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Real Estate Terms Glossary
A B C D E F G H I J K L M N O P
ABR
The Accredited Buyer Representative designation indicates a real estate agent specializing in representing buyers in the real estate transaction. The ABR is conferred by the Real Estate Buyer's Agent Council (REBAC).
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.
Acceptance
Refers to a legal term denoting acceptance of an offer. A buyer offers to buy and the seller accepts the offer
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, and escrow
instructions, etc.
Adverse Possession
Methods of acquiring title by open and notorious possession usually vary with each state.
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.
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.
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.
Assessment
The valuation of property for the purpose of levying a tax or the amount of the tax levied.
Assessor
One appointed to assess property for taxation.
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
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
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.
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.
Buyer-Broker
A real estate agent who specializes in representing the purchaser. Some agents who specialize In this area are referred to as Exclusive Buyers Agents and do not list properties. Most real estate agents throughout the USA who work with many of the more commonly known franchises do both,
list property and sell it as well. For clarification, have each agent detail out to you their position in
the transaction.
Buyers Market
A market condition that occurs in real estate where more homes is 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
CCIM
The highest designation of commercial specialists is the CCIM, Certified Commercial
Investment Member, conferred by the Commercial Investment Real Estate Institute of NAR.
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.
CMA- Comparative Market Analysis
A service normally provided by real estate agents prior to either listing a property or prior
to making an offer to purchase a property on the behalf of a purchaser. The true purpose of
a CMA is to establish to current estimated selling price of a property. This is accomplished
by researching both: the currently listed properties and the most recently sold properties,
in the same area, with as similar characteristics as the property in question. This information is
usually provided to the homeowner to help them establish a fair market selling price or it
may be given to a prospective purchaser to help guide them in a proper offer to make the owner.
Some real estate agents perform this service for free others may charge as much as $300
for this information. A lot depends on both who is doing the CMA and also how
detailed the information that is provided.
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.
Co-Op Housing
An apartment building or a group of dwellings owned by a corporation, the stockholders of
which are the residents of the dwellings. It is operated for their benefit by their elected board
of directors. In a cooperative, the corporation or association owns title to the real estate. A
resident purchases stock in the corporation, which entitles him to occupy a unit in the building
or property owned by the cooperative. While the resident does not own his unit, he has an
absolute right to occupy his unit for as long as he owns the stock.
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 two or more parties, written or oral, to do or not to do certain things.
Conveyance
The transfer of the title to land from one to another.
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 rate
limits.)
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.
CRP
The Certified Relocation Professional certification is conferred by the Employee Relocation
Council (E-R-C). The designation denotes relocation professionals who specialize in relocation
and who pass.
CRS
The Certified Residential Specialist designation, offered through NAR, denotes an agent who
specializes in residential real estate. Only about 3 percent of the members of NAR have earned
this designation.
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.
Down Payment
The amount of money to be paid by the purchaser to the seller upon the signing of the
agreement of sale. The agreement of sale will refer to the down payment amount and will
acknowledge receipt of the down-payment. The down-payment is the difference between the sales
price and maximum mortgage amount. The down-payment may not be refundable if the
purchaser fails to buy the property without good cause. If the purchaser wants the
down-payment to be refundable, he should insert a clause in the agreement of sale specifying
the conditions under which the deposit will be refunded, if the agreement does not already
contain such clause. If the seller cannot deliver good title, the agreement of sale usually
requires the seller to return the down-payment. and to pay interest and expenses incurred by
the purchaser.
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 down-payment. 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 lands
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.
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.
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
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.
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.
Fair Market Value
That price a property will bring given that both buyer and seller are fully aware of market
conditions and comparable properties.
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.
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.
Front Footage
The linear measurement along the front of a parcel. That portion of the parcel which fronts the
street or walkway.
FSBO-HOME:
For Sale by Owner, without the service of a professional realtor nor representation to buyers or sellers, which leaves both parties open to legal liability.
Functional Obsolescence
Loss in value due to out-of-date or poorly designed equipment while newer equipment and
structures have been invented since its 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 that is the buyer or recipient.
Grantor
That party in the deed that 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)
Intestate
A person who dies without made a will
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 interest does not go to his 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
Living Trust
A trust agreement, which the title to property and assets can be transferred into, thereby avoiding
probate. The Living Trust was the first of the Trusts. A Trust is created when a living person (the
Trustor) agrees to let someone (the Trustee) hold title to property for the benefit of someone
(the Beneficiary).
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.
Money Market Accounts
These are like a savings account usually offered through Securities Brokerage houses
and some banks, which usually pay higher interest rates, have check writing features,
along with a variety of other features. In most cases, a great place to put funds from
the closing of a real estate transaction. Check with a Mutual Funds Registered
Representative for details.
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.
Origination Fee
Application fee(s) for processing a proposed mortgage.
Option
A right given, for consideration, to purchase or lease property upon stipulated terms within a
specific period of time
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.
RAC
RAC Is The Nationwide Organization of Independent Appraisers Who Are Trained
Professionals In Relocation Appraising. Each member of RAC must: Have attended a minimum of 10 hours of relocation-related courses within the last three years. Provide at least three references from management level relocation clients. Provide three ERC or equivalent appraisal to demonstrate the member's understanding and ability to apply ERC appraisal guidelines, including forecasting.
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 in a real estate board affiliated 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.)
RREI
Residential Real Estate Inspector (RREI) or Commercial Real Estate Inspector (CREI) both
are members of the Foundation of Real Estate Appraisers (FREA).
Sales Agreement
See agreement of sale.
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.
Tenancy in Common
An undivided ownership in real estate by two or more persons. The interest need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exist.
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. In most cases Title
Companies and Escrow Companies are one in the same, both providing the same services.
It is simply a different name for the services, used in various parts of the country.
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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