Real Estate Glossary

 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

Abandonment - The voluntary relinquishment of rights of ownership or other interest (such as an easement by failure to use the property, coupled with an intent to abandon (give up the interest).

Abstract of Title - A compilation of the recorded documents relating to a parcel of land, from which an attorney may given an opinion as to the condition of title. Still in use in some states, but giving way to the use of title insurance.

Acceleration Clause - Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain even such as failure to pay an installment by a certain date, change of ownership, without the lenders consent, destruction of the property, or other event which endangers the security of the loan.

Accrued Depreciation - (1) The Amount reserved each year in the accounting system for the replacement of a building or other asset. (2)The useful life of a property at any given time.

Acknowledgement - A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.

Adjusted Gross Income - Gross income of a building if fully rented, less an allowance for estimated vacancies. 

Adjustable Mortgage Loans (AMLs) - Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan.

Amortization - Payment of a debt in equal installments of principal and interest, rather than interest only payments.

Annual Percentage Rate (A.P.R.) - The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes.

Appraisal - An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications. 

Arrears - (1) Payment made after it is due is in arrears. (2) Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance, as is rent. Example: A rental payment made July 1 pays the rent to August 1. An interest payment made July 1 pays the interest to July 1.

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B 

Balloon Note - A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.

Bankruptcy - Proceedings under federal bankruptcy statutes to relieve a debtor (bankrupt) from insurmountable debt. The bankrupt's property is distributed by the court to the creditors as full satisfactions of the debts, in accordance with certain priorities

Blanket Mortgage - (1) A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision. (2) A mortgage covering all real property of the mortgagor, both present and future. When used in this meaning, it is also called a "general mortgage."

Buydown - A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first 1 to 5 years of the loan.

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C

Capital Gains - Gains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.

Caveat Emptor - "Let the buyers beware." Legal maxim stating that the buyer takes the risk regarding quality or condition of the item purchased, unless protected by warranty or there is misrepresentation. Modernly, consumer protection laws have placed more responsibility for disclosure on the seller and broker.

Certificate of Title - In areas where attorneys examine abstracts or chains of title, a written opinion, executed by the examining attorney, stating that title is vest as stated in the abstract.

Closing - (1) In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. (2) A selling term meaning the point at which the client or custom is asked to agree to the sale or purchase and sign the contract. (3) The final call in a metes and bounds legal description which "closes" the boundaries of the property.

Cloud on Title - An invalid encumbrance on real property, which if invalid, would affect the rights of the owner. For example: A lot sells 1, tract 1, to B. The deed is mistakenly drawn to read lot 2 but eh recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, if necessary, by court action.

Condominium - A structure of two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (excluding paint or other finishes) of the exterior walls, floors, and ceiling. The balance of the property is called the common area.

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D

Deed - Actually, any one of the many conveyancing or financing instruments, but generally a conveyancing instrument, given to pass fee title to property upon sale.

Deficiency Judgment - Commonly, the amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Actually, the judgment is for the total amount and not for the deficiency, the recovery from the foreclosure sale being deducted from the amount.

Delivery - In conveyancing, the placing for of the property in the actual or constructive possession of the grantee. Usually accomplished by delivery of a deed to the buyer, or by recording said note.

Demand Note - A note having no date for repayment, but due on demand of the lender.

Depreciation - (1) Decrease in value to real property improvements caused by deterioration or obsolescence. (2) A loss in value as an accounting procedure to use as a  deduction for income tax purposes.

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E

Easement - A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another. It is either for the benefit of land (appurtenant), such as right to cross A to get to B, or "in gross", such as a public utility easement.

Egress - A term concerning a right to come and go across the land (public or private) of another. Usually part of the term ingress and egress.

Encumbrance, Incumbrance - A claim, lien ,charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in on other than the owner, but which will not prevent the transfer of fee title.

Equity Line of Credit - A combination of a line of credit and equity loan. A maximum loan amount is established based on credit and equity. A mortgage (deed of trust) is recorded against the potential borrower's property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the mortgage.

Escrow - Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event. Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions for their use.

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F

Fee - (1) Modernly, and not in strict legal terms, synonymous with fee simple or "ownership." (2) A charge made by a landlord to a tenant, which is not refundable. For example: A cleaning deposit would be refunded if the tenant left the rented property reasonably clean. A cleaning fee would be a charge by the landlord for cleaning the rented property and would not be refunded regardless of the condition of the property.

First Refusal Right - A right, usually given by an owner to a lessee, which gives the lesee a first chance to buy the property if the owner decided to sell. The owner must have a legitimate offer which the lessee can match or refuse. If the lessee refuses, the property can then be sold to the offeror.

Forfeiture - The taking of an individual's property by a government, because the individual has committed a crime. In the United States, private property cannot be taken, except by eminent domain upon payment of just compensation, or for nonpayment of taxes.

