on the deals that are purchased. The agent will also be able to help you evaluate the market through comparable sales.

Price Range $70,000 to $200,000.

You need to have you agent run a daily or weekly list for you on M.L.S. as follows:

Detached property (vacant).

Bedrooms and Baths required.

Square footage and other desired amenities.

All areas within a comfortable driving distance of requested schools, churches, etc.

Home Realtor plug in these requests as well to help acquire a home with potential equity.

Foreclosure	TLC	My Loss-Your Gain
Must Sell	Handyman Special	Under Market
Make Offer	Needs Work	Under Appraisal
Reduced	Bring All Offers	Under Assessed
Motivated	Vacant	Desperate
Estate Owner	Says Sell	Transferred
Bank	Relocating Owner	Financing
Investor	Quick Sale	Lease Option

The agent can actually program these characteristics into his or her computer and pull the same list each time with relative ease. This will give you a current list of homes in the M.L.S. you may then drive by the homes and see if any are of interest and then bring your agent out to show you the good properties. The agent will then write the contracts and submit and negotiate for you as the buyer.

The "remarks" above are not the only terms that can be used. Feel free to suggest others which may signify motivation or distress. Remember, agents will automatically earn a commission which will be paid by the seller at closing. It is agreed upon before the listing goes into the Multi-Listing Service. This is called "co-brokering".

The vacant properties can prove to be the best because it is obvious that the owner is making a payment on the vacant property. They may also have a second payment on another home that they may live in currently. That is motivation. Also, they have to keep the vacant property insured and they have to watch for vandalism as well. A good agent will point out these items during negotiations with the seller's agent.

Don't ever assume that an agent will bring you a good deal on their own. The agent may not even know the property is a good deal. Keep in mind that the agent will not run a daily list like this unless you ask them to do so. You will have to make sure you are specific in telling them what you are looking for in an investment property.

Talking To Sellers

When you are talking to sellers it definitely is to your advantage knowing how to sniff out a great deal rather than a marginal deal as quickly as possible. The type of deals you should be focus on are the "no-brainer kick yourself if you let it get away" opportunities. No matter what anyone tells you there is no 100% guaranteed deal that you couldn't possibly ever come out on the short end of. Even the most recognized real estate "gurus" out there will admit to deals they wished they hadn't done. So your best insurance for success is finding motivated sellers that are going to offer the best terms and price.

You should have your checklist of items to ask sellers when they call: address, # of bedrooms, fenced yard, etc…. The conversation should not sound like a homicide investigation so you want to develop a rapport and rhythm with the seller. When you get right down to it though all of the specific information about the property is great but you want to find out their motivation. It is inevitable that some sellers will just be looking for a quick all-cash retail sale. You are not their answer.

The name of the game is to find out their "situation". You will be seeking the seller that has a perceived problem with their property and that maybe you are the solution they are need. After taking the necessary information you want to get right down to the core by asking several prescreening questions.

Questions to ask when prescreening sellers:

Why are you looking to sell?

Do you have ballpark range of what you are asking for the property?

Is there something in mind you are needing to make it worth your while to sell the property?

If someone were to buy your property are you needing to close quickly?

If you are working with truly motivated sellers they will definitely not mind giving you a price range of what they need and even what the balance on their mortgage is if they have financing. When they can't give insight to any of the above listed question examples or that their mortgage balance is their business, then go find another one.

When someone says, "just look at it and make me an offer" you can but I wouldn't suggest it. I will simply state that I sure don't want to waste their time (actually mine) so if I had a ballpark range of what they are seeking that I can research more to see if I can meet their needs. Some sellers will be shocked that you wouldn't want to spend an hour to go out to drive by, another hour doing research on what you could possibly offer, and then take the time to call them back only to hear them say that just isn't an acceptable offer. Your time needs to be spent with motivated sellers on quality deals.

When you talk to sellers you need to sift and sort though conversations to find their motivation so that you can find the ones that have great potential. Even the best of potential sounding deals may not work out but you can sure save yourself a lot of time knowing how to prescreen effectively to find truly MOTIVATED SELLERS!

More Mistakes Beginning Real Estate Investors Make:

1. LACK OF ACTION / PROCRASTINATION

Taking the first step is always the hardest. Many people aren't sure what action to take first because their mind may be blurred with too many ideas at one time. Do your best to keep yourself focused in one or two directions and keep yourself from going in too many directions at one time.

2. HAVING THE WRONG PARTNERS

Your partner's attributes should always complement your own. In other words, if you don't have cash, your partner should. Other attributes may be, knowledge of closings, doing repairs, an understanding of buyer financing, rental procedures, etc.

However, many beginning investors form partnerships with people who don't have any better clue what to do and are more broke. The reason is probably so that they have a buddy to work with, that will give them positive support and motivation.

This is a disastrous mistake as a beginner trying to learn the ropes and nothing can be worse than splitting a check after you did all the work, that is if there is a check to split.

3. FEAR OF FAILURE OR MAKING A MISTAKE

Some people don't take action because they are afraid they are going to make a mistake. Everyone learns from their own mistakes, but it s better when you can learn from somebody who has already made the mistakes and can keep you from making the same mistakes also.

Study as many courses about real estate investing as you can. You help avoid costly mistakes, or getting a hands on seminar on how not to do something. You will never learn everything & the real estate field is always changing.

4. NOT MAKING ENOUGH OFFERS OR FEAR OF MAKING OFFERS

You're never going to buy a house if you do not make an offer. And the more offers you make, the more houses you will buy.

Don't be afraid to make an offer on the property. If you spent your time pre-qualifying the property and looking at it, then make the offer. Even if the seller is asking thousands more than what you want to pay.

Don't be afraid of the seller being insulted by the price or terms. Let them know why your offer is what it is. The property needs repairs, etc., bad area, etc.

Some of the reasons for not making the offers is fear it will not get accepted or a counteroffer. Some people say what if it gets accepted but I m not able to close? The worse thing that can happen is you will lose your deposit.

Other people say what if I get a counteroffer? If you get a counteroffer, decide what can be paid for the property. If they are still asking to high of a price for you, counter them again. If you can't get the seller down to your price range, go to the next seller. There are always more deals out there.

5. ABUSING WEASEL CLAUSES

Weasel clauses are contingencies put into your sales contract so that you have a way out of buying. Such as "Subject to my partners approval", "Subject to final inspection", or "Subject to buyer herein, finding a new buyer/assignee."

Simply put, weasel clauses are for weasels. After all, that's where the term came from. Most banks don't even consider a contract that has a weasel clause and most sales people will discourage the seller from accepting the contract.

Don't make an offer unless you fully intend to follow through and are willing to loose your deposit if you don't. Otherwise, you will quickly get a reputation for being a weasel.

6. NOT BEING ACCESSIBLE

When dealing in real estate it is always important that potential sellers and buyers be able to contact you easily. If a potential buyer or seller calls your phone number and they get an answering machine, they may simply hang up and that would cost you a deal that could have made you thousands of dollars.

When you do get a call and you re not able to answer it, make sure that you return their call promptly. If you do not already have a cell phone you may want to consider getting one. There are pagers available for as little as just a few dollars a month, and you should at least have a digital pager.

7. DEALING WITH UNMOTIVATED SELLERS

Spending too much time going out and looking at deals you could have pre-qualified and found out that were not true deals. Don t spend time analyzing a property s repairs, costs of improvements, closing costs, etc. before you know you can get a good deal on the property. Before you even go look at the property, you should know that this property may be a potential deal after talking to the seller.

8. WAITING FOR BLOCK HOUSES

If you want to keep a property as a rental, it's OK to want it to be block, not that there is anything wrong with good frame rentals. However, some investors wait for block houses to fix and sell retail, passing up very good deals on frame houses. There is absolutely no reason for an investor to pass up a frame house or block home that can be fixed up and sold for a profit.

There are many home buyers out there that haven't even had the word "block" cross their minds.

Remember, if you see a frame house that has rotten wood... WOOD IS CHEAP! How much does a 2 X 4 or sheet of plywood cost? However, when negotiating with a seller, you always want to act like the rotten wood will cost a fortune to fix.

9. LACK OF EDUCATION

Failure due to not understanding how to invest or not having a good enough education in real estate. This is, not to say that you need to know every technique and every thing there is about real estate investing before you can get started and you will never know everything.

However, it s important to know one or two investing techniques and master them and not try to be the master of all techniques. Pick out one or two ways, maybe three ways to find or buy real estate and put them to work. Remember to stay focused on those techniques. My course “Get Rich by Helping Others” is an excellent example of teaching you a cookie cutter method of buying real estate.

10. NOT FOCUSING / GETTING DISTRACTED

Getting distracted by other programs, taking bad advice, and listening to negative thinkers, can kill you chances for success as a real estate investor. The biggest negative thinkers that you re going to run into are most likely your closest friends and relatives.

They may say things like "You don t believe that stuff really works, do you?" or "You don t believe you can do that real estate stuff on late night TV?" Set them straight right away, that their negative sarcastic remarks are not welcome. Seek out positive and supportive people. Also, don't let yourself get distracted by other money making projects.

There is always some new course on how to get rich quick. Remember that real estate is the number one "MILLIONAIRE" maker in America.

It is very important that you create a system for staying focused and keeping track of all your leads. Keep yourself organized where you can process vacant houses as you find them and also process your potential tenants and potential buyers as they come to you.

Everyone who is going to do this business, needs to have a daily planner. A daily planner helps you to stay organized as to who you need to call, who you need to see, who you need to make offers and more. It is also very important to keep a to-do list in your planner.

11. NOT PLANNING A DEAL START TO FINISH

Another reason for people s failure in real estate is the fact that they do not plan their deal from start to finish when they make their offer. Many investors will go out looking for a property that is cheap and put an offer on the property. When the offer is accepted, that investor is not sure what they are going to do with the property.

12. DOING REPAIR WORK

Nothing can be worse than trying to do all the repairs yourself. The goal is to be a real estate investor, not a contractor or handyman. Now there s nothing wrong with doing one or two small things yourself. And when I say small, I mean as small as changing a light bulb or changing the door lock on the front door.

On a normal rehab, you can hire a contractor or handyman and have them completely redo the house in a matter of a couple of weeks. But if you, yourself try to do it, chances are it s going to take a couple of months. Not only do you have to pay the cost of the mortgage during the time that you re fixing the house up, but you re also spending your time doing repair work instead of finding your next deal.

The most labor it should ever take you to rehab a house is lifting a pen to write a check. You'll find this business so much easier when you watch other people do all the dirty work.

13. OVER DOING OR UNDER DOING REPAIRS

Another mistake investors make is either under doing repairs or overdoing repairs. If you under do the repairs on the house, the house is not going to look nice and home buyers just are not going to want to buy the house. This is going to increase your difficulties in finding a good buyer and increase the time that it s going to take to eventually sell the house.

If you overdo the repairs on the house, you re going to spend too much. The goal in real estate investing is to balance the amount of repairs that you do against what the market place is asking for. If you re repairing a house in a neighborhood where the average house sells for $150,000.00, you'll want to put in beautiful light fixtures, polished brass bathroom fixtures, marble sinks and plush carpet.

However, if you re dealing with a rental property in a lower income area, where the average price of the house is only $50,000.00, you'll want to go in with standard fixtures that are nice and presentable.

It does not take much to make a house look nice, with a little bit of paint, carpet, and a few door knobs and ceiling fans.

Telephone

A telephone, a quick survey, and a record form are your best tools to maximize returns on time and effort.

Script #1:

"Hi, my name is ___________________. I am a real estate investor and would like to discuss your property for sale. Is now a good time? (If not, schedule a conversation). I'm looking at several properties and just need to take a few minutes to see if your property would be of interest to me. If it is, I would put an offer on it within 24 hours."

Important Questions to Ask When Calling Newspaper Ads

How did you come up with the price?

Would you carry back financing (OTB - Owner Take Back)?

Why are you selling?

Are you in a hurry to sell (any deadlines)?

How long has the house been for sale?

What area is your house located in?

Why are you selling your house now?

How quickly do you want to close?

What is the balance of your mortgage? (Equity should be minimum 30%).

What type of mortgage? Interest rate? Assumable FHA or VA?

How flexible is your price if we brought you a cash offer?

Common Concerns

If the homeowner does not want to discuss the information…

"I don't want to waste your time or mine and I'd like to put an offer on the property as soon as possible."

This is a common discussion in the sale of a property…(ask nest question).

If homeowner wants you to see the property…

"I would love to after I get the answers to a few more questions."

Your time is valuable. Don't waste it!

Negotiations

The starting point for becoming a good negotiator is understanding the process. There are a series of steps effective negotiators understand and use. They are the five stages of negotiation. The time frame for the stages can be very short, a couple of hours, or very lengthy months or even years. All negotiation falls into these five specific stages:

				#5
			#4	Post Activity
		#3	Consummation
	#2	Compromise
#1	Exchange
Preparation

Poor negotiators start to negotiate without planning. The best negotiators always get their price, are in control and always spend substantial time and effort on preparation. Without a good, effective plan, you are bound to lose more than you gain.

In the exchange stage, both parties will "feel each other out" to gain advantage, determine the important issues, give opening positions and exchange information. Good negotiators will concentrate on building relationships, use purposeful questioning and focus on the important characteristics of the negotiation process.

Compromise is the name of the game in negotiation. The key is learning to give less and receive more. Easily said, but often difficult to master. You need to determine true leverage, know your options and how to use tactics to overcome an impasse.

Once you have a fundamental agreement, you need to consummate the deal. Lots of good deals have been lost due to poor finalization. Get it in writing quick and make it simple.

Finally, spend some time reviewing the deal. How did the process go? Could you have done better? What will you do the next time?

1. Everything is negotiable. Keep an open perspective about what is negotiable. You may believe retail prices in stores are the bottom line…they are not! There are very few non-negotiable products or services. Try to negotiate, you will be surprised.

2. The best time to negotiate. Everyone has peak time and an off time to work or perform. Find you opponent's off time and your peak time. Hopefully, they match. Never negotiate in you off time.

3. Know you goals. The best negotiators have specific goals and objectives. Keep them in mind and progress toward them.

4. Keep the bottom line in mind. Forget your pride, prestige and need to be right. Remember, in negotiation only the bottom line is important.

5. Set the pace of the race. Have a game plan, with a detailed timeline.

6. Access your opponents philosophy. Know if your opponent employs the win/win or the win/lose style.

7. Make goals realistic. Have a fair opening position. Know fair market value.

8. Begin with rapport. Make your opponent feel like he/she is your friend, but do not get personally involved.

9. Negotiating in person. If you are confident and understand body language, negotiate in person. You can get a lot of information by watching body language. If you are a little timid or lack confidence, negotiate by phone.

10. Negotiating by phone. If you are going to negotiate by phone, be the caller so that you can be prepared. If they call you, do not react. Call them back after you have collected your thoughts.

11. Negotiate from strength. In person-to-person negotiation, use your office. Home-court advantage can throw off your opponent.

12. Know walk-away points. Some of the best deals are the ones you will walk away from. Know your bottome line and stick to it.

13. Do not get upset about the first offer. It is simply a ploy. Do not take it personally

14. Do not get upset during discussions. Most discussions are meant to take advantage or gain leverage. It is just part of the process. If you get upset, the opponent's ploys are working.

15. Let them make the first offer. Do not show your cards. See their cards first.

16. Keep asking questions. Every session should give you more answers, more information and more leverage.

17. Do not tell, ask! No one likes to be told how to conduct their business or what to do. Ask questions politely, but firmly.

18. Lend with the minors. Keep your major concessions. Use only the minor concessions. Give a little at a time.

19. Be patient. Waiting out your opponent is a skill. Do not fold to the pressure. Silence is golden.

20. Greed kills. If you get what you came for…walk. More than one deal has been ruined by a greedy attitude.

21. Hide the salami. You can lose a whole salami, one piece at a time. Recognize the tactic and say no the first time. Keep the salami out of sight.

22. Play to their ego. Everyone likes to think they got the better of the deal. Play to their ego. Let them believe they have won.

23. Shut down intimidation and attacks. Ignore intimidation so as to minimize the effect and shut down the approach.

24. Use diminishing units. Stay away from splitting the difference. Always go decrease small increments. It gives the impression you are getting to your bottom line.

25. Two for one. Always get two pieces of information for every one piece you give out. Ask two questions before answering one of theirs.

26. Never need the deal. You can express a desire for the deal, but never need the deal. Always have an alternative option. If you do need the deal, do not let it be known.

27. Attack their weakness; you need to decrease their leverage. What are their challenges? Where are their weak points?

28. Position. Understanding your opponent's position tells you how far you can negotiate. Knowing their minimums, maximums and walk-away points gives you an advantage.

29. Flexibility wins. Remain flexible. Take each piece of their information and use it to your advantage. Always find common ground, a new direction, a way around an obstacle.

30. Prepare your giveaways. Have a specific plan of your concessions. Know what is first, second, third and what you will trade for them.

31. Keep price firm. Poor negotiators give in on price very quickly. Often they will offer a discount before being asked. Anticipate the question. Stay firm.

32. Do not second guess yourself. Once you have planned a strategy or executed a deal, do not second guess yourself. You did your best.

33. Do not burn a bridge. You never know when your opponent could help influence another deal or provide information.

34. Be ready to walk away. Know what constitutes a bad deal and be ready to walk away.

35. Save face. No one likes to be embarrassed. Ensure people look like winners even if they are losing. Always give people a chance to look good and save face.

36. Use test probes regularly. Test the acceptance of your position regularly. Regular reinforcement and agreement lead to positive deals.

37. Perception is everything. Perceived power is leverage. Test perception of your position. You may be pleasantly surprised. What they do or do not know can give you leverage.

38. Ask, you will be surprised. Ask for anything - you will be surprised at what you get.

39. Print lies. Just because it is in the budget, proposal, letter or media does not mean it is true! Test the numbers. Test the documentation. Test the parameters. Do not believe everything you read.

40. Check authority and decision making. Time is valuable. You can waste a lot of time with non-decision makers. Ensure you are talking to the right people.

41. Re-assess leverage. The leverage in the negotiation can change quickly. Continue to assess leverage. Who has the power or advantage today?

42. Pre-frame expectations. Early in the discussions it is useful to frame the negotiations or position. Tell them what you are going to tell them, and then tell them what you told them!

43. Start a little high but do not be unreasonable. Once you have identified your best case deal, ask for just a little more. Sometimes you will get it, most of the time it leads to a better deal. Wherever you start, be able to justify your position.

44. Have a game plan. Plan you negotiation. Know the issues. Have a time table. Plan concessions. Use a checklist or agenda for issue discussions. Stay close to the plan. Keep a logical progression.

45. Choose the time to break bad news. There is a good time for bad news. Wait for the right time. Usually just after you have made them feel good or given a good concession. Try the sandwich techniques, good news, bad news, good news. It lessens the impact.

46. Stall if you need the time. There is nothing wrong with postponing a decision on a key element of the negotiation. Stall for additional information or an approval, especially if you feel pressure.

47. Keep good records. Keep good records. You'll be surprised at the inconsistency in arguments, position and strategy if you keep detailed records. Consider recording the conversations for your own records and transcripts.

48. Make the cost more intangible. Use delay payments, defer, postpone.

49. Personal incentive. Include indirect benefits for participating. Think about frequent flyer programs, a nice benefit.

50. Expect more! Expect more! Expect more!

Monthly Cash Flow without Any of Your Own Money

A profitable, yet easy-to-learn method of creating cash flow is to buy and re-sell properties in back-to-back closings. However, flipping properties in this manner requires you to KEEP WORKING. When you stop working, the cash flow stops coming in. Rather than flip properties for all cash, flip them for some cash and a promissory note that pays you monthly income with interest for years and years.

Related Information

The "Wraparound" Transaction

Obviously, you need the cash to buy the property. Most people buy properties using a mortgage loan, which means you need enough cash flow from the sale of the property to pay off the loan you borrowed.

Enter the wraparound formula. A "wrap" is a transaction that involves leaving the first mortgage in place and creating a new loan to a buyer which is secondary to the first mortgage. The payments come in from the buyer, and you make the payments on the underlying loan still in place. There is a "spread" between the two payments which equals cash flow to you. Most agents equate a ?nothing down? offer with a buyer who is not serious.

Example: Buy a property worth $100,000 for a discounted price of $90,000. Put 20% down ($18,000) and finance the balance of $72,000 at 9% with a conventional loan. Your principal and interest ("P&I") payment is about $580.00 per month. Resell the property for $110,000, taking a down payment of $15,000 and a $95,000 note at 12% interest. You collect about $977 per month. Your cash flow is almost $400 per month ($4800/year), with just $10,000 invested (figuring $5000 in closing costs.) That's 48% annual interest on your money!.

This deal is definitely "cookie cutter" and easy to do, but I said "no money or credit." Here's the olution: find a partner to put up their money and credit.

Step 1: Locate an open-minded investor who has good credit and provable income.

Step 2: Form a limited liability company ("LLC") of which you are both the members, 50/50.

Step 3: Locate properties in nice middle class neighborhoods available for 10% or more below market.

Step 4: Execute a resolution from the LLC that your investor member will purchase a particular property in is name, for the benefit of the LLC. Have the investor purchase the property in his name, using his credit and down payment.

Step 5: Advertise the property for sale by owner "no credit required." Find a buyer willing to pay at least 10% more than the appraised value of the property with 10% or more as a down payment. The investor gets the cash to recoup his investment

Step 6: Execute a land contract to the new buyer.

Step 7: Collect monthly cash flow and split it with the investor.

In the above example, you so all the legwork and you split the cash flow with the investor. When the investor is unable to obtain any more loans, find another investor, rinse and repeat

How to Create a Money Machine

Are your real estate investments bringing you enough monthly cash flow? Is land-lording draining you of energy? Is property maintenance depleting your bank accounts? Are you open to new and safe methods of bringing huge annual returns on your cash? If you answered "Yes" to any of these questions, please read on . . .

You Can Be The Banker

Actually, it's not really a secret at all. In fact, bankers have been doing this for over a hundred years. Bankers make money by borrowing at low interest rates, then lending at higher interest rates. You deposit money in a saving account and they pay you 3% interest.

They lend the same money back to you for home loans at 7% or more. The "spread" between the interest rate they pay and the interest rate they collect amounts to incredible profit!

Consider this simple example: You are shopping for rates to refinance your home loan. A lender quotes you 7% interest. On a $100,000 loan, the monthly payment (amortized over 30 years) is about $665 per month.

