Zoning
Procedure that classifies real property for a number of different uses: residential, commercial, industrial, etc. in accordance with a land-use plan.
Warranty deed
A deed in which the grantor guarantees that he or she is giving the grantee good title free of encumbrances. Considered to be the best deed a grantee can receive.
VA loan
Veterans Administration-backed mortgage. The VA, a federal agency, operates a loan guarantee program for honorably discharged veterans and widows of veterans who died of a service-related injury. Mortgages call for low or no down payment. Sometimes referred to as GI loan.
Variance
A permit granted as an exception to a zoning ordinance that allows a property owner to meet certain specified needs.
Value
Market value or present worth. To have value, a property must have utility, scarcity, effective demand, and transferability.
Valid contract
One that meets all requirements of law, is binding upon its parties, and is enforceable in a court of law.
Useful life
The period of time over which a commercial property can be depreciated for federal income-tax purposes. Also known as economic life.
Undivided interest
Ownership by two or more persons that gives each the right to use the entire property.
Trust deed
A document used in place of a mortgage in certain states; a third-party trustee, not the lender, holds the title to the property until the loan is paid out or defaulted. Also called a deed of trust.
Townhouse
Usually a two- or three-story dwelling with shared walls, or a living unit operating under the condominium or townhouse form of ownership.
Title search
A professional examination of public records to determine the chain of ownership of a particular piece of property and to note any liens, encumbrances, easements, restrictions, or other factors that might affect the title.
Title insurance
An insurance policy that protects against any losses incurred because of defects in the title not listed in the title report or abstract.
Title
Actual ownership; the right of possession; also the evidence of ownership such as a deed or bill of sale.
Time-sharing
Part ownership of a property coupled with a right to exclusive use of it for a specified number of days per year.
Tenants in common
Style of ownership in which two or more persons purchase a property jointly, but with no right of survivorship and separate undivided interests. They are free to will their share to anyone they choose, a principal difference between this form of ownership and joint tenancy.
Tenancy by the entirety
A form of joint ownership reserved for married persons; right of survivorship exists and neither spouse has a disposable interest during the lifetime of the other.
Tax rate
The rate at which real property is taxed in a tax district or county. For example, in a certain county, real property may be taxed at a rate of 55 mills (or 0.055) per dollar of assessed valuation.
Tax basis
The price paid for a property plus certain costs and expenses, such as closing costs, legal counsel, and a commission paid to help find the property.
Tax credit
An allowed deduction that can be subtracted from your income tax. If you are entitled to a $1,500 credit, and your income tax would otherwise be $10,000, the credit would reduce the tax due to $8,500.
Survey
An exact measurement of the size and boundaries of a piece of land by civil engineers or surveyors.
Subletting
The leasing of premises by a lessee to a third party for part of the lessee’s remaining term.
Steering
The illegal practice of directing potential home buyers to or away from certain neighborhoods either to maintain or to change the character of an area, or to create a speculative situation.
Special assessment
A special tax imposed on specific parcels of real estate that will benefit from a proposed public improvement, such as a street or sewer.
Secondary mortgage market
Market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; plays an important role in getting money from those who want to lend to those who want to borrow.
Second mortgage
Lien on property that is subordinate to a first mortgage. In the event of default, the second mortgage is repaid after the first. Also called a junior mortgage, and in some circumstances a home equity loan.
Sales contract
Contract that contains the terms of the agreement between the buyer and seller for the sale of a particular parcel or parcels of real estate.
Right of survivorship
A feature of joint tenancy giving the surviving joint tenants the rights, title and interests of the deceased joint tenant. Right of survivorship is the basic difference between buying property as joint tenants and as tenants in common.
Right of first refusal
A person’s right to have the first opportunity to either lease or purchase real property.
Restrictive covenants
Clauses placed in a deed to restrict the full use of the property by controlling how future landowners may or may not use the property; also used in leases.
Reserve account
An account for money collected each month by a lender to pay for property taxes and property insurance as they come due.
Report of title
Document required before title insurance can be issued. It states the name of the owner, a legal description of the property, and the status of taxes, liens, and anything else that might affect the marketability of the title.
Replacement cost
The cost at today’s prices and using today’s construction methods, of building an improvement having the same usefulness as the one being appraised.
Redlining
Practice of refusing to make loans in certain neighborhoods. Also applies to insurance companies that refuse to offer policies in certain neighborhoods.
Recording
Entering or recording documents affecting or conveying interests in real estate in the recorder’s office; until recorded a deed or mortgage generally is not effective against subsequent purchases or mortgage liens.
