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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
This glossary is for informational purposes only and should not be
used without legal counsel for the purpose of
reading/understanding a contract.
- Abandonment
- The voluntary relinquishment of rights of
ownership or another form of interest (an easement) by
failure to use the property over an extended period of time.
- ABR
- The Accredited Buyer Representative
designation idicates a real estate agent specializing in
representating buyers in the real estate transaction.
- Abstract (Of Title)
- A summary of the public records relating to
the title to a particular piece of land. An attorney or
title insurance company reviews an abstract of title to
determine whether there are any title defects which must be
cleared before a buyer can purchase clear, marketable, and
insurable title.
- Acceleration Clause
- Condition in a mortgage that may require
the balance of the loan to become due immediately, if
regular mortgage payments are not made or for breach of
other conditions of the mortgage.
- Acre
- A measure of land, equal to 160 sq. rods
(43,560 sq.ft.). An acre is approximately 209' x 209'.
- Acknowledgment
- A formal declaration before an authorized
official (usually a notary public) by a person who has
executed a document, that he did in fact execute (sign) the
document
- Addendum
- Something added. A list or other items
added to a document, letter, contract, escrow instructions,
etc.
- Adverse Possession
- A method of acquiring title by open and
notorious possession usually vary with each state.
- Agent
- Acts of behalf of another, representing
that person's interests and serving as an intermediary.
- Agreement of Sale
- Known by various names, such as contract of
purchase, purchase agreement, or sales agreement according
to location or jurisdiction. A contract in which a seller
agrees to sell and a buyer agrees to buy, under certain
specific terms and conditions spelled out in writing and
signed by both parties.
- Alienation Clause
- A clause within a loan instrument calling
for a debt in its entirety upon the transfer of ownership of
the secured property. Also called a "due on sale"
clause.
- Amortization
- A payment plan which enables the borrower
to reduce his debt gradually through monthly payments of
principal.
- Appraisal
- An expert judgment or estimate of the
quality or value of real estate as of a given date.
- Assessed Value
- Value placed on property by the tax
assessor.
- Assignment
- A transfer or making over to another the
whole of any property, real or personal, or of any estate or
right therein. To assign is to transfer.
- Assumption of Mortgage
- An obligation undertaken by the purchaser
of property to be personally liable for payment of an
existing mortgage. In an assumption, the purchaser is
substituted for the original mortgagor in the mortgage
instrument and the original mortgagor is to be released from
further liability in the assumption, the mortgagee's consent
is usually required
- Attachment
- Seizure of property by court order, usually
done in pending law suit to make property available in case
of judgment.
- Balloon Payment
- The final installment paid at the end of
the term of a note; used only when preceding installments
were not sufficient to pay off the note in full.
- Bill of Sale
- An instrument used to transfer personal
property
- Binder or "Offer to
Purchase"
- A preliminary agreement, secured by the
payment of earnest money, between a buyer and seller as an
offer to purchase real estate. A binder secures the right to
purchase real estate upon agreed terms for a limited period
of time. If the buyer changes his mind or is unable to
purchase, the earnest money is forfeited unless the binder
expressly provides that it is to be refunded.
- Blanket Mortgage (Trust Deed)
- A single mortgage or trust deed which
covers more than one piece of real estate
- Bond
- An insurance agreement by which one party
is insured against loss or default by a third party. In the
construction business a performance bond ensures the
interested party that the contractor will complete the
project. A bond can also be a method of financing debt by a
government or corporation which is interest-bearing and has
priority over stock in terms of security.
- Breach
- Violation of an obligation in a contract
- Broker, Real Estate
- An agent licensed by the state to carry on
the business of operating in real estate. He usually
receives a commission for his services of bringing together
buyers and sellers, owners and tenants, in exchange
agreements.
- Building Code
- A set of stringent laws that control the
construction of buildings, design, materials and other
similar factors
- Building Line or Setback
- Distances from the ends and/or sides of the
lot beyond which construction may not extend. The building
line may be established by a filed plat of subdivision, by
restrictive covenants in deeds or leases, by building codes,
or by zoning ordinances.
- Built-Ins
- Items that are not movable, such a stoves,
ovens, microwave ovens, dishwashers.
- Buyers Market
- A market condition which occurs in real
estate where more homes are for sale than there are
interested buyers
- Capital Gains
- A term used for income tax purposes which
represents the gain realized from the sale of an asset less
the purchase price and deductible expense.
- Capitalization
- An appraising term used in determining
value by considering net operating income and a percentage
of reasonable return on investment.
