Real Estate Glossary

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

 

A

• A-Frame Design  –  An interior style that features a steeply peaked roof-line and a ceiling that is open to the top rafters.

• Accelerated Cost Recovery System  –  A tax calculation that provides greater depreciation in the early years of ownership of real estate and personal property.

• Abstract of Title – A condensed history or summary of all transactions affecting a particular parcel of real estate, including the original grant, all conveyances and encumbrances affecting the property, and the abs-tractor’s certification of the history’s accuracy.

• Acceleration Clause – A clause in a mortgage that gives the lender the right to require payment of the entire principal balance if the borrower defaults on an installment payment or other covenant.

• Acceptance – The consent to enter into, and be bound by the terms of, a contract.

• Access – The right to enter and exit a parcel of land from a public way, including the right to enter and exit via land belonging to others.

• Accretion  –  The gradual addition to the shore or bank of a waterway by deposits of sand or silt.

• Acknowledgment – The confirmation by which a party executing a legal document confirms his signature and voluntary agreement with the terms of the document, made before an authorized officer of the Court or notary public.

• Acre – 43,560 square feet of land.

• Active Solar System  –  A system that utilizes electric pumps or fans to transfer solar energy for storage or direct use.

• Add-On Interest  –  The interest a borrower pays on the principal for the duration of the loan.

• Additional Principal Payment  –  Extra money included in the monthly payment to help reduce the principal and shorten the term of the loan.

• Adjustable-Rate Mortgage (ARM) – A mortgage with interest rates that may fluctuate based on market conditions; the lender is permitted to adjust the mortgage’s interest rate periodically, though most ARM’s are limited in the amount that the interest rates can vary.

• Adjusted basis – The total of the original cost of a property and the value of any capital expenditures for improvements done to it, minus any depreciation taken.

• Adjustment Date – The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

• Adjustment period – The period of time between the adjustment dates for an adjustable-rate mortgage (ARM).

• Administrator – A person appointed by a probate court to administer the estate of an individual who has died without a will.

• Adverse Possession – A claim made against the land titled to another person, by virtue of open and hostile possession and use of the land to the exclusion of the titled owner.

• Aeolian Soil  –  Soil that is composed of materials deposited by the wind.

• Affidavit of Title – A sworn statement that is made in writing under oath by a seller of real property, and certified by a notary public, in which the seller identifies himself or herself, indicates marital status, certifies that no defects have occurred in the title since the examination of the title on the date of the contract, and confirms that he or she is in possession of the property (if applicable).

• Agency – The relationship between two or more persons wherein the agent is authorized to act on behalf of another person (or principal) in certain transactions.

• Agent – A person or company that acts on behalf of another to transact business, generally in exchange for payment. In real estate, it is a person or company with a real estate license working under the authority of a real estate broker.

• Agreed Boundary  –  A compromise boundary to which property owners agree in order to resolve a dispute.

• Alcove  –  A recessed section of a room, such as a breakfast nook.

• Alienation – The act of transferring property to another, either voluntarily (via a sale), or involuntarily (via adverse possession).

• Alienation Clause – The clause in a mortgage or deed of trust which asserts the lender’s option to require that the balance of the secured debt becomes immediately due and payable if the property is sold by the borrower, preventing the borrower from assigning the debt without the lender’s approval.

• Alkali  – Mineral salt found in soil.

• Alley  –  A lane behind a row of buildings or between two rows of buildings

• ALTA – American Land Title Association, the national association of title insurance companies, abs-tractors and attorneys specializing in real property law, headquartered in Washington, D.C.

• Alternative Mortgage  –  Any home loan that does not conform to a standard-fixed-rate mortgage.

• Aluminum-Clad Windows  –  Wooden windows with aluminum covering the exterior.

• Amenity – A natural or man-made feature of real property that enhances its value and attractiveness, though it is not essential to the property’s use.

• American Society of Home Inspectors (ASHI) – A professional trade association providing training and education in home inspections. Members meet qualification requirements to join. Phone: (800) 743-2744.

• Amortization – The process of payment of a debt or mortgage loan over time by installments.

• Amortization Schedule – A timetable for repayment of a debt or mortgage loan, showing the amount of each payment, what portion is applied to interest and principal, and the remaining balance.

• Amortization Term – The amount of time required to repay the mortgage loan, expressed in number of months.

• Amortize – To pay off a loan or mortgage with periodic payments that cover both principal and interest.

• Amortized Loan – A loan in which both the principal and interest are payable in monthly or other periodic installments over the term of the loan, with no balloon payment prior to maturity.

• Amperage  –  The strength of an electrical current.

• Annual  –  Any kind of plant that must be planted every year.

• Annual mortgagor statement – An annual report sent to the borrower (mortgagor) each year, showing the amount paid in taxes and interest during the year, as well as the remaining mortgage loan balance.

• Annual percentage rate (APR) – The overall cost of a mortgage, including interest, mortgage insurance, and loan origination fee (points), stated as a yearly percentage, thus allowing buyers to compare different types of mortgages based on the associated annual finance charges; the APR must be disclosed to borrowers by lenders, per the Truth-in-Lending Act.

• Annuity – The return, including interest, from an investment of capital, paid in a series of regular payments.

• Anticipatory Breach  –  A communication that informs a party that the obligations of the original contract will not be fulfilled.

• Appraisal – A written estimate of the value of an asset or property prepared by a qualified, independent party, through which the asset or property value is determined.

• Appraised Value – The estimate of a property’s fair market value, based on an appraiser’s analysis of the property.

• Appraiser – An individual educated to estimate the value of real property and personal property.

• Appreciation – An increase in the worth of a property due to changes in economic conditions or other causes; the opposite of depreciation.

• Appurtenance – Anything attached to, or used with, a parcel of land that will go to the new owner on conveyance of the land.

• Arbitration  –  A method of resolving a dispute in which a third party renders a decision.

• Arbor  –  An area shaded by trees, shrubs or vines on a latticework structure.