However, at the last minute someone at the bank decides that the color of you underwear isn't right, so your interest rate changes to 7.25%. Your monthly payment will now be $682. You aren't terribly upset, since, after all, what's $17 per month? What you don't realize is that the extra ¼ percent amounts to over $6,000 in additional interest!

An Incredible Opportunity in Today's Market

We are in a unique time in history in that real estate prices are rising, yet interest rates are dropping. This means that those who can borrow at low interest rates and loan at higher interest rates are making a bundle! Combine the interest rate "spread" and the "buy low, sell high" principle and your profit grows exponentially.

Enter Wraparound Mortgages

Consider this example: Susie Seller buys a $90,000 house for a 10% discount ($81,000). She borrows $81,000 from First Federal Financial on a favorable 8% thirty-year loan. Her principal and interest payments are roughly $594 per month.

She sells the property to Barney Buyer on an installment land contract for $100,000 (about 10% above market), taking $10,000 down and carrying the balance of $90,000 at 11% for thirty years.

She does not pay off the underlying loan, but rather collects payments ($952/month) from Barney on a monthly basis and continues to make payments on the underlying loan. She collects $358/month cash flow on the "spread" for 30 years!

This is a basic example of a "wraparound". The existing loan remains in place on the investment property, and a new loan is created which wraps around the existing loan.

Susie makes a profit on both an interest rate spread and a markup on the purchase price. People with poor credit rarely question the price of the property (especially since they do not have to qualify for the loan). When the new buyer pays off the remaining balance,

Susie pays off the underlying loan. In the meantime, she makes monthly cash flow on the spread between the interest she pays and the interest she collects. This cash flow is not offset by property management, maintenance and the aggravation of tenants.

There are no vacancies, calls from tenants, city code violations or other headaches to deal with. You can collect your monthly checks for thirty years, or you can sell your "wrap" note for cash!

You Don't Need Good Credit or Huge Sums of Cash

If you don't have the ability to qualify for low interest rate loans, not to worry! You can use partners who have good credit and income. You can take over existing loans with low interest rates, then re-sell the investment properties on a "wrap."

There are multiple ways to make a profit on "wraps," and you don't need credit, provable income or bundles of cash! If you are looking for an alternative to land-lording or a new way to create more cash flow, this is the ticket!

Little or No Down

Most of us would like to get into a house or real estate for little or no down payment. This allows us to have a reserve of security cash in the bank and allows us to use our money for other things such as investments, vacations, and big-people toys (my personal favorite is traveling).

You may be asking yourself how you can buy a house for less than 5% - 20% down plus closing costs and pre-paids (which typically amount to an additional $3,500). My answer to your question is short and sweet - the lease purchase contract.

This real-world example will prove to you how quick and easy it is to buy a home with the lease purchase contract. In fact, I taught this to one of my students.

My student told me this story: “While sitting at my desk shuffling through some paperwork, I got a phone call from a friend of mine who knew I was looking to move near his neighborhood. He told me that he drove by a beautiful home on a lake that had a For Rent sign in the front yard and that it would be perfect for me. So I drove by the home for myself to see what it was all about. It was perfect!”

”I jotted down the phone number from the sign and returned home. I did some research to determine what the home might be worth and what the fair market rent was. With my numbers in hand, I drove back out to the home and knocked on the door.”

”After some small talk. I asked them if they would consider selling their home and they said yes, as long as they got no less than $180,000. I knew from my research that their home was worth a little more.”

”I offered them the following lease purchase deal: $2,601 down (first month's rent plus $1,000 for the option deposit), $1,650 per month rent, $300 per month rent credit, a term of 4 years, and a sales price of $195,000. They accepted my lease purchase offer without batting an eye.”

”They have a positive monthly cash flow of $480, they have a tenant who will take care of their home as if it was their own (which it is), they have a written sales agreement for $195,000 in 4 years, plus they saved thousands of dollars in real estate commissions.”

”In 4 years I will have over $15,400 in equity ($400 x 48 months + $1,000) so I probably won't have to come up with a down payment when we close, I paid a minimum amount of money to gain control of a wonderful home, my closing costs are delayed for 4 years, I will profit from any appreciation in value of the home, I don't pay any taxes and I have a limited exposure to liability. This entire "lease purchase" process took less than two days to complete!”

”And my personal favorite, if I decide that I no longer want the home, I can assign (sell) my lease purchase agreement to a third party for a tremendous profit!”

People do this all the time. They are doing it as I type this page. Real estate brokerages have entire divisions set up to exclusively handle lease purchase deals. If all these people can do it, you can do it, too.

Without a doubt, the lease purchase contract provides for the best financing terms you will find in any free market in the world. The numbers never lie. It truly is... real estate with little or no down payment!

Down Payment assistance

The federal government as well as state and local governments is vitally interested in increasing home ownership in this country. Neighborhoods with a high percentage of homeowners are better maintained, have a lower incident of crime and usually have higher property values. In order to assist our citizens in their quest for home ownership many government agencies and private enterprises supported by the government have been created. While the intent of these agencies and companies is laudable the very nature of government bureaucracy has made the understanding and use of the available programs quite difficult for the average person who is not experienced in navigating government waters. There are overlapping programs, sometimes confusing requirements, and of course, the usual mass of government forms to complete. As you will see in this book, the number and complexity of programs is huge.

Now, you are convinced that it is time to buy a home; you realize that you do need money. Where do you find it? This book is designed to help you find the sources of funding your need for both mortgages and down payment. In these pages, you will find a detailed listing of federal loan and grants available to potential homebuyers and a brief description of state funding programs. We have included tips to use when applying for money researching information and working with experts. Some of the information will cover programs not specifically designed for home ownership, but which we think may be useful.

Applying For Government Assistance

Always apply to more than one program. This will increase your chances of having at least one of your applications approved. If you should end up with more than one approval, you will be able to make a choice.

Do not let eligibility rules stop you from applying. For instance, if the funds are only available to non-profit organizations, link up with an existing organization that you can work with.

Do not believe a "no" answer. When you inquire about a specific program and are told that it does not exist, don't believe it! Instead, keep asking questions until you find out the information you need. You might ask for similar programs, for referrals to other agencies, about restructuring that may have altered the title of the program or, finally, for names of other people who would know more about it.

Do not argue with the government. Fill out the application exactly as requested, even though it does not seem to make sense to you or you feel you could do it in a better way. While you may be right, your goal is to obtain funding, NOT to change the government's ways of doing things!

Talk to program officials before you fill out your application. Then you will know just what sort of answers and information the agency is looking for on applications. Understand the limits and usual grant/loan amounts awarded. You want to be sure to ask for the right amount of money.

Do not give up. Remember that there could be many reasons why your application might have been rejected. Like timing or because you have never applied before! Try again. Use resources to get help in processing your application. When nothing is happening with you proposal, solicit the help of your U.S. Senator or Representative's office. Use this very effective measure only as a last resort. You don't want to be in the position of "crying wolf."

Look into all types of funding programs. Never restrict yourself to only federal programs. Investigate state agencies, and even county or local ones.

How to Find Information

With the abundance of information available today, it is essential to know how to cut through all of it to find an expert. You must cultivate the skills needed to be able to make an expert want to share information with you. It will take a number of phone calls to reach the expert, so it is essential that you not become impatient with the process. Here are some pointers to keep in mind when telephoning.

Telephoning Tips

Introduce yourself cheerfully and with friendliness.

Be open, honest and to the point rather than evasive or deceitful.

Be confident and optimistic rather than negative.

Be humble and willing to listen rather than arrogant.

Do not demand information, but respect the expert's time and feelings.

Be generous in providing compliments to the expert about their knowledge and reputation.

Be social and conversational but not just chatty.

Help your expert with any information you can provide them with as long as you do not betray your client or another source, even if you have to call back later to provide it.

Send a short, handwritten or typed note thanking them for helping you.

Misinformation

There are three major causes for errors. Sometimes researchers do not have the time to become familiar with the industry jargon. Since you do not want to waste the experts' time, you may miss getting a complete explanation and later realize you did not get the information you needed or were off the mark. To avoid this pitfall, act as though you do no know much about the topic so that the expert will explain the basics in more detail and ask you questions to be sure you get the right answers. Another common error is to believe that information is accurate if it is in written form or comes from a computer. Once more you can contact an expert (other than the one quoted in your information) and seek their opinion about the figure. A third possible source of misinformation is that the expert is not accurate. To determine whether this is the case, TACTFULLY ask the expert WHY they believe what they have answered or HOW they arrived at the figure. You will be able to tell from the response whether to seek another expert or whether to verify the validity of the study. Remember, misinformation can lead you to make poor decisions that could be disastrous for you.

State Money

You may be able to acquire state money if you reside in the same state. The funds and assistance available change continuously from year to year. Often toll-free hotlines exist to provide you with information and referrals. If you ask, you may also receive a free booklet describing how to start a business in that state. Small Business Administration, part of the National Association of State Small Business Administrations, operates in all states to help people work well with their state governments.

Types of Funding Programs

Childcare Facilities Loans - You may be able to receive a loan for the purpose of developing an on-site childcare facility.

Energy Conservation Loans - Small business can be assisted in financing the installation of energy-saving equipment or devices.

Grants - same as with the federal government.

High Tech Loans - These are loans to help young companies develop or introduce new products.

Industrial Revenue Bonds or General Obligation Bonds - The state raises money, from the general public, to finance the purchase of fixed assets like equipment or buildings. The people who lend money to you do not have to pay federal taxes on the interest they charge you. General Obligation Bonds are similar except that the state promises to repay the loan if you cannot.

Interest Subsidies on Loans - The state subsidizes the interest rate you are charged by a bank so that it is like getting a loan at a much lower interest rate. Federal agencies do not use this system.

Loan Guarantees - These are similar to federal loan guarantees, except that the state government will go to the bank and co-sign your loan.

Loans - same as federal government.

Loans to Exporters - These loans exist to cover expenses related to fulfilling a contract and may not be available in all states.

Loans to Inventors - These exist to help the entrepreneur develop or market new products.

Loans to Women and/or Minorities - Almost every state has funds designated for economically disadvantaged groups.

Local Government Loans - This type of loan may exist to help local businesses start-up or expand.

Matching Grants - These supplement and back up federal grant programs and are usually awarded to projects that benefit the local area.

Special Regional Loans - When specific areas of a state have severe economic problems or are under developed, special funds may be available.

State Administered Federally Funded Programs

State governments administer many federally funded programs. A few examples of these are:

Small Business Innovative Research Grants (SBIR) - These grants are available to entrepreneurs to support six months of research on a technical innovation.

Small Business Investment Companies (SBIC) - These companies provide financial assistance in the form of long-term loans, equity financing and management services.

The SBA 7(A) Guaranteed and Direct Loan Program - This program guarantees a large percentage of a loan made through a private lender or makes direct loans.

Federal Money

There are many sources of federal funds available to entrepreneurs, and small business. The types of assistance are described with the following terms:

Loans - this is money lent by a federal agency for a certain period of time. There is the expectation of repayment, though interest payments may or may not be required.

Loan Guarantees - These are programs in which the federal agency agrees to pay back part or all of a loan to a private lender, should the borrower default.

Grants - These are funds given by a federal agency for a fixed period of time. No repayment is necessary.

Direct Payments - Individuals, private firms and institutions may be provided with funds by federal agencies for specified or unrestricted use.

Insurance - To assure reimbursement for losses sustained, there may be coverage under specific programs. The insurance may be provided through insurance companies or federal agencies. Premium payments may or may not be required.

The information in this section lists a description of various types of federal funds available to small businesses, entrepreneurs, inventors, and researchers. This information is obtained from the Catalog of Federal Domestic Assistance, a publication of the U.S. Government. The number next to the title description is the official reference for this federal program. For additional information contact the office listed.

The following types of assistance are listed:

1. LOANS

2. LOAN GUARANTEES

3. INSURANCE

4. DIRECT PAYMENTS

5. GRANTS

Calculating Settlement Needs

The first page of the HUD-1 Settlement summarizes all the costs and adjustments for the borrower and seller. Section J is the summary of the borrower's transaction and Section K is the summary of the seller's side of the transaction. You may receive a copy of the seller's side, but it is not required.

Section 100 summarizes the borrower's costs, such as the contract cost of the house, any personal property being purchased, and the total settlement charges owed by the borrower from Section L.

Beginning at line 106, adjustments are made for items (such as taxes, assessments, fuel) that seller has previously paid. If you will benefit from these items after settlement, you will usually repay the seller for that portion of the cost.

Here is an example for you to use in making your own calculations:

Assume in this example, the cost of the house is $100,000 and the borrower's total settlement charges brought from Line 1400 of Section L are $4,000. Assume that the settlement date is July 1. Here the borrower has agreed to pay the seller for the $40 Home Owner Association dues that have been paid for the month of July and for the 25 gallons of fuel oil left in the tank. This is added for a gross amount due from the borrower of $104,065.

Section 200 lists the amount paid by the borrower or on behalf of the borrower. This will include the deposit of earnest money you put down with the agreement of sale, the loan(s) you are getting and any loan you may be assuming.

Beginning at Line 210, adjustments are made for items that the seller owes (such as taxes, assessments) but for which you as the borrower will pay after settlement. The seller will usually pay you or credit you this portion at settlement.

In this example, assume the borrower paid an earnest deposit of $2,000 and is getting a loan for $80,000. A tax of $1,200 and an assessment of $200 are due at the end of the year. The seller will pay the borrower for six months or one-half of this amount. Line 220 shows the total $82,700 to be paid by or for the borrower.

Section 300 reflects the difference between the gross amount due from the borrower and the total amount paid by/for the borrower. Generally, line 303 will show the amount of cash the borrower must bring to settlement.

In this example, the borrower must bring $21,365.00 to settlement.

Costs Shared by Buyer and Seller

At settlement it is usually necessary to make an adjustment between buyer and seller for property taxes and other expenses. The adjustments between buyer and seller are shown in Sections J and K of the HUD-1 Settlement statement. In the example given above, the taxes, which are payable annually, had not yet been paid when the settlement occurs on July 1. The borrower will have to pay a whole year's taxes on the following December 1. However, the seller lived in the house for the first six months of the year. Thus, one half of the year's taxes are to be paid by the seller. Accordingly, lines 211 and 511 on the HUD-1 Settlement Statement would read as follows:

The borrower is given credit for this amount at the settlement and the seller will pay this amount or count it as a deduction from sums payable to the seller.

Similar adjustments are made for homeowner association dues, special assessments, and fuel and other utilities, although the billing periods for these may not always be on an annual basis. Be sure you work out these cost sharing arrangements or “pro-rations” with the seller before the settlement. You may wish to notify utility companies of the change in ownership and ask for a special reading on the day of settlement, with the bill for pre-settlement charges to be mailed to the seller at his or her new address or to the settlement agent. This will eliminate much confusion that can result if you are billed for utilities used when the seller owned the property.

The Basics of Foreclosure

Foreclosure is the legal process of the mortgage holder taking the collateral for a promissory note in default. The process is slightly different from state to state, but there are basically two types of foreclosure, judicial and non-judicial. In mortgage states, judicial foreclosure is used, whereas in deed of trust states, non-judicial foreclosure is used. Most states permit both types of proceedings, but it is common practice in most states to use exclusively one method or the other.

Judicial Foreclosure.

Judicial foreclosure is a lawsuit that the lender ("mortgagee") brings against the borrower ("mortgagor") to get the property. About half of the states use judicial foreclosure. Like all lawsuits, it starts with a summons and complaint served upon the borrower and any other parties with inferior rights in the property (remember, all junior liens, including tenancies, are wiped out by the foreclosure).

If the borrower does not file an answer to the lawsuit, the lender gets a judgment by default. A referee is then appointed by the court to compute the total amount (including interest and attorney's fees) that is due. The lender then must advertise a notice of sale in the newspaper for four to six weeks. If the total amount due is not paid, a public sale is conducted by the referee on the courthouse steps. The entire process can take as little as three months and as much as twelve months depending on the volume of court cases in your county.

The sale is conducted like an auction, the property going to the highest bidder. Unless there is significant equity in the property, the only bidder at the sale will be a representative of the lender. The lender can bid up to the amount it is owed, without having to actually come out of pocket to purchase the property.

If the proceeds from the sale are insufficient to satisfy the amount owed to the lender, the lender may be entitled to a deficiency judgment against the borrower and anyone else who guaranteed the loan. Some states prohibit a lender from obtaining a deficiency judgment against a borrower (See, e.g., Alaska Statutes §34.20.100, Washington Revised Code §61.24.010, California Code of Civil Procedure §580b).

Non-Judicial Foreclosure.

Most states permit a lender to foreclose without a lawsuit, using what is commonly called a "power of sale." Rather than a mortgage, the borrower ("grantor") gives a "deed of trust" to a trustee to hold for the lender ("beneficiary"). Upon default, the lender simply files a notice of default and a notice of sale, which is published in the newspaper. The entire process usually takes about 90 days. The borrower usually has a right of redemption after the sale (see below).

Strict Foreclosure.

A few states permit "strict" foreclosure, which does not require a sale. When the proceeding is started, the borrower has a certain amount of time to pay what is owed. Once the date has passed, title reverts to the lender. Many California and Oregon cases, in which the seller has sought forfeiture under a land contract, the court has ordered strict foreclosure. See, e.g., Peterson v. Hartell, 707 P.2d 232 (1985), Zimmerman v. Estate of Cook, 855 P.2d 193 (Oregon 1993) .

Reinstating the Loan.

Many states permit a borrower to "cure" the loan before the date of sale. This simply requires paying the amount in arrears, plus interest and attorney's fees. It is certainly more desirable for a defaulting borrower to reinstate a loan rather than pay off the entire principal balance.

Virtually states have specific laws requiring a reasonable notice to the defaulting borrower before the lender can accelerate the debt. If you are a lender, make sure you review the default notice with your attorney to ensure compliance with state law. If your attorney or other party sends the notice, be sure he complies with the Federal Fair Debt Collection Practices Act (See, Romea v. Heiberger & Associates, 97 Civ. 4681 (S.D.N.Y. 1998); Law firm held liable for violation of F.D.P.C.A. by signing 3-day demand for rent).

Redemption Rights.

Some states give a borrower the right to "redeem" the amount owed and get title to the property back after the sale. The length of the redemption period changes from state to state. The highest right of redemption is from the owner, borrower or guarantor on note. Behind him come the junior lien holders who are in danger of being wiped out by the foreclosing senior lien holder.

In states where there is a long redemption period, investors often buy the junior liens on the property to have the right to redeem the property from foreclosure. The holder of the most junior lien has the last right to redeem the property by paying off all underlying liens. The owner, of course, has the highest right. Obtaining a quitclaim deed from the owner gives you the right to redeem the property yourself.

Finding Good Deals

There are many ways to find a good Real Estate deal. Let's analyze the best ways based on our experience in the business.

First of all, what are we looking for in a property? There is commercial, residential, income producing, and many other types of Real Estate. We typically have found that we have the most success when dealing with single-family residential homes priced in the 70-100K ranges. Now this range will not hold true for every area. Lets face it, comparing New York to South Carolina or Florida to Nebraska will give us varying price ranges. So, use this as a scale. Try and stay in an area that can be afforded by lower to middle income individuals. The higher priced homes tend to carry a longer turn around time because your buyer group is very limited. The other levels give you a broader customer base. Remember, you will be in the business of selling your homes as quickly as you can to recognize a profit. Please understand that you may have more success with other types of properties, so feel free to explore those as well. However, the main focus of this section will be on the types of properties listed above.

Where do you look? Well there can be as many places to look, as there are properties to find. The best places to look are the following:

1. Local newspapers

2. Local Real Estate magazines

3. Local HUD and VA lists

4. Fannie Mae and Freddie Mac government agencies

5. Banks, Lenders, Insurance Companies, Credit Unions, Attorneys

6. Local Realtors via M.L.S. or Multiple Listing Services

7. Driving around

8. For Sale By Owner properties

9. County courthouse-foreclosures

We are looking for two things- Equity & Motivation on the part of the seller. Equity is termed the difference between the Value of the home and the amount Owed. Motivation is any one of many things. Look for ads that mention things such as:

Foreclosure	TLC	My Loss-Your Gain
Must Sell	Handyman Special	Under Market
Make Offer	Needs Work	Under Appraisal
Reduced	Bring All Offers	Under Assessed
Motivated	Vacant	Desperate
Estate Owner	Says Sell	Transferred
Bank	Relocating Owner	Financing
Investor	Quick Sale	Lease Option

These key words can usually detect motivation of some sort. You must also look for the obvious…Price. Look for low prices such as properties in the 70's, 80's and 90's. These same words can be used when a Realtor pulls M.L.S. properties for you. Make sure you ask them to go into the remarks section and do this for you.

Using Direct Mail

Scenario:

You get that first magical list that you anticipate as being the answer to finding truly motivated sellers. It doesn't even dawn on you the hours you spend typing up the letters because you're so focused on all the great deals to be made. It seems like the letters are just burning a hole in your hand by the time you get the stamps on them and to the post office.

Next week rolls around and your hopes were just about dashed by the time got that first call from a seller who received one of your letters. Now we're talking! It becomes obvious shortly into the conversation they're just "fishing" around and trying to find just how much you would pay for their property and no they are not in any hurry to sell.

What happened? Why didn't you get more calls from truly motivated sellers? Everything you heard about direct mail in real estate was that this is "THE" way to go in having a system set up for motivated sellers to find you.

The "Real World"

After you've read the above scenario know just two things right now:

1) Many new investors using direct mail without guidance sometimes experience these types of results and get discouraged from using direct mail again. These individuals will tell you, "oh, I tried mailing out letters and postcards once but I didn't get many (or any) deals".

2) DIRECT MAIL FINDS TRULY MOTIVATED SELLERS!!!! Now, this latter statement is what I hope by the time you finish reading my points will convince you that a well thought out direct mail plan is extremely effective but takes some thought on your part. You need to be more sophisticated than just throwing darts in the dark hoping you hit something.

Sure, the majority of your letters/postcards won't be responded but did you know that a success rate of substantially less than 1% can still make direct mail VERY profitable for you in real estate. Read on my friend!

What Makes A Great Direct Mail Campaign?

Now let's get into what you really need to know in starting your direct mail campaign. Get a organized game-plan together on how you are going to make sure that you get as many motivated sellers calling you as you can handle!

1) Define Your Target Market

You need to know what you're hunting so to speak. Just an "I Buy Houses" message to your market doesn't come close to what you need to do in direct mail. There are many, many ways to make money in real estate and finding the truly motivated sellers with direct mail means your message should be reflective of the target market you are seeking.

For example if you are targeting pretty house properties that are in pre-foreclosure then included in your message the seller doesn't need to know you take over properties with tenant terrors or that buy junker houses.

