Margin Of Security
Buffer amount between the value of the collateral and the principal balance of the obligation. For example, if the mortgage has a principal balance of $200,000 and the appraised value of the property is $250,000, the bank has a margin of security of $50,000 in the event of default. The greater the collateral value, the more protection the bank has. In troubled real estate markets because of adverse economic conditions, the market value of the property may fall substantially below the balance of the mortgage. Many homeowners in such a case have defaulted on the loan because of the decline in market values. For example, if the appraised value of a home has fallen to $60,000 while the mortgage balance is $100,000, it might be more financially prudent for the debtor to default on the mortgage.
Popular Real Estate Terms
Clause in an open-ended mortgage permitting the mortgagor to borrow additional sums of money in the future pledging than same real property collateral. A construction loan has a future ...
Name given by the Realtors National Marketing Institute which is affiliated with the National Association of Realtors. ...
Something coming before. Examples are the year before, first lien on property, and previous owner of property. ...
Originally strips of wood approximately 1 to 1 1/2 inch wide, 1/4 to 3/8 inch thick by approximately 4 ft. long which were nailed across the wall studs for the purpose of supporting ...
Agreement in which the contract price to build something is equal to the total costs incurred plus a predetermined profit. The profit may be based on a percentage of cost (e.g., 20% of ...
Contractual provision describing the terms under which coverage may be terminated. An insured or insurer may cancel a policy before its expiration date. Generally, a written notice of ...
In conducting a real estate transaction, each party is presumed honest and fair with no deceit. The intentions are honorable and realistic. If deception occurs without prior knowledge, the ...
Giving another an immediate benefit. Example are an employee in a real estate company receiving pension or health care benefits after five years of employment, and passing title to ...
Business organized as a distinct legal entity with ownership evidenced by shares of stock. To form a corporation, "articles of incorporation" must be filed with the state. When approved, ...
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