• Arch  –  A curved structure that supports weight over an area, such as a doorway.

• Architect  –  A licensed professional who designs homes, buildings, and other structures.

• Architectural Fees  –  The fee an architect charges for services. In general, architects charge for their services by the hour, by the square foot, or by a percentage of the project budget.

• ARM – Adjustable-rate Mortgage. Also see “Variable Rate Mortgage”.

• Arpent  –  A French measurement of land equal to .84625 acres.

• Asbestos – A mineral fiber used in some building materials, such as flooring, siding, insulation, and roofing. It is presently banned for most uses in real property.

• Assessed Value – A tax, charge or levy against a property made by the government, based on its value, and levied for a specific purpose, such as to finance sidewalks, a sewer, etc…

• Assessment Rolls – The public record of taxable property.

• Assessor – A public official who evaluates the value of a property for taxation purposes.

• Asset – Anything of monetary value owned by an individual, including real property, personal property, and enforceable claims against others (bank accounts, stocks, mutual funds, etc.).

• Assign – To transfer interest.

• Assignee – One who receives an assignment or transfer of rights.

• Assignor – One who makes an assignment or transfer of rights to another.

• Assumable Mortgage – A mortgage that allows a new owner to take over its obligations.

• Assumption Clause – The provision in an assumable mortgage that allows a buyer to take responsibility for that mortgage from the seller.

• Attachment – Seizure of property through Court process to force payment of a debt.

• Attorney-in-fact – One who holds a power of attorney from another to execute legal documents on behalf of the grantor of the power.

• Average Price  –  The price of a home determined by totaling the sales price of all houses sold in an area and dividing that number by the number of homes

• Aviation Easement  –  An easement over private property near an airport that limits the height of structures and trees

• Awning Windows  –  Single-sash windows that tilt upward and out

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B

• Back Ratio – The ratio of monthly housing costs (principal, insurance, taxes, and interest) plus regular monthly payments to gross monthly income, used by the lender to evaluate an applicant’s qualification for a loan; typical back ratios are between 32 – 45 percent.

• Back-to Back Escrow  –  Arrangements that an owner makes to oversee the sale of one property and the purchase of another one at the same time.

• Back-flow Valve  –  A valve in a sewer line that prevents sewage from flowing back into a house.

• Balance Sheet  –  A statement that shows the assets, liabilities and the net worth of an individual.

• Balloon-Frame Construction  –  A type of framing used in two story homes in which studs extend from the ground to the ceiling of the second floor.

• Balloon Mortgage – A mortgage with level monthly payments over a stated term, but which requires a lump sum payment in full due at the end of an earlier specified term.

• Balloon Payment – The final lump sum payment that is made at the maturity date of a balloon mortgage, which is larger than preceding regular payments.

• Balustrade  –  Railing held up by a set of posts on a porch or stairway.

• Bankruptcy – A legal proceeding in a federal court in which a debtor who owes more than the total of his or her assets can surrender those assets to the Bankruptcy Court, thereby being relieved of the future obligation to repay his or her unsecured debts; a Trustee in Bankruptcy administers the assets, selling them to pay as much of the debt as possible.

• Bargain and Sale Deed – A deed that carries with it no warranties against liens or other encumbrances, but which implies that the grantor has the right to convey title.

• Basis – The financial interest an owner of an investment property has, as determined by the Internal Revenue Service, in order to determine annual depreciation and gain or loss on the sale of the asset Adjusted Basis: When property is purchased, the owner’s basis is calculated to be the property cost plus the value of any capital expenditures for improvements made, minus any depreciation taken.

• Basis Point  –  A basis point is one one-hundredth of one percentage point. For Example: the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points.

• Bay Window  –  A window that projects outward into a curve.

• Before-tax-income  –  Total income before taxes are deducted.

• Benchmark – A permanent reference mark made on a piece of property for the sake of surveyors.

• Beneficiary – The person named to receive income from a trust, an estate, or a deed of trust.

• Bequeath – To gift or transfer personal property to another party, executed via a will.

• Betterment – An improvement to property that increases its value, as opposed to repairs or changes that maintain its value only.

• Bequest  –  Personal property given to a person through a will.

• Bid – A financial offer to purchase a property.

• Bidding War  –  Offers from multiple buyers for a piece of property. Sometime agents will compete to list a house for sale.

• Bill-of-Sale  –  A document that transfers ownership of personal property.

• Binder – A preliminary agreement for the purchase of real estate, secured by the payment of an earnest money deposit which evidences the purchaser’s good faith and intent to complete the purchase.

• Bi-weekly Mortgage  –  A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.

• Blanket Loan – A mortgage covering more than one parcel of real estate, which provides for each individual parcel’s partial release from the mortgage upon repayment of a portion of the debt.

• Blind-Nailing  –  Nails driven into the wall and concealed with putty.

• Blue-ribbon Condition  –  A house that has been maintained close to it’s original condition. Also, known as mint condition.

• Board Foot  –  Measurement of lumber that that is equivalent of 144 cubic inches.

• Board-and-Batten Siding  –  Siding that is composed of 8 to 12 inch wide wooden boards nailed vertically to create a barn-like exterior.

• Bona-fide  –  A legal term that refers to actions or persons that are honest and in good faith.

• Book Value  –  The value of a property as a capital asset based on its cost plus any additions, minus depreciation.

• Bond – A written financial obligation, usually secured by a mortgage or a deed of trust, and often posted with the Court, to guarantee against loss incurred with a potential claim.

• Borough  –  A section of a city that has an authority over local matters.

• Borrow Pit  –  The hole at a site that has been excavated.

• Boundary  –  The dividing line between two adjacent properties.

• Breach – Failure to follow through on a contractual promise or legal obligation.

• Breach-of-Contract  –  The failure to perform provisions set within a contract without a legal excuse.

• Breach-of-Warranty  –  A Seller’s inability to pass clear title to a buyer.

• Breast Height  –  The height at which the diameter of a tree is measured; four feet six inches above the ground.