They need to be informed that you can possibly take over their payments and know how to find tenant buyers that will help resolve their situation so they can move on with their lives. Define your target market because the message you send needs to reflect accordingly.

2) Generate Your Mailing Lists from Quality Sources

I've seen many types of mailing lists that weren't worth the paper they were printed on. If you're keying into pre-foreclosure properties then make sure the source providing the information is reputable and you can test out on a month or two basis before being tied into a one year contract or paid up front fee. Later when you find out the information is out-dated and inaccurate then you're stuck.

Another example is you may be into finding Absentee Owners. These are a great source of deals if done correctly and basically these are owners of a property where the tax bill is being sent to an address different than the subject property.

Ninety nine times out of a hundred that is a prime target for a tired landlord or Junker deals to be made. However, it can be quite frustrating when you find out the information you purchased hasn't been updated for over a year on the property tax records. Ouch!

Come to find out after doing a little investigating almost half the properties you would have been sending letters/postcards to changed ownership. You paid for but didn't receive quality information.

Make sure before you buy mailing list or property tax information that you have a chance to do a test basis on some of the material. Most all reputable companies selling quality information will have no problem sending you a small bit of test data to look over.

3) Don't Stop At One Mailing

This is a key principle that many investors seem to never grasp the concept of. If you have fulfilled the prior two steps in securing quality mailing list material and you know exactly your target market, then send them multiple mailings. I have my software system set up where for example any category that I key into will receive letters and postcards from me.

The text messages will be incremental in nature building up and playing on different angles and ideals trying to prompt them to call me. Sure, I'll get most responses from the initial mailing but many times it may take a little bit more persistency to get the seller persuaded. I'm glad I didn't stop with one seller sending out only five letters.

On the sixth letter we finally put together a deal and netted me over $8,000 quick cash. With another seller it was actually over a year of mailings before he came around but the deal got done.

4) Let Your Letter And System Pre-Screen The Sellers... Time is my most important commodity.

I don't have the time to talk to unmotivated inflexible sellers wanting all cash and retail value for their property. You don't and won't have the time to waste either with these types of sellers. Sure, some will get in under the radar but for the vast majority of the sellers that receive your message they will know a few things very quickly.

You are an investor and expect to make a profit and yes you have many creative ways to buy properties. In fact you can probably even close within 48 hours if you run through your due diligence checklist. However, the message in your letters/postcards needs to state that if they need all cash AND full retail value not to call you.

However, if they have some considerable degree of flexibility in either the cash price or terms then to call you as soon as possible. You need to be seeking quality of sellers and not quantity of sellers fielding fruitless phone conversations.

5) Direct Mail Is A Investment, Not An Expense

Make no mistake it does cost money to initiate and maintain an effective direct mail campaign. When you put together the cost of postage, letters, envelopes, postcards then you're talking substantial monies dedicated to this marketing medium.

In a prudent investor's budgetary considerations these are costs that most LIKE to consider. When you're experiencing success and know how to effectively secure quality mailing lists or generate them yourself then you soon change your mindset that you simply can not spend enough on postage.

Let me try to explain from the sense that just because you don't like to spend gas for your car should mean that you don't ever put gas in it. If you don't realize that fact then you aren't going to be going anywhere fast and you can make the same comparisons if you don't consider direct mail costs as an investment in your real estate business.

Summing It All Up

Direct mail is one of the best ways to find motivated sellers or rather have them find you but take some time and forethought from thought to finish on what you're trying to accomplish.

Your goal is to find truly profitable deals and the means you go about doing this are contingent upon your target market, quality of the mailing contact, multiple messages to same contact, pre-screening ability, and finally your commitment to direct mail and an investment in your real estate business. Be organized and focused in your direct mail campaign and soon you too will be finding all the motivated sellers you can handle!

Making Offers

Your next step is to make an offer. There are several reasons why a person would submit an offer to buy a home.

1. To occupy as a primary residence or a secondary residence.

2. To hold and/or rent for future long or short term returns.

3. To resell as an investment.

4. To "flip" the property for a fee.

We are most interested in #3 and #4 mentioned above. Lets talk about each option. As a Real Estate investor, we make our money in two ways. First, we buy a property under market value; we renovate the property, and then resale the property at Market Value profit. This makes up a large portion of our business. Second, we "tie up a property" via a contract and we then assign the contract to a second party for a fee (usually $5,000) and we are no longer obligated to purchase the property. Once the sale is closed we are paid our "assignment fee.

Profits will be much higher under the first scenario, but the time frame is much greater and the expense and time are very high. The second option brings a lower profit, but brings a quicker return with little to no expense. In essence you as the Investor are being paid a flip fee in the amount of approximately $5,000.

Lease Purchase

What are the Key Elements to a Binding Real Estate Contract?

1. Offer and Acceptance: Original signatures with no alterations to the contract. If the original offer is marked up and initialed by the party receiving it, then signed, this is not an offer and acceptance but a counter-offer. Any final agreement should be reduced to a final writing and signed by both parties.

2. Consideration: A bargained for exchange of something of value. Money is the most common form of consideration, but a promise to perform (i.e. a promise to pay) is also satisfactory.

3. In Writing: A real estate contract must be in writing.

a. Identify the Parties: The full name of the parties must be on the contract.

b. Identify the Property: At least the address, but preferably the legal description must be on the contract.

c. Purchase Price: The amount of the sales price or a reasonably ascertainable figure (an appraisal to be completed at a future date) must be on the contract.

d. Signatures: A real estate contract must be signed to be enforceable.

e. Legal Purpose: The contract is void if it calls for illegal action.

f. Competent Parties: Minors, mentally impaired, drugged persons, etc. cannot enter into a contract

g. Meeting of the Minds: Each side must be clear as to the essential details, rights, and obligations of the contract.

What is a Lease Purchase Contract?

A lease purchase contract (or lease option contract as some call it) combines a basic lease contract with an option-to-purchase contract. The tenant/buyer pays to the landlord/seller a nonrefundable option deposit that is applied to the purchase price of the home.

The tenant/buyer then pays to the landlord/seller a sum that is typical to the rental amount usually on a monthly basis. A portion of that monthly payment is then applied to the purchase price of the home. During, or at the end of the lease period, the tenant/buyer has exclusive right to buy the home under the terms to which both parties have previously agreed.

Lease + Option-to-Purchase = Lease Purchase

Investment Property Analysis

Subject Property: To be determined

DESCRIPTION: To be determined

Single-family detached dwelling

Standard construction, conformed zoning

Property Analysis

Appraised value *	$ ____________________
Loan Amount	$ ____________________
Gross Margin	$ ____________________
Percent to loan Value	$ ____________________
Rehab Estimate	$ ____________________
Closing Costs Estimate	$ ____________________
Dealer's Gross Marin	$ ____________________

* Goal (Purchase not to exceed 75% of Appraised Value.)

Detailed Investment Analysis reports available through our Real Estate Software Program.

Determining Market Value

As you know, anyone can go out and pay fair market value or even top dollar for a property; it really doesn't take much skill or specialized training. However, if you are looking to buy your home with equity, or to get a good deal, you must know the value of the homes in the area. There are several ways to do this, and as part of your task, we will have you take action today and start learning the market value in your area. This lesson and the assigned task are some of the same strategies a real estate investor uses to Determine Market Value.

FSBO

One of the ways you can determine market value is by utilizing For Sale By Owners (fsbo's). You can look in your local paper and start calling fsbo's in the areas you are interested in and pre-qualified for. When calling a fsbo, use our property information sheet to start taking down information on potential properties, for example; what neighborhood, number of bedrooms and bathrooms, square-footage, and amenities. Ask the seller, if they have had the property appraised or if they have run comparisons for similar properties in the area. Also, look for key words or phrases in the ads to identify a potential good deal, things like motivated seller, moving out of state, must sell, discounted for quick sale, owner financing, etc.

Using Real Estate Professionals

You may want to use the help of a real estate agent (a buyer's agent) to help you find a home in the areas you are considering. They can utilize the MLS (Multiple Listing Service) to locate properties you may want to look at and provide you with a lot of the information on your property information form. They can also run "comps"(comparisons) to see what houses in the area have sold for and other current listings in the area. You have a professional on your side, working on your behalf and the commission is paid on the seller's side. The listing agent and their real estate company will get half of the commission and the selling agent and their real estate company will get the other half. Use our Real Estate Interview sheet to help you pick the best real estate professional for you.

Task - Call at least 5 Real Estate Professionals and fill out the Interview sheet. When you pick the pro for you, have them provide information and comps on at least 5 properties for each area you are considering.

Using the Internet/Technology

Now that we are in this incredible time of technology and access to information, it makes your life much easier. You can look at a lot of information on the Internet before you ever call on a FSBO or a Real Estate Professional. Most of your local Real Estate companies will have a company website with listings in your area, and the individual Real Estate Professionals will have the same, and even tell you about their track record and their specialties. You can also take a look at FSBO's in your area through several websites. Be sure to do some preliminary research before you contact a FSBO or real Estate Professional, make copies of the properties you are interested in and make copies of the Realtors or agents you may want to work with.

Court House Records

Although you have access to the court house for all public information, you can find out all the information you need without visiting your local court house, if your court house in on-line, you can use the information gathered above to confirm prices and dates and so forth?

Appraisal

An appraisal will be ordered before closing on a property, but if you want to know exactly what the property is worth, you can order an appraisal for a few hundred dollars. We recommend that you use the previously described methods to find fair market value and add an addendum in your contract regarding the appraisal. See the contracts portion of our training to learn more about addendum's and how to protect yourself with escape clauses.

After you have completed the lessons and tasks in this portion of the program, you should have a very good idea about the market value in the areas you are considering. And as indicated above, these are some of the same techniques and strategies that real estate investors use as well. This lesson is designed to give you the knowledge and the confidence to move forward. You are ready to start writing offers, as well as negotiate the best deal for you. You are starting to see how having the knowledge and putting it into action is giving you a tremendous advantage in the marketplace, and that's exactly what the real estate investors do for a living.

How to Select a Realtor

The first step in selecting a Realtor or selecting an individual whom specializes in the area in which you would like to live. This Realtor will have successfully over the past six month to a year executed many transactions in your desired area. This will insure that your Realtor can best assist you in some of the needs that you may have. An example may be: Churches, Schools and Social Organizations, that you may desire to be near, to better enhance the new home that you are about to purchase. The way that you determine that this Realtor fits your criteria; you request an MLS Search in your desired area, on sold properties on the past twelve months. These sold listings will tell you which Realtor was responsible for these sold transactions, this will help you determine which Realtors you may want to interview to assist you in the home buying process.

Tip number three involves something that sounds basic but very important. You must immediately take a liking to the person that you're going to work with. It is very important that all parties both personally like and respect the goals of each party. You will many, many, many hours and days with this person. Please pick someone that you like.

Tip number four, make sure that your Realtor is constantly giving you options to look at, this will insure that you can make your very best and wisest decision based on all the opportunity available in the areas that you desire. Your task for this lesson is to go out and do some homework on Realtors that have had the most success in your desired area, and conduct three interviews.

Homeowners Insurance

Homeowners insurance is designed to protect you from disasters that could devastate you financially. In fact, lenders will not provide loans unless you have homeowners insurance. In many cases, your monthly mortgage payment will include taxes and insurance. If you pay your insurance separately and let your policy lapse, you and your mortgage company will be notified immediately, and if not taken care of quickly, the Mortgage Company could start the foreclosure process.

Shopping Around

You can shop around for homeowners insurance just like anything else, and if you are paying your insurance yourself, you will be required to bring proof of insurance and proof of at least one payment to closing. We recommend that, like the other action steps, you call at least three different insurance companies for quotes. If you have had a real estate buying agent working with you, ask them for recommendations and any help they can provide you regarding homeowners insurance.

Types of Policies

We have all heard the expression; "It's better to be safe than sorry." And that is certainly true with homeowners insurance, remember this will probably be the most expensive investment you are likely to make. We will outline the different types of policies that are available.

A basic policy will protect your home, landscaping and any outside structures from many different types of disasters like lightning, fire, theft, and storms. If you choose a broad policy you will be covered for additional items such as frozen pipes and a fallen tree, the items not covered would be things like floods and earthquakes.

There are several choices of policies and you will need to read your policy because only items listed are covered. The standard policy will consist of coverage for 100 percent of the value of your home; the least amount of coverage we would recommend is 80 percent. You should also have liability coverage, in case anyone is injured on your property or in your home as well as coverage for your personal items in your home.

Action Step

Using our Insurance Coverage sheet, contact at least 3 companies and compare rates, then call our affiliate partner and send in your quote sheets, our goal is to give you the best coverage for the lowest price. Make sure that all companies are quoting on the same coverage.

For Sale by Owner (FSBO)

The key to successfully executing a For Sale by Owner transaction involves working with your local classified section of the Newspaper on a daily basis. When you work with a For Sale by Owner seller you have the ability to potentially negotiate a better price for you on your purchase than if there is a Realtor involved. The first way to determine what a good deal is in terms of working with a For Sale by Owner seller is to determine the fair market value of several homes in the neighborhood. This can be done by calling Realtors that have listings in the area that you desire, and asking them the appraised value of the home they have listed. Not the asking price The Appraised Value. When you determine that have a home that has anywhere from ten to twenty thousand dollars in equity you may want to at that point submit an offer. If you would like assistance in submitting an offer on a property call your coach.

Another great way to locate For Sale by Owner properties is driving the neighborhood in which you desire to live in. This will give you the opportunity to work with people on a one on one basis eliminating any middle people who may not have the best interest of all parties involved. We do suggest that working with a Realtor can help execute a successful transaction. But it is also very true, when two parties work together one on one, and when there are no commissions involved in the transaction, it is very likely that both the seller and the buyer can create a win, win situation.

For Sale by Owner across this country is becoming a very welded way for people to sell homes. If you would like more information on For Sale by Owner, and would like some assistance in working with these individuals please contact the coach today. Best of Luck in your search, and Best of Luck in developing a relationship with the seller who understands your and their needs.

Your task on this lesson is to go to the task section for our For Sale by Owner section. Click now, this will involve telephone strategies for you to implement. Please make ten phone calls to people selling their homes, For Sale by Owner. The more you practice the more comfortable you will feel. Once you've made ten successful phones calls please contact your coach to update him or her with what you found out. Remember, we are here to assist you and help you, and we have fielded a team of experts to successfully simplify the process of you negotiating and purchasing your home. Good Luck!

Alternative Financing

If your credit is less than perfect or you are a little on the short side of a down payment, does that mean you are out of the home buying game?? Not at all!!! You probably won't fit into the Fannie Mae mold, but you still have plenty of options available to you.

Lease Option/Lease with an Option to Buy

A lease option or lease with an option to buy is a great way to tie up a property while you get your affairs in order. A lease option is an example of a unilateral agreement, which means that it is binding upon one person and in this instance, that person is the Seller. Under a lease option, you have the right to purchase the property and the Seller has to sell it at the agreed upon terms, however, you are never bound to buy the property. If you are working on repairing your credit, are still saving a down payment or don't have a long enough job history to qualify for a conventional loan, a lease option provides you the time to "get your ducks in a row". Many times a seller will be willing to credit a portion of the rent towards the purchase price. Be careful, though, because an underwriter will probably only give you credit for that portion of the rent that is above the fair market rent for the area. A lease option is also a great way to lock in the price of the property in an appreciating market.

Seller Held Financing (Owner Take-Back/Carry Back)

If the seller has equity in the property or owns the property free and clear, convince the seller to act as a lender and finance the property. The best way to demonstrate the advantage of holding the mortgage to the seller is to run an amortization schedule and let the seller see in black and white the enormous amount of interest he will make. Sellers will often take less than the market rate in interest and you don't have to jump through all the conventional "hoops" to qualify. Again, if you are just trying to repair credit or gain time on a job, you may give the seller an additional incentive by utilizing a balloon payment. A balloon is a lump sum all due at one time. For example, you could amortize the loan over 30 years (that would keep your monthly payment low) and have a 10 year balloon. That would mean that in 10 years, the loan would be payable in full. But, that would give you 10 years to get your house in order, so to speak. At that time, you would go and get some other permanent type of financing or perhaps even sell the property and move on.

Lease Option/Lease with an Option to Buy

A lease option or lease with an option to buy is a great way to tie up a property while you get your affairs. A lease option is an example of a unilateral agreement, which means that it is binding upon one person and in this instance, that person is the Seller. Under a lease option, you have the right to purchase the property and the Seller has to sell it at the agreed upon terms, however, you are never bound to buy the property. If you are working on repairing your credit, are still saving a down payment or don't have a long enough job history to qualify for a conventional loan, a lease option provides you the time to get your ducks in a row. Many times a seller will be willing to credit a portion of the rent towards the purchase price. Be careful, though, because an underwriter will probably only give you credit for that portion of the rent that is above the fair market rent for the area. A lease option is also a great way to lock in the price of the property in an appreciating market.

Seller Held Financing (Owner Take-Back/Carry Back)

If the seller has equity in the property or owns the property free and clear, convince the seller to act as a lender and finance the property. The best way to demonstrate the advantage of holding the mortgage to the seller is to run an amortization schedule and let the seller see in black and white the enormous amount of interest he will make. Sellers will often take less than the market rate in interest and you don't have to jump through all the conventional hoops to qualify. Again, if you are just trying to repair credit or gain time on a job, you may give the seller an additional incentive by utilizing a balloon payment. A balloon is a lump sum all due at one time. For example, you could amortize the loan over 30 years (that would keep your monthly payment low) and have a 10 year balloon. That would mean that in 10 years, the loan would be payable in full. But, that would give you 10 years to get your house in order, so to speak. At that time, you would go and get some other permanent type of financing or perhaps even sell the property and move on.

Rent vs. Own

So, you think you want to join the legions of Americans who own a home? Before deciding if homeownership is for you or not, there are many different factors to consider. In this lesson, we are going to pursue the pros and cons of ownership to determine if it is for you.

A few reasons to continue renting . . . .

If you are starting your career and your future is uncertain, you may be better off renting than buying. If you don't plan to stay in a home for 4-5 years, you may lose money unless the real estate market is surging because you need to recoup the expenses of buying and selling. Renting allows you freedom, flexibility and mobility.

If you are not willing to sacrifice a bit of your lifestyle, you may be better off renting. Homeownership is expensive . . . from the down payment to closing costs to fix-up expenses and repairs to furnishings. Are you ready to make the commitment? You may have to forego that fancy vacation or car for several years.

If you don't know the difference between a Phillips screwdriver and a flathead, you may want to continue renting. When you are renting and the plumbing leaks, it may be an inconvenience, but the landlord repairs the problem and bears the expense. If you are going to be a homeowner, learn your way around a toolbox! You will need it.

Final Consideration: If you pay 35% less in rent than you would for owning - including the monthly mortgage payment, property taxes, homeowner's insurances and association fees, it is probably wiser to continue renting.

WHY OWN?

The bottom line is - 65% of Americans cannot be wrong!! Homeownership didn't become the American Dream by chance. From the days of the caveman, man has wanted to be the master of his domain, the king of his castle, etc.

Security and Enjoyment - When you own your home, you are free to conduct your lifestyle the way you choose (within reason). You can decorate, landscape, etc. in the style you choose.

Equity - Equity is the value of the property in excess of what is owed on the property. Over time, with every payment you make and with appreciation of your real estate, you gain equity - sort of a forced savings account. When you sell you will probably put a nice chunk of change in your pocket if you purchase correctly. When you are renting, you are helping someone else pay off a property.

Tax Benefits - Many of the costs associated with purchasing real estate is tax deductible such as mortgage interest and real estate taxes are tax deductible. In the early years of your mortgage loan, the majority of your payment goes to interest and therefore, becomes tax deductible in the year you pay it. Also, many of the costs associated with the purchase are tax deductible as well. For further information, please check with your CPA or your coach.

Fixed Payment - Even with the popularity in recent years of adjustable mortgages, the fixed-rate mortgage is still the most common (more on this later). With the fixed-rate mortgage, your payment is locked in for a 15 or 30 year term. When you are renting, you are at your landlord's mercy as to what the rent will be from year to year and whether or not the unit will even available to you from one year to the next.

Remember: Your first house does not need to be your dream house. You may not achieve your dream house until the second or third house. You just keep trading up until you get there and know that you will!

Rent vs. Own Analysis

How much are you paying in rent each month?	________________
What is the price of the home you would buy?	________________
How much of a down payment could you make?	________________
(Note: most conventional lenders will require at least 5% down)	________________
How much do you make each year before taxes?	________________
How long do you plan to live in the house before you move or refinance your mortgage?	________________

TASK

On a notepad, write your motivation for wanting to purchase a house. Fill out the analysis above.

What is a Mortgage?

Very few people pay cash for their homes. Typically, a homebuyer will put down the smallest amount possible when purchasing a home. The rest of the money is borrowed from a lender, or in some instances, from the seller. When you borrow money for any purpose, you will sign a promissory note ("note"). The note is the evidence of the debt. In the note, you agree to repay according to the terms and conditions in the note. When you purchase real estate, the lender needs to have some sort of security in the event you fail to make payments in accordance with the Note. The Buyer gives the Lender a mortgage or deed of trust as a "security instrument" in real estate transactions. The mortgage or deed of trust specifies what action the lender may take in the event you default and fail to repay the Note.

The state you reside in will determine if you will be utilizing a mortgage or deed of trust.

A mortgage is a legal claim against your real estate. You as the buyer give the mortgage to the Lender. You become the Mortgagor. The lender becomes the Mortgagee. An easy way to remember who the players are is that the Mortgagor "or" lives behind the door. The Mortgagee "ee" gets the money.

Real estate loans secured by properties in deed of trust states are secured by the deed of trust. The Buyer becomes the Trustor "or" and actually transfers the ownership of the property to a Trustee "ee". The Trustee or their Beneficiary receives the money every month and holds the deed of trust until such time as the loan is paid off.

Lenders prefer to have loans secured by deeds of trust because the foreclosure process on a trust deed is a lot faster and less expensive than foreclosing on a mortgage.

TYPES OF MORTGAGES

There are virtually hundreds of different types of mortgages. These types of mortgages are commonly referred to as "products". As with any product you would buy, each has their unique features. The loan products fall into three primary categories: conventional also known as conforming, and non-conforming or unconventional and government loans.

