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Real Estate Glossary


abstract of title - History of title to real estate, summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstracter that the history is complete and accurate.

acceleration clause - The clause in a mortgage or deed of trust which may be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant.

accretion - The increase or addition of land by the deposit of sand or soil washed up naturally from a river, lake, or sea.

accrued depreciation - Physical deterioration, external depreciation, and functional obsolescence in which it causes a loss in value

acknowledgment - A formal decoration made before a duly authorized officer, usually a notary public, by a person who has signed a document.

acre - 43,560 square feet/4,840 square yards or 4,047 square meters.

actual eviction - Legal process that results in the tenants being physically evicted.

ad valorem tax - Also called the general tax. Taxes based according to value, generally a real estate tax.

addendum - Additions to an existing contract without altering the original. Must be signed by all parties.

adjustable-rate mortgage (ARM) - A loan characterized by a fluctuating interest rate, usually one tied to a bank or saving and loan association cost-of-funds index.

administrator - A court appointed person who helps with the settlement of an estate of a person who has died without a will.

agency - Relationship between principal and agent where the agent is authorized to represent the principal in the transactions.

agent - A fiduciary relationship created under the law of agency when a owner, as the principal, executes a listing agreement or management contract authorizing a licensee to be his or her agent.

air lots - Airspace over a piece of land.

air rights - Rights to use the space above property.

amendment - A change to the existing content of a contract. Must be signed by all parties.

American Land Title Association (ALTA) - Title insurance policy that protects the interest in a collateral property of a mortgage lender who originates a new real estate loan.

Americans with Disabilities (ADA) - Protects the rights of individuals with disabilities in employment and public accommodations.

amortized loan - A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.

annexation - Converting personal property into real property.

annual percentage rate (APR) - Under the Truth in Lending Act all charges associated with a loan has to be disclosed to borrowers by lenders.

antitrust laws - Laws designed to protect free enterprise by making it illegal for certain groups that form only to minimize competition. Price fixing is a violation example of the antitrust law in real estate.

appraisal - The process where property value is obtained.

appraiser - An independent person trained to provide an unbiased estimate of value.

appreciation - An increase in the worth of a property due to economic or related causes, which may prove to be either temporary or permanent; opposite of depreciation.

appurtenance - A right, privilege, or improvement belonging to, and passing with, the land; "runs with the land."

area - A level surface or piece of ground; the size of a surface; the amount of a two-dimensional object.

asbestos - Mineral once used in insulation and other materials that can cause respiratory diseases.

balance - The appraisal principle that states that the greatest value in a property will occur when the type and size of the improvements are proportion to each other as well as the land.

balloon payment - A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.

beneficiary - (1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn. (2) a lender in a deed of trust loan transaction.

blanket loan - A mortgage covering more than one parcel of real estate, providing for each parcel's partial from the mortgage lien upon repayment of a definite portion of the debt.

blockbusting - The illegal practice of inducing homeowners to sell their properties by making representations regarding the entry or prospective entry of persons of a particular race or national origin into the neighborhood.

blue-sky laws - Common name for those state and federal laws that regulate the registration and sale of investment securities.

broker - One who acts as an intermediary on behalf of others for a fee or commission. more.

broker's price opinion (BPO) - An opinion or real estate value commissioned by a bank or attorney and provided by a broker.

brokerage - The bringing together of parties interested in making a real estate transaction. more.

building code - An ordinance that specifies minimum standards of construction for buildings to protect the public safety and health.

building permit - Written governmental permission for the construction, alteration, or demolition of an improvement, showing compliance with building codes and zoning ordinances.

buyer agency agreement - A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer. The broker represents the buyer under the law of agency.

buyer's agent - A residential real estate broker or sales person who represents prospective purchaser in a transaction. The buyer's agents owes the buyer-principal the common-law or statutory agent's duties.

capital gain - Profit earned from the sale of an asset.

capitalization - A mathematical process for estimating the value of a property using a proper rate of return on the investment and the annual net operating income expected to be produced by the property. The formula is expressed as follows: Income/Rate = Value.

capitalization rate - The rate of return a property will produce on the owners investment.

caveat emptor - A Latin phrase meaning, let the buyer beware.