Realtor
A real estate broker or agent who is a member of the National Association of Realtors, a professional real estate group that subscribes to a Code of Ethics. Not every broker or agent is a Realtor, a word that is a registered trademark and always capitalized.
Real estate salesperson
Person who has passed a state examination for that position, and must work under the supervision of a broker.
Real estate investment trust (REIT)
Entity that allows a very large number of investors to pool their money in the purchase of real estate, but as passive investors. The investors do not buy directly. Instead, they purchase shares in the REIT that owns the real estate investment.
Real estate broker
Individual who has passed a state broker’s test and represents others in realty transactions. Anyone having his or her own office must be a broker.
Real estate
The land itself and everything extending below and above it, including all things permanently attached, whether by nature or by man.
Quit-claim deed
A conveyance by which the grantor transfers whatever interest he or she has in the real estate without warranties or obligations.
Qualification
Act of determining a potential buyer’s needs, abilities, and urgency to buy and matching these with available properties.
Property tax
Assessment levied by city and county governments on real and personal property to generate the bulk of their operating revenues to pay for such public services as schools, libraries, and roads.
Property tax deductions
The Internal Revenue Service allows homeowners to claim as itemized personal deductions money paid for state and local realty taxes, as well as interest on debt secured by their homes. It also allows for the deduction of loan prepayment penalties, and the deduction of points on new loans.
Private mortgage insurance (PMI)
Required by most lenders for conventional loans with a down payment of less than 20 percent. Insurance is paid by the borrower and guarantees the lender will not lose money if the borrower defaults.
Point
Fee charged by a lender to get additional revenue over the interest rate. A point is equal to one percent of the loan amount.
Plat
Map or survey showing the location and boundaries of individual properties and how they have been subdivided into lots and blocks.
Planned Unit Development (PUD)
Individually owned houses with community ownership of common areas, such as swimming pools and tennis courts.
PITI
Acronym for "principal, interest, taxes, and insurance." Frequently used to describe a loan payment that combines all four items.
Option
The exclusive right to purchase or lease a property at a predetermined price or rent at some future time.
Open listing
Listing that gives a broker a nonexclusive right to find a buyer; the owner can still find a buyer himself and avoid a commission.
Nonconforming use
Use of property that is permitted to continue after a zoning ordinance prohibiting it has been passed.
Net lease
Lease requiring the tenant to pay all the costs incurred in maintaining a property, including taxes, insurance, repairs, and other expenses normally required of the owner.
Multiple listing
Agreement that allows real estate brokers to distribute information on the properties they have listed for sale to other members of a local real estate organization. Allows the widest possible marketing of those properties. Commissions are split by mutual agreement between the listing broker and the selling broker.
Mortgagor
Party or person that borrows money, giving a lien on the property as security for the loan; the borrower.
Mortgage company or mortgage banker
Financial intermediary that offers mortgages to borrowers, and then resells them to various lending institutions, government agencies, or private investors.
Maturity date
Date on which principal and interest on a mortgage or other loan must be paid in full.
Market value
Generally accepted as the highest price that a ready, willing, and able buyer will pay and the lowest price a ready, willing, and able seller will accept for a property.
Maintenance fees
Paid by a condominium unit owner to the owners’ association for upkeep of the common areas.
Loan-to-value ratio
Relationship of a mortgage loan to the appraised value of a piece of property. Usually expressed to the buyer in terms of how much the lender will lend, i.e. - 75 percent financing.
Loan servicing
Task of collecting monthly payments, handling insurance and tax impounds, delinquencies, early payoffs, and mortgage releases.
Loan origination fee
Paid by the borrower to get a loan; it covers expenses incurred by the lender, such as the cost of the appraisal, credit report, title search, etc.
Listing
Contract used for hiring a real estate agent to sell a piece of property. Also a piece of property that is for sale.
Lien
A debt on a property which encumbers it until the obligation is paid; a mortgage, back taxes, or other claim.
License
A privilege or right granted to a person by a state to operate as a real estate broker or salesperson.
Lease-purchase option
Opportunity to purchase a piece of property by renting for a specified period, with the provision that the lessee may choose to buy after or during the leasing period at a predetermined sale price.
Lease
Contract that conveys the right to use property for a period of time in return for a consideration, usually rent, paid to the property owner. Junior mortgage
Any mortgage, such a second or third mortgage on a property, which is subordinate to the first one in priority.
Judgment
Court decree stating that one person is indebted to another. Also specifies the amount of the debt.
Interim financing
Short-term loan usually made during the construction phase of a building project or until a permanent, long-term loan can be obtained. Also called a construction loan.
Installment payment
Periodic payment, usually monthly, of interest and principal on a mortgage or other loan.