Conventional mortgages are originated by banks or mortgage banker/brokers and then sold in the secondary market. The secondary market is an organization of investors sponsored by the federal government who invest in these mortgages. Two of the most common investors are Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (The Federal Home Loan Mortgage Corp.). Because these loans are sold as securities to investors they need to be of the highest quality. The underwriting criteria are very stringent. The applicant must have squeaky clean perfect credit, a secure job history, and their housing expense cannot exceed 28% of their gross monthly income. In addition, their housing expense plus all other monthly debts cannot exceed 36% of their gross monthly income. These percentages are called ratios.

Non-conforming mortgage loans are those that don't adhere to the Fannie Mae/Freddie Mac rules. Most of these loans will be "portfolio" products. In other words, the institution that originates the loan will not be selling it, but instead will retain the loan and service it for its life. These products are helpful for people who have less than perfect credit or where verification of income can be a problem i.e. the self-employed.

Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans are examples of government loans. FHA loans are insured by the Federal government and VA loans are guaranteed by the government. FHA and VA also uses ratio to determine how much house you can afford, however, their guidelines are somewhat more lenient than conventional mortgages. For FHA the ratios are 29/41 and for VA there is no housing ratio and the debt ratio cannot exceed 41%. VA does consider residual income, which varies with the size of your family. Residual income is how much is left over after the bills are paid. FHA/VA formulas will allow you to qualify for a larger loan than the conventional loan ratios. The ratios are not etched in stone and may be somewhat flexible.

CHOOSING THE RIGHT TYPE OF MORTGAGE

Once upon a time there was one mortgage product. It was the "traditional" 30-year fixed rate mortgage. As we emerge into the new millennium, new products are being born almost daily. Some of the most popular mortgage products offered today are:

Traditional 30-year fixed rate mortgages

15-year fixed rate mortgages

Graduated-payment mortgages

Growing equity mortgages

Adjustable-rate mortgages

Balloons, 3/1 ARMS and Two-Steps

FHA, VA

Conventional loans

Traditional 30-year mortgages

The main advantage of the 30-year fixed rate mortgage is that your interest rate and monthly payment will not go up. The disadvantage is that if interest rates go down, you may have to spend thousands of dollars to refinance to get a lower rate.

The 15-year fixed rate mortgage

This product is usually very popular when interest rates are low. Usually lenders charge a lower rate because they will be getting their money back faster. The difference in payment between the 30-year and the 15-year is negligible if you consider you pay the loan off in half the time and save substantial interest. Just as with the 30-year loan, you have the security of knowing that the interest rate and monthly payment will remain stable during the term of the loan. The disadvantage of this loan is that many people don't have the additional income to qualify for the higher payment. You can still accomplish the same outcome by prepaying the mortgage. See "Mortgage Reduction".

Graduated Payment Mortgage

A graduated payment mortgage (GPM) is designed to be more affordable in the early years than the 15 or 30-year traditional mortgages. Its monthly payments start low and increase by a fixed percentage every year for five years. For the first five years, the loan balances goes up slightly instead of down like a traditional loan. This is called negative amortization. The main advantage of the GPM is being able to qualify for a larger loan with less income. The disadvantages are that lenders typically require at least 10% down (as opposed to 5% for traditional products) and that the negative amortization can cause you to owe more money than the property is worth if the real estate market is not strong.

Growing Equity Mortgage

A Growing Equity Mortgage (GEM) is a graduated payment mortgage whose payments continue to increase until the loan is paid off. They do not level off after the 5th year like the GPM. The advantage is that the loan is paid off quickly and substantially less interest is paid. It is no more difficult to qualify for a GEM than it is to qualify for a traditional loan because of the GEM's lower initial monthly payment. The obvious disadvantage with this product is that the payments keep going up regardless of whether your income keeps going up.

Adjustable Rate Mortgage. Adjustable rate mortgages (ARMS) became popular in the late 70's and early 80's because interest rates were very high. ARMS start out at a rate lower than the fixed rate and adjust up or down depending on the economic climate. ARMS are good when interest rates are on the downslide or you intend to keep the property for less than 3 years. There are many different ARM products. Adjustment periods can vary as well as the amount depending on which index the arm is tied to. There are also various "caps" that can be placed on the ARMS. A "cap" is the maximum amount the ARM can adjust up to. Never consider any ARM that does not have a cap. Another feature that is popular with an ARM is a "convertibility" feature. This allows you to "convert" the adjustable rate to a fixed rate without refinancing. When considering an ARM, be sure that you can afford the worst-case scenario.

Government Loans. FHA and VA loans have many advantages over conventional loans:

Easier qualifying requirements

Lower interest rates

Lower down payments (FHA 3%-5% and VA $0 down)

The loan limits are usually smaller than conventional loan limits.

Always consult with a mortgage professional to determine which mortgage product is best for you.

The Real Estate Contract

The most critical component in any real estate transaction is the contract. Therefore, it is of the utmost importance that you maintain control of the contract and that you use a contract that favors you. If you are working with a Realtor, they will have a standard real estate contract that they must use if they are writing the contract on your behalf. The key is for you to prepare your own contract and submit it to the Realtor to present to the Seller. If you use the Realtor's contract, you are locked into boilerplate language that is supposed to be normal and customary for your particular region. Quite frankly, we aren't concerned with what is normal and customary. We want to make sure that our contract protects us and that it contains the provisions that we have actually negotiated. There is no such thing as a standard real estate transaction. No two are exactly the same and therefore, the contracts should not be exactly the same.

In this lesson, we are going to show you how to custom build a contract for the purchase of your home.

Security Instruments by State

State	Security Instrument

Alabama	Mortgage
Alaska	Deed of Trust
Arizona	Deed of Trust
Arkansas	Mortgage
California	Deed of Trust
Colorado	Deed of Trust
Connecticut	Open-End Mortgage
Delaware	Mortgage
District of Columbia	Deed of Trust
Florida	Mortgage
Georgia	Security Deed
Hawaii	Mortgage
Idaho	Deed of Trust
Illinois	Mortgage
Indiana	Mortgage
Iowa	Mortgage
Kansas	Mortgage
Kentucky	Mortgage
Louisiana	Mortgage
Maine	Mortgage
Maryland	Deed of Trust
Massachusetts	Mortgage
Michigan	Mortgage
Minnesota	Mortgage
Mississippi	Deed of Trust
Missouri	Deed of Trust
Montana	Deed of Trust
Nebraska	Deed of Trust
Nevada	Deed of Trust
New Hampshire	Mortgage
New Jersey	Mortgage
New Mexico	Mortgage
New York	Mortgage
North Carolina	Deed of Trust
North Dakota	Mortgage
Ohio	Open-End Mortgage
Oklahoma	Mortgage
Oregon	Deed of Trust
Pennsylvania	Mortgage
Rhode Island	Mortgage
South Carolina	Mortgage
South Dakota	Mortgage
Tennessee	Deed of Trust
Texas	Deed of Trust
Utah	Deed of Trust
Vermont	Mortgage
Virginia	Deed of Trust
Washington	Deed of Trust
West Virginia	Deed of Trust
Wisconsin	Mortgage
Wyoming	Mortgage

What Type of Property is Right for You?

Just as there are many different types of make and model of cars, there are choices to be made in real estate. Once you have selected the property that best suits you and your lifestyle, you will go to the next step which is selecting the features that are most important to you. Some things you will want to consider is the size of your family, whether you prefer city living or country living, how much spare time you have to devote to maintenance or yard work and more. First, let's talk about the different types of properties available:

Condominium - If you are living in an apartment now and that kind of communal, low-maintenance living suits you, you may wants to consider a condo. When you purchase a condo, you on the interior living space which is attached to your neighbors by common walls, floors and ceilings. You receive a deed to your space and you share the costs of maintaining the common areas with the other owners. In addition to your "common walls", common areas can be community pools, clubhouses, parking lots, recreational facilities, landscaping/lawns, etc.

Common areas are owned and maintained by a homeowners (HOA) is organized and operated as a corporation within your state. The HOA establishes By-laws which regulate how they are operated. The HOA elects a Board of Directors annually that oversees the management of the property, establishes a budget, authorizes repairs and improvements and collects the monthly maintenance fees from the owners.

The HOA is essentially your community government. They will establish the rules of the community such as whether or not pets are allowed and what size and type, to the color you can paint your doors, and to how loudly you can play your stereo. Before contemplating any condo purchase, be sure to review the articles of incorporation, by-laws, covenants, restrictions, etc. to make sure the rules are ones you can live with. Bear in mind that the condo fees are subject to change so you will need to factor that into your budget.

Many people buy condos as investors and are not owner-occupants. Remember the best properties are owner-occupied. If the condominium is largely occupied by tenants, they may not take the same degree of pride in ownership that you would. Also, the investor-owners will be voting on the management of the condo and issues that may be important to you might not be important to them. In any resort area, the majority of the occupants are bound to be renters.

Co-Operative (Co-ops) - Cooperative units are very similar to condos, but instead of purchasing your space inside your walls, you purchase shares in the corporation that owns the property. Co-ops are prevalent in New York, Washington D.C. and other large cities The style of living is very similar to a condominium, but buying a co-op can be more difficult as the owners of the co-op can determine whether or not to vote you "in". This can also be a problem when selling your unit as the co-op will determine whether or not the new buyer can purchase the unit. For most, this is probably not a preferred method of ownership.

Town homes - A town home is another type of attached housing where you will share a common wall or walls with other owners. With a town home, you will own the property to the front and back of your unit, as well as the side if you are an end unit. In most cases, you will also own the land below it and the air above it. With a town home, you own the property and have complete control of your property. You are also able to dispose of the property as you see fit - rent it, sell it, etc. There will probably be a homeowner's association that will maintain and oversee the common areas and for which you will have to pay a fee. In general, ownership of a town home will be less restrictive than a condo or co-op.

Zero-Lot Line or Patio Home - A zero lot line property is a single family detached property that usually has a patio or deck in the back and a small patch of land between units. With this type of property, you own your unit and the dirt under it and around it and are responsible for maintaining your patch of land. Sometimes there will be a HOA involved, but it will primarily be to maintain entrances and other common areas. Zero-lot line homes are very popular with single people and retirees because of the low maintenance yards.

Detached Single Family Residence (SFR) - The SFR is by far the most popular housing choice. If you are thinking resale, and you always should be considering the resale, your SFR is the best choice. With a SFR residence, you typically have fewer restrictions with what you do with your property than you do in an attached unit. Obviously, you don't have to worry about listening to your neighbors through the walls either. SFR can be found in subdivisions or freestanding on tracts of land. A SFR in a PUD (planned unit development) can be an especially good investment because the PUD will have deed restrictions which limit the actions of the homeowners. It would be unlikely in a PUD that your neighbor could collect junk cars in their front yard or paint their house purple or lime green. Deed restrictions can be confining but certainly will ensure the value of your property. A 3 bedroom/2 bath SFR is the most in-demand property.

Multi-family Properties - A multi-family property may be a great way for you to get into a property of your own and can also be a profitable investment. For example, if you invest in a two-unit building and live in one side and rent the other, the rent can usually pay for a large part, if not all, of your mortgage expense so that your overall housing expense is greatly reduced or diminished. In addition, the repairs and certain improvements that you make to the property become tax deductible from your federal income tax return. A small two or three unit rental is a great way to get started in the real estate investment business.

Once you have determined what type of property suits your lifestyle, you will have to consider what features appeal to you and whether or not they fit your budget.

The Full Time Investor

Many self-acclaimed real estate investing gurus state that everyone should quit their jobs and immediately jump into full time real estate investing. They often claim incredible results from students with little experience.

We would like to caution that life-changing decisions are not usually simple and that full time investing is not for everyone. Let's discuss some pros and cons of full-time versus part-time real estate investing.

The Full-Time Real Estate Investor

Entering into the real estate profession on a full-time basis offers several advantages over a part-time commitment. Being successful requires you to develop knowledge in many aspects of real estate, and more time focused on real estate leads to greater knowledge.

The more you learn, the more you earn, since you do not need to rely on as many professional services or partners for help. You also learn to recognize a deal (or a dud) faster, which gives you more time to do more business or spend with your family.

As a full-time real estate investor, you work your own hours. When we say "full-time," that may mean as little as twenty hours per week if you are good at finding deals. The rest of your time can be spent pursuing other vocations or hobbies.

Or, if you are so inspired, you can work forty or more hours and use the extra cash flow to buy rental properties or diversify your holdings in the stock market. The point is that you need to satisfy your cash flow needs before you can start "investing" your money.

One final point you should consider is whether you want to be "self-employed." If you have always worked for someone else, being your own boss sounds very attractive.

In some, respects, this isn't quite the truth. Being your own boss means being an accountant, bookkeeper, stock clerk, receptionist and office manager all-in-one. You have to do deal with tax returns, payroll, office supplies, customer service, bills and all the other hassles that come with a business. You don't have friends to chat with at the water cooler. You don't have paid health insurance, a company car and a 401(k). You take your problems home with you every night.

Sound like fun? It is, once you learn how to master your time and run your business. Being the master of your own life and career is well worth the other hassles of dealing with your own business.

The Part-Time Real Estate Investor

The part-time real estate investor holds a "regular job." This may be by choice or for the time being until his real estate ventures are bringing in enough cash to quit his job.

If it is the latter reason, don't quit your job because the real estate "guru" told you so. Quit your job when it is not worth the income that it brings you. In other words, if you are making more money per hour flipping real estate properties on the side, you are at the point that where your regular job is costing you money. Only then, is it time to quit!

One of the advantages of starting out part-time is that you can maintain cash flow while learning the business. It may take weeks or possibly months to find your first deal. That same deal may take several months to turn around, especially if you decide to fix it and sell it retail.

Think twice before telling your boss you're leaving; you will have plenty of time to make the career switch once you have real estate experience. You may, on the other hand, like your occupation. If so, continue to work at it, and invest in real estate on the side.

The best case scenario, if you are married, is to have one spouse work a regular job. The other spouse work the real estate business for creating wealth, retirement income and a nice college fund for the children. Of course, in today's market, you could be laid off due to unforeseen circumstances.

If you earn additional income flipping real estate properties and invest the proceeds into rental properties, you will be covered if your main income is lost. This is especially the case for married women that often forego a career and raise a family, only to find themselves divorced with no means of making a living.

We don't want to sound cynical about marriage, but with a fifty-percent divorce rate in America, it never hurts to have a system for making money.

Someone with a full time job tends to have little free time to focus on real estate investing. A part-timer should learn most of the same skills as a full timer. Thus, the key disadvantage to flipping real estate on a part-time basis is that it takes sacrifice to learn the business.

Something has to give; television, lazy weekends, meaningless hobbies and even some family activities must be compromised. As with any education, time spent learning about real estate will bring its own rewards, especially if the people in your life understand your goals and your plan to achieve those goals.

If you are married, make sure your spouse reads this material with you and participates in the fun process of making money.

Treat Real Estate Investment As a Business

People are lured to real estate investing because of the quick buck that it promises. Don't hold your breath, you won't get rich quick. An "overnight sensation" usually takes about five years.

More than ninety percent of the people who take a real estate seminar quit after three months. Real estate investing should be treated with the seriousness of a career. It takes months, even years for a business to cultivate customers and have a life of its own. You need to treat it like any other business.

"The “Help Program”

Everyday, in every city in America, there are people who need temporary help in making their mortgage payment. The reasons are many. Maybe the owner was laid off for a couple of months. Maybe there were other expenses, but whatever the reasons these people need help.

They may only need to make two or four payments to catch up on their mortgage. This isn't much. Normally For a small amount, say under $3,500, it usually doesn't pay to borrow that amount from a bank or finance company because of the up-front costs to borrow money. Even if they wanted to, they run into a catch 22. Most banks or finance companies will not lend money to people who are behind on their house payment no matter how good their credit has been in the past.

Now you might ask, “if their own bank wouldn't loan them money, than why should I”? Good question. The answer is that we won't actually give them a loan, but we will help them and at the same time we will be 100% protected. How is that possible? We will explain that later in the course.

There is a real need for this service. I can assure you that you won't have trouble finding these people that will need your help. I will teach you how to place a simple 3 line ad in your local newspaper will bring you all the clients you can possibility handle. The "Help Program" is designed to do just that, help them, but it is not a loan, and you are not a lender. There was a person in Denver that has acquired over 125 homes in just eighteen months? He did it using a version of the “Help Program”.

We can teach you to do this program no matter where you live or weather you have any experience in real estate.

You Will Learn:

How To Acquire Properties With As Little As

$2,500 Down Without Ever Having to Talk to a Banker?

How To Almost Double Your Money Every Year On Properties You Don't Keep!

How to Buy Properties At 30% to 40% Below Market even with bad or no credit!

In this advanced home-study course you'll learn exactly how to tap into the moneymaking power and security of buying properties "subject to" the existing financing. What this means to you is:

You Will Get All the Equity As The Loan is reduced!

You Will Get All the Appreciation While In Title!

You Will Get All the Tax Breaks!

You Will Get All the Cash Flow!

You Will Own the Property!

BUT you will not have to qualify for a mortgage, personally guarantee a loan, or

talk with your bank!

There are no banks to qualify with because we teach you to buy "Subject To". The closing paperwork is easy to implement and you can close in 48 hours if you want to. You will control all the properties you buy. If terms like "All Inclusive Trust Deed", "Wrap-around Mortgage", "Contract For Deed", and "Subject to Financing" sounds unfamiliar to you, then you need this course, because without it you're missing out on a whole new way of acquiring and selling property. Your also losing out on thousands of dollars of profit you might not get otherwise.

You'll learn:

Work once - get paid for life with no more work.

How to start with no cash if you need to.

How you can buy with no credit on your part.

How to create a Million Dollar plus estate within ten years.

How to establish credit if you want to.

Reduce estate taxes, probate, and capital gains taxes - legally.

Save thousands on your taxes using over 125 tax strategies and write-offs.

How you can earn interest on the Banks money.

Step-by-step how to simply "take over" someone's payments and

property in the safest and simplest way possible.

How to consistently buy properties for 30% under market.

How you can close fast (even in 48 hours if needed!).

How to stay in control of the deal at all times.

How to avoid the legal entanglements of buying property from people who are behind on payments.

How to increase your cash flow and make an extra $25,000 or more when you re-sell the property.

How to use corporations, partnerships, and trusts to avoid the due on sale clause.

Common seller objections to and how to handle them.

Key clauses you need in your paperwork to protect your interests and maximize your profits.

How to cultivate private sources of funding for your deals.

How to flip your deals for instant cash.

Implementing the ultimate planning formula that ensures long term success.

Learning exactly what you really want out of life and how to get it.

Going from fearful to fearless in everything you do.

Reversing the risks for both you and the buyer. Creating WIN-WIN situations.

Protecting your rapidly increasing investment assets.

How to reduce or eliminate investment taxes.

Proven techniques for filling your homes quickly.

Simple ways to calculate your profit before you buy.

Fill out forms and contracts without an attorney.

Advertising techniques that work.

Dealing with Sellers in foreclosure and bankruptcy.

Learn how to control negotiations with sellers.

Copies of all the paperwork, blank and filled in samples.

How to beat out other investors by 30 days.

You will also:

Discover How To Buy Newer Homes In Nice Neighborhoods and

Get Paid From The Sellers To Buy Them!

This Powerful Information Alone Is Worth 500 Times The Whole

Cost of The Home Study Course!!!

No kidding, do you know how powerful this is? Let's assume you order my course “Get Rich By Helping Others”, The Ultimate Money Machine. Now let's assume you don't have any money to really get started investing but you will use my program to learn how to get private investors. Since the average investment using the “Help Program” is around $2,500, each investor with only $10,000 will get you into 4 houses.

While you are earning around 100% annually on your money you can easily afford to pay your investor 12% interest per year. Although this process is easy to do you still need to find the investors. The “Help Program” itself is a powerful investing tool for you to accumulate properties, but you will need some money to get started.

When you read and learn about this additional remarkable bonus program you will quickly see that you won't need to find investors for the “Help Program” or use your own money, because this proven bonus report will teach you on how to find people who will actually pay you to buy their home and the cash they give you will allow you to invest in the “help Program” as well. Do you understand what I'm saying? Let me say it in a different way.

We'll show you how to have motivated sellers call you and ask you to buy their pretty homes!!!

Yes, THEY CALL YOU. People will pay you $5,000, $10,000, $15,000, $20,000 or more to buy their home. This is cash money in your pocket. Talk about a sure fire way to riches! How many deals like this could you do in a month?

This is for real. I know several people that are using this system and making a great deal of money in the process. Once you know the secret and how to implement it you can position yourself to buy one, two or more very nice homes each and every month and get paid for doing it. If you only average $10,000 cash back in your pocket at closing, you would be earning $20,000 per month on just two homes. That works out to $240,000 per year plus ownership of 24 homes, and all without:

Using Any Of Your Own Money Talking To The Bank

Buying Fixer Uppers Using Your Credit

Paying Top Dollar Using An Investor

Now I know what you're saying. You're saying, “why would anyone in their right mine sell their home at a discount, plus pay somebody to take over their payments?”

Well all I can tell you is that people do and will, and this Free Bonus Report will teach you how you can take advantage of this system for your own good. These are not distress properties, fixer uppers, or anything like this. These usually will be nice homes two to four years old in nice subdivisions.

And you know what; we haven't even talked about the potential profit you can make on those homes when you sell them. We have only talked about the cash you should average in your pocket at closing when you buy.

If you average $10,000 in your pocket at closing and stand to earn another $20,000 when you sell you're making $30,000 for every house you buy without spending one thin dime of your money. Getting two of these homes per month will make you a very wealthy person.

And what I like most about this Special Bonus Program is that you can use the money that people will pay you when you buy their home to re-invest helping people using the strategies I teach with the “Help Program.

Here Is What Some Of My New Students Are Saying:

Dear Mr Gaudina,

After a short time classified advertising as you outlined, I have completed my first "Help Program" deal. The owner needed around $23,000 to bring the mortgage current. The house is a four family with a finished basement and is already fully rented with the owner occupying the basement. I could easily sell this house for $550,000 and the mortgage on the property is only $290,000. I purchased the property with an instant $260,000 equity position. After last speaking with the owner the absolute least I will make on this property is $22,000. Not bad for a first deal!!! Thanks for being my mentor. Your program is the greatest!!!

Roman F. New York

Hello Jan:

I apologize for not getting an update to you sooner. I have been busy. I have ran an ad for three months and did 8 deals. The average home value was 100k, with an average 25k in equity. The average to fund the deals was $3000. I have taken three of the eight homes back and in the process of Leasing them with options to buy. Two of the homes needed minor repairs to make them tip top shape. I'm amazed at how easy it has been to build this business. Once I sell the three homes plus get my monies back from the other 5 Help program deals, I will have made close to $80,000, not bad for a part time business in three months. Plus, during those three months I have walked away from 5 other help program deals due to the cash needed to fund them.