- Cash Flow
- The owner's spendable income after
operating expenses and debt service is deducted
- Certificate of Title
- A certificate issued by a title company or
a written opinion rendered by an attorney that the seller
has good marketable and insurable title to the property
which he is offering for sale. A certificate of title offers
no protection against any hidden defects in the title which
an examination of the records could not reveal. The issuer
of a certificate of title is liable only for damages due to
negligence. The protection offered a homeowner under a
certificate of title is not as great as that offered in a
title insurance policy.
- Chain Of Title
- A history of conveyances and encumbrances
affecting the title as far back as records are available
- Client
- One who employs another's services, as in
an attorney, real estate agent, insurance agent, etc.
- Closing
- In the sale of real estate it is the final
moment when all documents are executed and recorded and the
sale is complete. Also a general selling term where a sales
person is attempting to sell something and the buyer agrees
to purchase
- Closing Costs
- The numerous expenses which buyers and
sellers normally incur to complete a transaction in the
transfer of ownership of real estate. These costs are in
addition to price of the property and are items prepaid at
the closing day.
- Closing Statement
- A list of the final accounting of all
Moines of both buyer and seller prepared by an escrow agent
which notes all costs each must pay at the completion of a
real estate transaction.
- Cloud (On Title)
- An outstanding claim or encumbrance which
adversely affects the marketability of title.
- Commission
- Money paid to a real estate agent or broker
by the seller as compensation for finding a buyer and
completing the sale. Usually it is a percentage of the sale
price- - 6 to 7 percent on houses, 10 percent on land.
- Common Area
- That area owned in common by owners of
condominiums and planned sight development homes within a
subdivision.
- Community Property
- Both real and personal property accumulated
by a husband and wife after marriage through joint efforts
of both living together.
- Condemnation
- A declaration by governing powers that a
structure is unfit for use.
- Conditional Sales Contract
- A contract for the sale of property where
the buyer has possession and use, but the seller retains
title until the conditions of the contract have been
fulfilled. Also known as a land contract.
- Condominium
- Individual ownership of a dwelling unit and
an individual interest in the common areas and facilities
which serve the multi- unit project.
- Consideration
- Anything of value given to induce someone
into entering into a contract.
- Construction Loan
- The short-term financing of improvements on
real estate. Once the improvements are completed a 'take
out' loan for a longer term is usually issued.
- Contingency
- A condition upon which a valid contract is
dependent. For example; the sale of a house is contingent
upon the buyer obtaining adequate financing.
- Contract
- An agreement between tow or more parties,
written or oral, to do or not to do certain things.
- Contractor
- In the construction industry, a contractor
is one who contracts to erect buildings or portions of them.
There are also contractors for each phase of construction:
heating, electrical, plumbing, air conditioning, road
building, bridge and dam erection, and others.
- Conventional Mortgage
- A mortgage loan not insured by HUD or
guaranteed by the Veterans' Administration. It is subject to
conditions established by the lending institution and State
statutes. The mortgage rates may vary with different
institutions and between States. (States have various
interest limits.)
- Conveyance
- The transfer of the title to land from one
to another.
- Counter Offer
- An offer in response to an offer. 'A'
offers to by 'B's' house for $20,000 which is listed for
$22,000. 'B' counter offers 'A's' offer by stating that he
will sell the house to 'A" for $21,000. The $21,000 is
the counter offer.
- Covenants
- Agreements written into deeds and other
instruments stating performance or non-performance of
certain acts or noting certain uses or non-uses of property.
- Deed
- A formal written instrument by which title
to real property is transferred from one owner to another.
The deed should contain an accurate description of the
property being conveyed, should be signed and witnessed
according to the laws of the State where the property is
located, and should be delivered to the purchaser at closing
day. There are two parties to a deed: the grantor and the
grantee. (See also deed of trust, general warranty deed,
quitclaim deed, and special warranty deed.)
- Default
- Failure to make mortgage payments as agreed
to in a commitment based on the terms and at the designated
time set forth in the mortgage or deed of trust. It is the
mortgagor's responsibility to remember the due date and send
the payment prior to the due date, not after. Generally,
thirty days after the due date if payment is not received,
the mortgage is in default. In the event of default, the
mortgage may give the lender the right to accelerate
payments, take possession and receive rents, and start
foreclosure. Defaults may also come about by the failure to
observe other conditions in the mortgage or deed of trust.
- Depreciation
- Decline in value of a house due to wear and
tear, adverse changes in the neighborhood, or any other
reason.