Future Acquired Property - Property acquired after a loan or sale. For example: A loan agreement may state that the loan is a lien on all property presently owned or which the borrower may acquire in the future.

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G

General Partnership - A partnership made up of general partners, without special (limited) partners.

Grantor-Grantee Index - The record of the passing of title to all the properties in a county as kept by the county recorder's office. Property is checked by tracing the names of the sellers and buyers (chain of title). Title companies usually have more efficient methods by keeping records according to property description, rather than people's names.

Gross Income - The scheduled (total) income, either actual or estimated, derived from a business or property.

Gross Lease - A lease which obligates the lessor to pay all or part of the expenses of the leased property, such as taxes, insurance, maintenance, utilities, etc.

Guaranty - Agreement to pay the debt or perform the obligation of another in the event the debt is not paid or obligation not performed. Differs from a surety agreement in that there must be a failure to pay or perform before the guaranty can be in effect.

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H

Heir - One who by law, rather than by will, receives the estate of a deceased person.

Homestead - The dwelling (house and contiguous land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to set a maximum amount) against the rights of creditors. Property tax exemptions (for all or part of the tax) are also available in some states. Statutory requirements to establish a homestead may include a formal declaration to be recorded.

Home Warranty Insurance - Private insurance insuring a buyer against defects (usually in plumbing, heating, and electrical) in the home he ahs purchased. The period of insurance varies and both new and used home may be insured.

Hypothecate - To mortgage or pledge, without delivery of the security to the lender.

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I

Impound Account - Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The mortgagor or trustor pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.

Improvements - Generally, buildings, but may include any permanent structure or other development, such as street, utilities, etc.

Inheritance Tax - A tax on the transfer of property from a deceased person; based on the right to acquire the property rather than the property itself.

Installment Contract - A method of purchasing by installment (usually monthly) payments. When referring to real property, it is usually called a land contract.

Insured Mortgage - A mortgage insured against loss to the mortgagee in the event of a default and a failure to the mortgaged property to satisfy the balance owing plus costs of foreclosure.

Involuntary Conversion - Conversion of real property to personal property (money) without the voluntary act of the owner. This occurs when property is taken by eminent domain (condemnation). The owner is allowed to convert back to real property (buy another property) without paying tax on the gain from the condemnation. This must be done within a set time (3 years) and the prices of the old and new property are considered to forma  new tax base.

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J

Joint Tenancy - An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Judgment - The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Just Compensation - In condemnation the amount paid to the property owner. The theory is that in order to be "just," the property owner should be no richer or poorer than before the taking.

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K

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L

Late Charge - A penalty for failure to pay an installment payment on time. Usually not allowed as interest for tax deductions. May or may not be included as usury. If not, the amount of late charge is either set by statute or must be "reasonable."

Lease with-Option to Purchase - A lease under which the lessee has the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period. 

Lessee's Interest - In appraising the value of a lessee's interest to determine the value of a potential sublease of assignment (sale) of the lease, the value is the market value of the property, less the interest of the lessor. The lessor's interest would be largely determined by the ratio of the return on the lease to the market value without the lease.

Lien Waiver (Waiver of Liens)  - For our purposes, a waiver of mechanic's lien rights, signed by subcontractors so that the owner or general contractor can receive a draw on a construction loan.

Loan Policy - A title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalid title in the borrower, or loss caused by invalid title in the borrower, or loss of priority of the mortgage or deed of trust.

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M

Marketable Title - Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

Mechanic's Lien - A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.

Merger of Title - A lesser interest in real property being merged (absorbed) into a greater interest. For example : A lessee purchases the property being leased. The interest as a lessee is merged into the interest as an owner, thus ending the leasehold interest.

Mortgage - (1) To hypothecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property. (2) The instrument by which real estate is hypothecated as security for the repayment of a loan.

Mortgagee - The party lending the money and receiving the mortgage. Some states treat the mortgagee as the "legal" owner entitled to rents from the property. Other states treat the mortgagee as a secured creditor, the mortgagor being the owner. The latter is the more modern and accepted view.

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N

Negotiable Instrument - According to the Uniform Negotiable Instruments Act , an instrument is negotiable when it is in writing and signed, containing an unconditional promise or order to pay a certain amount of money, on demand, or at a definite future date, to the bearer, to order, or to a named or certain drawee.

Net Lease - A lease requiring the tenant to pay, in addition to a fixed rental., the expenses of the property lease, such as taxes, insurance, maintenance, etc. In some states, the terms net net, net net net, triple net, and other such repetitions are used.

Notorious Possession - A requirement for adverse possession. Possession so open (notorious) that the owner is presumed to have notice of it and its extent.

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O 

Open-End Mortgage - A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage.

Ownership - Rights to the use, enjoyment, and alienation of property, to the exclusion of others. Concerning real property, absolute rights are rate, being restricted by zoning laws, restrictions, liens, etc.

