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C

Canons of Professional Ethics and Conduct: a code of ethics established by the Texas Real Estate Commission and published in its Rules.

capital gain: income earned from the sale of an asset.

capital investment: the initial capital and the long-term expenditures made to establish and maintain a business or investment property.

capitalization: a mathematical process for estimating the value of an income-producing property by divindg the annual net operating income by the capitalization rate. The formula is expressed as Income/Rate = Value.

capitalization rate: the rate of return a property will produce on the owner’s investment.

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

casualty insurance: a type of policy that protects a property owner or other person from loss of injury sustained a a result of theft, vandalism, or similar occurrences.

caveat emptor: a Latin phrase meaning “Let the buyer beware.”

chain of title: the succession of conveyances from some accepted starting point, whereby the present holder of real property derives his or her title.

channeling: the illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status. See also steering.

chattel: personal property; personalty.

Civil Rights Act of 1966: the first and primary law guaranteeing equal rights to all U.S. citizens; prohibits all discrimination based on race or color.

client: the person who employs an agent to perform a service for a fee.

closing: 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 agent: the person responsible for conducting the settlement of a real estate sale.

closing statement: a detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction. See also HUD-1

cloud on the title: any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by the title search and removed by either quitclaim deed or suit to quite title.

Code of Ethics: an agreement to which all Realtors must subscribe and that holds the members to high standards of conduct.

codicil: a supplement or an addition to a will, executed with the same formalities as a will, that normally does not revoke the entire will.

coinsurance clause: a provision in insurance policies covering real property that requires that policyholder maintain fire insurance coverage generally equal to at least 80% of the property’s annual replacement cost. 

collateral: something of value deposited with a lender as a pledge to secure repayment of a loan.

commingle: the illegal act of a real estate broker who mixes the money of other people with his or her own money instead of maintaining a separate trust account for other parties’ funds held temporarily by the broker.

commission: payment to a broker for services rendered such as in the sale or purchase of real property; usually a percentage of the selling price of the property

commitment: See title commitment.

common elements: parts of a property that are necessary to convenient to the existence, maintenance, and safety of a condominium or are normally in common use by all of the condominium residents. Each condominium owner has an undivided ownership interest in the general and limited common elements.

common law: the body of law based on custom, usage, and court decisions.

community property: a system of property ownership based on the theory that each spouse has a equal interest in the property acquired by the efforts of either spouse during marriage.

community property right of survivorship: a declaration made by husband and wife that community property will go to the survivor upon the death of one party; eliminates probate.

Community Reinvestment Act: the federal law that requires that federally regulated lenders describe the geographic market area they serve. Deposits from that area are to be reinvested in that area whenever practical.

comparables: properties listed in an appraisal report that are substantially equivalent to the subject property and are used to compare and establish a value of the subject property.

competent parties: people who are recognized by law as being able to contract with others; usually those of legal age and sound mind.

competitive market analysis (CMA): a comparison of the prices of recently sold homes that are similar to the subject house in terms of location, style, and amenities. Based on this analysis, a broker or salesperson can help the seller determine a listing price.

comprehensive plan: a master plan to guide the long-term development of a government subdivision, such as a city or country to ensure that social and economic needs are balances against environmental and aesthetic concerns.

computerized loan origination (CLO): a computer network tied into a major lender that allows agents across the country to initiate mortgage loan applications in their own offices.

condemnation: a judicial or an administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for publics use and compensate she owner.

condition: a contingency, qualification, or occurrence on which an estate or property right is gained or lost.

conditional use permit: a grant approved by a planning and Zoning Commission allowing, with conditions, a special use of property that is the public interest.

condominium: the absolute ownership of an apartment or a unit (generally in a multiunit building) based on a legal description of the airspace the unit actually occupies, plus and undivided interest in the ownership of the common elements, which are owned jointly with the other condominium elements, which are owned jointly with the other condominium unit owners.

consideration: something of value that induces a person to enter into a contract. Consideration may be “valuable” (money) or “good”(love and affection).

constructive notice: notice given to the world by recorded documents. All people are charged with knowledge of such documents and their contents, whether or not they actually have examined them. Possession of property also is considered constructive notice that the person in possession has an interest in the property.

consumer: an individual, partnership, corporation, or Texas government agency that seeks or acquires, by purchase or lease, and goods or services, as defined by the Texas Deceptive Trade Practices Act.

contents insurance: See renters’ insurance.

contract: an agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertake to do or refrain from doing some legal acts or acts. A contract maybe be either unilateral, where only one party is bound to act, or bilateral, where all parties to the instrument are legally bound to act as prescribed.

contract for deed: a contract for the sale of real estate wherein the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until final payment. Also called an installment contract, land contract, or contract of sale.

conventional loan: a loan that is not insured by the FHA or guaranteed by the VA.

conveyance: written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from one person to another.

cooperative: a residential multiunit building whose title is held by a corporation that is owned by and operated for the benefit of persons living within the building, who are stockholders of the corporation, each possessing a proprietary lease.

co-ownership: a broad category of ownership by more than one person. Examples are tenants in common and joint tenants.

core real estate course: a real estate course included in the statute or approved by the Texas Real Estate Commission as fulfilling part of the core requirements for licensure. Permitted by stature or Rule: Principles of Real Estate, Real Estate Appraisal, Real Estate Marketing, Real Estate Mathematics, Real Estate Brokerage, Property Management, Real Estate Investments, Law of Agency, Law of Contracts, Promulgated Contract Forms, and Residential Inspection for Real Estate Agents.

corporation: an entity or organization, created by operation of law, whose rights of doing business are essentially the same as those of an individual. The entity has continuous existence until it is dissolved according to legal procedures.

corporeal right: a tangible interest in real estate.

corpus: the principal or capital, as distinguished from the interest or income, of a fund or estate.

cost approach to value: an estimate of value based on current construction costs, less depreciation, plus land value. Contrast with the income approach to value and the sales comparison approach to value.

cost recovery: an Internal Revenue Service term for depreciation.

counseling: the business of providing people with expert advice on a subject, based on the counselor’s extensive, expert knowledge of the subject.

counteroffer: a new offer made as reply to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror’s repeating it.

covenant: See restrictive covenant

credit: on a closing state, an amount entered in a person’s favor – either an amount the party has paid or an amount for which the party must be reimbursed.

curtesy: a life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his deceased wife. Most states, including Texas, have abolished curtesy.

customer: one who purchases or sells property without being represented by an agent.

cycle: a recurring sequence of events that regularly follow one another, generally within a fixed interval of time.