Inspection
The act of physically examining and testing a piece of property to ascertain certain information.
Improvement
Any form of land development or man-made addition, such as the erection of a building or fence, to enhance the value of private property; also an improvement to publicly owned structures, such as a sewer or road.
HUD
Acronym for the Department of Housing and Urban Development, an agency from which almost all of the federal government’s housing programs flow.
Housing codes
Local regulations that set minimum conditions under which dwellings are considered fit for human habitation. It guards against unsanitary or unsafe conditions and overcrowding.
Homestead protection
State and federal laws that protect against the forced sale of a person’s home by creditors. Also, upon the death of one spouse, provides the other with a home for life.
Homeowner’s insurance policy
Packaged insurance policy for homeowners and tenants that cover property damage and public liability, such as fire, theft, and personal liability.
Historic structures
Buildings of historical or architectural significance, perhaps landmarks, that are designated by federal, state, or local historical commissions.
Highest and best use
Use of land that is most logical and productive. Refers to the greatest income it can bring the owner, as well as factors such as aesthetics and benefits to the surrounding community.
Graduated payment mortgage
Mortgage loan for which the initial payments are low but increase over the life of the loan.
Grace period
Specified period of time to meet a commitment after it becomes due, without penalty or default. For example, most lenders allow a two-week grace period after the due date of the mortgage payment before a late fee is imposed.
Gentrification
Process whereby private or government-sponsored development of certain aging neighborhoods results in the displacement of low- or moderate-income families by the more affluent and leads to an increase in property values.
Freddie Mac
Common name for the Federal Home Loan Mortgage Corporation, which buys and sells loans in the secondary mortgage market.
Foreclosure
Legal action instigated by a lender to end all ownership rights when mortgage payments have not been kept up.
Fixtures
Any personal property that has been permanently attached to real property and therefore included in the transfer of real estate. The kitchen sink is a fixture.
First mortgage
Mortgage on a property that is superior to any other. It is the first to be paid in the event of foreclosure.
Fiduciary
Person acting in a position of trust, responsibility and confidence for another, such a broker for his client.
FHA
Acronym for Federal Housing Authority, an agency created within the Department of Housing and Urban Development (HUD) that insures mortgages on residential property, with downpayment requirements usually lower than prevailing ones.
Fannie Mae
Common name for the Federal National Mortgage Association, which buys and sells loans in the secondary mortgage market.
Exclusive-right-to-sell listing
Listing that gives the broker the right to collect a commission no matter who sells the property during the listing period.
Exclusive agency listing
Listing where the owner reserves the right to sell his property himself, but also agrees to list with no other broker during the listing period besides the appointed real estate broker.
Escrow account
Special bank account into which escrow monies are deposited and from which they are disbursed. Lawyers and real estate brokers maintain escrow accounts to hold money in trust for others.
Escrow
Money or documents held by a third party until specific conditions of an agreement or contract are fulfilled.
Escheat
Reversion of property to the state when the owner dies without leaving a will and has no heirs to whom the property may pass.
Equity build-up
Term used to refer to the increase of one’s equity in a property due to mortgage balance reduction and price appreciation.
Equity
Value an owner has in a piece of property less the debt against it. For example, if the market value of a house is $150,000 and the owner has paid off $10,000 of a $75,000 mortgage, the owner has $85,000 equity.
Encumbrance
Any impediment to a clear title. It can be a claim, lien, zoning restriction, or other legal right or interest in land that diminishes its value. The report of the title search usually shows all encumbrances.
Encroachment
A building or other improvement that extends beyond its boundary and intrudes upon the property of another.
Eminent domain
The right or power of government to acquire private property for public use without the consent of the owner, provided fair compensation is provided.
Easement
Limited right to cross or use for some specified purpose the property of another. It may be permanent or temporary. Water, sewage, and utility suppliers frequently hold an easement across private property.
Earnest money deposit
Money that accompanies an offer to purchase as evidence of good faith. It is almost always a personal check, certified check, or money order rather than cash
Due-on-sale
Clause in a note or mortgage giving the lender the right to call the entire loan balance due if the property is sold or otherwise conveyed.
Downpayment
Initial cash investment made as evidence of good faith when purchasing real estate. It is usually a percentage of the sale price.
Discount points
Added loan fee charged by a lender to make the yield on a lower-than-market-value loan competitive with higher-interest loans.
Discount broker
Full-service broker who charges less than the prevailing commission rates in his or her community.
Depreciation
Gradual decline on paper in market value of real estate, especially because of age, obsolescence, wear and tear, or economic conditions.