- Documentary Stamps
- A State tax, in the forms of stamps,
required on deeds and mortgages when real estate title
passes from one owner to another. The amount of stamps
required varies with each State.
- Down Payment
- The amount of money to be paid by the
purchaser to the seller upon the signing of the agreement of
sale.
- Earnest Money
- The deposit money given to the seller or his agent by the
potential buyer upon the signing of the agreement of sale to
show that he is serious about buying the house. If the sale
goes through, the earnest money is applied against the
downpayment. If the sale does not go through, the earnest
money will be forfeited or lost unless the binder or offer
to purchase expressly provides that it is refundable.
- Easement Rights
- A right- of- way granted to a person or company
authorizing access to or over the owner's land. An electric
company obtaining a right- of- way across private property
is a common example.
- Economic Obsolescence
- Loss of useful life and desirability of a property through
economic forces, such as change in zoning, changes in
traffic flow, etc., rather than deterioration.
- Encroachment
- An obstruction, building, or part of a building that
intrudes beyond a legal boundary onto neighboring private or
public land, or a building extending beyond the building
line.
- Encumbrance
- A legal right or interest in land that affects a good or
clear title, and diminishes the land's value. It can take
numerous forms, such as zoning ordinances, easement rights,
claims, mortgages, liens, charges, a pending legal action,
unpaid taxes, or restrictive covenants. An encumbrance does
not legally prevent transfer of the property to another. A
title search is all that is usually done to reveal the
existence of such encumbrances, and it is up to the buyer to
determine whether he wants to purchase with the encumbrance,
or what can be done to remove it.
- Equity
- The value of a homeowner's unencumbered interest in real
estate. Equity is computed by subtracting from the
property's fair market value the total of the unpaid
mortgage balance and any outstanding liens or other debts
against the property. A homeowner's equity increases as he
pays off his mortgage or as the property appreciates in
value. When the mortgage and all other debts against the
property are paid in full the homeowner has 100% equity in
his property.
- Escalation Clause
- A clause in a lease providing for an increased rent at a
future time due to increased costs to lessor, as in cost of
living index, tax increases, etc.
- Escheat
- The reverting of property to the state in the absence of
heirs.
- Escrow
- Funds paid by one party to another (the escrow agent) to
hold until the occurrence of a specified event, after which
the funds are released to a designated individual. In FHA
mortgage transactions an escrow account usually refers to
the funds a mortgagor pays the lender at the time of the
periodic mortgage payments. The money is held in a trust
fund, provided by the lender for the buyer. Such funds
should be adequate to cover yearly anticipated expenditures
for mortgage insurance premiums, taxes, hazard insurance
premiums, and special assessments.
- Estate
- The ownership interest of a person in real property. Is
also used to refer to a deceased person's property. And
often used to describe a large home with spacious grounds
- Fair Market Value
- That price a property will bring given that both buyer and
seller are fully aware of market conditions and comparable
properties.
- Fee Simple
- Ownership of title to property without any limitation,
which can be sold, left at will, or inherited.
- Fixtures
- Items affixed to buildings or land usually in such a way
that they cannot be moved without damage to themselves or
the property, such as plumbing, electrical fixtures, trees,
etc.
- Foreclosure
- A legal term applied to any of the various methods of
enforcing payment of the debt secured by a mortgage, or deed
of trust, by taking and selling the mortgaged property, and
depriving the mortgagor of possession.
- Front Footage
- The linear measurement along the front of a parcel. That
portion of the parcel which fronts the street or walkway.
- Functional Obsolescence
- Loss in value due to out-of-date or poorly designed
equipment while newer equipment and structures have been
invented since it's construction.
- General Warranty Deed
- A deed which conveys not only all the grantor's interests
in and title to the property to the grantee, but also
warrants that if the title is defective or has a
"cloud" on it (such as mortgage claims, tax liens,
title claims, judgments, or mechanic's liens against it) the
grantee may hold the grantor liable.
- Grantee
- That party in the deed who is the buyer or recipient.
- Grantor
- That party in the deed who is the seller or giver.
- Ground Lease
- A lease of vacant land
- Hazard Insurance
- Protects against damages caused to property by fire,
windstorms, and other common hazards.
- Home Owners Association
- An association of homeowners within a community formed to
improve and maintain the quality of the community. An
association formed by the developer of condominiums or
planned developments.
- HUD
- U.S. Department of Housing and Urban Development. Office
of Housing/Federal Housing Administration within HUD insures
home mortgage loans made by lenders and sets minimum
standards for such homes.