chain of title - The succession of conveyances, from some accepted starting point, whereby the present holder of real property derives title.

change - The appraisal principle that holds that no physical or economic condition remains constant.

chattel - See personal property

client - The principal

closing - An event where promises made in a sale contract are fulfilled and mortgage loan funds (if any) are distributed to the buyer.

closing statement - A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction.

cloud on title - Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.

code of ethics - A written system of standards for ethical conduct.

commission - payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.

common law - The body of law based on custom, usage, and court decisions

comparables - Properties used in in an appraisal report that are substantially equivalent to the subject property.

competition - The appraisal principle that states that excess profits generate competition.

competitive market analysis (CMA) - a comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities.

condemnation - A judicial or administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use and compensates the owner.

condominium - The absolute ownership of a unit in a multi-unit building based on legal description of the airspace the unit actually occupies, plus an undivided interest in the ownership of the common elements, which are owned jointly with the other condominium unit owners.

conformity - The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value.

consent - Expressing or implying permission, approval, or agreement of an action or decision.

consumer - An individual who purchases goods or services that are not for resale.

contingency - A provision in a contract that requires a certain act to be done or certain event to occur before the contract becomes binding.

contract - A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

convention loan - A loan that requires no insurance or guarantee.

conveyance - A term used to refer to any document that transfers title to real property. The term is also used in describing the act of transferring.

cooperating broker - See listing broker

cooperative - A residential multi-unit building whose title is held by a trust or corporation that is owned by and operated for the benefit of people living within the building who are the beneficial owners of the trust or shareholders of the corporation, each possessing a proprietary lease.

co-ownership - Title ownership held by two or more persons.

cost - The total amount of money insured for products or service.

cost approach - The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation.

counteroffer - A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

covenant - A written agreement between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases, and contracts for deed.

credit - On a closing statement, an amount entered in a person's favor-either an amount the party has paid or an amount for which the party must be reimbursed.

customer - The third party or non represented consumer for whom some level of service is provided.

debit - On a closing statement, an amount charged; that is, an amount that the debited party must pay.

decedent - A person who as died.

deed - A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

delinquent taxes - Taxes that are unpaid and past due.

demand - The amount a goods people are willing and able to buy at a given price; often coupled with supply.

depreciation - (1) In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolesce. (2) in real estate investment, an expense deduction for tax purposes taken over the period of ownership of income property.

disclosure - Relevant information or fact that are known or should have been known.

dual agency - Representing both parties to a transaction. This is unethical unless both parties agree to it illegal in many states.

earnest money - Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but to be applied to the purchase price if the sale is closed.

easement - A right to use the land of another for specifies purpose, such as for a right-of-way or utilities; an incorporeal interest in land.

economic life - The number of years during which an improvement will add value to the land.

eminent domain - The right of government or municipal quasi-public body to acquire property for public use through a court action called condemnation, in which the court decides that the use is a public use and determines the compensation to be paid to the owner.

encumbrance - Anything- such as mortgage, tax, or judgment lien; an easement; a restriction on the use of the land; or an outstanding dower right-that may diminish the value or use and enjoyment of the property.

equity - The interest or value that an owner has in property over in and above and indebtedness.

escheat - The reversion of property to the state or country, as provided by state law, in cases where a decedent dies.

escrow - The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered upon the performance of certain conditions outlined in the escrow instructions.

estate tax - Federal tax on a decedent's real and personal property.

ethics - The system of moral principles and rules that becomes standard for professional conduct.

eviction - A legal process to oust a person from procession of real estate.

exception - The exclusion of a part of the property conveyed.

executed contract - A contract in which all parties have fulfilled their promises and thus performed the contract.

Fair Housing Act - The federal law that prohibits discrimination in housing based on race, color, religion, sex. handicap, familial status, and nation origin.

Fannie Mae - A government-sponsored enterprise established to purchase any kind of mortgage loans in the secondary market from primary lenders.