Deficiency judgment
Judgment issued against a borrower when the sale of foreclosed property does not bring in enough to pay the balance owed on the mortgage.
Default
Breach of a contract or failure to meet a legal obligation. Nonpayment of a mortgage beyond a certain number of payments is considered a default.
Deed restrictions
Provisions placed in deeds to control how future landowners may or may not use the property. Also called deed covenants.
Deed of trust
Document resembling a mortgage that conveys legal title to a neutral third party as security for a debt. Also called a trust deed or deed in trust.
Credit report
A past history of debt repayment used by creditors as an indicator of future readiness to responsibly repay debt.
Counteroffer
An offer made in response to an earlier, unacceptable one; it terminates the original offer.
Cooperative
Land and building owned or leased by a corporation which in turn leases space to its shareholders, who are also part owners of the building and have a proprietary lease. In lieu of rent, they each pay a proportionate monthly or quarterly fixed rate to cover operating costs, mortgage payments, taxes, etc.
Contractor
One who contracts to do something for another. For example, in construction, a specialist who enters into a formal construction contract to build a real estate structure or handle renovations, improvements, and additions to an existing structure.
Contract
A legally enforceable agreement between two or more parties. To be valid, a real estate contract must be dated, in writing, include a consideration, have a description of the property, the place and date of delivery of the deed, and spell out all terms and conditions that were mutually agreed upon. It also must be […]
Contingency
A provision in a contract that keeps it from becoming binding until a certain event happens. A satisfactory inspection report might be a contingency.
Construction loan
Type of loan where money is doled out as construction takes place; borrower must obtain a permanent long-term mortgage from another source to repay the construction loan. Also called an interim loan.
Condominium
Type of housing where buyers own their units outright, plus an undivided share, or joint ownership, in the common elements of the building or community.
Competitive market analysis
A method of determining home value that looks at recent home sales, homes presently on the market, and homes that were listed but did not sell.
Comparables
Properties similar to a specific piece of property that are used to help estimate the value of that property.
Common elements
Parts of a condominium, cooperative, or private home association shared by all residents, so that each unit owner holds an undivided interest in, for example, the hallways, parking facilities, or swimming pool.
Commission
Payment, or brokerage fees, given by the seller of a property to a real estate agent for services rendered. Usually paid at the closing.
Commingle funds
Mixing of a clients’ funds, or escrow, with an agent’s personal funds in an account; considered to be grounds for the suspension or revocation of the broker’s real estate license.
Cloud on title
Defect in the title that impairs the owner’s ability to market the property. This might be a lien, claim, judgment, or encumbrance.
Closing statement
Written account of all expenses, adjustments, and disbursements received by the buyer and seller when completing a real estate transaction.
Closing costs
Expenses over and above the price of property that must be paid by buyers and sellers before title is transferred. Also known as settlement costs.
Close
Act of finalizing a transaction in which all the concerned parties meet to transfer title to a property. Also, when real estate formally changes ownership.
CC&Rs
Stands for covenants, conditions and restrictions. They are the rules by which a property owner in a condominium agrees to abide.
Caveat emptor
Latin for "Let the buyer beware." Under this legal phrase, the buyer is expected to judge and evaluate property carefully before buying, or purchase at their own risk.
Cancellation clause
Stipulation in a contract that allows a buyer or seller to cancel the contract in the event of a certain specified occurrence.
Buyer’s market
Describes an excess supply of homes for sale, in which there are few buyers and many sellers. In such a market, the buyer can typically negotiate more favorable prices and terms.
Buy-down
Cash payment to a lender to reduce the interest rate a borrower must pay on a new mortgage loan. Commonly used by builders to sell new homes.
Building codes
Minimum construction standards set by state or local laws for public safety and health. Includes the design, construction, repair, and quality of building materials, as well as the use and occupancy of structures.
Builder’s warranty
Written statement by a builder assuring that a dwelling was completed according to a stipulated set of standards. It protects the buyer from any latent defects.
Broker
Licensed individual who acts independently in conducting a real estate brokerage business; also a person who buys and sells for another for a commission.
Breach of contract
When one party fails to live up to the terms and conditions of a contract, without a valid, legal excuse.
Blockbusting
Illegal practice of creating panic selling in a neighborhood for financial gain. Typically exploits racial and religious bias to get homeowners to sell low so the properties can be resold at a mark up.
Blanket mortgage
Single mortgage that covers more than one real property, i.e. - a house plus the vacant lot next door.
Binder
Short purchase contract used in some areas to secure a real estate transaction until a more formal contract can be signed at a later date; usually accompanied by an earnest money deposit.
Balloon loan
Mortgage loan in which a larger final payment becomes due because the loan amount was not fully amortized.
