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Home » Real Estate Terms  
Real Estate Terms
 
A B C D E F G H I J K L M

N O P Q R S T U V W X Y Z

Land
Property or real estate, not including buildings or equipment, that does not occur naturally. Depending on the title, land ownership may also give the holder the rights to all natural resources on the land. These may include water, plants, human and animal life, fossils, soil, minerals, electromagnetic features, geographical location, and geophysical occurrences.

Land Contract
An agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. This type of contract is technically not a legally binding agreement and, therefore, many different types of payment formats can be found. As in a standard mortgage, there is an agreed upon price and payment schedule, but the payments are often not amortized evenly, so that a large balloon payment may be required to complete the purchase. Also known as an installment purchase contract or an installment sale agreement.

Land Flip
A fraudulent practice in the real estate business of selling undeveloped land at highly inflated prices. A land flip occurs when a group of dishonest buyers trades the land among its members, increasing the price with each transaction. The group will then finally unload the property onto an unsuspecting outside buyer at a price that the buyer will likely never be able to recoup from its own sale of the land.

Land Lease Option
An option within a lease contract that grants the lessee the right to extend the period of the lease beyond the original length of time. Usually, the lessee is required to pay a premium for the option, such as a small amount of money in each year of the original lease.

Land Trust
A legal agreement where a trustee is appointed to maintain ownership of a piece of real property for the benefit of another party: namely, the beneficiary of the trust. Land trusts are used by several different types of organizations for several reasons; nonprofit entities use them to hold conservation easements, and corporations and investment groups use them to accumulate large portions of land.

Land Value
The total value of the land, including any upgrades or improvements to the land.

Land Value Tax - LVT
A tax on the value of a piece of land. Land value tax inherently makes up a portion of all real estate property tax; however, land value tax takes only the fair value of the land into account. The taxation of land is very straightforward, requiring only a valuation of the land.

Landlocked
In a business sense, a piece of property that is totally inaccessible via public thoroughfare, except through an adjacent lot. A vacant lot that is located behind a strip mall and can only be reached by walking through the mall qualifies as this type of lot. Landlocked property is "locked up" all around by other property.

Landlord
A real estate owner who rents or leases land or a building to another party, known as a tenant. The landlord will often provide the necessary maintenance or repairs during the rental period, while the tenant is responsible for the cleanliness and general upkeep of the property. A female landlord may be referred to as a "landlady."

Landominium
A type of residential property in which the owner owns both the home and the land on which the home is built. The home is a part of a community, like a condominium, where the landscaping, maintenance and other services are provided by a homeowners' association.

Landscape

Layout

Lease
An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt.

Lease Option
An agreement that gives a renter the choice to purchase a property during or at the end of the rental period. As long as the lease option period is in effect, the landlord/seller may not offer the property for sale to anyone else. When the term expires, the renter must either exercise or forfeit the purchase option. A lease option gives a renter/potential buyer more flexibility than a lease-purchase agreement, which requires the renter to purchase the property at the end of the rental period.

Lease Rate
The amount of money paid over a specified time period for the rental of an asset, such as real property or an automobile. The lease rate that the lender earns from allowing someone else to use his property compensates him for not being able to put that property to another use during the term of the lease.

Lease To Own
An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time. More often than not, a portion of the total rental payment goes toward paying down the value of the item leased in the event that the renter wishes to exercise the option.

Leaseback
An arrangement where the seller of an asset leases back the same asset from the purchaser.

Leasehold Improvement
Improvements on a leased asset that increase the value of the asset.

Lender-Paid Private Mortgage Insurance
Private mortgage insurance that a mortgage lender pays on behalf of a borrower. Mortgage lenders generally require private mortgage insurance if a mortgage has a loan to value (LTV) ratio of more than 80%. When a lender pays the private mortgage insurance on behalf of the borrower, they do so in exchange for charging the borrower a higher interest rate. In other words, the borrower still pays for the private mortgage insurance, but does so in the form of a higher interest rate.

Lessee
An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt.

Lessor
The person who rents land or property from a lessor. / The lessee is known also as the "tenant".

Level Payment Mortgage
Level payment mortgages can be either fixed or variable-rate loans. This type of mortgage can sometimes result in negative amortization, which inflates the balance of the loan. These home loans are not appropriate for all types of homeowners and can result in financial entrapment for those who do not understand the possible consequences.

Leveraged Lease
A lease agreement wherein the lessor, by borrowing funds from a lending institution, finances the purchase of the asset being leased.