Federal Home Loan Mortgage Corporation - See Freddie Mac

Federal National Mortgage Association - See Fannie Mae

fiduciary - One in whom trust and confidence is placed; a reference to a broker employed under the terms of a listing contract or buyer agency agreement,

fixture - An item of personal property that has been converted to real property by being permanently affixed to the realty.

foreclosure - A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the right of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.

fraud - Deception intended to cause a person to give up property or a lawful right.

Freddie Mac - A government sponsored enterprise established to purchase primarily conventional mortgage loans in the secondary market.

Ginnie Mae - A government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA and VA loans as collateral.

Government National Mortgage Association - See Ginnie Mae

grantee - A person who receives a transfer of real property from a grantor.

grantor - The owner transferring title to or an interest in real property to a grantee.

heir - One who might inherit or succeed to an interest in land under the state law of descent when the owner dies without leaving a valid will.

home equity loan - A loan (sometimes called a line of credit) under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property.

homeowners' insurance - A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

HUD-1 - A form that itemizes fees and services and charged to a borrower and seller during a real estate transaction.

index - An objective economic indicator to which the interest rate for an adjustable-rate mortgage is tied.

inflation - The gradual reduction of the purchasing power of the dollar, usually related direct.

interest - A charge made by a lender for the use of money.

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

latent defect - A hidden structural defect that could not be discovered by ordinary inspection and that threatens the property's soundness or the safety of it's inhabitants. Some states impose on sellers licensees a duty to inspect for and disclose latent defects.

law of agency - See agency

lease - A written or oral contract between a landlord (the lessor) and a tenant (the lessee) that transfers the right to exclusive possession and use of the landlord's real property to the lessee for a specified period of time and for a stated consideration (rent). By state law, leases for longer than a certain period of time (generally one year) must be in writing to be enforceable.

lessee - See lease

lessor - See lease

leverage - The use of borrowed money to finance an investment.

license - (1) A privileged or right granted to a person by a state to operate as a real estate broker or salesperson. (2) the revocable permission for a temporary use of land-a person right that cannot be sold.

licensee - A person who has the skills and knowledge to be licensed in real estate.

lien - A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court.

life tenant - A person in possession of a life estate.

lis pendens - A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either a state or a federal court.

listing agreement - A contract between an owner (as principal) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission.

listing broker - The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the cooperating broker, from whose office negotiations leading up to a sale are initiated. The listing broker and the cooperating broker may be the same person.

living trust - A trust that is created during one's lifetime.

margin - A premium added to the index rate representing the lender's cost of doing business.

marketable title - Good or clear title, reasonably free from the risk of litigation over possible defects.

market value - The most probable price property would bring in an arm's-length transaction under normal conditions on the open market.

mortgage - A conditional transfer or pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien.

mortgage banker - Mortgage loan companies that originate, service, and sell loans to investors.

mortgage brokers - An agent of a lender who brings the lender and borrower together. The broker receives a fee for this service.

mortgage lien - A lien of charge on the property of a mortgagor that secures the underlying debt obligations.

National Association of Realtors (NAR) - The largest real estate organization in the world; NAR members subscribe to a strict code of ethics. Active brokers are allowed to use the trademarked designation REALTOR.

negotiable instrument - A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee's right to payment.

net lease - A lease requiring the tenant to pay not only the rent but also cost incurred in maintaining the property, including taxes, insurance, utilities, and repairs.

net listing - A listing based on the price the seller will receive if the property is sold. Under a net listing, the broker can offer the property for sale at the highest price attainable to increase the commission. This type of listing is illegal in many states.

obsolescence - The loss of value due to factors that are outmoded or less useful. Obsolescence may be functional or external.

open-end loan - A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage.

open listing - A listing contract under which the broker's commission is contingent on the broker's producing a ready, willing, and able buyer before the property is sold by the seller or another broker.

option - A agreement to keep open for a set period an offer to sell or purchase property.

P&I - Principle and Interest

package Loan - A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances.

