Real Estate Glossary
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- 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).
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.
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.
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.
- 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.
Gross Income - Gross income of a building if fully rented,
less an allowance for estimated vacancies.
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.
Payment of a debt in equal installments of principal and interest,
rather than interest only payments.
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.
- An opinion of value based upon a factual analysis. Legally, an
estimation of value by two disinterested persons of suitable qualifications.
- (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.
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.
- 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
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."
- 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.
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.
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
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.
(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.
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.
- 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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- Actually, any one of the many conveyancing or financing
instruments, but generally a conveyancing instrument, given to
pass fee title to property upon sale.
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.
- 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
Demand Note - A note having no
date for repayment, but due on demand of the lender.
- (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.
- 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.
A term concerning a right to come and go across the land (public
or private) of another. Usually part of the term ingress and
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
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.
- 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.
- (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.
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.
- 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.
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
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Partnership - A partnership made up of general partners, without
special (limited) partners.
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
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,
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.
- One who by law, rather than by will, receives the estate of a deceased
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.
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.
To mortgage or pledge, without delivery of the security to the
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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.
Generally, buildings, but may include any permanent structure or
other development, such as street, utilities, etc.
Tax - A tax on the transfer of property from a deceased
person; based on the right to acquire the property rather than the
Installment Contract - A
method of purchasing by installment (usually monthly) payments.
When referring to real property, it is usually called a land
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.
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.
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.
- The decision of a court of law. Money judgments, when
recorded, become a lien on real property of the defendant.
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
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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."
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
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
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.
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.
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.
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
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.
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.
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.
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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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.
- 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,
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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.
- The payment in full of an existing loan or other lien.
- The party bringing a civil action against a defendant.
(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.
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).
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.
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.
Section - One quarter of a section. A quarter section
(commonly called a quarter) contains 160 acres.
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
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- The process of canceling a defeasible title to land, such as
is created by a mortgage foreclosure or tax sale.
- (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
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).
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.
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
"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
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.
- The measurement of the boundaries of a parcel of land, its
area, and sometimes its topography.
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.
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.
Principal - A principal whose identity is not revealed by an
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.
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.
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."
- (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.
- 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.
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.
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.
- Ratio of income from an investment to the total cost of the
investment over a given period of time.
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
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.