• Brick  –  Building material made from clay molded into oblong blocks and fired in a kiln.

• Bridge Loan – A form of second trust, collateral for which is the borrower’s present home, usually taken on to allow the proceeds from the sale of the borrower’s present home to be used to close on a new home, before the previous home is sold.

• Broker – An intermediary who assists in negotiating contracts between two or more parties, for a fee; in real estate, a broker is licensed to assist in the purchase, selling, rental or managing of real estate; the broker’s services will vary, depending on whether he or she is employed by the seller or the buyer.

• Broom Clean  –  The ideal condition of a building when it is turned over to a new owner or tenant.

• Buffer Strip  –  A parcel of land that separates two or more properties.

• Building Code – An ordinance that specifies minimal standards for construction, alteration, or demolition of a building, set for the sake of safety.

• Building Inspector  –  A city or county employee who enforces the building codes and ensures that work is being correctly performed according to plans.

• Building and Loan Association  –  An organization that raises money to help its members purchase real estate or construct a building.

• Building Moratorium  –  A halt on  home construction to slow the rate of development.

• Building Permit  –  A permit issued by a local government agency that allows the construction of a home or the renovation of a home.

• Building Restriction Line (or “Set-back”) – The minimal distance from the road where a building may be positioned, which appears in the original plat of subdivision, restrictive covenants, or in zoning ordinances and building codes.

• Built-Ins  –  Appliances or other items that are framed into a home or permanently attached.

• Bundle of Rights  –  The various interests of rights an owner has in a property.

• Bulkhead  –  A retaining wall designed to hold back water from the ocean or other bodies of water.

• Bureau of Land Management – The branch of government responsible for the surveying and management of public lands.

• Butterfly Roof  –  A roof formed by two gables that dip in the middle to resemble a butterfly’s wings.

• Buy-Back Agreement – A written agreement which specifies the conditions under which the seller is allowed to repurchase the property, usually restricted to a certain period of time and to a price stated in the agreement.

• Buy-down — When the lender or home builder lowers the interest rate on initial payments on a loan, often for the first few years, allowing a borrower whose income is expected to increase in subsequent years to qualify for a loan they otherwise are currently not qualified for.

• Buyer-Agency Agreement – When the broker is the agent for the buyer and is financially obliged to the buyer.

• Buyer’s Market – When the real estate buyer is at advantage because there is more supply of houses or real estate available for sale than there is demand, thus lowering prices.

• Buyers Remorse  –  An emotion felt by first-time home-buyers after signing a sales contract or closing the purchase of a house.

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C

• Call Option – A provision of a mortgage that allows the mortgagee, or lender, to require the mortgage to be due and payable for any reason at the end of a specified period of time.

• Cap – A limit placed on an adjustable-rate mortgage (ARM) as to how much the interest rate or mortgage payments may increase or decrease.

• Capital Expenditure – The expense incurred making an improvement to a property in order to extend it useful life or to add to its value.

• Capital Gain – Profit earned from the sale of an asset.

• Capital Gains Tax  –  A tax placed on the profits from the sale of real estate or investments

• Capitalization – A mathematical formula that estimates the value of a property, utilizing the rate of return on the investment and the annual net operating income expected.

• Capitalization Rate – The rate of return a property will produce on the owner’s investment.

• Cash-Out Refinance – A loan for refinancing a property which offers cash over and above what is needed to repay the first mortgage, closing costs, points and any other mortgage liens due. The additional cash can be used for any purpose.

• Caveat Emptor – Translation: “buyer beware”, meaning that the buyer is responsible for inspecting any real estate or property before purchase for defects, as the seller is not required to disclose any problems to the buyer, though if asked outright, cannot conceal any defects.

• CC & R ‘ s – Covenants, Conditions and Restrictions; or the rights and obligations of individual owners of real property within a subdivision (or other tract of land where there is more than one owner of property) in relation to other owners, or to the organized association of owners, within the same subdivision, relative to the use and maintenance of the property commonly owned among them.

• Certificate of Deposit – A document provided by a bank or financial institution that is proof of a deposit of funds with that bank or institution, also promising to return the deposit plus earnings at a specified interest rate within a specified time period.

• Certificate of Eligibility – A document issued by the U.S. government certifying a veteran’s eligibility for a VA guaranteed loan for a home or business.

• Certificate of Occupancy – A city or county document certifying that a building is approved for occupancy, often required by insurance companies to insure the property.

• Certificate of Reasonable Value (CRV) – A document issued by the Department of Veterans Affairs (VA) establishing the maximum loan amount for a VA mortgage.

• Certificate of Satisfaction – A document recorded with land records and signed by the Note-holder of a property, showing release of a mortgage, deed of trust, or lien on that property.

• Certificate of Title – A statement of opinion provided by a title company or attorney, based on examining public records, stating that the title to a piece of real estate is legally held by the current owner; because this certification does not cover matters not of record, it is no longer commonly used.

• Chain – A unit for measuring land equaling 66 feet in length.

• Chain-of-Title  –  The official record that details the ownership history of a piece of property.

• Change Frequency  –  The adjustment schedule on an adjustable-rate mortgage.

• Chattel – Personal property.

• Clear Title – A document establishing ownership of a property that is free of any legal questions or controversies as to the current ownership.

• Closing – Also known as “escrow” or “settlement”. The process of finalizing the sale of a property via a meeting of the buyer, seller and lender, at which legally binding documents are executed, money is dispersed, the deed is prepared, and ownership is formally transferred from the seller to the buyer.

• Closing Costs – Expenses over and above the price of the property that are incurred by the buyers and sellers in transferring ownership of property, usually including property insurance, taxes, attorney’s fees, an origination fee, an amount placed in escrow, title insurance, the mortgage insurance premium, points, and filing fees.

• Closing Statement – A summary financial accounting of a real estate transaction disclosing all cash incoming, outgoing, and any charges or credits made.