- Interest
- A charge paid for borrowing money. (See mortgage note)
- Involuntary Lien
- A lien which attaches to property without the consent of
the owner such as tax liens as opposed to voluntary liens
(mortgages).
- Joint Tenancy
- Joint ownership by two or more persons with right of
survivorship. Upon the death of a joint tenant, his/her
interest does not go to his/her heirs, but to the remaining
joint tenants.
- Lease
- A contract between the owner of real property, called the
lessor, and another person referred to as the lessee,
covering all conditions by which the lessee may occupy and
use the property.
- Lease With Option To Purchase
- A lease where the lessee has the option to purchase the
leased property. The terms of the purchase option must be
set forth in the lease.
- Legal Description
- The geographical identification of a parcel of land
- Lessee
- One who contracts to rent property under a specified
lease>
- Lessor
- An owner who contracts into a lease with a tenant
(lessee).
- Lien
- A claim by one person on the property of another as
security for money owed. Such claims may include obligations
not met or satisfied, judgments, unpaid taxes, materials, or
labor. (See also special lien.)
- Life Estate
- A estate in real property for the life of a person
- Listing
- A contract between owner and broker to sell the owner's
property
- Marketable Title
- A title that is free and clear of objectionable liens,
clouds, or other title defects. A title which enables an
owner to sell his property freely to others and which others
will accept without objection.
- Mechanic's Lien
- A lien created by statute on a specific property for labor
or materials contributed to an improvement on that property.
- Mortgage
- A lien or claim against real property given by the buyer
to the lender as security for money borrowed. Under
government- insured or loan- guarantee provisions, the
payments may include escrow amounts covering taxes, hazard
insurance, water charges, and special assessments. Mortgages
generally run from 10 to 30 years, during which the loan is
to be paid off.
- Mortgage Commitment
- A written notice from the bank or other lending
institution saying it will advance mortgage funds in a
specified amount to enable a buyer to purchase a house.
- Mortgage Insurance Premium
- The payment made by a borrower to the lender for
transmittal to HUD to help defray the cost of the FHA
mortgage insurance program and to provide a reserve fund to
protect lenders against loss in insured mortgage
transactions. In FHA insured mortgages this represents an
annual rate of one- half of one percent paid by the
mortgagor on a monthly basis.
- Mortgage Note
- A written agreement to repay a loan. The agreement is
secured by a mortgage, serves as proof of an indebtedness,
and states the manner in which it shall be paid. The note
states the actual amount of the debt that the mortgage
secures and renders the mortgagor personally responsible for
repayment.
- Mortgage (Open- End)
- A mortgage with a provision that permits borrowing
additional money in the future without refinancing the loan
or paying additional financing charges. Open- end provisions
often limit such borrowing to no more than would raise the
balance to the original loan figure.
- Mortgagee
- The lender in a mortgage agreement.
- Mortgagor
- The borrower in a mortgage agreement.
- Multiple Listing
- A listing taken by a member of an organization of brokers,
whereby all members have an opportunity to find a buyer.
- Negative Amortization
- When monthly payments are not enough to cover interests
costs, they are added to the principal balance, and you may
end up owing more than when you started. This is most likely
to occur with ARMs that have
payment caps.
- Notary Public
- One who is authorized by federal or local government to
attest authentic signatures and administer oaths.
- Note
- A written instrument acknowledging a debt and promising
payment
- Offer
- A presentation to form a contract or agreement.
- Option
- A right given, for consideration, to purchase or lease
property upon stipulated terms within a specific period of
time
- Origination Fee
- Application fee(s) for processing a proposed mortgage.
- Plat
- A map or chart of a lot, subdivision or community drawn by
a surveyor showing boundary lines, buildings, improvements
on the land, and easements.
- P.M.I. (Private Mortgage Insurance)
- Insurance which covers a portion of the first mortgage
allowing the lender to offer more lenient terms to a
borrower.
- Points
- Sometimes called "discount points." A point is
one percent of the amount of the mortgage loan. For example,
if a loan is for $25,000, one point is $250. Points are
charged by a lender to raise the yield on his loan at a time
when money is tight, interest rates are high, and there is a
legal limit to the interest rate that can be charged on a
mortgage. Buyers are prohibited from paying points on HUD or
Veterans' Administration guaranteed loans (sellers can pay,
however). On a conventional mortgage, points may be paid by
either buyer or seller or split between them.
- Prepayment
- Payment of mortgage loan, or part of it, before due date.
