S corporation: A corporation that is not taxed as a separate entity. Instead,
the income, losses, credits, etc. are passed through to the shareholders.
Safe harbor: Structure approved by the IRS, which if followed, will produce
a foreseeable tax consequence. Structuring a transaction outside the safe harbor
rules creates uncertainty regarding the tax consequences of the transaction.
Sale-leaseback: A technique in which a seller deeds property to a buyer for
a consideration, and the buyer simultaneously leases the property back to the seller.
Sales price or net sales price: The contract price of the property less closing
Second mortgage: A mortgage that has a lien position subordinate to the first
Secondary mortgage market: The buying and selling of existing mortgages.
Secured loan: A loan that is backed by collateral.
Security: The property that will be pledged as collateral for a loan.
Self-cancelling installment note: A means of transferring property to heirs
that freezes the gift and estate tax value of appreciating property to the value
at the date of a sale. The property owner transfers real estate to children or other
family members on an installment basis then forgives any amounts that are unpaid
on the note when he dies. The sale price is calculated using the fair market value
plus a “risk premium” for the possibility that the seller may die before receiving
all the payments.
Self-directed IRA: An IRA account in which the owner has freedom to make
decisions about particular investments.
Seller financing or seller carry-back: A financing arrangement under which
the seller of property provides the buyer with the financing needed to acquire the
property. The financing is often a note from the buyer secured by the property without
money changing hands.
Seller in a like-kind exchange: The person who owns the Replacement Property
before the exchange occurs.
Seller take-back: An agreement in which the owner of a property provides
financing, often in combination with an assumable mortgage. See
Servicer: An organization that collects principal and interest payments from
borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages
that have been purchased by an investor in the secondary mortgage market.
Servicing: The collection of mortgage payments from borrowers and related
responsibilities of a loan servicer.
Settlement: See Closing.
Settlement sheet: See HUD-1 statement.
Shared equity financing agreement (SEFA): A contract under which two or more
people acquire undivided interests for more than 50 years in an entire dwelling
unit, including the land. Under the agreement, one or more of the co-owners is entitled
to occupy the property as his main home upon payment of rent to the other co-owner
Special deposit account: An account that is established for rehabilitation
mortgages to hold the funds needed for the rehabilitation work so they can be disbursed
from time to time as particular portions of the work are completed.
Standard deduction: A set amount of deduction that is used to reduce a taxpayer’s
adjusted gross income if she does not choose the itemized deduction method of calculating
Standard payment calculation: The method used to determine the monthly payment
required to repay the remaining balance of a mortgage in substantially equal installments
over the remaining term of the mortgage at the current interest rate.
Starker exchange: A Like-Kind Exchange where there is a delay between the
closing of the sale of the Relinquished Property and the closing of the purchase
of the Replacement Property.
Stepped-up basis: An asset’s original purchase price adjusted upward for
appreciation or downward for depreciation for tax purposes at the time of inheritance.
Step-rate mortgage: A mortgage that allows for the interest rate to increase
according to a specified schedule (i.e., seven years), resulting in increased payments
as well. At the end of the specified period, the rate and payments will remain constant
for the remainder of the loan.
Straight-line depreciation: Depreciation where the amount for each period
Subdivision: A housing development that is created by dividing a tract of
land into individual lots for sale or lease.
Subordinate financing: Any mortgage or other lien that has a priority that
is lower than that of the first mortgage.
Subsidized second mortgage: An alternative financing option known as the
Community Seconds® mortgage for low- and moderate-income households. An investor
purchases a first mortgage that has a subsidized second mortgage behind it. The
second mortgage may be issued by a state, county, or local housing agency, foundation,
or nonprofit corporation. Payment on the second mortgage is often deferred and carries
a very low interest rate (or no interest rate). Part of the debt may be forgiven
incrementally for each year the buyer remains in the home.
Survey: A drawing or map showing the precise legal boundaries of a property,
the location of improvements, easements, rights of way, encroachments, and other
Sweat equity: Contribution to the construction or rehabilitation of a property
in the form of labor or services rather than cash.