identification period
The period during which the exchanger must identify replacement property in a 1031 tax deferred exchange. The identification period starts on the day the exchanger transfers the first relinquished property and ends at midnight on the 45th day thereafter.

illusory contract
An apparent contract that is not a contract because the parties have not agreed to be bound.

implied agency
An agency agreement created by the actions of the parties, and not a stated (written or verbal) agreement.

implied agreement/contract
A contract under which the agreement of the parties is demonstrated by their acts and conduct.

implied authority
The authority of an agent to perform acts which are reasonably necessary to accomplish the purpose of the agency.

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implied easement
When the owner of two or more adjacent properties sells a part thereof, he or she grants by implication all those apparent and visible easements which are necessary for the reasonable use of the property granted.

IMPLIED WARRANTY OF HABITABILITY
A legal doctrine imposing on the landlord a duty to make the leased premises acceptable to live in and ready for occupancy and to continue to maintain them in a state of repair throughout the entire term of the lease.

IMPOUND ACCOUNT
A trust account established to set aside funds for future needs.

IMPROVED LAND
Real property whose value has been enhanced by the addition of on-site and off-site improvements such as roads, sewers, utilities, buildings, etc.; as distinguished from raw land.

IMPROVEMENTS
Valuable additions made to property, amounting to more than repairs, costing labor and capital and intended to enhance the value of the property. Improvements of land would include grading, sidewalks, sewers, streets, utilities, etc. Improvements on land would include buildings, fences, and the like.

IMPUTED INTEREST
Interest implied by the federal tax law.

INCOME APPROACH
An approach to the valuation or appraisal of real property as determined by the amount of net income the property will produce over its remaining economic life.

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income and expense report
A financial report generated by a property manager that details the income and expenses from a property and the amount remitted to the owner.

INCOME PROPERTY
Property purchased primarily for the income to be derived plus certain tax benefits, such as accelerated depreciation. Income property can be commercial, industrial or residential.

income ratio
The relationship between a person's total income and the amount needed to make one month's mortgage payment.

INCORPOREAL RIGHTS
Intangible or non-possessory rights in real property such as easements, licenses, profits and the like.

increasing and diminishing returns
The addition of more improvements to land and structures which increases value only to the assets' maximum value. Beyond that point, additional improvements no longer affect a property's value. As long as money spent on improvements produces an increase in income or value, the law of increasing returns applies. At the point where additional improvements do not increase income or value, the law of diminishing returns applies.

INDEPENDENT CONTRACTOR
One who is retained to perform a certain act, but who is subject to the control and direction of another only as to the end result and not as how he performs the act. The critical feature, and what distinguishes an independent contractor and an employee or agent, is the right to control.

index
Used to set interest rates, such as the six month Treasury bill rate.

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index method
The appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs.

index rate
The rate to which the interest rate on an adjustable rate loan is tied (see adjustable-rate mortgage). At set adjustment periods, the borrower's interest rate will move up or down as the index rate changes. Four indices are most commonly used:

Six-Month Certificate Of Deposit (CD) Spot Index—This index is the weekly average of the interest rates paid by institutions on negotiable six-month certificates of deposit. Because it reflects every blip and swing of the market, it can change quickly.

One-Year Treasury Spot Index—This index is the weekly average interest paid by the U.S. Government on funds borrowed for one year. It changes more slowly than the CD index.

Treasury Twelve-Month Average Index—This index is the yearly average of the monthly interest paid by the U.S. Government on actively traded securities. It changes more slowly than either of the preceding indices.

Eleventh District Cost-of-Funds Index—This index is the monthly weighted average cost of what banks on the West Coast pay for their various deposits and for the advances they get through the Federal Home Loan Bank Board of San Francisco. It moves at a tortoise's pace compared to the other indices.

indirect management costs
Expenses in a budget of a real estate agency or parent company the are partially attributable to the operation of a management department.

industrial broker
Zander Properties is also a real estate broker who has experience brokering industrial real estate.

INDUSTRIAL PARK
An area zoned industrial and containing sites for many separate industries and developed and managed as a unit, usually with provisions for common services for the users.