• Clouded Title, or Cloud on Title – Any conditions revealed by a title search, usually during the sale of the property, that make the title to a piece of real estate controversial; can only be removed by a quitclaim deed, release, or court action.

• Co-maker  –  A person who signs a promissory note with the borrower and assumed the responsibility for the loan.

• Commitment  –  A promise by a lender to make a loan with specific terms for a specified period.

• Common-Area  –  An area inside a housing development that is owned by all residents.

• Common-Area Assessments  –  Fees paid by the owners of a condominium project or planned multi-unit development to maintain, repair, improve or operate common areas.

• Community Reinvestment Act  –  A federal law that encourages financial institutions to loan money in the neighborhoods where minority depositors live.

• Comparative Market Analysis  –  An estimate of the value of a property based on an analysis of recent sales of properties with similar characteristics.

• Compound Interest  –  The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.

• Coinsurance – A sharing of insurance risk between the insurer and the insured, and it depends on the amount of the policy and the actual value of the property insured at the time of the loss.

• Contiguous Lots  –  Pieces of property that are adjoined.

• Contingency – A condition that must be satisfied before a contract is legally binding, or where one event or agreement is dependent on the fulfillment or completion of another event.

• Contract – An agreement to do or not to do a certain thing.

• Contract-to-Purchase  –  A contract that the buyer initiates which details the purchase price and conditions of the transaction and is accepted by the seller. Also know as an agreement of sale.

• Conventional Mortgage – A fixed rate, fixed-term mortgage not insured by the Federal Government.

• Conveyance  –  The transfer of title of a property.

• Counter Offer  –  A response to an offer.

• Curable Defect  –  A deficiency in a property that is easy or inexpensive to fix, such as chipping paint.

• Curb Appeal  –  The first impression of a house as seen from the street.

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D

• Deed – A written document that conveys the ownership of real estate from one person or party to another.

• Deed of Trust – A written document that grants a trustee, in the event of foreclosure, the full power to sell, mortgage and subdivide the property in question.

• Deed Restriction – A clause in a Deed that limits the uses of the property (e.g., types or quantities of structures permitted).

• Deed-in-Lieu, or Deed-in-Lieu of Foreclosure – A deed given by a mortgagor to the mortgagee when the mortgage is in default, to avoid foreclosure.

• Default – The failure to meet the legal obligations in a contract; in real estate, failure to pay mortgage payments as scheduled or to comply with other stipulations of the mortgage.

• Deferred Interest – Interest on a mortgage which is delayed because the monthly payment of the mortgage is not large enough to cover the entire principal and interest due, and therefore is added to the loan balance See “negative amortization”

• Deficiency Judgment – A claim made by the holder of a note against the maker, in the event that a foreclosure sale does not bring in enough proceeds to fully cover the note and the costs of sale, for the difference

• Delivery – The final, unconditional and absolute transfer of a Deed from seller to buyer, such that the seller cannot revoke the transfer of ownership; the Deed itself does not pass title until the seller delivers it to the buyer.

• Department of Housing and Urban Development – A U.S. government agency established to implement certain federal housing and community development programs.

• Department of Veterans Affairs (VA) – A federal agency that insures residential mortgages made to eligible military veterans, which thereby encourages loans being made to veterans.

• Depreciation – A decline in the value of property, due to any cause; the opposite of appreciation Also an expense deduction taken for tax purposes over the period of owning income property.

• Devise – To dispose or convey ownership of real property via a will.

• Disclosure – A statement of facts made by the buyer about the condition of a property being sold and its surrounding area such as whether a house is located in a flood plain or whether there are known defects in or affecting the property, required by law in most US State.

• Discount point – A unit of measurement used for loan charges, with one point equaling 1 percent of the value of the loan.

• Domicile  –  A person’s primary or permanent home.

• Dower – The rights of a spouse to the property of their deceased spouse.

• Down Payment – The amount of the purchase price of a property paid in cash (i.e. not financed with a mortgage) that is required to secure the property; typically 20%.

• Dual Agency – Representation of opposing parties in a transaction (e.g. when a realtor is the agent for both buyer and seller); requires consent of both parties to be allowed, and is illegal in some US states.

• Due-on-Sale Clause – A provision in a mortgage allowing the lender to demand payment of the entire balance of the note if the mortgagor sells or otherwise transfers the property.

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E

• Earnest Money – A deposit made of a portion of the purchase price by the buyer to demonstrate his or her serious intent to purchase the property, usually accompanied by an agreement outlining the terms and conditions of the sale.

• Easement – The permanent or temporary right to use the property of another for a specific purpose — e.g. for access over the property, putting up utility lines, etc.

• Eminent Domain  –  The government’s right to condemn private land for public use, such as the routing of a public highway.

• Empty Nesters  –  Potential buyers who have raised their families and want to move into a smaller home.

• Encroachment – A condition that limits the interest in a title to property, such as a mortgage, deed restrictions, easements, unpaid taxes, etc…

• Endorser  –  A person who signs over ownership of a property to another property.

• Equity – The owner’s financial interest in a property, over and above any indebtedness for that property; or the difference between the fair market value of the property, and the amount still owed on its mortgage.

• Escrow – A deed, contract, or something of value deposited with a disinterested third party, to be delivered upon the performance of certain conditions by the parties involved; e.g., an attorney or escrow agent taking custody of funds and documents upon the closing of a sale of real estate.

• Escrow Analysis  –  A lender’s periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower’s monthly mortgage payment to pay for expenses such as property taxes and insurance.

• Eviction  –  A legal procedure to remove a tenant for certain reasons including failure to pay rent.

• Examination of Title  –  An inspection by a title company of public records and other documents to determine the chain of ownership of property.

• Exclusive Listing  –  A contract that gives a real estate agent the exclusive right to market a property for a specific period of time.

• Extended Mortgage – A mortgage in which the due date of payment is extended, and is usually charged at a higher interest rate than the original mortgage.