Liar Loan
A category of mortgages known as low-documentation or no-documentation mortgages that have been abused to the point where the loans are sometimes referred to as liar loans. On certain low-documentation loan programs, such as stated income/stated asset (SISA) loans, income and assets are simply stated on the loan application. On other loan programs, such as no income/no asset (NINA) loans, no income and assets are given on the loan application form. These loan programs open the door for unethical behavior by unscrupulous borrowers and lenders.

Life Cap
The maximum amount that the interest rate on an adjustable rate loan can increase over the term of the loan. A life cap can be expressed as an absolute interest rate - such as a maximum lifetime rate of 12%, which is called an interest rate ceiling - or as a maximum percentage change in the interest rate from the initial interest rate on the loan. When the life cap is expressed as a maximum percentage change from the initial interest rate, it can also apply to interest rate decreases.

Lifetime Cap
The maximum interest rate on an adjustable-rate mortgage (ARM) that may be charged at any point over the life of the mortgage. The lifetime cap is usually expressed as a percentage increase from an initial interest rate. For example, if a fixed period ARM has an initial fixed interest rate of 5% and a lifetime cap of 5%, the maximum interest rate that may be charged is 10%. Lifetime caps are usually part of a mortgage's interest rate cap structure which consists of initial, periodic and life caps.

Limited Common Elements
Elements of condominium living units that are assigned to specific tenants but are still considered to be property of the condominium. Limited common elements can include front doors, balconies or windows. They can also extend to parking places and boat slips. Limited common elements are normally defined in the condominium documentation.

List Price
1. The manufacturer's suggested retail price, determined by supply and demand, for consumer goods such as automobiles or electronics. 2. The initial asking price for a real estate property, such as a home, as determined by similar properties that have recently sold in the area. These comparison properties are known as comparables. The list price can be thought of as the starting price for negotiations; it is not necessarily the price that the buyer will pay.

Littoral Land
Land that is located next to a pooled body of water. Littoral land includes land that is situated next to a lake, ocean or sea. The term stands in contrast to riparian land, which is land located next to a river or stream.

Loan

Loan Application Fee
A fee charged to process an application for a loan, such as a home mortgage from a lender or mortgage broker. Loan application fees are charged to cover some of the costs involved in processing the application including credit checks, property appraisals and basic administrative costs.

Loan Grading
A system of credit scoring that assigns a rating of asset quality to a portfolio of loans. Loan grading is based upon a comparison of all loans that are outstanding within a given portfolio. This system places loans into one of six categories, ranked from most stable to complete write-off, or unreviewed.

Loan Modification
A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

Loan Officer
Representatives of banks, credit unions and other financial institutions that find and assist borrowers in acquiring loans. Some specialized loan officers, called loan underwriters, analyze and assess the creditworthiness of potential borrowers to see if they qualify for a loan. Loan officers usually work on either consumer or mortgage loans.

Loan Servicing
The administration aspect of a loan from the time the proceeds are dispersed until the loan is paid off. This includes sending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance (and managing escrow and impound funds), remitting funds to the note holder, and following up on delinquencies.

Loan-To-Cost Ratio - LTC
A ratio used in commercial real estate construction to compare the amount of the loan used to finance a project to the cost to build the project. If the project cost $1 million to complete and the borrower was asking for $800,000, the loan-to-cost (LTC) ratio would be 80%. The costs included in the $1 million cost figure would be land, construction materials, construction labor, professional fees, permits and so on.

Loan-To-Value Ratio - LTV Ratio
A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.

Local Tax
An additional tax on top of federal and state taxes, usually collected in the form of property taxes. Also called "municipal tax".

Locked-In Interest Rate
Referring to a loan where the borrower and lender agree on a constant rate for a specified period. The lending institution promises to charge this locked in rate as a legal commitment. Sometimes there are certain qualifications or exceptions which, if not met over the life of the loan, will allow the lender to charge a higher rate. Also known as a  fixed rate.

Low / No Documentation Loan
A category of loans which generally fall into the Alt-A sector of mortgage lending that gives borrowers the ability to state a limited amount of information on their mortgage application. Limited income, employment or asset information may be required depending on the specific type of low documentation loan; however, in some cases, the borrower may not need to provide them at all. There are subtle differences between various low documentation and no documentation loan programs offered by mortgage lenders.

Low-Down Mortgages
Mortgage programs which require a minimal down payment. Most low-down mortgages require a down payment of between 3% - 5% of the property value; however, some lenders have programs for 100% financing (or 0% down payment). Low-down mortgages are designed primarily for borrowers with a low to moderate income and first-time home buyers. Other borrowers elect to use low-down mortgages in order to use their down payment elsewhere. Low-down mortgages are offered through several sources, including state and local governments, the Federal Housing Administration, the Veterans Administration and individual lenders.

 

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