Glossary of Real Estate Terms (Oregon) – D
Debtor – The person or entity owing money to a creditor such as a bank or other lender. In real estate finance, the “debtor” is the borrower.
Debt-to-Income (“DTI”) Ratio – The relationship between one’s monthly debt versus their monthly income. The total monthly debt service on one’s loan (that is, principal, interest, taxes, insurance and HOA dues) versus their gross monthly income from all sources, will yield a ratio called “the front-end DTI.” One’s total reoccurring monthly expenses (both housing and non-housing) compared to their gross monthly income is known as the “back-end DTI.” Although ratios may vary, many conventional lenders insist that borrowers’ front-end DTI not exceed 28% and their back-end DTI not exceed 36%. The lower these ratios, the better one’s chances are to obtain a loan.
Deed –The document used to convey title to real property. An owner who makes the conveyance by deed is the “grantor” and the person acquiring the title is the “grantee.” Deeds are normally recorded in the public records at the time of closing of the transaction. In Oregon there are four primary types of deeds; each differs based upon the representations the grantor makes to the grantee about the quality of the title. In order of protection to the grantee (from the most to the least), they range from Warranty (or General Warranty) Deed, Special Warranty Deed, Bargain and Sale Deed, and Quitclaim Deed.
Deed-in-Lieu-of- Foreclosure – A deed given by a borrower to the lender transferring title in the secured property back to the lender. Although it avoids the unpleasantness of going through a foreclosure, legal advice should be obtained before giving property back in this manner, as there can be unintended legal and tax consequences.
Default – The failure to honor the terms of a contract. Most contracts, such as a note and mortgage or trust deed, require that written notice of default be given before the lender may institute foreclosure action. A default is not necessarily the same as a breach of contract. Some defaults may be cured. An uncured default becomes a breach and provides the basis for one to take legal action.
Defendant – One against whom a lawsuit is filed in court. In arbitration the defendant is called the “respondent.”
Deficiency – In its most general sense, a “deficiency” is any shortfall in the repayment of a debt or other financial obligation.
Depreciation – In real estate terminology, the loss in value of property due to market conditions, age, excess wear and tear, and other causes. In income tax terminology, depreciation of certain property is a deductible item representing the cost of replacement over the life of the asset.
Desk Top Underwriting (“DU”) – A proprietary computer program used by Fannie Mae to evaluate loan applications, including the borrower’s financial and credit history and information about the subject property.
Discount Points – A “point” is normally equal to 1% of the amount of the loan. Points are paid for purposes of reducing or “buying down” the interest rate on a loan. By reducing the interest rate, the monthly payments are also reduced, meaning that it becomes more affordable to those whose income would not qualify them for a higher monthly installment. Points are a form of pre-paid interest and thereby increase the lender’s yield on the loan.
Distressed Housing – Residential housing that has lost value when compared to its value when originally purchased. Frequently, distressed housing is also characterized by a mortgage and/or other liens that together exceed the price the home can be sold for today.
Distressed Transaction – Any type of real estate transaction in which the seller is compelled to sell or transfer the property back to the bank or to a third party due to adverse factors such as the inability to refinance a loan coming due, a falling real estate market, lack of renters or buyers (if investment, retail or commercial property) or other similar factors. Examples of distressed transactions include transfers by deed-in-lieu-of-foreclosure, short sales, etc. Distressed transactions are primarily characterized by a property that has lost significant value, usually below the total indebtedness due on it and/or mortgage repayment terms that the borrower can no longer meet.
Domestic Partnership – In Oregon, a 2008 Iaw known as the Oregon Family Fairness Act that permits same sex couples to register as domestic partners. A Declaration of Domestic Partnership form must be signed and notarized before it can be accepted. On January 1, 2010 domestic partners can now document the legal name each will use after the Declaration is filed. For more information see: http://www.oregon.gov/DHS/ph/chs/order/dp.shtml
Down Payment – The principal amount paid at the time of closing that represents the buyer’s cash contribution toward the purchase price of a property. Down payment includes any pre-paid earnest money deposit. The balance of the purchase price is the amount financed, either by a lender, the seller, or a combination of the two. An 80% loan would mean that 20% of the purchase price is represented by the buyer’s down payment.
Dual Agency – In real estate brokerage terminology, dual agency means that the listing agent (that is, the seller’s agent) or the listing agent’s company also represents the buyer in the same transaction. Each state has its own statutes, regulations and disclosures regarding dual agency. In Oregon, dual agency is legal if properly documented. It is called “disclosed limited agency.” (See, ORS 696.800(4))
Due on Sale Clause – A clause in a loan that permits the lender to declare a default should the borrower/owner convey the property to a third party without the lender’s written approval. Most due on sale clauses are very detailed and prohibit any form of transfer of the property or any interest therein, including the right of possession through rental or lease.