Once I get two of the three homes lease-optioned, I will put the Help Program ad back in the newspaper. I envision doing the Help Program full time in the next 12 to 18 months. I have found enough sources of money to make this into a full-part time business.

Respectfully,

Darren, October 24, 2003

PS. Jan, God Bless you for showing me this business.

Jan:

We have done a total of 10 deals...Been a little more careful with the rules of the game after the first few months. Played one a little close on the equity and apprasialed value. (got a little anxious) Ha.But it will work too. We are using Land Contracts. One has filed Bankruptcy and tried to make us a Creditor. We have already explained to their lawyer that we own the house. Cant wait to see this play out!

This business is very Exciting! Having a great time. Getting more comfortable all the time with dealing. The last deal we made is the best yet. Condo in Little Rock area. Appraisal 225,000.00 and we are in for 90,000.00 buying price on 6 month12 month contract. This is our 8th month.

We have about 40,000 invested and control 1,535,000.00 in market valve properties.

Thanks again Jan,

Your student

Larry B. Arkansas, November 17, 2003

Hi Jan...

Thank you SO much for the book "Helping Others"...

We received it in the mail only a few days after placing our online order all the way to Australia! I was Wrapped!!!

Since then myself and my partner have both read the book from cover to cover and are so anxious to get started. We spoke to our Solicitor to make sure all the legal side of things were ok for here in Australia and our State that we are living in. He said everything was fine! - Another bonus!

So from here we are very excited in choosing a respectable name for our new business and registering it with the government and getting started. We are both so eager and excited its fantastic! I love the questionnaire too. That's an awesome tool.

Thanks Jan....I'm sure you will be hearing from us again as this is being set up and progressing..

I can't Wait! Talk soon.

Best Regards,

Rachel, from Australia.

Dear Jan,

Since our first deal for $11,000 we have closed 3 other deals in 30 days. We have in Deeds about $1,115,000 in Real Estate. $17,000 we have invested to control over $327,000 in equity in that property.

We can see the potential in this business. We are running a couple of small ads in the paper saying "Avoid Foreclosure" for about $30.00 a pop. Just got 2 calls today. Both look good! Thanks Jan for the mentoring and the great idea.

P.S. It was one of the best feelings I've ever had to have a young recently divorced mother of two come to tears when we saved her home from foreclosure. This is definitely a help;help : win;win program.

Larry April 28, 2003

Hi Jan:

Thank you for sending this wonderful book "Get Rich By Helping Others". I can't wait to get started. I have ordered the Mentoring. I have renovated 13 homes over a three year period and flipped several Junkers. The best money I made was selling two of them on a land contract. I'm thankful for the "Help Program".

Darren

To Jan:

Purchased your program Helping others about two months ago. Very impressed with the concept. My first deal I put down $11,000 and acquired about $290,000 of potential equity. The program really works.

Larry

Jan:

Thank you for helping me close my first two deals within 40 days of buying your course. I only put up $6,000 and created over $100,000 in equity.

Giuseppe

Hello Jan,

I received my package Friday the 14th. What a great time to receive it. It's Saturday and we had a significant snowfall for this area and blowing and drifting snow makes it almost impossible to make it out to work on my investment property. I am at Chapter 5 and getting more excited as I read. I look forward to the rest of the chapters and hope to place an ad next week. I am sure I will be calling to mentor and I look forward to your expertise.

Thanks

Rick B.

I am closing at 11:00 on one of my properties today and wish I had'ent sold it after reading the section about being my own bank and cashing out and selling it on my own. Just look at the money I'm losing! But hind site is 20/20. Thank God for people like you giving your secret and humble opportunity to others. Rick B. again.

Dear Jan,

I have just completed reading your manual from cover to cover and I must say your Help Program is ingenious! Not too long ago I spent $2,500 for a big name weekend workshop and a bag full of binders with 50 ways to buy real estate with no money down. Not one of those ways has as much potential as your single approach does to systematically build wealth without risk. I'm looking forward to working with you as my mentor. Thank you for doing this.

Norman, H.

Sonoma, CA

Jan,

Just listened to tape #1 - your sincerity of wanting to be my Mentor is clear! I'm excited!

What a tremendous program! Make so much sense... and all of it is founded on truly helping others! Even in cases where the property is lost and sold... we end up salvaging 50% equity for the original property owner.

You are "GOOD PEOPLE" Mr. Jan Gaudina! :-)

Mike, October 4th

Hi Jan,

I have your real estate program and I must say, I am very impressed with the methods explained in your program. It is very simple to follow. I am in the process of reading the book over for a second time. I have already got a good report with some agents as well as mortgage brokers and investors. I can't wait to get this program going so I can start making extra cash. Thank you very much for sharing your knowledge. If I need help with anything, I will be sure to call you.

Regards,

Dennis

Jan

I have never seen such an easy way to accumulate real estate and make money so easy. Renovating houses is a drag. It ties up tons of cash. For the same 50k I was using to renovate a house to make 15k. I can use the 50k to control 2 million dollars in real estate to make at least 150k. I like the later even better. I have been called a 'Saint', an 'Angel', and I have other people wanting to know how I do it. Thank you, Jan.

Darren

Hi Jan

Our first deal is in escrow and I am refinancing the 77k owed by the seller's mortgage for 112k That's 35k profit and I still own the property (which just appraised for 140k). We are probably going to rent it out with a 500.00 a month pos cash income however I ran a free internet add to sell and the phone keeps ringing.

Coupled together with the second house that the owner recovered from me for a 1400.00 profit I have earned about 65k! Not bad considering I only ran an add for 6 weeks.

Giuseppe

Dear Mr Gaudina (Jan),

I am just writing to say thank you so much for everything!!! This program is so much more than I even dreamed it to be, in fact I would say it is an answer to prayer. It is absolutely invaluable!

I have only had your course for a few days and already the your guidance in asset protection and corporations lead me to make some changes in the way I run my current business has already saved me more money than I used to purchase your entire program! And this is even before I have even started to use the Help Program!!!

Not only does your course include everything but the kitchen sink but it truly is a business in a box. This is saying a lot because I have purchased other real estate programs, some absolutely lousy and some were actually great! But I can say hands down that I would have payed 10 times what I payed for all of those courses combined to learn what I have learned through your course. What is amazing is that the way your course is put together you provide the framework to make as little as a few hundred dollars a month, as well as the foundation to make a few Hundred Thousand Dollars a month. As amazing as this course is, that is still not what impresses me the most.

A few years ago when I was down and going through a hard time I still mustered up enough courage to try to start a business. I answered an ad in the newspaper under "Business Oportunities" and to make a long story short, I met and made friends with a man named "Jack". He was an older businessman who taught me how to start and run a vending business. He told me how to start, what to expcect and how to handle any problems that could arise and how to make the best of them. To put it short he became my mentor. He was already wealthy and did not need my money. With his guidance I not only own and operate my own succesful vending business but I have helped others do the same as Jack taught me.

I have that same combination of excitement and gratitude now because among everything else, I really purchased your program for the metoring. What easier way to do something than to have some one take you by the hand and walk you through it? In speaking with you I can tell you are positive and encouraging. You also make yourself available and give real facts and straight forward answers and opinions. Thank you for making yourself available. I'm really grateful to have you as a mentor.

Sincerely,

Roman F. NY.

THANKS MR.GAUDINA

YOUR SYSTEM IS THE BEST THAT I HAVE SEEN IN TEN YEARS. IAM ONE OF THOSE PEOPLE THAT HAVE SPENT AT LEAST SIX FIGURES TRYING TO FIND THE RIGHT SYSTEM FOR ME AND MY FAMILY. I THINK THAT THIS IS THE RIGHT ONE.YOUR MATERIAL IS SIMPLE AND STRAIGHT FORWARD.I HAVE GAINED A GREAT AMOUNT OF KNOWLEGDE IN THE FIRST 24 HOURS OF STUDYING.AND YOUR MENTORING FROM DAY ONE IS EXCELLENT.

THANKS AGAIN,

CLYDE, NV.

Jan,

It's now the end of May and I have purchased 4 homes in addition to my original home! I run my simple ad...and that's it! This last house only cost $1,706.00 and there is $50,000.00 in equity in the house. I know I will be retiring in 5 years! The program works for those that have the desire to succeed. Thanks for the help Jan.

Sincerely,

Rich S. California

Jan,

Hello. First of all, let me introduce myself. My name is Alex Horvath, I work with Bob Adolfson and have been assisting him with the Help Program. I would like to tell you about the first couple deals that we have done so far. The first home that we bought was for the price of about $150,000. He had about $50,000 of equity in his home. We had to give him about $7,000 to get him caught up. We gave him a 6th month lease. He is in his 3rd month right now and has made all payments on time and in the correct amount.

The second home we bought for the price of $327,000. We had to give the client about $19,000 to catch him up on his Mortgage. He has about $350,000 of equity in his home. He only wanted a 45 day lease, which we gave him. He is now past due. We have been lenient with him, but tomorrow is it. If we are not paid in full tomorrow, we will start the process of listing his home on the MLS.

Thanks Jan for your leadership and help. We will keep in touch to let you know what happens with the two scenarios above.

Sincerely,

Alex Horvath, Bob Adolfson

This is an opportunity to make it big in the real estate world of investing. Go to my web site:

http://ameradream.com/aboutus_moneymachine.htm

And reserve your copy today.

Jan H. Gaudina

Glossary

401(k) 403(b) - An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 401(k) plans are provided by employers that are private corporations. 403(b) plans are provided by employers that are not for profit organizations.

Abatement - Stopping or reducing of amount or value, as when assessments for ad valorem taxation are abated after the initial assessment has been made.

Absentee landlord - An owner of an interest in income-producing property who does not reside on the premises and who may rely on a property manager to oversee the investment.

Absolute fee simple title - A title that is unqualified. Fee simple is the best title that can be obtained. (See also fee simple)

Abstract of Title - A full summary of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status. The person preparing the abstract of title, called an abstracter, searches the title as recorded or registered with the county recorder, county registrar, circuit court and/or other official sources. Simplified Definition: A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.

Abstraction - Method of finding land value in which all improvement costs (less depreciation) are deducted from sales price. Also called extraction.

Acceleration Clause - A provision in a mortgage, trust deed, promissory note or contract for deed (agreement of sale) that, upon the occurrence of a specified event, gives the lender (payee, obligee or mortgagee) the right to call all sums due and payable in advance of the fixed payment date. (See Alienation Clause). The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. Simplified Definition: Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

Access - A way to enter and leave a tract of land, sometimes by easement over land owned by another. (See also egress and ingress)

Accessibility - The relative ease of entrance to a property by various means, a factor that contributes to the probable most profitable use of a site.

Accessory buildings - Structures on a property, such as sheds and garages, that are secondary to the main building.

Accredited Buyer Representative - Only 4,000 real estate professionals on two continents who have been awarded the ABR designation by the National Association Of Realtors.

Accretion - The gradual and imperceptible addition of land by alluvial deposits of soil through natural causes, such as shoreline movement caused by streams or rivers. This added land upon a bank or stream, navigable or not, becomes the property of the riparian or littoral owner, and it also becomes subject to any existing mortgages.

Accrual basis - In accounting, a system of allocating revenue and expense items on the basis of when the revenue is earned or the expense incurred, not on the basis of when the cash is received or paid out.

Accrued depreciation - (1) For accounting purposes, total depreciation taken on an asset from the time of its acquisition. (2) For appraisal purposes, the difference between reproduction or replacement cost and the appraised value as of the date of appraisal.

Accrued expenses - Expenses incurred that are not yet payable. In a closing statement, the accrued expenses of the seller typically are credited to the purchaser (taxes, wages, interest, etc.).

Acknowledgment - A formal declaration made before a duly authorized officer, usually a notary public, by a person who has signed a document; also, the document itself. An acknowledgment is designed to prevent forged and fraudulently induced documents from taking effect.

Acquisition appraisal - A market value appraisal of property condemned or otherwise acquired for public use, to establish the compensation to be paid to the owner.

Acre - A measure of land, 208.71 by 208.71 feet in area, being 43,560 square feet, or 160 square rods or 4,840 square yards.

Actual age - The number of years elapsed since the original structure was built. Sometimes referred to as historical or chronological age.

Actual Damages - Real, substantial and just damages, or the amount awarded to a complainant in compensation for his actual and real loss or injury. (Black's Law Dictionary, 4th Ed.)

Ad Valorem - According to value (Latin); generally used to refer to real estate taxes that are based on assessed property value.

Addendum - Additional material attached to, and made part of, a document. If there is space insufficient to write all the details of a transaction on the sales contract form or if changes are required to the original contract, the parties will attach an addendum to the document. The sales contract should incorporate the addendum by referring to it as part of the agreement. The addendum should refer to the sales contract and be dated and signed or initialed by all the parties.

Adjustable-Rate Mortgage (ARM) - 1) A mortgage that allows the interest rate to be adjusted according to an index after a specific period of time. 2) A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Adjusted Taxes Basis - The original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures.

Adjustment - Decrease or increase in the sales price of a comparable property to account for a feature that the property has or does not have in comparison with the subject property.

Adjustment Date - The date the interest rate changes on an adjustable-rate mortgage (ARM).

Administrator - A male person appointed by the court to settle the estate of a person who has died intestate (leaving no will). Sometimes referred to as the personal representative. (See Executor)

Administratrix - A female person appointed by the court to settle the estate of a person who has died intestate (leaving no will). Sometimes referred to as the personal representative. (See Executrix)

Advance Fee - A fee paid before any services are rendered. Specifically, it is a practice of some brokers to obtain a nonrefundable fee from the seller in advance to cover the advertising of properties or businesses for sale while giving no guarantee that a buyer will be found, which is often held to be improper conduct. All Brokers must keep accurate records of expenditures.

Adverse land use - A land use that has a detrimental effect on the market value of nearby properties.

Adverse Possession - The acquiring of title to real property owned by someone else by means of open, notorious, hostile and continuous possession for a statutory period of time. The burden to prove title is on the possessor, who must show that four conditions were met: (1) He or she has been in possession under a claim of right. (2) He or she was in actual, open and notorious possession of the premises so as to constitute reasonable notice to the record owner. (3) Possession was both exclusive and hostile to the title of the owner (that is, without the owner's permission and evidencing an intention to maintain the claim of ownership against all who may contest it). (4) Possession was uninterrupted and continuous for at least the prescriptive period stipulated by state law.

Aesthetic value - Relating to beauty, rather than to functional considerations.

Affidavit - A sworn statement written down and made under oath before a notary public or other official authorized by law to administer an oath. The term literally means "has pledged one's faith." The affiant (person making the oath, sometimes called the deponent") must swear before the notary that the facts contained in the affidavit are true and correct.

Agency - A relationship created when one person, the principal, delegates to another, the agent, the right to act on his or her behalf in business transactions and to exercise some degree of discretion while so acting. An agency gives rise to a fiduciary relationship and imposes on the agent, as the fiduciary of the principal, certain duties, obligations, and high standards of good faith, ethics and loyalty.

Agent - One authorized to represent and to act on behalf of another person (called the principal). Unlike an employee, who merely works for a principal, an agent works in the place of a principal. The main difference between an agent and an employee is that the agent may bind his or her principal by contract, if within the scope of authority, whereas an employee may not unless given express authorization.

Aggregate - In statistics, the sum of all individuals.

Aggrieved Party - One whose legal right is invaded by an act complained of. The word "aggrieved" refers to a substantial grievance, a denial of some personal or property right, or the imposition upon a party of a burden or obligation. (Black's Law Dictionary, 4th Ed.)

Agreement of Sale - Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

AIDS - Persons with acquired immunodeficiency syndrome are protected under most federal and state discrimination laws. If buyers ask the real estate agent whether a prior occupant had AIDS, most agents point out that the law prevents responding one way or the other. Many states have amended their licensing laws to provide that the fact that someone has AIDS is not deemed a material fact and therefore does not form the basis for a claim that a broker concealed a material fact. Also protected are persons with AIDS-related complex (ARC) or human immunodeficiency virus infection (HIV).

Alienation - The act of transferring ownership, title or an interest or estate in real property from one person to another. Property is usually sold or conveyed by voluntary alienation, as with a deed or assignment of lease. Involuntary alienation takes place when property is sold against the owner's will, as in a foreclosure sale or a tax sale. (See Alienation Clause)

Alienation Clause - A provision sometimes found in a promissory note or mortgage that provides that the balance of the secured debt becomes immediately due and payable at the option of the mortgagee upon the alienation of the property by the mortgagor. Alienation is usually broadly defined to include any transfer of ownership, title or an interest or estate in real property, including a sale by way of a contract for deed. Also called a due-on-sale clause. (See Acceleration clause)

Allocation method - The allocation of the appraised total value of the property between land and building. The allocation may be accomplished either on a ratio basis or by subtracting a figure representing building value from the total appraised value of the property.

Allowance for vacancy and collection losses - The percentage of potential gross income that will be lost due to vacant units, collection losses or both.

Amenities - The qualities and state of being pleasant and agreeable; in appraising, those qualities that are attached to a property and from which the owner derives benefits other than monetary; satisfaction of possession and use arising from architectural excellence, scenic beauty and social environment.

Amortization - The gradual repayment or retiring of a debt by means of systematic payments of principal and/or interest over a set period, so that at the end of the period there is a zero balance. The principal is thus directly reduced or amortized over the life of the loan. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.

Amortized mortgage - A mortgage loan in which the principal and interest are payable in periodic installments during the term of the loan so that at the completion of all payments there is a zero balance.

Annual Percentage Rate - An expression of the relationship of the total finance charge to the total amount to be financed as required under the federal Truth-in-Lending Act. Tables available from any Federal Reserve Bank may be used to compute the rate, which must be calculated to the nearest one-eighth of 1 percent. Use of the APR permits a standard expression of credit costs, which facilitates easy comparison of lenders.

Annuity - A fixed, regular return on an investment.

Annuity method - A method of capitalization that treats income from real property as a fixed, regular return on an investment. For the annuity method to be applied, the lessee must be reliable and the lease must be long term.

Antitrust Laws - State and federal laws designed to maintain and preserve business competition. The Sherman Antitrust Act (1890) is the principal federal statute covering competition, which is defined by most courts as "that economic condition in which prices are determined by market forces without interference from private concerns and there is reasonable freedom of entry into most businesses."

Application - The form used to apply for a mortgage loan, containing information about a borrower's income, savings, assets, debts, and more.

Appraisal - An estimate of quantity, quality or value; the process through which conclusions of property value are obtained; also refers to the report setting forth the process of estimating value.

Appraisal Foundation - Nonprofit corporation established in 1987 and headquartered in Washington, D.C., sponsored by major appraisal and appraisal-related professional and trade groups.

Appraisal methods - The approaches used in the appraisal of real property. (See also cost approach, income capitalization approach, sales comparison approach)

Appraisal process - A systematic analysis of the factors that bear on the value of real estate; an orderly program by which the problem is defined; the work necessary to solve the problem is planned; the data involved are acquired, classified, analyzed and interpreted into an estimate of value; and the value estimate is presented in the form requested by the client.

Appraisal report - An appraiser's written opinion to a client of the value sought for the subject property as of the date of appraisal, giving all details of the appraisal process.

Appraisal Standards Board - Created by the Appraisal Foundation and responsible for establishing minimum standards of appraisal competence.

Appraised value - An estimate by an appraiser of the amount of a particular value, such as assessed value, insurable value or market value, based on the particular assignment.

Appraiser - An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

Appraiser Qualification Board - Created by the Appraisal Foundation and responsible for establishing minimum requirements for licensed and certified appraisers and licensing and certifying examinations.

Appreciation - Permanent or temporary increase in monetary value over time due to economic or related causes. Approaches to value. Any of the following three methods used to estimate the value of real estate: cost approach, income capitalization approach and sales comparison approach.

Appurtenance - Anything used with land for its benefit, either affixed to land or used with it, that will pass with the conveyance of the land.

APR - An expression of the relationship of the total finance charge to the total amount to be financed as required under the federal Truth-in-Lending Act. Tables available from any Federal Reserve bank may be used to compute the rate, which must be calculated to the nearest one-eighth of 1 percent. Use of the APR permits a standard expression of credit costs, which facilitates easy comparison of lenders. Certain real estate brokerage activities have come under public scrutiny by the Federal Trade Commission. These activities include the fixing of general commission rates by local boards or groups of brokers and the exclusion of brokers from membership in local boards or in multiple-listing arrangements due to unreasonable membership requirements.

Arms-length transaction - A transaction in which both buyer and seller act willingly and under no pressure, with knowledge of the present conditions and future potential of the property, and in which the property has been offered on the open market for a reasonable length of time and there are no unusual circumstances.

Arranger of Credit - A defined under the federal Truth-in-Lending Law, a person who regularly arranges for the extension of consumer credit by another person if a finance charge will be imposed, if there are to be more than four installments, and if the person extending the credit is not a creditor. At present, the term does not include a real estate broker who arranges seller financing of a dwelling or real property.

Array - An arrangement of statistical data according to numerical size.

As-is - Words in a contract intended to signify that no guarantees whatsoever are given regarding the subject property and that it is being purchased exactly as it is found. An "as-is" indicator is intended to be a disclaimer of warranties or representations. The recent trend in the courts to favor consumers tends to prevent sellers from using as-is wording in a contract to shield themselves from possible fraud charges brought on by neglecting to disclose material defects in the property.

Assemblage - The combining of two or more adjoining lots into one larger tract to increase their total value.

Assess - To make a judgment of value.

Assessed Value - The value placed on property, land and improvements by a public tax assessor for purposes of determining property taxes.

Assessment - The imposition of a tax, charge or levy, usually according to established rates. (See also special assessment)

Assessor - One who determines property values for the purpose of ad valorem taxation.

Asset - Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Assignment - The transfer of the right, title and interest in the property (ownership) of one person (the assignor) to another (the assignee). There are assignments of, among other things, mortgages, sales contracts, contracts for deed, leases and options. Simplified Definition: When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.

Assignment of Deed of Trust - The transfer of the right, title and interest in the property of one person (the assignor) to another (the assignee). There are assignments of, among other things, mortgages, sales contracts, contracts for deed, leases and options. Simplified Definition: A written document, that transfers the beneficial interest in a note and deed of trust from one to another.

Associate Broker - A real estate license classification used in some states to describe a person who has qualified as a real estate broker but still works for and is supervised by another broker; also called a broker-salesperson, broker-associate or affiliate broker.

Assumable Mortgage - A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.

