Glossary of Real Estate Terms (Oregon) – E
Earnest Money Agreement – A real estate sale agreement where the parties, i.e. seller and buyer, agree upon the price and terms of the sale. The agreement usually includes some payment or agreement to pay an “earnest money deposit” (or “binder” or “good faith money”). If the buyer fails to perform, the agreement usually contains a provision for the forfeiture of the deposit to the seller. If properly prepared, executed and signed, an Earnest Money Agreement is a binding contract, the breach of which can result in various remedies to the injured party. The term “Sale Agreement” is frequently used interchangeably with “Earnest Money Agreement.”
Earnest Money Deposit – A deposit made by a buyer that accompanies the offer of purchase. Some deposits are by check, but most frequently they take the form of a promissory note redeemable within a certain period of days following seller acceptance of the offer. In Oregon, the standard real estate form sale agreements published by Oregon Real Estate Forms LLC (“OREF”) provide that the earnest money deposit will be forfeited to the seller if the buyer defaults or fails to close without legal excuse. The printed form also provides that retaining the deposit is the seller’s sole remedy. However, if the transaction fails to close due to the seller’s default, or the failure of a buyer contingency such as financing, the entire deposit is to be refunded, although this does not limit the buyer from exercising any other legal remedies against the seller.
Easement – A legal right of use (as opposed to possession) over a parcel of land. The easement, which should always be recorded, sets out the prescribed use to which it will be used, such as access, installation and maintenance of utilities, views, etc. A well-drafted easement will also address other issues, such as (a) The duty and cost to maintain the easement area; (b) Insurance; (c) Methods of dispute resolution; (d) Whether the easement is permanent or limited in duration, and; (e) Whether it is exclusive or nonexclusive. The person whose property is encumbered by the easement is the “servient tenant” and the person benefitted is the “dominant tenant.” The use of an exclusive easement is limited to the dominant tenant and a non-exclusive easement means that both the dominant and servient tenants may use it. In drafting, it is important that the intended use be clearly defined, as a use by the dominant tenant that exceeds the permitted use can be prohibited by the servient tenant. This is called “overburdening” the easement.
East Metro Association of Realtors® – The local Realtor® association for Realtors® whose business is primarily located in the east county portions of the Portland-Metro area. It is headquartered in Gresham, Oregon.
Eminent Domain – The power that a government (federal, state, municipal) and certain quasi-government agencies have to take private property for public use. The landowner receives payment based upon the fair market value of the property taken. If the parties cannot agree on the value, a proceeding called “condemnation” occurs where the value is established in court. Juries are permitted to make the determination in Oregon.
Encroachment – Any incursion of one’s property upon the land of another. Most encroachments are the result of the placement of a structure, a portion of which “encroaches” over the boundary line into neighboring property. Encroachments must be removed by the encroacher or a solution, such as an easement or boundary line adjustment, must be reached between the parties.
Encumbrance – A generic term referring to anything on the public record affecting title to a property. Some encumbrances are reasonable and necessary, such as easements for the installation, maintenance and repair of underground utilities. This type of encumbrance does not impair the marketability of a property. Other recorded encumbrances, such as judgments, tax liens, recorded mortgages and trust deeds, do affect marketability, and must be removed prior to closing in order to transfer clear title to the property.
Environmental Protection Agency (“EPA”) – The large federal agency charged with developing and enforcing rules and regulations over all aspects of the environment. (See, http://www.epa.gov/)
Equal Credit Opportunity Act (ECOA) – A federal law that requires lenders to make credit equally available without regard to race, religion, color, national origin, age, sex, marital status, or source of income.
Equity – The difference between the fair market value of a property and the total balance due on all recorded financial claims owed against it (such as loans, judgments, taxes, etc).
Equitable Relief – A generic designation for certain legal claims filed in civil (as opposed to criminal) court, where the plaintiff is seeking some form of relief other than money damages, which are inadequate under the circumstances. Such forms of relief include specific performance, where a party is seeking to compel another to perform under the terms of a contract, such as a contract to sell real property. Rescission, where a party asks the court to “rescind” a contract, thus restoring the status quo before the parties became bound. The usual basis for rescission is due to fraud, misrepresentation, or mutual mistake by the parties, where there was no meeting of the minds. Injunctive relief, i.e. asking the court to compel or stop (“enjoin”) an act, is another form of equitable relief, where money damages are an insufficient remedy.
Escrow – The service provided by licensed companies acting as a neutral third party between seller and buyer in a real estate transaction. Escrow only acts on written instructions from the parties, known as “escrow instructions.” An escrow officer assigned to the transaction collects all sums due (such as the buyer’s down payment and the lender’s loan funds), solicits payoff statements from all existing creditors of record, and distributes all funds to those persons or companies necessary for removal of their recorded liens and other financial claims appearing on the public record. This process is known as “closing” and in Oregon closings are handled by licensed escrow companies. Under the statewide OREF Sale Agreement form in Oregon, if the transaction fails to close on the closing date (or mutually extended closing date) it can constitute an automatic termination of the transaction. Oregon attorneys rarely close real estate transactions although they are permitted to do so without an escrow license. In Oregon, most escrow companies are affiliated with title companies.
Escrow Account – An account handled by escrow. Distribution of funds from this account cannot occur without joint written instructions from the parties. If any party objects to a disbursement, escrow will not do so until it has consent from everyone. If that cannot be obtained, it will tender the money into court and ask for judicial directions through a process called “interpleader.”
Estate – In real estate law, an “estate” is an interest in real property. In probate law, an “estate” is the totality of one’s property, both real and personal, owned at the time of their death.
Estoppel – A legal concept holding that one may not conduct oneself in a certain way, causing another to rely to their detriment, and then subsequently taking a contrary position. For example, permitting a debtor to consistently pay a creditor on a date that is well after the due date and saying nothing about it may create an “estoppel,” thus preventing the creditor from later declaring the debtor in default due to late payments.
Estoppel Certificate – A written document signed by a tenant stating that they have no claims against the landlord or defenses against full enforcement of the lease. Commercial leases usually contain a cooperation provision providing that if the building or property is to be sold, the tenant will sign an estoppel certificate which the owner-seller would give to prospective buyers to provide assurances that there are no unresolved claims or defenses that have not been disclosed.
Eviction – The process of removing a commercial or residential tenant from the property they are possessing under a rental or lease agreement. The technical name for the process is a “forcible entry and detainer” or “FED,” which is a “summary” or fast-track proceeding usually taking less than two weeks, unless contested. (See, ORS 105.105 to 105.168)
Exclusive Agency Listing – The written agreement between a real estate broker and property owner authorizing the broker to secure a ready, willing and able buyer for the listing price or such other price and terms as the seller may agree. Upon doing so the agreement provides for payment of a commission which is usually an agreed-upon percentage of the sale price at closing. An “exclusive agency” listing makes the broker the owner’s exclusive agent for purposes of earning the commission entitlement, but permits the owner to avoid payment of the commission if they find their own buyer. Obviously, this is not the preferred form of listing for brokers, since it pits them against their own seller in an effort to be the first one to find the right buyer.
Exclusive Right to Sell Listing – Differs from the Exclusive Agency Listing in that it requires the payment of a commission regardless of whether the seller finds their own buyer. The net effect of this type of listing is that it effectively removes the seller from the marketing and sale process, thus permitting the broker to concentrate on accomplishing their objective.