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F

• Fannie Mae – Nickname for Federal National Mortgage Corp. (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by or guaranteed by VA, as well as conventional home mortgages.

• Fair Market Value – The highest price that a buyer, who is willing but not required to buy, would pay for a piece of property or home, and the lowest price that a seller, who is willing but not required to sell, would accept

• Federal Housing Administration (FHA) – An agency of the U.S. Department of Housing and Urban Development (HUD), whose function is the insuring of residential mortgage loans made by private lenders; while setting standards for construction and underwriting, the FHA itself does not lend money, or construct housing.

• Feng Shui  –  An ancient Chinese belief that the physical characteristics of a house and the positioning of the home will affect the fortunes of the property owner.

• FHA Loan – A loan insured by the Federal Housing Administration, and made by an approved lender in accordance with the FHA’s regulations.

• Fiduciary Relationship – A relationship of trust and confidence, as between principal and agent, trustee and beneficiary, attorney and client.

• Financing Contingency – A contractually agreed upon time to settle your financing needs, which is usually two to three weeks from contract commencement. If you find you are unable to obtain financing during this time, you can back out of the contract without penalty.

• First Mortgage  –  The primary mortgage on a property that has priority over all other voluntary liens.

• Fixed-rate mortgage (FRM) – A mortgage in which the interest rate remains fixed over the duration of the term of the loan.

• Fixture  –  Personal property permanently attached to the house, such as drapery rods, toilets, built-in bookcases or a furnace.

• Flood Insurance  –  Hazard coverage that is required in designated flood areas.

• Forbearance  –  A course of action that a lender may pursue to delay foreclosure or legal action against a delinquent borrower.

• Foreclosure – A legal proceeding usually initiated by the lender or creditors, involving a forced sale of a property owned by a borrower who has defaulted on payment of, or on the terms of, a loan on said property, and whereby the borrower is deprived of his or her interest in the property.

• Freddie Mac – Nickname for Federal Home Loan Mortgage Corp. (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.

• Frontage  –  The portion of property that borders a roadway or body of water.

• Fully Amortized Adjustable-Rate Mortgage  –  A mortgage that amortizes, or pays down the balance of a loan.

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G

• General Warranty Deed – A deed in which the grantor warrants title against all claims, offering the greatest guarantee of protection of any type of deed, and which is used in most real estate deed transfers of title.

• Ginnie Mae – The Government National Mortgage Association (GNMA), a United States corporation that guarantees privately issued securities backed by pools of mortgages insured by the Federal Housing Administration, the Farmers Home Administration, or the Veterans Administration.

• Graduated-payment mortgage (GPM) – A flexible-payment mortgage with monthly principal and interest payments that increase by a certain percentage each year for a certain number of years, and then level off for the remainder of the term.

• Grantee – The person who, by written document, receives title or an interest in real property from a grantor.

• Grantor – The person who, by written document, transfers title to or an interest in real property to a grantee.

• Gross Lease – The most common of residential leases, whereby the landlord pays for all property expenses incurred through ownership, such as taxes, insurance, repairs, etc…

• Ground Lease – A long-term lease of land (usually 99 years) that allows the lessee to build and use the land as agreed in the lease, at the end of which, the land and any improvements revert to the owner.

• Ground Rent – The payment made for the use of land when the title to the property is of a leasehold estate, rather than as a fee simple estate.

• Growing-Equity Mortgage (GEM) – A fixed-rate loan for which the monthly payments increase over a designated period of time, with the increased amount of the monthly payment being applied directly to the principal balance, thereby shortening the term of the loan.

• Guarantee mortgage, or Insured Mortgage – A mortgage that is guaranteed against default by a third party (such as the FHA), and for which the borrower must pay an insurance premium.

• Guardian – An individual designated by the Court to protect and preserve the property of someone who is not able to manage his or her own affairs.

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H

• Hazard Insurance – Insurance protection for specified losses due to natural causes, such as fire, floods, earthquake, tornadoes, and other “acts of God”.

• Heir – An individual who will potentially inherit an interest in land from someone who dies.

• Hiatus – A gap or space between two parcels of lands that is not included in the legal description of either parcel.

• Home Equity Line of Credit, or Home Equity Loan – A mortgage loan (usually not the primary mortgage) or line of credit which gives the property owner the option to obtain cash advances from the loan proceeds, using his or her residence as collateral, but which is not to exceed a pre-arranged amount of the owner’s total equity in the property.

• Homeowners’ Association (HOA) – A nonprofit association of individual owners of units in a multi-unit structure (either a planned unit development, or a condominium) that manages the common areas of that structure. In a planned unit development (PUD) project, the association holds title to the common elements, whereas in a condominium project, it holds no title to the common elements.

• Homeowner’s Insurance – An insurance policy available to residential real estate owners that protects homeowners against financial loss from fire, theft, public liability, and other risks.

• Homestead – Real estate that is owned and utilized as the primary family residence, protected in some states as exempt from the claims of creditors.

• Homestead Deed – A document filed in the land records asserting a homestead exemption, protecting a variable amount of his assets (depending on which state) against the claims of creditors.

• Housing ratio, or Debt-to-Income Ratio – The percentage that results from dividing a borrower’s housing expenses by his/her gross monthly income, used by the lender to evaluate an applicant’s qualification for a loan.

• HUD-1 Statement – The document used in closing a real estate transaction (also known as a “closing statement” or a “settlement sheet”) which itemizes the funds that are payable at closing, including broker commissions, loan costs, and escrow amounts, and which provides a summary of the seller’s net proceeds and the buyer’s net payment at closing. It is required by the US Department of Housing and Urban Development (HUD) whenever federally-related mortgages are being made on residential properties.

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I

• Impound, or Reserves – The portion of a borrower’s monthly payments held by the lender to pay for taxes, hazard and mortgage insurance, lease payments, and other items that will come due.

• In testate – The condition of dying without leaving a will. The description of an estate without a will.

• Income Approach – The method of estimating the value of a property by calculating its generated income.