Assumption - The term applied when a buyer assumes the seller's mortgage.

Assumption of Mortgage - An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability. In the assumption, the mortgagee's consent is usually required. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such an "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

Attachment - 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.

Attorney-in-Fact - A competent and disinterested person who is authorized by another person to act in his or her place. In real estate conveyance transactions, an attorney-in-fact, who has a fiduciary relationship with his or her principal, should be so authorized by way of a written, notarized and recordable instrument called a power of attorney. (See Power-of-Attorney)

Attorneys Fee - The agreement of sale negotiated previously between the buyer and the seller may state in writing who will pay each of the above costs.

Average deviation - In statistics, the measure of how far the average individual, or variate, differs from the mean of all variants.

Backup offer - An offer to buy submitted to a seller with the understanding that the seller has already accepted a prior offer; a secondary offer. Sometimes the seller accepts the backup offer contingent on the failure of the sales transaction on the part of the first purchaser within a specified period of time. The seller must be careful how he or she proceeds, however, when the time for buyer's performance under the first contract has expired.

Balance - The appraisal principle that states that the greatest value of a property will occur when the type and size of the improvements are proportional to each other as well as to the land.

Balloon Mortgage - A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Balloon Payment - Under an installment obligation, a final payment that is substantially larger than the previous installment payments and repays the debt in full; the remaining balance that is due at maturity of a note or obligation.

Band of investment - A method of developing a discount rate based on (1) the rate of mortgage interest available, (2) the rate of return required on equity and (3) the debt and equity share in the property. A variation of this method is used to compute an overall capitalization rate.

Bankruptcy - A condition of financial insolvency in which a person's liabilities exceed assets and the person is unable to pay current debts. By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a Chapter 7 No Asset" bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an "A" paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.

Bargain and sale deed - A deed that contains no warranties against liens or other encumbrances but implies that the grantor has the right to convey title.

Base line - A reference survey line of the government or rectangular survey, being an imaginary line extending east and west and crossing a principal meridian at a definite point.

Base rent - The minimum rent payable under a percentage lease. Bench mark. A permanent reference mark (PRM) used by surveyors in measuring differences in elevation.

Basis - The dollar amount that the Internal Revenue Service attributes to an asset for purposes of determining annual depreciation or cost recovery, and gain or loss in the sale of the asset. The determination of basis is of fundamental importance in tax aspects of real estate investment. All property has a basis. If property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, reduced by any cost recovery depreciation actually taken or allowable. (See adjusted basis)

Benchmark - The standard or base from which specific estimates are made.

Beneficiary - A person who receives benefits from the gifts or acts of another, as in the case of one designated to receive the proceeds from a will, insurance policy, or trust; the real owner, as opposed to the trustee who holds only legal title. With a trust, the trustee holds the legal title, but the beneficiary enjoys the benefits of ownership.

Bid Authorization Letter - Your written authorization instructing the trustee to make the initial opening bid at the trustee's sale on the lender's behalf. This form will also advise our office of any additional amounts to be included in the opening bid, (total debt), such as funds advanced by you to pay delinquent real estate taxes, etc.

Bilateral Contract - A contract in which each party promises to perform an act in exchange for the other party's promise to perform. The usual real estate contract is an example of a bilateral contract in which the buyer and seller exchange reciprocal promises respectively to buy and sell the property. If one party refuses to honor his or her promise and the other party is ready to perform, the nonperforming party is said to be in default.

Bill of Sale - A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

Binder or "Offer to Purchase" - A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Bi-weekly Mortgage - A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle.

Blanket Trust Deed or Mortgage - A trust deed secured by several properties or a number of lots. A blanket mortgage is often used to secure construction financing for proposed subdivisions or condominium development projects. The developer normally seeks to have a "partial release" clause inserted in the mortgage so that he or she can obtain a release from the blanket loan for each lot as it is sold, according to a specified release schedule.

Blended Rate - An interest rate offered by a lender that is a blended rate between a lower interest existing mortgage and a new mortgage with a higher rate. This is usually offered to convince a buyer to refinance a lower interest first mortgage along with a additional amount instead of taking a second mortgage.

Blind Ad - An advertisement that does not include the name and address of the person placing the ad, only a phone number or post office box address. Licensed brokers are generally prohibited by state license laws from using blind ads.

Blockbusting - An illegal and discriminatory practice whereby one person induces another to enter into a real estate transaction from which the first person may benefit financially by representing that a change may occur in the neighborhood with respect to race, sex, religion, color, handicap, family status or ancestry of the occupants, a change possibly resulting in the lowering of the property values, a decline in the quality of schools or an increase in the crime rate. Also called panic selling or panic peddling.

Bona fide - In or with good faith; honestly, openly, and sincerely; without deceit or fraud. Truly; actually; without simulation or pretense. Innocently; in the attitude of trust and confidence; without notice of fraud, etc. (Black's Law Dictionary, 4th Ed.)

Bond Market - Usually refers to the daily buying and selling of thirty year treasury bonds Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

Book value - The value of a property as an asset on the books of account; usually, reproduction or replacement cost, plus additions to capital and less reserves for depreciation.

Boot - Money or other property that is not like-kind, which is given to make up any difference in value or equity between exchanged properties. Boot may be in the form of cash; notes; gems; the market value of an asset such as a mortgage, land contract, personal property, goodwill, a service or a patent offered in an exchange. The taxable gain in the like-kind exchange is recognized immediately to the extent of boot, whereas other gain from the exchange may be deferred until subsequent transfer.

Breach of Contract - Violation of any of the terms or conditions of a contract without legal excuse; default; nonperformance. The non-breaching party can usually seek one of three alternative remedies upon a material breach of the contract: rescission of the contract, action for money damages or an action for specific performance.

Breakdown method - (See observed condition depreciation)

Break-even point - That point at which total income equals total expenses.

Break-even ratio - The ratio of operating expenses plus the property's annual debt service to potential gross income.

Bridge Loan - An equity mortgage placed on presently owned real estate that is used to finance the down payment of newly acquired real estate. Bridge loans are often used by those who have not yet sold their previous property, but must close on a purchase property.

Broker - An experienced agent licensed by the state to supervise other licensed agents acting on behalf of others in a transaction.

Building capitalization rate - The sum of the discount and capital recapture rates for a building.

Building codes - Rules of local, municipal or state governments specifying minimum building and construction standards for the protection of public safety and health.

Building Line or Setback - Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Building residual technique - A method of capitalization using net income remaining to building after interest on land value has been deducted.

Bulk Transfer of Goods - Any transfer in bulk of a substantial part of the materials, supplies, merchandise, equipment or other inventory of an applicable enterprise that is not in the ordinary course of the transferor's business.

Bundle of rights - A term often applied to the rights of ownership of real estate, including the rights of using, renting, selling or giving away the real estate or not taking any of these actions.

Business Opportunity - Any type of business that is for sale (also called business brokerage). The sale or lease of the business and goodwill of an existing business, enterprise or opportunity, including a sale of all or substantially all of the assets or stock of a corporation, or assets of partnership or sole proprietorship.

Buy Down - Usually refers to a fixed rate mortgage where the interest rate is bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buy down" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buy down adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

Buyers Agent - A broker and the agents under his or her supervision who have been formally appointed by a buyer to act on its behalf in a real estate transaction.

Buyers Broker - A broker who represents the buyer in a fiduciary capacity. Some buyer's brokers practice single agency, in which they represent either buyers or sellers, but never both in the same transaction. Some buyer's brokers represent only buyers and refer prospective sellers to other brokers. The broker is paid by the buyer, or through the seller or listing broker at closing, provided all parties consent.

Call Option - Similar to the acceleration clause.

Cap - Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.

Capacity of Parties - The legal ability of people or organizations to enter into a valid contract. A person entering into a contract will have full, limited or no capacity to contract: The inability of a person to enter into a valid contract under any circumstances. Such inability can arise when a person has been adjudicated insane or is an officer of a corporation who is not authorized to execute a contract in behalf of a corporation.

Capital recapture - The return of an investment; the right of the investor to get back the amount invested at the end of the term of ownership or over the productive life of the improvements.

Capitalization rate - The percentage rate applied to the income a property is expected to produce to derive an estimate of the property's value; includes both an acceptable rate of return on the amount invested (yield) and return of the actual amount invested (recapture).

Capitalized value method of depreciation - A method of computing depreciation by determining loss in rental value attributable to a depreciated item and applying a gross rent multiplier to that figure.

CAR California Association of Realtors - CRS Certified Residential Specialists, professional designation held by fewer than 5% of Realtors in the United States (GRI) Graduates of the Realtors'

Cash basis - A system of recognizing revenue and expense items only at the time cash is received or paid out.

Cash equivalency technique - Method of adjusting a sales price downward to reflect the increase in value due to assumption or procurement by buyer of a loan at an interest rate lower than the prevailing market rate.

Cash flow - The net spendable income from an investment, determined by deducting all operating and fixed expenses from gross income. If expenses exceed income, a negative cash flow is the result.

Cash flow rate - (See equity capitalization rate)

Cash on cash rate - (See equity capitalization rate)

Cash-out refinance - When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."

Caveat emptor - Latin for "let the buyer beware." A buyer should inspect the goods or realty before purchase.

Census Tract - An area with a population that is at least 50 percent minority or an area that has a median family income at or below 80 percent of the median family income for the Metropolitan Statistical Area (MSA)

Certificate of Deposit - A time deposit held in a bank which pays a certain amount of interest to the depositor.

Certificate of Deposit Index - One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

Certificate of Eligibility - A document issued by the Veterans Administration that certifies a veteran's eligibility for a VA loan.

Certificate of reasonable value (CRV) - A certificate insured by the Veterans Administration setting forth a property's current market value estimate, based on a VA-approved appraisal. The CRV places a ceiling on the amount of a VA-guaranteed loan allowed for a particular property.

Certificate of Title - A statement of opinion prepared by a title company, licensed abstracter or an attorney on the status of a title to a parcel of real property, based on an examination of specified public records. This certificate of title should not be confused with the certificate of title that is issued to a titleholder of land registered under the Toreens system, or with a title insurance policy. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy, but it does certify the condition of title as of the date the certificate is issued, on the basis of an examination of the public records maintained by the recorder of deeds, the county clerk, the county treasurer, the city clerk and collector and clerks of various courts of record. The certificate also may include records involving taxes, special assessments, ordinances, zoning and building codes. Note that a certificate of title does not offer protection against "off -the-record" matters such as undisclosed liens, rights of parties in possession and matters of survey and location. Nor does it protect against "hidden defects" in the records themselves, such as fraud, forgery, lack of competency or lack of delivery. A title insurance policy, not a certificate of title, protects against certain off-the-record and hidden defects risks.

Chain - A surveyor's unit of measurement equal to four rods or 66 feet, consisting of 100 links of 7.92 inches each; ten square chains of land are equal to one acre.

Change, principle of - The principle that no physical or economic condition ever remains constant.

Chattels - Tangible personal property items.

Civil Rights Act of 1968 - In 1968, Congress enacted Title VIII of the Civil Rights Act, called the federal Fair Housing Act, which declared a national policy of providing fair housing throughout the United States (Reference Sections 3601-3631 of Title 42, United States Code). This law makes discrimination based on race, color, sex, familial status, handicap, religion or national origin illegal in connection with the sale or rental of most dwellings and any vacant land offered for residential construction or use.

Clear Title - A title that is free of liens or legal questions as to ownership of the property.

Client - One who hires another person as a representative or agent for a fee.

Close-of-Escrow - The consummation of a real estate transaction, when the seller delivers title to the buyer in exchange for payment by the buyer of the purchase price. Closing in some areas may not occur until the documents are recorded; however, under general rules of real estate law, transfer of title takes place upon delivery of the deed to the grantee.

Closing - This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

Closing Costs - Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

Closing Day - The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Closing Expenses - Expenses not including the purchase price of a property, that are paid by the seller and buyer to other parties at closing.

Closing Statement - The computation of financial adjustments required to close a real estate transaction, computed as of the day of closing the sale; used to determine the net amount of money the buyer must pay to the seller to complete the transaction, as well as amounts to be paid to other parties, such as the broker or escrow holder. (See Settlement Statement)

Cloud (On Title) - An outstanding claim or encumbrance which adversely affects the marketability of title.

Cloud on Title - Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.

Co-Borrower - An additional individual who is both obligated on the loan and is on title to the property.

Code of Ethics - Rules of ethical conduct, such as those that govern the actions of members of a professional group. Community property - A form of property ownership in which husband and wife have an equal interest in property acquired by either spouse during the time of their marriage. Community property does not include property that each spouse owned prior to marriage or property received by gift or inheritance or as the proceeds of separate property.

Collateral - In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

Collection - When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

Commercial Real Estate - A classification of real estate that includes income-producing property such as office buildings, gasoline stations, restaurants, shopping centers, hotels and motels, parking lots and stores.

Commingling - Mixing deposits or moneys belonging to a client (trust funds) with one's personal money.

Commission - Most sales people earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction.

Common Area Assessments - In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

Common Areas - Land or improvements in a condominium development designated for the use and benefit of all residents, property owners and tenants. Common areas frequently include such amenities as corridor or hall areas and elevators, and parks, playgrounds and barbecue areas, which are sometimes called green belts. In shopping centers, the common areas are parking lots, malls and traffic lanes.

Common elements - All portions of the land, property and space that make up a condominium property that include land, all improvements and structures, and all easements, rights and appurtenances and exclude all space composing individual units. Each unit owner owns a definite percentage of undivided interest in the common elements.

Common Law - An unwritten body of law based on general custom in England and used to an extent in some states. Common Law will prevails unless it is superseded by written law.

Community Property - A system of property ownership based on the theory that each spouse, in a marriage, has an equal interest in the property acquired by the efforts of either spouse during the marriage. This system stemmed from Germanic tribes and, through Spain, came to the Spanish colonies of North and South America. In states that maintain a community property system, such as California and other states with laws of Spanish origin, there are two classifications of property - separate property and community property. Separate property is property that either the husband or wife owned at the time of marriage or that was acquired by one spouse during marriage by inheritance, will or gift.

Company Dollar - The term "company dollar" is the amount left over after all commissions have been paid out.

Comparable Sales - Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

Comparative Market Analysis (CMA) - This is a term often used by real estate brokers in preparing a report for prospective sellers and buyers, indicating market trends in various neighborhoods, based on computer statistics generated from multiple-listing service data. Generally, these analyses are used for clients to determine a listing price for the sale of a home or for buyers to determine if a list price is reasonable for a given location.

Comparative unit method - (See square-foot method)

Competition, principle of - The principle that a successful business attracts other such businesses, which may dilute profits.

Compound interest - Interest paid on both the original investment and accrued interest.

Concurrent Ownership - Ownership by two or more persons at the same time, such as joint tenants, tenants by the entirety, tenants in common or community property owners.

Condemnation - The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Conditional use permit - Approval of a property use inconsistent with present zoning because it is in the public interest. For example, a church or hospital may be allowed in a residential district.

Conditions, covenants and restrictions (CC&Rs) - Private limitations on property use placed in the deed received by a property owner, typically by reference to a Declaration of Restrictions.

Condo - See "Condominium."

Condominium - The absolute ownership of an apartment or a commercial unit, generally in a multiunit building, by a legal description of the airspace that the unit actually occupies, plus an undivided interest in the ownership of the common elements, which are owned jointly with the other condominium unit owners.

Condominium Conversion - Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel - A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.

Condominium Ownership - An estate in real property consisting of an individual interest in an apartment or commercial unit and an undivided common interest in the common areas in the condo project such as the land, parking areas, elevators, stairways, exterior structure and so on. Each condominium unit is a statutory entity that may be mortgaged, taxed, sold or otherwise transferred in ownership, separately and independently of all other units in the condo project. Units are separately assessed and taxed based on the combined value of the individual living unit and the proportionate ownership of the common areas. The unit also can be separately foreclosed upon in case of default on the mortgage note or other lienable payments. In effect, the condominium permits ownership of a specific horizontal layer of airspace as opposed to the traditional view of vertical property ownership from the center of the earth to the sky. Typically, the unit, the percentage of common interest and the limited common elements are appurtenant to each other and cannot be sold or transferred separately.

Conformity, principle of - The principle that buildings should be similar in design, construction and age to other buildings in the neighborhood to enhance appeal and value.

Conservator - A guardian, protector, preserver or receiver appointed by a court to administer the person and property of another (usually an incapable adult) and to ensure that the property will be properly managed. A conservator may not need a real estate license to sell the protected real estate, although the sale does require court approval.

Consideration - An act or the promise thereof, which is offered by one party to induce another to enter into a contract; that which is given in exchange for something from another; also the promise to refrain from doing a certain act, like filing a justifiable lawsuit (the forbearance of a right). Consideration, which distinguishes a contractual obligation from a gift, is usually something of value, such as the purchase price in and paid for a promise or it may be a return promise. Thus, the mere promise to pay money is sufficient consideration, so an earnest money deposit is not necessary for purposes of creating a binding contract.

Construction Loan - A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Constructive Fraud - Breach of a legal or equitable duty that the law declares fraudulent because of its tendency to deceive others, despite no showing of dishonesty or intent to deceive. A broker may be charged with constructive fraud for failing to disclose a known material fact when the broker had a duty to speak for example, if a listing broker failed to disclose a known major foundation problem not readily observable upon an ordinary inspection.

Contiguous - Adjacent; in actual contact; touching.

Contingency - A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract - An agreement entered into by two or more legally competent parties who, for a consideration, undertake to do or to refrain from doing some legal act or acts.

Contract of Purchase - See "Agreement of Sale."

Contract of Sale - A contract for the purchase and sale of real property in which the buyer agrees to purchase for a certain price and the seller agrees to convey title by way of a deed or an assignment of lease (for leasehold property). In addition to binding the parties to the purchase and sale of the property during the period of time required to close the transaction, the contract frequently serves as the initial directions to the closing agent or escrow company to process the mechanics of the transaction. In essence, the contract of sale is an executory contract to convey property, serving as the vehicle to get to the deed, which finally conveys title; it is the blueprint for the entire transaction. Some of the many names for this contract are sales contract, purchase agreement, deposit receipt, offer and acceptance, agreement of sale, offer to lease or purchase and sale agreement.

Contract rent - (See scheduled rent)

Contractor - In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Contribution, principle of - The principle that any improvement to a property, whether to vacant land or a building, is worth only what it adds to the property's market value, regardless of the improvement's actual cost.

Conventional loan - A mortgage loan, made with real estate as security, that is neither insured by the FHA nor guaranteed by the VA.

Conventional Mortgage - A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)

Conversion - The appropriation of property belonging to another. The conversion may be illegal (as when a broker misappropriates client funds), or it may be legal (as when the government condemns property under the right of eminent domain).

Convertible ARM - An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

Convey - When real property is transferred from one owner to another.

Conveyance - A written instrument, such as a deed or lease, by which title or an interest in real estate is transferred.

Co-Op - A residential unit in a property owned by a corporation. Ownership of stock in the corporation gives the shareholder the right to occupy a specific unit and obligates him or her to contribute to the corporation for required expenses.

Cooperative (co-op) - A type of multiple ownership in which the residents of a multi unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Cooperative Housing - An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit.

Corporation - An association of shareholders, created under law, having a legal identity separate from the individuals who own it. Correction lines. A system of compensating for inaccuracies in the rectangular survey system due to the curvature of the earth. Every fourth township line (24-mile intervals) is used as a correction line on which the intervals between the north and south range lines are measured again and corrected to a full six miles.

Correlation - (See reconciliation)

Cost - The amount paid for a good or service.

Cost approach - The process of estimating the value of a property by adding the appraiser's estimate of the reproduction or replacement cost of property improvements, less depreciation, to the estimated land value.

Cost index - Figure representing construction cost at a particular time in relation to construction cost at an earlier time, prepared by a cost reporting or indexing service.

Cost of Funds Index (COFI) - One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

Cost service index method - (See index method)

Counteroffer - A new offer made in response to an offer received from an offeror. A counteroffer has the effect of rejecting the original offer, which cannot thereafter be accepted unless revived by the offeror's repeating it.

Covenant - An agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of property.

Credit - 1. Obligations that are due or are to become due to a person. 2. In closing statements, that which is due and payable to either the buyer or seller the opposite of a charge or debit. The credit appears in the right-hand column of the accounting statement.

Credit report - A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Credit Repository - An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

Creditor - The person to whom a debtor owes a debt or obligation; a lender.

Cubic-foot method - A method of estimating reproduction cost by multiplying the number of cubic feet of space a building encloses by the construction cost per cubic foot.

Curable depreciation - A depreciated item that can be restored or replaced economically. (See also functional obsolescence-curable and physical deterioration-curable)

Datum - A horizontal plane from which heights and depths are measured.

Debit - A charge on an accounting statement or balance sheet (appearing on the left-hand column); the opposite of a credit. Used in bookkeeping and in preparing the closing statement in a real estate transaction.

Debt - An amount owed to another.

Debt investors - Investors who take a relatively conservative approach, typically taking a passive role in investment management while demanding a security interest in property financed.

Debtor - One who owes money; a borrower, a maker of a note; a mortgagor.

Decedent - A dead person, especially one who has died recently.

Declaration of restrictions - Document filed by a subdivision developer and referenced in individual deeds to subdivision lots that lists all restrictions that apply to subdivision properties. (See also deed restrictions)

Decreasing returns, laws of - The situation in which property improvements no longer bring a corresponding increase in property income or value.

Deed - A written instrument that conveys title to or an interest in real estate when properly executed and delivered.

Deed in Lieu of Foreclosure: - A deed to a lender given by an owner conveying mortgaged property in which the mortgage is in default. It is an alternative to a foreclosure action. Its main disadvantage to a lender is that the deed does not wipe out junior liens, as a foreclosure action would.

Deed of trust - Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he fails to pay the deed as agreed, the deed becomes valid, and the trustee will not have difficulty gaining possession of the real property. (See trust deed)

Deed restrictions - Provisions in a deed limiting the future uses of the property. Deed restrictions may take many forms: they may limit the density of buildings, dictate the types of structures that can be erected and prevent buildings from being used for specific purposes or used at all. Deed restrictions may impose a myriad of limitations and conditions affecting the property rights appraised.

Deed-in-Lieu - Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.

Default - Failure to perform a duty or meet a contractual obligation.

Delinquency - Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

Demised premises - Property conveyed for a certain number of years, most often by a lease.

Demography - The statistical study of human populations, especially in reference to size, density and distribution. Demographic information is of particular importance to people involved in market analyses and highest and best use analyses in determining potential land uses of sites.

