Glossary - C

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Cancellation clause: A clause that may be included in a lease granting the Lessor or the Lessee the right to terminate the lease term upon the happening of certain stated events or occurrences by the payment from one party to the other of definite amounts of money as consideration.

Capital: (1)Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth as a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital improvement: Any structure or component erected as a permanent improvement to real properly that adds to its value and useful life.

Certificate of deposit: A document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of occupancy: A certificate issued by a governmental authority indicating that a building is ready and fit for occupancy and that there are no building code violations.

Certificate of title: A statement provided by an abstract company, title company, or attorney stating with the earliest existing document and ending with the most recent.

Chain of title: The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Chattel: Another name for personal property.

Closing: A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement".

Closing cost item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.

Closing costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors® often provide estimates of closing costs to prospective homebuyers.

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 a quitclaim deed, release, or court action.

Collateral: An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Commission: The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment letter: A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment".

Common area assessments: Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common areas: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common law: An unwritten body of law based on general custom in England and used to an extent in the United States.

Comparables: An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Condemnation: The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through the exercise of the right of eminent domain.

Condominium: A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Consideration: An act or the promise there of, which is offered by one party to induce another to enter into a contract; that which is given in exchange for something from another.

Construction loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builders at periodic intervals as the work progress.

Consumer reporting agency (or bureau): An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

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 oral or written agreement to do or not to do a certain thing.

Conventional mortgage: A mortgage that is not insured or guaranteed by the federal government.

Cooperative (co-op): A type of multiple ownership in which the residents, of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Corporate relocation: Arrangements under which an employer moves and employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expending its office capacity.

Covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Credit: An agreement in which a borrower receives something of value in exchange for a promise to repay the lender as a later date.

Credit history: A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Creditor: 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.