• Income Property – Real estate developed for the purpose of generating income.

• Indemnify – To provide for compensation in the case of loss or damage to property.

• Indemnity – The statement of terms under which loss or damage to property will be compensated.

• Index – A published interest rate used by lenders to compare the interest rate for an adjustable-rate mortgage (ARM) with that earned by other investments (e.g., the yield on Treasury bills, interest rate on loans from savings and loans institution, etc.), as a result of which the ARM interest rate is adjusted.

• Ingress – The right to enter on or over a piece of property.

• Installment Contract, or Contract for Deed – A contract for the sale of real estate whereby the buyer is in possession of the property while paying off the purchase price in periodic installments, despite the title being retained by the seller until the future date of final payment..

• Installment Debts – Long-term debts that usually extend for more than one month.

• Insurable Title – A property title which an insurance company is willing to insure against possible claim.

• Insured Closing Letter – An indemnity provided by a title insurance company to a lender, whereby the title insurance company assumes responsibility in the case that the closing agent does not fulfill the terms of the loan, or misappropriates the loan proceeds.

• Insured Mortgage – A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI) so that if the borrower defaults on the loan, the insurer compensates the lender the lesser of the loss incurred or the actual insured amount.

• Interest Rate Buydown Plan – An arrangement made for the initial years of a mortgage whereby the seller (or any other party) deposits money into an account that is then released toward the monthly payments on the mortgage, thereby bringing the mortgagor’s interest rate down below the actual interest rate.

• Interest Rate Ceiling – The maximum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage note.

• Interest Rate Floor – The minimum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage note.

• Interim Financing – A temporary or short-term loan, often made during the construction phase of a building project, and usually replaced by a permanent long-term mortgage.

• Investor – The holder of a mortgage or the permanent lender for whom the mortgage maker services the loan. Any person or institution that invests in mortgages.

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J

• Joint Ownership Agreement – An agreement made between two or more owners of the same property, defining their rights and responsibilities (e.g. recommended in the case of married owners of property).

• Joint tenancy, or Tenants By The Entirety – Ownership of real estate by two or more parties held jointly for life; if one of the owners dies, the survivor(s) inherit the property without reference to the deceased’s will.

• Judgment – A decision or decree made by a court of law.

• Judgment Lien – A claim against the real property of a debtor, as decreed by the court.

• Jumbo Loan or Non-Conforming Loan – A loan amount that exceeds the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation; because such loan cannot be funded by these two agencies, it carries a higher interest rate.

• Junior Mortgage, or Secondary Mortgage – A mortgage whose claim to repayment is of lesser priority than another, previously recorded mortgage.

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L

• Lease – A written agreement between the property owner and a tenant that stipulates rent to be paid, as well as the terms under which the tenant may reside in the real estate for a designated period of time.

• Lease Option – A lease that gives the tenant the right to purchase the property, either during the lease term or at its end.

• Lease Purchase Agreement – Buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.

• Leasehold Estate – The tenant’s right to title to a property for a specific period of time whereby the tenant does not actually own the property but has a long-term lease on it.

• Lender’s Title Insurance – An insurance policy covering a lender for the loan amount, whereby the coverage declines in amount as the loan is paid off, to the point where there coverage ends when the loan is paid completely.

• Lessee – The individual or party who takes property upon a lease.

• Lessor – The individual or party who grants property upon a lease.

• Liabilities – An individual’s financial obligations.

• Lien – A legal claim or charge allowed to a creditor against a debtor’s property that must be paid when the property is sold to transfer title.

• Life Estate – The right to use, occupy and own, for the duration of the life of the individual.

• Lifetime Payment Cap, or Lifetime Rate Cap – The limit on the amount that payments can increase or decrease over the term of an adjustable-rate mortgage (ARM).

• Liquid Asset – Cash, or an asset that can be readily converted into cash.

• Liquidated Damages – The compensation predetermined by both parties to a contract to be paid to the injured party, should the other party breach the contract.

• Lis Pendens – A legal document filed in either a federal or state court indicating that a suit is pending against property located in the county where the notice is recorded.

• Listing Agreement – A contract by which a broker is employed by the seller to find a buyer for the seller’s real estate, according to the seller’s terms, and for which service, the broker is paid a commission.

• Listing Broker – A broker whose office initiates the property listing (as opposed to the cooperating broker, whose office negotiates the sale); the listing broker and the cooperating broker may be the same person.

• Loan Origination – The process by which a lender sets up a mortgage loan secured by real property.

• Loan origination Fee – The fee charged by the lender to the borrower for setting up a mortgage loan, usually computed as a percentage of the total mortgage amount.

• Loan-to-Value (LTV) Percentage – The proportion of the amount of the mortgage loan against the appraised value or sales price of the piece of property being pledged as collateral; e.g., a home with appraised value of $100,000 but with a $90,000 mortgage has a LTC of 90 percent.

• Lock-In – A guaranteed interest rate established at the time of closing which is honored if the mortgage closes within a certain period of time, also usually establishing the number of points to be paid at closing as well.

• Lock-In Period – The time period during which the set interest rate is guaranteed to the borrower. Lock in periods vary.

• Loss Payable Clause – A provision in an insurance policy that provides payment for any loss to two or more parties, as their interest so justifies, the two parties typically being the owner and the lender.

• Lot – A parcel of land with fixed boundaries as determined by a survey.

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M

• Majority – The age at which an individual is legally entitled to handle his or her own affairs.

• Margin – The amount added to the index on an adjustable-rate mortgage (ARM) that establishes the adjusted interest rate at a given time.

• Market Value, or Fair Market Value – The most likely price that a piece of property or home can realistically be sold for, and is dependent on the selling price of similar real estate in the area.

• Marketable Title – A clear, unencumbered title, reasonably acceptable without the threat of the risk of litigation.

• Maturity – The date on which the principal balance of a loan, bond, or other financial commitment is due and payable.

• Mechanic’s Lien – A lien created by statute to allow unpaid contractors, laborers or suppliers who have performed work on or furnished materials for the construction of a building to recover the value of their work.