INJUNCTION
A legal action which forbids a party defendant from doing some act; it requires a person to whom it is directed to refrain from doing a particular thing.

inflation
The gradual reduction of the purchasing power of the dollar, usually related directly to the increases in the money supply by the federal government.

inheritance taxes
An "estate" tax imposed by the state on heirs for their right to inherit property. The tax is not levied on the property itself, but rather on the heirs for their right to acquire the property by succession or devise. Therefore, the rates or the deductions may vary depending on the degree of the relationship.

At the time of a person's death, a statutory lien usually attaches to all real property interests owned by the decedent, which lien remains in effect until the inheritance taxes have been paid and a "tax clearance" is issued. This applies even if property was held in joint tenancy with right of survivorship.

in-house sale
A sale in which the listing broker is the only broker in the transaction; there is no outside broker involved as in a cooperative sale. Either the listing salesperson finds the buyer, or another salesperson working for the listing broker finds the buyer. If the buyer is a client of the broker, the issue of dual agency arises.

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initial rate
The inital rate charged to a borrower for the first adjustment period of an adjustable rate mortgage.

INNOCENT PURCHASER FOR VALUE
One who purchases real property without notice, actual or constructive, of any superior rights or interests in the real property.

INSPECTION
A visit to and review of the premises. A prudent purchaser of property always inspects the premises before closing.

installment contract
A contract for the sale of real estate whereby 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 a future date, which may not be until final payment. Also called a contract for deed or articles of agreement for warranty deed.

installment note
A promissory note with payments of principal and interest made at designated intervals.

installment sale
An income tax method of reporting gain received from the sale of real estate when the sales price is paid in installments, i.e., where at least one payment is to be received after the close of the taxable year in which the sale occurs. No down payment is required in an installment sale.

If certain conditions are met the taxpayer can save on taxes by postponing the receipt of an installment and the reporting of such income to future years when his or her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale.

Institute of Real Estate Management (IREM)
A national organization concerned with professional management of real estate. The professional designation conferred by IREM is ARM, Accredited Resident Manager.

INSTITUTIONAL LENDER
Financial institutions such as banks, insurance companies, savings and loans or any lending institution whose loans are regulated by law.

INTEREST
The sum paid or accrued in return for the use of money.

interest factor
In a table, numbers derived from formulas used to determine the present or future value of money. Interest factors are a function of interest rate and time, and can be derived for any combination of the two.

interest-only
A term loan calling for payments of interest only, not to include any amount for principal.

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INTERIM FINANCING
A short-term loan usually made during the construction phase of a building project; often referred to as the "construction loan."

interim occupancy agreement
An agreement allowing a buyer to take possession of a property as a tenant prior to close of escrow.

Internal Rate of Return (IRR)
A multi-year analysis of rate of return similar to Financial Management Rate of Return (FMRR). Used by investors in medium and large properties (occasionally on small properties). Multi-year cash flows and net sale proceeds are analyzed using discounted cash flow techniques to solve for the Financial Management Rate of Return (FMRR).
IRRs and FMRRs are the best rate of return indicators, because they require an analysis of the investor's entire holding period, not just a single year. The discounting process takes into consideration the time value of money and thereby produces a more realistic rate of return.

INTESTATE
To die without a valid will.

intestate succession
A succession of a property to the heirs when a person dies without a will.

intrinsic value
An appraisal term referring to the value created by a person's personal preferences for a particular type of property.

INVENTORY
An itemized list of property. Many brokers recommend that their clients attach to the sales contract an inventory of property to be included in the sale of a residential property, including a condominium dwelling.

INVERSE CONDEMNATION
An action for "just compensation "brought by one whose property has been effectively "taken" or substantially interfered with or taken without just compensation.

investment
Money directed toward the purchase, improvement and development of an asset in expectation of income or profits.

investment property rule
The Internal Revenue Code specifies that no gain or loss should be recognized on the exchange of property held for productive use in trade or business or for investment if the property is exchanged for property of like kind that is to be held for productive use in trade or business or for investment.

involuntary lien
A lien placed on property without the consent of the property owner.

IRS tax lien
A federal tax lien, or Internal Revenue Service (IRS) tax lien, results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes. A federal tax lien is a general, statutory, involuntary lien on all real and personal property held by the delinquent taxpayer. Its priority, however, is based on the date of filing or recording; it does not supersede previously recorded liens.

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