Deposit - Money offered by a prospective buyer as an indication of good faith in entering into a contract to purchase; earnest money; security for the buyer's performance of a contract. An earnest money deposit is not necessary to create a valid purchase contract because the mutual promises of the parties to buy and to sell are sufficient consideration to enforce the contract. If the buyer completes the purchase, the deposit money is applied toward the purchase price.

Depreciated cost - For appraisal purposes the reproduction or replacement cost of a building, less accrued depreciation to the time of appraisal.

Depreciation - For appraisal purposes, loss in value due to any cause, including physical deterioration, functional obsolescence and external obsolescence. (See also obsolescence)

Depth factor - An adjustment factor applied to the value per front foot of lots that vary from the standard depth.

Development - (See neighborhood life cycle)

Devise - A transfer of real property under a will. The donor is the devisor, and the recipient is the devisee.

Direct capitalization - Selection of a capitalization rate from a range of overall rates computed by analyzing sales of comparable properties and applying the formula I/V = R to each.

Direct costs - Costs of erecting a new building involved with either site preparation or building construction, including fixtures.

Direct market comparison approach - (See sales comparison approach)

Disability - A physical or mental impairment that substantially limits one or more major life activities, such as walking, seeing, learning and working. Disability includes a record of such impairment or the fact of being regarded as having such impairment. The Americans with Disabilities Act (ADA) protects individuals with disabilities from various forms of discrimination in employment, public services, transportation, public accommodations and telecommunication services. A person abusing illegal drugs or alcohol is not covered, but a person who is rehabilitated in these areas may be protected under ADA. (See handicap)

Disclaimer - A statement denying legal responsibility, frequently found in the form of the statement, "There are no promises, representations, oral understandings or agreements except as contained herein." Such a statement, however, would not relieve the maker of any liabilities for fraudulent acts or misrepresentations. (See hold-harmless clause)

Disclosed Dual Agent - A broker and the agents under his or her supervision who represent both parties in a real estate transaction after obtaining the written informed consent of both parties.

Discount - To sell at a reduced value; the difference between face value and cash value.

Discount points - In the mortgage industry, this term is usually used only in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is one percent of the loan amount.

Discounting - To sell at a reduced value; the difference between face value and cash value. Some companies specialize in buying mortgages and real estate contracts (often referred to as paper) at a discount. Often the original lender, wanting to cash out on the loan, will thus sell the mortgage at the current published mortgage discount rate. If the discount rate is 12 percent, for example, the lender could sell a $100,000 mortgage at 88 percent of its worth ($88,000 or 12 percent below par).

Disintermediation - The process of individuals investing their funds directly instead of placing their savings with banks, savings and loan associations and similar institutions for investment by such institutions. This bypassing of financial institutions occurs when proportionately higher yields are available on secure investments (such as high-grade corporate bonds, money market funds and government securities) than can be obtained on savings deposits.

Divided Agency - Acting for more than one party in a transaction without the knowledge and consent of all parties thereto. This situation is considered unlawful and may be grounds for revocation or suspension of license under Section 10176(d) of the Business and Professions Code. (See dual agency)

Documentary Stamps - A state tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each state.

Down Payment - An amount which in addition to the mortgage(s), equals the purchase price of a property.

Dual Agency - An agency relationship in which the agent acts concurrently for both principals in a real estate transaction. (See agency, agent, fiduciary)

Due-on-Sale-Clause - A form of acceleration clause found in some mortgages, especially savings and loan mortgages, requiring the mortgagor to pay off the mortgage debt when the property is sold, resulting in automatic maturity of the note as the lender's option. This clause effectively eliminates the possibility of the new buyer assuming the mortgage unless the mortgagee permits the assumption, in which case the mortgagee might increase the interest rate or charge an assumption fee.

Duplex - A structure that provides housing accommodations for two families and supplies each with separate entrances, kitchens, bedrooms, living rooms and bathrooms. A two-family dwelling with the units either side by side or one above the other.

Dwelling - Any building, structure or part thereof used and occupied for human habitation or intended to be so used, including any appurtenances. Many municipalities have adopted ordinances relating to the repair, closing and demolition of dwellings unfit for human habitation.

Earnest Money - The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Earnest Money Deposit - The deposit given to the buyer's agent or seller's attorney by the buyer as evidence of good faith and in consideration of his or her promise to purchase the property.

Easement - A right to use the land of another for a specific purpose, such as a right-of-way or for utilities; a non-possessory interest in land. An easement appurtenant passes with the land when conveyed.

Easement Rights - A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.

Easton vs Strassburger - The duty on the licensee to make a reasonable investigation of the property evolved from the case of Easton v. Strassburger (1984). As the leading case on this issue, the courts decision sent the message "loud and clear" to all real estate licensees that their responsibility does not stop at a mere disclosure of material facts known to the licensee. Easton filed suit against Strassburger, the real estate agency and others for fraudulent concealment and intentional misrepresentation regarding potential soil problems and a resulting slide on the property.

Economic age-life method of depreciation - A method of computing accrued depreciation in which the cost of a building is depreciated at a fixed annual percentage rate; also called the straight-line method.

Economic base - The level of business activity in a community-particularly activity that brings income into the community from surrounding areas.

Economic life - The period of time during which a structure may reasonably be expected to perform the function for which it was designed or intended.

Economic obsolescence - (See external obsolescence)

Economic rent - (See market rent)

Effective age - The age of a building based on the actual wear and tear and maintenance, or lack of it, that the building has received.

Effective demand - The desire to buy coupled with the ability to pay.

Effective gross income - Estimated potential gross income of a rental property from all sources, less anticipated vacancy and collection losses.

Effective Interest Rate - The actual rate or yield of a loan, regardless of the amount stated on the debt instrument. (See Nominal Interest Rate)

Egress - A way to leave a tract of land; the opposite of ingress. (See also access)

Embezzlement - The fraudulent appropriation to his or her own use or benefit of property or money entrusted too him/her by another, by a clerk, agent, trustee, public officer, or other person acting in a fiduciary character.

Eminent domain - The right of a federal, state or local government or public corporation, utility or service corporation to acquire private property for public use through a court action called condemnation, in which the court determines whether the use is a necessary one and what the compensation to the owner should be.

Encroachment - A building, wall or fence that extends beyond the land of the owner and illegally intrudes on land of an adjoining owner or a street or an alley.

Encumbrance - Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or burden, obstruct or impair the use of a property but not necessarily prevent transfer of title; a right or interest in a property held by one who is not the legal owner of the property. There are two general classifications of encumbrances: those that affect the title, such as judgments, mortgages, mechanics' liens and other liens, which are charges on property used to secure a debt or obligation; and those that affect the physical condition of the property, such as restrictions, encroachments and easements. (See Easement)

Endorsement - A method of transferring title to a negotiable instrument, such as a check or promissory note, by signing the owner's name on the reverse side of such instrument. A blank endorsement guarantees payment to subsequent holders. An endorsement that states that it is without recourse does not guarantee payment to subsequent holders. A special endorsement specifies the person to whom or to whose order the instrument is payable.

Enjoin - 1. to direct or order (someone) to do something. 2. to prescribe (a course of action) with authority or emphasis. 3. to prohibit or restrain by an injunction. (See Injunction)

Entrepreneurial profit - The amount of profit attributable to the development function.

Environmental obsolescence - (See external obsolescence)

Equal Credit Opportunity Act (ECOA): - Federal legislation passed in 1974 to ensure that the various financial institutions and other firms engaged in the extension of credit exercise their responsibility to make credit available with fairness and impartiality and without discrimination on the basis of race, color, religion, national origin, sex or martial status, age, receipt of income from public assistance programs (food stamps, social security), and ensure good-faith exercise of any right under the Consumer Credit Protection Act (creditor must state reasons for denial of credit). The act applies to all who regularly extend or arrange for the extension of credit. A real estate licensee is considered a creditor if the licensee routinely assists sellers in determining whether a proposed buyer in a land contract or purchase-money mortgage is creditworthy.

Equalization - The raising or lowering of assessed values for tax purposes in a particular county or taxing district to make them equal to assessments in other counties or districts.

Equilibrium - (See neighborhood life cycle)

Equity - The interest or value that an owner has in real estate over and above any mortgage or other lien or charge against it.

Equity capitalization rate - A rate that reflects the relationship between a single year's before tax cash flow and the equity investment in the property. The before-tax cash flow is the net operating income less the annual debt service payment, and the equity is the property value less any outstanding loan balance. The equity capitalization rate, when divided into the before tax cash flow, gives an indication of the value of the equity. Also called cash on cash rate, cash flow rate or equity dividend rate.

Equity dividend rate - (See equity capitalization rate)

Equity investors - Investors making use of what is termed venture capital to take an unsecured and thus relatively risky part in an investment.

Erosion - The gradual loss of soil due to the operation of currents, tides or winds.

Escalator clause - A clause in a contract, lease or mortgage providing for increases in wages, rent or interest, based on fluctuations in certain economic indexes, costs or taxes.

Escheat - The reversion of property of a decedent who died intestate (without a will) and without heirs to the state or county as provided by state law.

Escrow - An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.

Escrow Account - Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner's insurance when they come due. The lender pays them with your money instead of you paying them yourself.

Escrow Analysis - Once each year your lender will perform an "escrow analysis" to make sure they are collecting the correct amount of money for the anticipated expenditures.

Escrow Disbursements - The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

Escrow Instructions - In a sales transaction, a writing signed by buyer and seller that details the procedures necessary to close a transaction and directs the escrow agent how to proceed. Sometimes the buyer and seller execute separate instructions and sometimes the contract of sale itself serves as escrow instructions.

Estate - The degree, quantity, nature and extent of ownership interest that a person has in real property. Estate in land. The degree, quantity, nature and extent of interest a person has in real estate.

Estate in remainder - The remnant of an estate that has been conveyed to take effect and be enjoyed after the termination of a prior estate; for instance, when an owner conveys a life estate to one party and the remainder to another. (For a case in which the owner retains the residual estate, see estate in reversion).

Estate in reversion - An estate that comes back to the original holder, as when an owner conveys a life estate to someone else, with the estate to return to the original owner on termination of the life estate.

Eviction - The lawful expulsion of an occupant from real property.

Examination of Title - The report on the title of a property from the public records or an abstract of the title.

Excess income - (See excess rent)

Excess rent - The amount by which scheduled rent exceeds market rent.

Exchange - A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of "like kind" (i.e., real estate for real estate).

Exclusive Agency Listing - A written listing agreement giving a sole agent the right to sell a property for a specified time, but reserving to the owner the right to sell the property himself without owing a commission. The exclusive agent is entitled to a commission if he or she personally sells the property or if it is sold by anyone other than the seller. It is exclusive in the sense the property is listed with only one broker. The multiple-listing service must accept exclusive-agency listings submitted by participating brokers.

Exclusive Listing - A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.

Exclusive Right-To-Sell - A written agreement between the broker and the owner, whereby the owner promises to pay a fee or commission to the broker if his or her property is sold during the listing period.

Exclusive-Authorization-and-Right-to-Sell-Listing: - A written listing agreement appointing a broker the exclusive agent for the sale of property for a specified period of time. The listing broker is entitled to a commission if the property is sold by the owner, by the broker or by anyone else. The phrase "right-to-sell" really means the right to find a buyer; it does not mean that the agent has a power of attorney from the owner to sell the property.

Execute - The act of making a document legally valid, such as formalizing a contract by signing, or acknowledging and delivering a deed. In some cases, execution of a document may refer solely to the act of signing; in other cases it may refer to complete performance of the document's terms.

Executor - A male person named in a will to administer an estate. If no executor is named a person will be appointed by a testator to carry out the directions and requests in his or her last will and testament, and to dispose of his or her property according to the provisions of the will. State probate laws generally refer to this person as a "personal representative of the decedent." "Executrix" is the feminine form of Executor

Executrix - A female person named in a will to administer an estate. If no executor is named, a person will be appointed by a testator to carry out the directions and requests in his or her last will and testament, and to dispose of his or her property according to the provisions of the will. State probate laws generally refer to this person as a "personal representative of the decedent."

Expense - The cost of goods and services required to produce income.

Expense-stop clause - Lease provision to pass increases in building maintenance expenses on to tenants on a pro-rata basis.

External obsolescence - Loss of value from forces outside the building or property, such as changes in optimum land use, legislative enactment's that restrict or impair property rights and changes in supply-demand relationships.

Externalities - The principle that outside influences may have a positive or negative effect on property value.

Fair Credit Reporting Act - A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Employment and Housing Act: - California's Fair Employment and Housing Act (FEHA) (Sections 12900-12996 of the Government Code) prohibits housing discrimination based on marital status as well as race, color, religion, sex, national origin or ancestry. The Department of Fair Employment and Housing enforces the law, which is based on the former Rumford Fair Housing Act. Example: Some years ago Len Lessor tried to evict Alice Tenant because Alice, an unmarried woman, was living with an unrelated adult male. Len was unsuccessful because his intended action violated what was then the Rumford Act. Len recently decided to require that each member of an unrelated couple living together in one of his apartments meet his rental financial requirements, even though married couples can aggregate their income to meet the financial requirements. Can Len do that? No. The Fair Employment and Housing Act bans discrimination based on marital status. Note: Discrimination under FEHA does not include refusal to rent part of a single-family, owner-occupied dwelling to only one individual. All notices and advertisements must comply with FEHA, except for those expressing a preference for applicants of one sex for the sharing of living in a single dwelling unit.

Fair Market Value - The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Familial Status - Familial status is defined as one or more individuals who have not obtained the age of eighteen (18) years, being domiciled with a parent or other person having custody, or anyone who is pregnant. It is therefore unlawful to refuse housing to anyone with children under the age of 18 or anyone who is pregnant, except when such housing meets the definition of housing for older persons.

Fannie Mae (FNMA) - The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library. Fannie Mae's Community Home Buyer's Program is an income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

Feasibility study - An analysis of a proposed subject or property with emphasis on the attainable income, probable expenses and most advantageous use and design. The purpose of such a study is to ascertain the probable success or failure of the project under consideration.

Federal Home Loan Mortgage Corporation (FHLMC) - Commonly known as "Freddie Mac," a federally chartered corporation established in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie Mac was created as a part of the savings association system and, while it is not so limited, its loan purchase policies are designed to accommodate savings association needs. It functions with an independent board of directors but is subject to oversight by HUD.

Federal Housing Administration (FHA) - A federal agency of the U.S. Department of Housing and Urban Development (HUD), the FHA was established in 1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home-financing system through the insurance of housing mortgages and credit and to exert a stabilizing influence on the mortgage market. FHA was the government's response to a lack of quality housing, excessive foreclosures and a building industry that collapsed during the depression. its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Federal National Mortgage Association (FNMA) - Popularly known as "Fannie Mae," an active participant in the secondary mortgage market. Fannie Mae was established as a federal agency in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government-insured loans in a depression-wracked economy when few lending institutions would undertake this type of loan.

Federal Reserve Bank System - Central bank of the United States established to regulate the flow of money and the cost of borrowing.

Federal Reserve System ("the Fed") - The nation's central bank created by the Federal Reserve Act of 1913. Its purpose is to help stabilize the economy through the judicious handling of the money supply and credit available in this country. The system functions through a seven-member Board of Governors (appointed by the President) and 12 Federal Reserve District Banks, each with its own president. The system sets policies and works with the privately owned commercial banks.

Fee Appraiser - A non-salaried appraiser who is paid a fee for the appraisal assignments he or she performs.

Fee simple - The greatest possible estate or right of ownership of real property, continuing without time limitation. Sometimes called fee or fee simple absolute.

Fee simple defensible - Any limitation on property use that could result in loss of the right of ownership.

Fee Simple Estate - An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

Fee simple qualified - Ownership of property that is limited in some way.

Fee Title - The maximum possible estate one can possess in real property. A fee title estate is the least limited interest and the most complete and absolute ownership in land; it is of indefinite duration, freely transferable and inheritable. A "fee title" is sometimes referred to as "the fee." (See Fee Simple)

FHA - The Federal Housing Administration. Insures loans made by approved lenders in accordance with its regulations.

FHA Mortgage - A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan. (See Government Loan)

Fiduciary - A relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker (and salesperson) to a principal. The fiduciary owes complete allegiance to the client. Among the obligations that a fiduciary owes to his or her principal and the duties of loyalty, obedience and full disclosure; the duty to use skill, care and diligence; and the duty to account for all moneys.

Final value estimate - The appraiser's estimate of the defined value of the subject property, arrived at by reconciling (correlating) the estimates of values derived from the sales comparison, cost and income approaches.

Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) - Federal legislation that mandates state licensing or certification for appraisers performing appraisals in certain federally related transactions.

Firm Commitment - A lender's agreement to make a loan to a specific borrower on a specific property.

First mortgage - A mortgage that has priority as a lien over all other mortgages.

Fixed expenses - Those costs that are more or less permanent and do not vary in relation to the property's occupancy or income, such as real estate taxes and insurance for fire, theft and hazards.

Fixed-rate mortgage - (See amortized mortgage)

Fixture - Anything affixed to land, including personal property attached permanently to a building or to land so that it becomes part of the real estate.

Flood insurance - Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Forbearance - The act of refraining from taking legal action despite the fact that payment of a promissory note in a mortgage or deed of trust is in arrears. It is usually granted only when a borrower makes a satisfactory arrangement by which the arrears will be paid at a future date.

Foreclosure - A court action initiated by a mortgagee or lienor for the purpose of having the court order that the debtor's real estate be sold to pay the mortgage or other lien (mechanic's lien or judgment).

Foreclosure (Definition 2) - The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Form appraisal report - Any of the relatively brief standard forms prepared by agencies such as the Federal Home Loan Mortgage Corporation and Federal National Mortgage Association and others for routine property appraisals.

Fraud - Any form of deceit, trickery, breach of confidence or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another. Unlike negligence, fraud is a deceitful practice or material misstatement of a material fact, known to be false, and done with intent to deceive, or with reckless indifference as to its truth, and relied on by the injured party to his or her damage.

Freddie Mac - Nickname for the Federal Home Loan Mortgage Corporation which buys and sells FHA, VA, and, conventional loans from the members of the Federal Reserve System and Federal Home Loan Bank System.

Freehold - An estate in land in which ownership is for an indeterminate length of time.

Frequency distribution - The arrangement of data into groups according to the frequency with which they appear in the data set.

Frivolous - Of little or no worth, or importance; not worthy of serious notice. (The Random House College Dictionary).

Front foot - A standard of measurement, being a strip of land one foot wide fronting on the street or waterfront and extending the depth of the lot. Value may be quoted per front foot.

Functional obsolescence - Defects in a building or structure that detract from its value or marketability, usually the result of layout, design or other features that are less desirable than features designed for the same functions in newer property.

Functional obsolescence-curable - Physical or design features that are no longer considered desirable by property buyers but could be replaced or redesigned at relatively low cost.

Functional obsolescence-incurable - Currently undesirable physical or design features that are not easily remedied or economically justified.

General Agent - One authorized by a principal to perform any and all acts associated with the continued operation of a particular job or a certain business of the principal. The essential feature of a general agency is the continuity of service, such as that provided by a property manager of a large condominium project. Most real estate brokers are treated as special agents. (See Agent, Special Agent)

General Warranty Deed - A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Going concern value - The value existing in an established business property compared with the value of selling the real estate and other assets of a concern whose business is not yet established. The term takes into account the goodwill and earning capacity of a business.

Goodwill - An intangible, salable asset arising from the reputation of a business; the expectation of continued public patronage; including other intangible assets like trade name and going concern value. When a business is sold, the sales price often reflects its goodwill value.

Government Loan - A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.

Government National Mortgage Association (Ginnie Mae) - A federal agency created in 1968 when the Federal National Mortgage association (FNMA) was partitioned into two separate corporations. Ginnie Mae," as it is popularly called, is a corporation without capital stock and is a division of HUD. The GNMA operates the special assistance aspects of federally aided housing programs and has the management and liquidating functions of the old FNMA. The FNMA is authorized to issue and sell securities backed by a portion of its mortgage portfolio, with the GNMA guaranteeing payment on such securities. GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA)

Government Survey System - A system of land description that applies to much of the land in the United States, particularly in the western states; also called the geodetic or rectangular survey system. It is based on pairs of principal meridians and base lines, with each pair governing the surveys in a designated area.

Grant deed - A type of deed in which the grantor warrants that he or she has not previously conveyed the estate being granted to another, has not encumbered the property except as noted in the deed, and will convey to the grantee any title to the property the grantor may later acquire.

Grantee - A person who receives a conveyance of real property from a grantor.

Grantor - The person transferring title to or an interest in real property to a grantee.

GRI Graduate Realtors Institute - The symbol is recognized nation wide. It shows clients that the holder has a solid grasp of real estate fundamentals. GRI consists of three, five day programs. GRI I Residential Real GRI II Advanced Residential Real Estate GRI III Specialty Real Estate

Gross building area - All enclosed floor areas, as measured along a building's outside perimeter.

Gross income - (See potential gross income)

Gross income multiplier - A figure used as a multiplier of the gross income of a property to produce an estimate of the property's value.

Gross leasable area - Total space designed for occupancy and exclusive use of tenants, measured from outside wall surfaces to the center of shared interior walls.

Gross lease - A lease of property under the terms of which the lessee pays a fixed rent and the lessor pays all property charges regularly incurred through ownership (repairs, taxes, insurance and operating expenses).

Gross living area - Total finished, habitable, above-grade space, measured along the building's outside perimeter.

Gross market income - (See potential gross income)

Gross rent multiplier - (See gross income multi-Ground lease. A lease of land only on which the lessee usually owns the building or is required to build as specified by the lease. Such leases are usually long-term net leases; the lessee's rights and obligations continue until the lease expires or is terminated for default. Ground rent. Rent paid for the right to use and occupy land according to the terms of a ground lease.

Ground Lease - A lease of land alone, sometimes secured by improvements placed on the land. Also called a land lease, the ground lease is a means used to separate the ownership of the land from the ownership of the buildings and improvements constructed on the land.

Growing equity mortgage (GERI) - A type of loan that rapidly increases the equity in a property by increasing the monthly payments a certain percentage each year and applying those increases to the principal.

Guardian - A person, appointed by court or by will, given the lawful custody and care of the person or property of another (called a ward). The ward might be a minor, an insane person or even a spendthrift. The guardian may, upon court approval and without necessity of obtaining a real estate license, sell the ward's property, if it is in the best interest of the ward.

Handicap - As defined in the Fair Housing Act, a physical or mental impairment that substantially limits one or more major life activities (walking, seeing, learning, working) or a record of having such an impairment or being regarded as having such impairment. Handicap does not include current, illegal use of or addiction to a controlled substance. (See Disability)

Hazard Insurance - Protects against damages caused to property by fire, windstorms, and other common hazards.