• Metes and Bounds – Means for describing property by a set of directions and distances, when there isn’t identification based on a surveyed lot number.

• Minor – An individual below the age at which he or she is legally entitled to handle his or her own affairs.

• Monument of Survey – The indications made on natural or man-made objects that indicate the boundaries of a survey.

• Mortgage – A legal document that pledges a property to the lender as security for the payment of a loan or debt.

• Mortgage Broker – An individual or company that acts as an agent between borrowers and lenders for the purpose of arranging and negotiating mortgage contracts; who is paid a fee for such service.

• Mortgage Insurance – A contract that guarantees the lender against loss caused by a mortgagor’s default on a government or conventional mortgage; such insurance can be issued by a private company or by a government agency, and covers either only a percentage, or the total, of the mortgage loan.

• Mortgagee – The lender of money in a mortgage transaction.

• Mortgagor – The borrower of money in a mortgage transaction.

• Multiple-listing service (MLS) – An organization of brokers who share their listing agreements with one another in order to find buyers for their properties more effectively than they could individually.

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N

• National Association of Realtors® (NAR) – A real estate trade organization that sets the standards for integrity and honesty within the real estate profession nationwide.

• Negative Amortization – A gradual increase in the balance of a loan or mortgage which occurs because the monthly payments made are too small to cover the entire principal and interest charges; this shortfall amount is added to the remaining balance, resulting in negative amortization.

• Net Listing – The advertisement of the price of property for sale in terms of the net price the seller will receive, once the property is sold, a type of listing which is illegal in many states.

• Net Worth – The total value of all of an individual’s assets, minus all liabilities or debts.

• No Cash-Out Refinance – A transaction for refinancing a mortgage in which the new mortgage amount is limited to the sum total of the remaining balance of the first mortgage, points, closing costs, whatever is required to satisfy any liens that are more than one year old and other funds for the borrower’s use (as long as the amount is one percent or less of the principal amount of the new mortgage).

• Notary – An individual authorized by law to certify documents and signatures.

• Note – A legal document that obligates a borrower to repay a loan or owed sum of money at a stated interest rate over a designated period of time. A written promise to pay a certain amount of money.

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• Open Listing – A contract under which the broker is commissioned to find a buyer before the property is sold by the seller or another competing broker.

• Option – The agreement to keep an offer to purchase or lease open for a specific period of time.

• Option Period The amount of time negotiated in the contract in which the buyer can cancel the contract for any reason. Typically, the option period is 10 days, and the buyer pays a nominal fee (e.g. $100) for the right to cancel. This is usually the time period when a potential buyer has the home inspections performed by a licensed home inspector.

• Option Listing – An agreement by which the broker advertising the property has the right to purchase the listed property himself.

• Origination Fee – A fee paid to the lender for the evaluation, preparation/processing, and submission a loan application.

• Owner Financing – A property transaction for which the seller provides all or part of the financing to the buyer.

• Owner’s Title Insurance – A policy insuring the full purchase price of a piece of property for the buyer, usually including adjustments for inflation each year up to a maximum of 150% of the original policy amount, the premium for which is payable at the time of closing.

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P

• P.M.I, or Private Mortgage Insurance – Acronym for Private Mortgage Insurance, see below.

• Partial Payment – A payment that is less than the agreed upon monthly payment on a loan.

• Partition – The forced dividing of real estate among parties who were previously its co-owners.

• Patent – A first in a series of documents by which the federal or state government transfers ownership of public lands to an individual.

• Pay-Off Amount – The total balance on an existing loan or mortgage.

• Percolation Test – A testing of the soil on a property to evaluate if its absorption and drainage capacity will allow installation of a septic system.

• Personal Property – Property that does not qualify as real property.

• PITI – Acronym for principal, interest, taxes and insurance, the four components of a monthly mortgage payment, which are taken into account when a lender is evaluating a borrower’s financial qualifications for a loan.

• Plat, or Plot – A map showing a piece of land subdivided into lots, streets and common area, if applicable.

• Point – A one-time fee charged by the lender for originating a loan, one point being equal to one percent of the amount of the mortgage.

• Power of Attorney – A written legal document authorizing a person to act as agent for another, to the extent outlined in the document.

• Power of Sale – A provision in a will, mortgage or trust agreement authorizing the sale or transfer of land in accordance with the terms of the provision.

• Pre-Approval – A commitment from a lender to loan a certain amount of money to a buyer at a designated interest rate and for a specified period of time, which gives the buyer an advantage in competing to purchase real estate or a home.

• Pre-Foreclosure Sale – The sale of a property by a mortgagor for less than the amount owed to the lender of the mortgage for the property, thereby allowing the mortgagor to avoid foreclosure, and done with the approval of the lender.

• Prepayment Penalty – A fee that is charged by the lender to a borrower who pays off a loan earlier than the due date, thereby costing the lender interest and other income from charges.

• Pre-Qualification – The process by which the amount of loan a prospective buyer will be eligible to borrow is determined, based on his or her income and expenses, which can be used to demonstrate the buyer’s financial capability to the seller.

• Prime Rate – The most favorable interest rate that banks charge, usually to their preferred customers.

• Principal – The amount borrowed, not including interest or other charges.

• Principal Balance – The portion of the original amount borrowed that is due on a loan or mortgage at any point in time.

• Private mortgage insurance, or P.M.I. – A policy that insures that the lender will recover a specific percentage of the loan amount from the insurance company in the event that the borrower defaults; is not backed by any government agency; is usually required when a down payment of less than 20% is put on real estate or a home purchased.

• Probate – The court proceedings to prove that a will is valid.

• Procuring Cause – The action or person who brings about the desired result; e.g., under an open listing, the broker who brings in the buyer who actually purchases the property.

• Promissory Note – A written promise to pay a specified amount of money in a designated period of time, which is also transferable to a third party.