PITI - The basic cost of owning a home-mortgage Principle and Interest, real estate Taxes, and hazard Insurance.

plat - A detailed map that illustrates the geographic boundaries and individual lots.

plat map - A map of a town, section, or subdivision indicating the location and boundaries of individual properties.

plottage - The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot.

possession - Owning or occupying a property.

price-fixing - See antitrust laws.

principle - (1) A sum loaned or employed as a fund or an investment, as distinguish from its income or profits. (2) The original amount (as in a loan) of the total due and payable at a certain date. (3) A main party to a transaction-the person fro whom the agent works.

private mortgage insurance (PMI) - Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure or deficiency.

probate - A legal process by which a court determines who will inherit a descendants property and what the estate's assets are.

puffing - Exaggerated or superlative comments or opinions.

quiet title - A court action to remove a cloud on the title.

quitclaim deed - A conveyance by which the grantor transfers whatever interest he or she has in the real estate, without warranties or obligation.

radon - A naturally occurring gas that is suspected of causing lung cancer.

real property - The interests, benefits, and rights inherent in real estate ownership.

reconveyance deed - A deed used by a trustee under a deed of trust to return title to the trustor.

redemption - The right of a defaulted property owner to recover his or her property by curing the default.

redlining - The illegal practice of a lending institution denying loans or restricting their number for certain areas of a community.

reverse mortgage - A loan under which the homeowner receives monthly payments based on his or her accumulated equity rather than a lump sum.  The loan amount must be repaid at a prearranged date, upon the death of the owner, or upon the sale of the property.

riparian rights - An owner's rights in land that borders on or includes a stream, river, or lake. These rights include access to and use of the water.

secondary mortgage market - A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called the secondary money market. Mortgages are first originated in the primary mortgage market.

section - A portion of township under the rectangular (government) survey system. A township is divided into 36 sections, number 1 through 36. A section is a square with mile-long sides and area one one square mile, or 640 acres.

seller's disclosure notice - Documents completed by the seller of a home listing any known issues of the property, including home improvements made.

setback - The amount of space local zoning regulations require between a lot line and a building line.

severalty - Ownership of real property by one person only; also called sole ownership.

subdivision plat - See plat map.

sublease - See subletting.

subletting - The leasing of premisses by a lease to a third party of the lessee's remaining term. See also assignment.

suit to quiet title - A court action intended to establish or settler the title to a particular property, especially when there is a cloud on the tile.

supply and demand - The appraisal principle that follows the interrelationship of the supply of and demand for real estate. Because appraising is based on economic concepts, this principle recognizes that real property is subject to the influences of the marketplace as with other commodity.

surface rights - Ownership rights in a parcel of a real estate that are limited to the surface of the property and do not include the air above it (air rights) or the minerals below the surface (subsurface rights).

survey - The process by which boundaries are measured and land area are determined; the on-site measurement of lot lines, dimensions, and position of a house on a lot, including the determination of any existing encroachments or easements.

taxation - The process by which a government or municipal quasi-public body raises monies to fund its operation.

tenant - One who holds or possesses lands or tenements by any kind of right or title.

testate - Having made and left a valid will.

testator - A person who has made a valid will. A women often is referred to as a testatrix, although testator can be used for either gender.

title - (1) The right to ownership or the ownership of land. (2) The evidence of ownership of land.

title insurance - A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters specifically excluded by the policy.

title search - The examination of public records relating to real estate to determine the current state of ownership.

township - The principle unit of the rectangular (government) survey system. A township is a square with 6-mile sides and an are of 36 square miles.

Truth in Lending Act (TIL) - Federal government regulates the lending practices of mortgage lenders through this act.

unilateral contract - A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not illegally bound to perform; however, if the second party does not comply, the first party is obligated to keep the promise.

valid contract - A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it

VA loan - A mortgage loan on approved property made to a qualified veteran by ab authorize lender and guaranteed ny the Department of Veterans Affairs in order to limit the lender's possible loss.

warrant clause - A part of the deed where the seller warrants the title conveyed to the buyer.

water rights - Common law rights held by owners of ;and adjacent to river, lakes, or oceans; includes restrictions on those rights and land ownership.

will - A written document, properly witnessed, providing for the transfer of title to property owned by the deceased, called testator.

wraparound loan - A method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principle balance of the first mortgage and whatever additional sums are advanced by the lender. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount without disturbing the existence of the first mortgage.

zoning - A regulatory tool that helps communities regulate and control how land is used.

zoning ordinance - An exercise of police power by municipality to regulate and control the character and use of property.