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P

Partial Release - A release of a portion of property covered by a mortgage. A subdivider will obtain a partial release as each lot is sold, upon payment of an agreed upon amount. In  areas where the subdivider is not usually the builder, it may be necessary to sell groups of lots to obtain a partial release. In areas where deeds of trust are used instead of mortgages, a "partial reconveryance" is the document used. 

Payoff - The payment in full of an existing loan or other lien.

Plaintiff -  The party bringing a civil action against a defendant.

Planned (Unit) Development - A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels. The lots are generally small, being the exact size of the improvements, or slightly larger.

Point - One percent. When referring to mortgages or deeds of trust, the term is used to describe the percentage of discount rather than interest (for which the word percent is used).

Power of Attorney - An authority by which one person (principal) enables another (attorney in fact) to act for him. (1) General power - authorizes sale, mortgaging, etc. of all property of the principal. Invalid in some jurisdiction. (2) Special power - specifics property, buyers, price and terms. How specific it must be varies in each state.

Prescriptive Easement - The granting of an easement by a court based on the presumption that a written easement was given (although none existed), after a period of open an continuous use of land.

Private Mortgage Insurance - Insurance against a loss by a lender in the event of default by a borrower (mortgagor). The insurance is similar to insurance by a governmental agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.

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Q

Quarter Section - One quarter of a section. A quarter section (commonly called a quarter) contains 160 acres.

Quitclaim Deed - A deed operating as a release, intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.

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R

Redemption - The process of canceling a defeasible title to land, such as is created by a mortgage foreclosure or tax sale. 

Refinance - (1) The renewing of an existing loan with the same borrower and lender. (2) A loan on the same property by either the same lender or borrower. (3) The selling of loans by the original lender.

Reinstatement - (1) Payment of a note, mortgage, deed of trust, etc, to bring it from default to good standing. (2) Restoring the previously used entitlement of a veteran to enable the veteran to purchase property under a VA program. (Also called Restoration of Eligibility).

Right of Way - A strip of land which is used as a roadbed, either for a street or railway. The land is set aside as an easement or in fee, either by agreement or condemnation. May also be used to describe the right itself to pass over the land of another.

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S

Secondary Mortgage Market - The buying and selling of first mortgages of trust deeds by banks, insurance companies, government agencies, and other mortgagees. This enables lenders to keep an adequate supply of money for new loans. The mortgages may be sold at full value (par) or above, but are usually sold at discount. The secondary mortgage market should not be confused with second mortgage.

"Subject to" Clause - A clause in a deed, stating the grantee takes title "subject to" an existing mortgage. The original mortgagor is alone responsible for any deficiency. should there be foreclosure of the mortgage. Differs from an "assumption" clause, whereby the grantee "assumes" and agrees to pay the existing mortgage.

Sweat Equity - A program which allows a purchaser to do work on the property in place of all or part of the down payment and other costs of purchase.

Survey - The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.

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T 

Tenancy In Common - An undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists. 

Transfer Tax - State tax on the transfer of real property. Based on purchase price or money changing hands. Check statutes for each state. Also called documentary transfer tax.

Trustee in Bankruptcy - One appointed by a bankruptcy court, and in whom the property of the bankrupt vests. The trustee holds the property in trust, not for the bankrupt, but for the creditors.

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U

Undisclosed Principal - A principal whose identity is not revealed by an agent.

Unilateral Contract - A contract under which one party makes a promise; the other party, although marking no reciprocal promise, may be obligated by law or may have already given consideration.

Unrecorded Instrument - A deed, mortgage, etc, which is not recorded in the county recorder's office and, therefore, not protected under recording statutes. Valid between the parties involved, but not against innocent third parties.

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V

Variable Interest Rate - An interest rate which fluctuates as the prevailing irate moves up or down. In mortgages there are usually maximums as to the frequency and amount of fluctuation. Also called "flexible interest rate."

Venue - (1) The county (or other geographical division) in which an action or prosecution is brought for trial and which is to furnish the panel of jurors. (2) The county in which an acknowledgement (notarization) is made.

Voluntary Lien - A lien placed against real property by the voluntary act of the owner. Most commonly, a mortgage or deed of trust.

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W

Waive - To knowingly abandon, relinquish, or surrender a right, benefit, or claim.

Warranty Deed - A deed used in many states to convey fee title to real property. Until the widespread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee for defective title.

Without Recourse - A finance term. A mortgage or deed of trust securing a note without recourse allows the lender to look only to the security (property) for repayment in the event of default, and not personally to the borrower. 

Wrap-Around Mortgage - A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under  the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate than if refinancing.

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Y

Yield - Ratio of income from an investment to the total cost of the investment over a given period of time.

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Z

Zero Lot Line - The construction of a building on any of the boundary lines of a lot. Usually built on the front line, such as a store built to the sidewalk.

Zone - (1) An area of a county or city in which the use of the land is restricted by law (zoning ordinance). (2) An area designated by a number for the delivery of mail. Zip codes incorporate the zones.

 

 


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