• Prorate – To divide the proportionate share of existing expenses on a piece of property between the seller and buyer, e.g., taxes owed at the time of a transfer of title from the seller to the buyer.

• Purchase and Sale Agreement – A written contract signed by the buyer and seller that states the conditions under which a property will be transferred or sold.

• Purchase Money Mortgage – An agreement whereby financing provided by the seller is included in the purchase price.

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Q

• Quiet Title – A court action to remove a claims or objections of other parties on a title.

• Quitclaim Deed – A deed that releases whatever interest or title a grantor may hold in a property, without claiming any obligations or warranties.

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R

• Radon – A colorless, odorless gas formed by the breakdown of uranium in subsoils. It can enter a house through cracks in the foundation or in water and is considered to be a health hazard.

• REALTOR and REALTOR-Associate – Registered collective membership marks that identity real estate professionals who are members of the National Association of REALTORS and who subscribe to its strict code of ethics.

• Rent with Option – A contract which gives one the right to lease property at a certain sum with the option to purchase at a later date.

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• Savings and Loan Association (S&Ls) – Depository institutions that specialize in originating, servicing, and holding mortgage loans primarily on owner-occupied residential property.

• Savings Bank – A financial institution organized to hold individual depositors’ funds in interest-bearing accounts and to make long-term investments, such as home mortgage loans.

• Severalty Ownership – Ownership by one person only; sole ownership.

• Shared-Equity Mortgage – A home loan in which an investor is granted a share of the equity, thereby allowing the investor to participate in the proceeds from resale.

• Survey – The process by which a parcel of land is measured and its area ascertained.

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• Tax Sale – A sale of real property ordered by the court in order to raise money to cover delinquent taxes.

• Tenancy In Common – A version of joint tenancy of a property, but without any right of succession by survivor-ship among the owners.

• Testate – To die having prepared and left a valid will.

• Testator – The individual who makes out a last will and testament.

• Time Is Of The Essence – A condition in a contract requiring the completion of a certain act within a designated period of time.

• Time-Share – A form of ownership interest which allows use of the property only for a fixed or variable period of time.

• Title – A legal document that evidences a person’s ownership of and right to possess a property.

• Title Insurance – Insurance that protects the owner or mortgagee against loss arising from disputes over or defects in the title to a parcel of real estate that arise after ownership has been transferred.

• Title Search – Research into public title records to determine the current status of ownership of a piece of property; a licensed attorney must provide any legal interpretation of the records found.

• Torrens Title – Now a dated system (only used in a few US states) whereby the court issues a certificate establishing the extent of an individual’s estate, including any exceptions noted.

• Township – A division of land that is six miles square, containing 36 square-mile sections.

• Tract – A specific parcel of land.

• Transfer of Ownership – Any circumstance in which the ownership of a property changes hands, e.g., via outright, titled purchase, or the assumption of an existing on a property, or possession of the property via a land sales trust, even any transfer of a beneficial interest in the trust.

• Transfer Tax – State or local taxes imposed on a transfer of ownership of real property.

• Trust – A right to a piece of property that is held for the benefit of another.

• Trust Deed, Or A Deed of Trust – A written document that grants the trustee the title to a piece of property for the benefit of another, and which gives the trustee the power to sell, mortgage or subdivide the property.

• Trustee – A party who holds property for the benefit of another.

• Trustor – The borrower in a trust loan transaction.

• Two-Step Mortgage – An adjustable-rate mortgage that charges a below-market interest rate for a designated number of years (usually 5 or 7) after which the interest rate is adjusted to the current market conditions.

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• Underwriting – The process of analyzing a borrower’s capability to honor repayment of a loan (evaluating his or her credit, assets, employment) along with the value of the property being purchased, to help minimize the risk involved for the party lending the purchase money.

• Unilateral Contract – A one-sided contract in which only one party is legally under obligation by the terms of the contract; one party promises an action to the second party, who is not legally required to respond, but if the second part does comply, then the first party is obligated to honor the promise made.

• Unsecured Loan – A loan that is not guaranteed by collateral.

• Usury – The act of charging more than the maximum rate of interest permitted by law.

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• VA Guarantee – An insurance contract for which the Veterans Administration (VA) guarantees the lender’s recovery of a designated percentage of the loan amount from the insurer in the event that the borrower defaults on the loan.

• VA loan, or Government Mortgage – A mortgage loan available to qualified military veterans which is guaranteed by the Department of Veteran Affairs, usually offering either no down payment or a low down payment.

• Valuation – The estimated of value of a property.

• Variable Rate Mortgage, or Adjusted Rate Mortgage – A mortgage with interest rates that may fluctuate based on market conditions.

• Variance – A special suspension of zoning laws to allow the use of property in a manner not in accord with existing laws.

• Verification of Deposit – A statement signed by the borrower’s financial institution that verifies the current balances in the borrower’s accounts.

• Verification of Employment – A statement signed by the borrower’s employer that verifies the borrower’s current position and salary.

• Vest – To pass an immediate right on to a person.

• Vested – Having the right to withdraw a percentage of a fund before its agreed-upon maturity date; e.g., the percentage vested to individuals with retirement funds differs; if someone is 80% vested, that means they can only withdraw 80% of the funds set aside for them until its maturity.

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W

• Waiver – The relinquishing of a right

• Warranty – A guarantee provided to the purchases regarding the quality of appliances or fixtures sold Also a promise by the grantor of a piece of property that he or she is responsible to the buyer if the title of ownership is defect in any way

• Warranty Deed – A document conveying ownership of a property that guarantees a clear, clean title

• Will – A written document stating how an individual chooses to have his or her property distributed after his or her death

• Wraparound Loan or Wraparound Mortgage – A method of refinancing which covers the remaining balance on an existing first mortgage as well as the additional amount of loan being requested by the mortgagor; full payments covering both mortgages are made to the Wraparound mortgagee, who then forwards on the portion of payment due to the first mortgagee.

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Z

• Zoning – The regulation by local government of the use and development of private land.

 

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