Mortgage agreements often restrict the right of prepayment
either by limiting the amount that can be prepaid in any one
year or charging a penalty for prepayment. The Federal
Housing Administration does not permit such restrictions in
FHA insured mortgages.
- Prepayment Penalty
- A penalty within a note, mortgage, or deed of trust
imposing a penalty if the debt is paid in full before the
end of its terms.
- Principal
- The basic element of the loan as distinguished from
interest and mortgage insurance premium. In other words,
principal is the amount upon which interest is paid.
- Purchase Agreement
- An agreement between buyer and seller denoting price and
terms of the sale.
- Real Estate Agent
- a licensed person who works under the direction of a
broker selling and renting real estate.
- Real Estate Broker
- A middle man or agent who buys and sells real estate for a
company, firm, or individual on a commission basis. The
broker does not have title to the property, but generally
represents the owner.
- Realtor
- A real estate broker holding membership with the National
Association of Realtors.
- Refinancing
- The process of the same mortgagor paying off one loan with
the proceeds from another loan.
- Restrictive Covenants
- Private restrictions limiting the use of real property.
Restrictive covenants are created by deed and may "run
with the land," binding all subsequent purchasers of
the land, or may be "personal" and binding only
between the original seller and buyer. The determination
whether a covenant runs with the land or is personal is
governed by the language of the covenant, the intent of the
parties, and the law in the State where the land is
situated. Restrictive covenants that run with the land are
encumbrances and may affect the value and marketability of
title. Restrictive covenants may limit the density of
buildings per acre, regulate size, style or price range of
buildings to be erected, or prevent particular businesses
from operating or minority groups from owning or occupying
homes in a given area. (This latter discriminatory covenant
is unconstitutional and has been declared unenforceable by
the U.S. Supreme Court.)
- Seller's Market
- More buyers than sellers.
- Special Assessments
- A special tax imposed on property, individual lots or all
property in the immediate area, for road construction,
sidewalks, sewers, street lights, etc.
- Special Lien
- A lien that binds a specified piece of property, unlike a
general lien, which is levied against all one's assets. It
creates a right to retain something of value belonging to
another person as compensation for labor, material, or money
expended in that person's behalf. In some localities it is
called "particular" lien or "specific"
lien. (See lien.)
- Special Warranty Deed
- A deed in which the grantor conveys title to the grantee
and agrees to protect the grantee against title defects or
claims asserted by the grantor and those persons whose right
to assert a claim against the title arose during the period
the grantor held title to the property. In a special
warranty deed the grantor guarantees to the grantee that he
has done nothing during the time he held title to the
property which has, or which might in the future, impair the
grantee's title.
- Survey
- A map or plat made by a licensed surveyor showing the
results of measuring the land with its elevations,
improvements, boundaries, and its relationship to
surrounding tracts of land. A survey is often required by
the lender to assure him that a building is actually sited
on the land according to its legal description.
- Tax
- As applied to real estate, an enforced charge imposed on
persons, property or income, to be used to support the
State. The governing body in turn utilizes the funds in the
best interest of the general public.
- Title
- As generally used, the rights of ownership and possession
of particular property. In real estate usage, title may
refer to the instruments or documents by which a right of
ownership is established (title documents), or it may refer
to the ownership interest one has in the real estate.
- Title Insurance
- Protects lenders or homeowners against loss of their
interest in property due to legal defects in title. Title
insurance may be issued to a "mortgagee's title
policy." Insurance benefits will be paid only to the
"named insured" in the title policy, so it is
important that an owner purchase an "owner's title
policy", if he desires the protection of title
insurance.
- Title Search or Examination
- A check of the title records, generally at the local
courthouse, to make sure the buyer is purchasing a house
from the legal owner and there are no liens, overdue special
assessments, or other claims or outstanding restrictive
covenants filed in the record, which would adversely affect
the marketability or value of title.
- Trustee
- A party who is given legal responsibility to hold property
in the best interest of or "for the benefit of"
another. The trustee is one placed in a position of
responsibility for another, a responsibility enforceable in
a court of law. (See deed of trust.)
- Variable Interest Rate
- A fluctuating interest rate which can go up or down
depending on the going market rate.
- Voluntary Lien
- A voluntary lien by the owner such as a mortgage, as
opposed to involuntary liens (taxes).
- Waive
- To relinquish, or abandon. To forego a right to enforce or
require anything.
- Wrap-Around Mortgage
- A second mortgage which is subordinate to but includes the
face value of the first mortgage.
- Zoning Ordinances
- The acts of an authorized local government establishing
building codes, and setting forth regulations for property
land usage.
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