Heir - A person who inherits under a will or a person who succeeds to property by the state laws of descent if the decedent dies without a will (intestate).

Highest and best use - The legally and physically possible use of land that is likely to produce the highest land (or property) value. It considers the balance between site and improvements as well as the intensity and length of uses.

Historical cost - Actual cost of a property at the time it was constructed.

Historical rent - Scheduled (or contract) rent paid in past years.

Hold-Harmless Clause - A contract provision whereby one party agrees to indemnify and protect the other party from any injuries or lawsuits arising about of the particular transaction. Such clauses are usually found in leases in which the lessee agrees to "indemnify, defend and hold harmless" the lessor from claims and suits of third persons for damage resulting from the lessee's negligence on the leased premises.

Holdover tenancy - A tenancy in which the lessee retains possession of the leased premises after the lease has expired and the landlord, by continuing to accept rent from the tenant, thereby agrees to the tenant's continued occupancy.

Holographic Will - A will that is written, dated and signed in the testator's handwriting, but not witnessed. Some states consider a holographic will to be valid even though it was not witnessed, presumably on the theory that the handwriting can be analyzed to verify authenticity and demonstrate competency.

Home Inspection - An examination of the physical structure and systems of a home and property.

Home Mortgage Disclosure Act (HMDA) - A federal law that requires lenders with federally related loans to disclose the number of loan applications and loans made in different parts of their service areas; designed to eliminate the discriminatory practice of redlining.

Homeowners association - Organization of property owners in a residential condominium or subdivision development, usually authorized by a declaration of restrictions to establish property design and maintenance criteria, collect assessments and manage common areas.

Housing Financial Discrimination Act of 1977 (Holden Act) - The Act prohibits financial institutions (banks, savings & loans, or other financial institutions, including mortgage loan brokers, mortgage bankers and public agencies) from engaging in discriminatory loan practices.

HUD - Department of Housing and Urban Development.

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. When the property is sold and the buyer assumes the seller's mortgage, the lender does not usually return the escrow account balance to the owner. The sum remains with the lender, and it is the responsibility of the buyer and seller to prorate the balance between them. Impound accounts are required for FHA loans, and although VA regulations do not require an impound account for taxes and insurance premiums on GI loans, many lenders customarily require that such accounts be established and maintained. Under RESPA, the amount of reserves in the impound account is limited to one-sixth of the estimated amount of taxes and insurance that will become due in the 12-month period beginning at settlement. Sometimes, part of the purchase price due the seller may be impounded or put aside by escrow to meet the postclosing expense of clearing title or repairing the structure. The issue of use of interest earned on reserve funds is frequently debated. Typically, lenders do not pay interest to borrowers on money held as reserves.

Improved land - Real property made suitable for building by the addition of utilities and publicly owned structures, such as a curb, sidewalk, street-lighting system and/or sewer.

Improvements - Structures of whatever nature, usually privately rather than publicly owned, erected on a site to enable its utilization, e.g., buildings, fences, driveways and retaining walls.

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

Increasing returns, law of - The situation in which property improvements increase property income or value.

Incurable depreciation - A depreciated item that would be impossible or too expensive to restore or replace.

Independent contractor - A person who contracts to do work for another by using his or her own methods and without being under the control of the other person regarding how the work should be done. Unlike an employee, an independent contractor pays all of his or her expenses, personally pays income and social security taxes and receives no employee benefits. Many real estate salespeople are independent contractors.

Index method - An appraisal technique used to estimate reproduction or replacement cost. The appraiser multiplies the original cost of construction by a price index for the geographic area to allow for price changes.

Indirect costs - Costs of erecting a new building not involved with either site preparation or building construction; for example, building permit, land survey, overhead expenses such as insurance and payroll taxes, and builder's profit.

Industrial broker - A real estate broker who specializes in brokering industrial real estate.

Industrial district or park - A controlled development zoned for industrial use and designed to accommodate specific types of industry, providing public utilities, streets, railroad sidings and water and sewage facilities.

Ingress - The way to enter a tract of land. Often used interchangeably with access. (See also access)

Injunction - A legal action whereby a court issues a writ that forbids a party defendant from doing some act or compels the defendant to perform an act. An injunction requires the person to whom it is directed to refrain from doing a particular thing, such as violating deed restrictions or house rules prohibiting pets.

Installment contract - A contract for the sale of real estate by which the purchase price is paid in installments over an extended period of time by the purchaser, who is in possession, with the title retained by the seller until a certain number of payments are made. The purchaser's payments may be forfeited upon default.

Installment Sale - An income tax method of reporting gain received from the sale of real estate when the sales price is paid in installments, i.e., where at least one payment is to be received after the close of the taxable year in which the sale occurs. No down payment is required in an installment sale. If certain conditions are met the taxpayer can save on taxes by postponing the receipt of an installment and the reporting of such income to future years when his or her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale.

Institute Capital - Money and/or property comprising the wealth owned or used by a person or business enterprise to acquire other money or goods. Capitalization The process employed in estimating the value of a property by the use of an appropriate capitalization rate and the annual net operating income expected to be produced by the property. The formula is expressed as Income/Rate = Value

Insurable value - The highest reasonable value that can be placed on property for insurance purposes.

Interest - A percentage of the principal amount of a loan charged by a lender for its use, usually expressed as an annual rate.

Interest rate - Return on an investment; an interest rate is composed of four component rates: safe rate, risk rate, non-liquidity rate and management rate. Management rate. Compensation to the owner for the work involved in managing an investment and reinvesting the funds received from the property.

Interim use - A temporary property use awaiting transition to its highest and best use.

Intestate - Dying without a will or without having made a valid will. Title to property owned by someone who dies intestate will pass to his or her heirs as provided in the law of descent of the state in which the property is located.

Inure - 1. to come into use; take or have effect. 2. to become beneficial or advantageous.

Investment value - The worth of investment property to a specific investor.

Inwood annuity table - A table that supplies a factor to be multiplied by the desired yearly income (based on the interest rate and length of time of the investment) to find the present worth of the investment.

Joint tenancy - Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, the decedent's interest passes to the surviving joint tenant(s) by the right of survivorship.

Joint venture - The joining of two or more people to conduct a specific business enterprise. A joint venture is similar to a partnership in that it must be created by agreement between the parties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only, rather than for a continuing business relationship.

Judgment - The formal decision of a court on the respective rights and claims of the parties to an action or suit. A judgment that has been entered and recorded with the county recorder usually becomes a general lien on the property of the defendant.

Land - The earth's surface in its natural condition, extending down to the center of the globe, its surface and all things affixed to it, and the airspace above the surface.

Land capitalization rate - The rate of return, including interest, on land only.

Land development method - (See subdivision development method)

Land residual technique - A method of capitalization using the net income remaining to the land after return on and recapture of the building value have been deducted.

Land trust - A trust originated by the owner of real property in which real estate is the only asset. Because the interest of a beneficiary is considered personal property and not real estate, a judgment against the beneficiary will not create a lien against the real estate. Thus land trusts are popular when there are multiple owners who seek protection against the effects of divorce, judgments or bankruptcies of each other.

Landlocked parcel - A parcel of land without any access to a public road or way.

Landlord - One who owns property and leases it to a tenant.

Latent defect - Physical deficiencies or construction defects not readily ascertainable from a reasonable inspection of the property, such as a defective septic tank or underground sewage system, or improper plumbing or electrical wiring.

Lease - A written or oral contract for the possession and use of real property for a stipulated period of time, in consideration for the payment of rent. Leases for more than one year generally must be in writing.

Leased fee - The lessor's interest and rights in the real estate being leased.

Leasehold estate - The lessee's right to possess and use real estate during the term of a lease. This is generally considered a personal property interest.

Legal description - A statement identifying land by a system prescribed by law. (See also lot and block system, metes and bounds description and rectangular survey system)

Lessee - The person to whom property is leased by another; also called a tenant.

Lessees interest - An interest having value only if the agreed-on rent is less than the market rent.

Lessor - The person who leases property to another; also called a landlord.

Lessors interest - The value of lease rental payments plus the remaining property value at the end of the lease period.

Letter of opinion - Report of property value that states the appraiser's conclusion of value or a range of values and provides only a brief summary of the supporting data and appraiser's analysis.

Letter of transmittal - First page of a narrative appraisal report, in which the report is formally presented to the person for whom the appraisal was made.

Levy - To impose or assess a tax on a person or property; the amount of taxes to be imposed in a given district.

License - (1) The revocable permission for a temporary use of land--a personal right that cannot be sold. (2) Formal permission from a constituted authority (such as a state agency) to engage in a certain activity or business (such as real estate appraisal)

LID Land improvement district - Special tax or assessment passed on to home buyers to pay for roadwork and improvements. can last up to 17 years or more, can be billed, monthly, quarterly, or annually. Usually becomes lien on property and is passed down to future owners until paid off.

Lien - A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court sale.

Life estate - An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons.

Liquidated Damages - An amount predetermined 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.

Lis Pendens - A recorded legal document that gives constructive notice that an action affecting a particular piece of property has been filed in a state or federal court. Lis pendens is Latin for "action pending' and is in the nature of a "quasi lien." A person who subsequently acquires an interest in that property takes it subject to any judgment that may be entered; that is, a purchaser pending a lawsuit is bound by the result of the lawsuit.

Listing Contract - A written agreement between a seller and a broker that allows the broker to sell the property during a given time period for a stated commission.

Living trust - An arrangement in which a property owner (truster) transfers assets to a trustee, who assumes specified duties in managing the asset. After the 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. The living trust is gaining popularity as a way to hold title and avoid probate of trust assets.

Loan Application Fee - The charge paid by the buyer to the mortgage lender when applying for a mortgage.

Loan Origination Fee - The charge paid by the buyer to the lender for processing a mortgage.

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

Lot and block system - Method of legal description of an individual parcel of land by reference to tract, block and lot numbers and other information by which the parcel is identified in a recorded subdivision map. Also called lot, block and tract system and subdivision system.

Maintenance expenses - Costs incurred for day-to-day upkeep, such as management, wages and benefits of building employees, fuel, utility services, decorating and repairs.

Maker/Drawer - The maker of a check is known as the drawer. (See Payee)

Manufactured Home - A structure, transportable in one or more sections, which, in the traveling mode, is eight body feet or more in width, or 40 body feet or more in length, or, when erected on site, is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein. (H & S Code ss 18007)

Marital property - (See community property and tenancy by the entirety)

Markers - (See monuments)

Market - A place or condition suitable for selling and buying.

Market comparison approach - (See sales comparison approach)

Market comparison method of depreciation - (See sales comparison method of depreciation)

Market data approach - (See sales comparison approach)

Market extraction method of depreciation - (See series comparison method of depreciation)

Market price - (See sales price)

Market rent - The amount for which the competitive rental market indicates property should rent. An estimate of a property's rent potential.

Market value - The most probable price real estate should bring in a sale occurring under normal market conditions.

Marketable Title - A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Material Fact - Any fact that is relevant to a person making a decision. Agents must disclose all material facts to their clients. Agents must also disclose to buyers material facts about the condition of the property, such as known structural defects, building code violations and hidden dangerous conditions. Brokers are often placed in a no-win situation of trying to evaluate whether a certain fact is material enough that it needs to be disclosed to a prospective buyer, such as the fact that a murder occurred on the property 10 years ago or the fact that the neighbors throw loud parties. It is sometimes difficult to distinguish between 'fact" and "opinion." The statement "real property taxes are low" is different from "real property taxes are $500 per year." Even though brokers act in good faith, they may still be liable for failure to exercise reasonable care or competence in ascertaining and communicating pertinent facts that the broker knew or "should have known." Many state have certain disclosure requirements for real estate transactions.

Mean - The average of all items included within a group, calculated by dividing the sum of the individual items, or variates, by the number of variates.

Mechanics lien - A lien created by statute that exists in favor of contractors, laborers or material men who have performed work or furnished materials in the erection or repair of a building.

Mello-Roos Bonds - Based on passage of the Mello-Roos Community Facilities Act of 1982, certain housing tracts may be within what are called "community facilities districts" where special taxes are assessed to finance designated public facilities and/or services. Mell-Roos liens are usually municipal bonds issued to fund streets, sewers and other infrastructure needs before a housing development is built. These special assessments are paid by the seller and will be assumed by the buyer.

Meridian - One of a set of imaginary lines running north and south used by surveyors for deference in locating and describing land under the government survey method of property description. (See principal meridian)

Metes and bounds description - A method of legal description specifying the perimeter of a parcel of land by use of measured distances from a point of beginning along specified boundaries, or bounds, using monuments, or markers, as points of reference.

Mile - A measurement of distance, being 1,760 yards or 5,280 feet.

Military Ordinance Location - It is now a well know fact that certain military bases in California contain live ammunition for various reasons. A seller of residential property located within one mile of such a hazard must give the buyer written notice as soon as practicable before transfer of title.

Misdemeanor - Offenses lower than felonies and generally those punishable by fine or imprisonment otherwise than in a penitentiary.

Misrepresentation - A false statement or concealment of a material fact made with the intention of inducing some action by another party.

Mobile home - A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation system; does not include a recreational vehicle. Also called a manufactured home.

Mobile Home Park - An area zoned and set up to accommodate mobile homes and provide water hookups and sewage disposal for each home. The mobile-home park contains all utilities, streets, parking and amenities. Mobile-home parks are also referred to as trailer parks.

Monuments - Natural or artificial objects used to define the perimeter of a parcel of land using the metes and bounds method of legal description.

Mortgage - A conditional transfer or pledge of real property as security for the payment of a debt; also, the document used to create a mortgage lien.

Mortgage (Open-End) - A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure.

Mortgage Banker - A person, corporation or firm not otherwise in banking and finance that normally provides its own funds for mortgage financing as opposed to savings and loan associations or commercial banks that use other people's money--namely that of their depositors--to originate mortgage loans. Although some mortgage bankers do supply permanent long-term financing, the majority specialize in supplying short-term and interim financing, either through their own resources or by borrowing from commercial sources.

Mortgage Broker/Company - A person or firm that acts as an intermediary between borrower and lender; one who, for compensation or gain, negotiates, sells or arranges loans and sometimes continues to service the loans; also called a loan broker. Loans originated by the mortgage broker are closed in the lender's name and are usually serviced by the lender. This is in contrast to mortgage bankers, who not only close loans in their own names but continue to service them as well. Many mortgage brokers are also licensed as real estate brokers and provide these financing services as supplements to their realty services.

Mortgage Commitment - A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance - A policy that provides protection for the lender in the case of default. Also may guarantee repayment of the loan in the event of the death or disability of the borrower.

Mortgage Insurance Premium - The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

Mortgage Note - A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgagee - The lender in a loan transaction secured by a mortgage.

Mortgagor - An owner of real estate who borrows money and conveys his or her property as security for the loan. NAR National Association of Realtors Narrative appraisal report. A detailed written presentation of the facts and reasoning behind an appraiser's estimate of value.

National Association of REALTORS® (NAR) - Formerly known as the National Association of Real Estate Boards (NAREB), NAR is the largest and most prestigious real estate organization in the world. Its members include REALTORS® and REALTOR-ASSOCIATES® representing all branches of the real estate industry. The national organization functions through local boards and state associations. Active brokers who have been admitted to membership in state and local NAR boards are allowed to use the trademark REALTOR®. Salespeople are admitted on a REALTOR-ASSOCIATE® active status. NAR members subscribe to a strict Code of Ethics.

Negative Amortization - A financing arrangement in which the monthly payments are less than the true amortized amounts and the loan balance increases over the term of the loan rather than decreases; an interest shortage that is added to unpaid principal.

Negligence - The failure to use ordinary or reasonable care under the circumstances.

Neighborhood - A residential or commercial area with similar types of properties, buildings of similar value or age, predominant land-use activities, and natural or fabricated geographic boundaries, such as highways or rivers.

Neighborhood life cycle - The period during which most of the properties in a neighborhood undergo the stages of development, equilibrium and decline. Properties require an increasing amount of upkeep to retain their original utility and become less desirable. development (growth). Improvements are made, and properties experience a rising demand. equilibrium. properties undergo little change; also called stability.

Net income ratio - The ratio of net operating income to effective gross income.

Net lease - A lease requiring the tenant to pay rent and part or all of the costs of maintenance including taxes, insurance, repairs and other expenses of ownership. Sometimes known as an absolute net lease, triple net lease or net, net, net lease.

Net Listing - An employment contract in which the broker receives as commission all excess moneys over and above the minimum sales price agreed on by broker and seller. Because of the danger of unethical practices in such a listing, its use is discouraged in most states.

Net operating income - Income remaining after operating expenses are deducted from effective gross income.

Nominal Interest Rate - The stated interest rate in a note or contract, which may differ from the true or effective interest rate, especially if the lender discounts the loan and advances less than the full amount. (See Effective Interest Rate)

Non-conforming use - A once lawful property use that is permitted to continue after a zoning ordinance prohibiting it has been established for the area; a use that differs sharply from the prevailing uses in a neighborhood.

Non-liquidity rate - A penalty charged for the time needed to convert real estate into cash. risk rate. An addition to the safe rate to compensate for the hazards that accompany investments in real estate.

Note - A document signed by the borrower of a loan and stating the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note serves as evidence of the debt. When secured by a mortgage, it is called a mortgage note, and the mortgagee is named as the payee. In a trust deed, the note is usually made payable to the bearer or holder. The note may also contain some of the same provisions as in the mortgage or trust deed document, such as prepayment or acceleration.

Notice of Default - A notice to a defaulting party announcing that a default has occurred. The defaulting party is usually provided a grace period during which they may cure the default. Notices of default are frequently provided for in contracts for deed and mortgages and are sometimes required by operation of law.

Notice of Non-responsibility - A legal notice designed to relieve a property owner of responsibility for the cost of improvements ordered by another person (such as a tenant). The owner usually gives notice that he or she will not be responsible for the work done by posting notice in some conspicuous place on the property, and by recording a verified copy in the public records.

Obligor - A promisor; one who incurs a lawful obligation to another (the obligee). The maker of a promissory note is an obligor. In a performance bond, the contractor is the obligor. One who guarantees the performance of the obligation is a surety; also called a guarantor. (See Payor)

Observed condition depreciation - A method of computing depreciation in which the appraiser estimates the loss in value for all items of depreciation. (See also incurable depreciation and curable depreciation)

Obsolescence - Lessening of value from out-of-date features as a result of current changes in property design, construction or use; an element of depreciation. (See also external obsolescence and functional obsolescence)

Occupancy - Possession and use of property as owner or tenant.

Occupancy rate - The percentage of total rental units occupied and producing income.

Offeree - The person to whom an offer is made - usually the owner.

Offeror - The party who makes an offer - usually the buyer.

Open House - The common real estate practice of showing listed homes to the public during established hours.

Open Listing - A listing given to any number of brokers who can work simultaneously to sell the owner's property. The first broker to secure a buyer who is ready, willing and able to purchase at the terms of the listing earns the commission. In the case of a sale, the seller is not obligated to notify any of the brokers that the property has been sold. Unlike an exclusive listing, an open listing need not contain a definite termination date. The listing terminates after a reasonable time, usually whatever is customary in the community. Either party can, in good faith, terminate the agency at will.

Open-end Trust Deed - An expandable loan in which the borrower is given a limit up to which he or she may borrow, with each incremental advance to be secured by the same trust deed.

Operating expense ratio - The ratio of total operating expenses to effective gross income.

Operating expenses - The cost of all goods and services used or consumed in the process of obtaining and maintaining income. (See also fixed expenses, maintenance expenses and reserves for replacement)

Operating statement - The written record of a business's gross income, expenses and resultant net income.

Operating statement ratio - Relationship of a property's expenses to income, found by dividing total operating expenses by effective gross income.

Opportunity cost - The value differential between alternative investments with differing rates of return.

Option - An agreement to keep open, for a set period, an offer to sell or lease real property.

Option Listing - A listing in which the broker also retains an option to purchase the property for the broker's own account. In view of the body of litigation involving breach of fiduciary duties by brokers who conceal offers from buyers until after the broker has exercised the option, full and fair disclosure must be given to the seller.

Orientation - Positioning a structure on its lot with regard to exposure to the sun, prevailing winds, privacy and protection from noise.

Over improvement - An improvement to property that is more than warranted by the property's highest and best use and thus not likely to contribute its cost to the total market value of the property.

Overage rent - Rent paid over a base amount in a percentage lease.

Overall capitalization rate - A rate of investment return derived by comparing the net income and sales prices of comparable properties.

Overall rate - The direct ratio between a property's annual net income and its sales price.

Ownership in severalty - Individual ownership of real estate, not to be confused with the use of the word several to mean "more than one"; also called tenancy in severalty, sole tenancy or separate ownership.

Paired sales analysis - A method of estimating the amount of adjustment for the presence or absence of any feature by pairing the sales prices of otherwise identical properties with and without the feature in question. A sufficient number of sales must be found to allow the appraiser to isolate the effect on value of the pertinent factor (also called paired data set analysis and matched pairs analysis).

Parameter - A single number or attribute of the individual things, persons or other entities in Population.

Parcel - The entire tract of real estate included in a condominium development; also referred to as a development parcel.

Partial interest - Any property interest that is less than full fee simple ownership of the entire property.

Partial Release Clause - A mortgage provision under which the mortgagee agrees to release certain parcels from the lien of the blanket mortgage upon payment by the mortgagor of a certain sum of money. The clause is frequently found in tract development construction loans.

Partnership - An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law a partnership is regarded as a group of individuals rather than as a single entity.

Patent - The instrument that conveys real property from the state or federal government to an individual.

Payee - The person to whom a debt instrument, such as a check or promissory note, is made payable; obligee; the receiver. (See Maker)

Payor - The debtor on a promissory note or the party who makes payment to another. (See Obligor)

Percentage lease - A lease commonly used for commercial property that provides for a rental based on the tenant's gross sales at the premises. It generally stipulates a base monthly rental, plus a percentage of any gross sales exceeding a certain amount.

Personal property - Items that are tangible and movable and do not fit the definition of realty; chattels.

Physical deterioration-curable - Loss of value due to neglected repairs or maintenance that are economically feasible and, if performed, would result in an increase in appraised value equal to or exceeding their cost.

Physical deterioration-incurable - Loss of value due to neglected repairs or maintenance of short-lived or long-lived building components that would not contribute comparable value to a building if performed.

Physical life - The length of time a structure can be considered habitable, without regard to its economic us