Assumption of mortgage
Taking title to property that has an existing mortgage, and being personally liable for its payment as a condition of the sale.
Assessment
Tax or charge levied on property by a taxing authority to pay for local improvements such as sidewalks, streets, and sewers.
Assessed value
A value placed on a property by an agency of the government for taxation and other purposes.
As is
Said of property offered for sale in its present condition with no guarantees as to quality and no promise of repair or fix-up by the seller; property is purchased in exactly the condition in which it is found.
Appurtenance
Whatever is annexed to land or used with it that will pass to the buyer with conveyance of title, such as a garage or fence.
Appreciation
Increase in property value or worth due to economic or related factors; the opposite of depreciation.
Appraisal
A formal estimate of property value conducted by a professional qualified to make such an opinion.
Annual percentage rate (APR)
Combines the interest rate with other loan costs, such as points and loan fees, into a single figure that shows the true annual cost of borrowing.
Amortize
Pay a debt in monthly or other periodic installments until the total amount, along with the interest, if any, is paid.
Air rights
Right to occupy and use the open space above a parcel of land or property, such as in the leasing of air space over existing buildings or highways.
Agent
Person authorized to act by and on behalf of another. Adjustable rate mortgage (ARM)
Mortgage loan on which the interest rate falls and rises with changes in prevailing rates. The mortgage rate is tied to a selected index and may be adjusted annually. Also called a variable rate mortgage.
Acceleration clause
Stipulation in a mortgage agreement that allows the lender to demand immediate payment of the entire loan balance if any scheduled payment is missed.
Z
Zone – The area set off by the proper authorities for a specific use or in an area subject to certain restrictions or restraints.
Y
Yard – A unit of measurement that is 3 feet long.
X
X – An individual who cannot write may execute a legal document by affixing an "X" – his or her mark – where the signature normally goes and a witness would write the person’s name beneath the mark and then sign his or her own name.
W
Wainscoting – The wooden lining of an interior wall and also the lower part of a wall when it is finished different than the upper wall.
V
VA – See Veterans’ Administration.
U
Ultra vires activities – The actions of a corporation done beyond the powers granted in its charter that could lead to a lawsuit by its shareholders.
T
Tacking – The adding together of successive periods of adverse possession of parties in privity with each other in order to create one continuous adverse possession to meet the legal time requirement to establish title.
S
Safe rate – The rate of interest paid on government bonds, utility bonds or bank savings which holds mimimal chance of loss.
R
Race notice – The concept used in recordation of a property wherein the first party to register the property becomes the recognized owner.
Q
Quadrangle – A square-shaped land area used in the government survey system method of land description that is 24 miles on each side and contains 16 townships. See United States Government Survey System.
P
Package loan – A type of mortgage used in home financing that is inclusive and covers the real property and the improvements as well as any movable mechanical or electrical equipment.
O
Objective value – The value used in the income and market data approaches of appraisal that can be easily determined using data directly from the market.
N
NAR – See National Association of REALTORS®
M
MAI – See Member Appraisal Institute
L
Laches – An established legal doctrine under which, apart from any question of statutory limitation, courts discourage laziness and delay in the enforcements of rights and due to the delay or negligence in asserting one’s legal rights, will refuse to try suits not brought within a set reasonable time period.
K
Key lot – A lot in such a position that one side is adjacent to the back of other lots which in a subdivision is considered to be a least desirable lot.
J
Jalousie – An exterior slotted blind or shutter window like a Venetian blind used to permit ventilation while avoiding rain penetration and also to control sunlight.
I
Identity of interest – The system whereby the builder and sponsor of a housing project subsidized by the government have ownership interests in each other.
H
Habendum clause – The to have and to hold clause in a deed that describes the extent of the interest conveyed, such as fee or life estate and which is no longer an essential part of a deed.
G
Gable roof – A steeply pitched roof with sloping sides.
F
Facade – The real front or face of a building but often also used to refer to a false front.
E
Earnest money – A sum of money or other consideration given by a prospective purchaser as a deposit or partial payment as evidence of good faith in conjunction with an offer to purchase real property rights which if accepted will become part of the down payment.
D
Damages – The payment to a party who has suffered a loss or has been harmed by a sustained injury either to his or her person, property or relative rights through an act or default of another which is used to make up for the wrong.
C
CAI – See Community Associations Institute.
B
Backfill – The replacement of excavated earth back into a hole or against a structure.
A
1031 Exchange – An exchange which is officially called an Internal Revenue Code 1031 Exchange which allows an owner to trade one like property for another under very specific guidelines and defer paying income tax.
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