Construction Terminology

Construction Terms

Construction Term Balloon Mortgage
A loan which is repaid by a series of small, periodic payments until a given date, when either the balance comes due in a
single, large payment or the amount of the payments rises significantly.

Construction Term Balloon Payment
A balloon payment is a lump sum payment that is made at a particular time during the life of a loan. Normal payments
would be made until this time and then a balloon payment would be made to retire the loan.

Construction Term Bankruptcy
The state of being unable to pay your debts such that you submit yourself to the protection of the state. A person or
business may voluntarily assign himself into bankruptcy or may be petitioned into bankruptcy by his creditors. Once in
bankruptcy, the person surrenders his assets to a trustee in bankruptcy who sells the assets for the benefit of the
bankrupt's creditors, first secured creditors then unsecured creditors. Once a person is discharged from bankruptcy, none
of his former creditors may pursue him for his former debts.

Construction Term Bid
A formal offer submitted by a contractor to do a job. This bid should be made in accordance with plans and specifications
required to complete the project.

Construction Term Bid Bond
Bid bond is a bond issued by a bonding company on behalf of a contractor. This provides assurance that if the bid is
accepted, the contractor will provide a contract and performance bond. If the contractor defaults, the bonding company is
obligated to pay the recipient of the bid the difference between the contractor's bid and the next lowest acceptable lowest
bidder.

Construction Term Bill Of Sale
Documentary evidence that title to personal property (chattels) has passed to the Purchaser for valuable consideration

Construction Term Binder
Binder is an amount of money used to secure an insurance policy until the permanent documents can be completed.

Construction Term Bond
A Bond is an amount of money that some cities require to receive a license. This bond is usually between $5000 -
$10,000 and will be kept on deposit in a government agency.

Construction Term Borrower
The person or company that receives money from a lender (often a bank, credit union or trust company) in exchange for a
written promise to pay and a registered lien on property.

Construction Term Breach Of Contract
A failure to meet one's obligations, whether under a contract or otherwise. A breach of contract allows the innocent party
to enforce the contract, rescind the contract or sue for damages.

Construction Term Broker
A term used to describe a person who serves as an agent who negotiates contracts of purchase and sale of real estate.
The broker works with an individual in order to try to obtain a permanent mortgage. The broker will be paid a fee for the
service and is usually beneficial in hard to qualify loans.

Construction Term Builder Warranty
An enforceable guarantee of the quality of construction given by a builder or developer.

Construction Term Builders Risk
An insurance policy issued to builders during the construction project. These policies normally will cover any losses due to
theft, vandalism, or any act of God. This policy will expire or be turned over into a regular home owner policy at the
completion of the project.

Construction Term Building Code
Set of regulations established by a municipality to govern the standards of construction in that municipality.

Construction Term Building Permit
A document obtained from the local government, allowing for the construction of a structure in accordance with the terms
of the permit

Construction Term Building Restrictions
Limiting rules which may appear in building codes or in title documents which control the size, placement, materials, design
or location of new construction.

Construction Term Building Setback
The minimum distance a building or other improvement may be constructed from a property line. May be established by
agreements, title documents or municipal by-laws or ordinances.

Construction Term Buy Down
The payment of extra money on a loan now so as to reduce the interest rate over a given period or over the life of the
loan. This extra payment may be made by the borrower, by the lender as an incentive to the borrower to borrow from the
lender or by the vendor/builder as an incentive to the borrower to buy a certain property.

Construction Term Back Charge
Billings for work performed or costs incurred by one party that, in accordance with the agreement, should have been
performed or incurred by the party to whom billed. Owners bill back charges to general contractors, and general
contractors bill back charges to subcontractors. Examples of back charges include charges for cleanup work or to repair
something damaged by another subcontractor, such as a tub chip or broken window

Construction Term Bankruptcy
The state of being unable to pay your debts such that you submit yourself to the protection of the state. A person or
business may voluntarily assign himself into bankruptcy or may be petitioned into bankruptcy by his creditors. Once in
bankruptcy, the person surrenders his assets to a trustee in bankruptcy who sells the assets for the benefit of the
bankrupt's creditors, first secured creditors then unsecured creditors. Once a person is discharged from bankruptcy, none
of his former creditors may pursue him for his former debts.

Construction Term Binder
Binder is an amount of money used to secure an insurance policy until the permanent documents can be completed.

Construction Term Building Restrictions
Building restrictions are restrictions that are stated in either  city ordinances or covenants of a subdivision.

Construction Term Building Code
Set of regulations established by a municipality to govern the standards of construction in that municipality.

Construction Term Building Permit
A document obtained from the local government, allowing for the construction of a structure in accordance with the terms
of the permit
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Category Construction Glossary