Glossary of Real Estate Terms

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A loan

The credit industry term used to describe a loan that reflects the best possible interest rate, terms and conditions. Consumers must demonstrate good credit in order to secure an "A" loan.

Abstract of title

A history of a title and the current status of a title based on a title examination.

Acceleration clause

A provision in a mortgage or deed of trust that permits the lender to declare the entire principal balance of the debt immediately due and payable if the borrower is in default.

Acceptance

Compliance with the terms and conditions of an offer so that a contract becomes legally valid.

Access

The right to go onto and leave a property.

Accrued

Accumulated.

Accrued depreciation

The amount of depreciation taken, as of a given date, for tax purposes. The loss in value in a structure measured by the cost of a new replacement.

Acknowledgment

A formal statement before an authorized official (e.g., notary public) by a person who executed a deed, contract, or other document that it was (is) his free act.

Acquisition

The act of acquiring a property.

Acre

A land area containing 43,560 square feet.

Action to quiet title

A lawsuit to clear a title to real property.

Actual eviction

The removal of a tenant by the landlord because the tenant breached a condition of a lease or other rental contract.

Actual notice

The knowledge that a person has of a fact.

Adjustable-rate mortgage (ARM)

A mortgage in which the interest rate changes according to changes in a predetermined index.

Adjusted basis

Original cost (purchase price and closing costs) of a property plus capital improvement minus depreciation, in any.

Adjusted sales price

The amount realized reduced by the cost of fixing up expenses.

Administrator's deed

One executed by an administrator to convey title to estate property.

Adverse possession

A method of acquiring title to real property by conforming to statutory requirement. A form of involuntary alienation of title.

Affirmative easement

A legal requirement that a servient owner permit a right of use in the servient land by the dominant owner.

Agency

The fiduciary relationship existing between a principal and agent.

Agent

A person authorized by another to act on her behalf.

Agreement

A contract. Mutual assent between two or more parties.

Air rights

Rights in the air space above the surface of land.

Alienation

Transfer of title to real property.

Alienation clause

A clause in a mortgage or deed of trust that entitles the lender to declare the entire principal balance of the debt immediately due and payable if the borrower sells the property during the mortgage term.

Amenities

Benefits resulting from the ownership of a particular property.

Amortization schedule

A designation of periodic payments of principal and interest over a specific term to satisfy a mortgage loan.

Annual percentage rate (APR)

The actual effective rate of interest charged on a loan expressed on a yearly basis; not the same as the simple interest rate.

Appraisal

An estimate of property value based on factual data.

Appraisal process

An organized and systematic program for estimating real property value.

Appraisal report

A report containing an estimate of property value and the data on which the estimate is based.

Appreciation

An increase in property value.

Appurtenant easement

A right of use in the adjoining land of another that moves with the title to the property benefiting from the easement.

Arrears

Delinquent in meeting an obligation. The payment of interest for a prior period as scheduled.

Artificial person

A corporation of other legally recognized entity.

Asking price

The price specified in a listing contract.

Assessed value

The value to which a local tax rate is applied to calculate the amount of real property tax.

Assessment

A levy against property.

Assessor

An official of local government who has the responsibility for establishing the value of property for tax purposes.

Assignee

One to whom contractual rights are transferred.

Assignment

A transfer of legal rights and obligations by one party to another.

Assignment of a lease

The transfer by a lessee of the entire remaining term of a lease without any reversion of interest to the lessee.

Associate broker

Any person employed by or on behalf of an agency to perform real estate brokerage services and licensed by the commission as an associate broker.

Assumable mortgage

One that does not contain an alienation clause.

Attorney-at-law

A person licensed by a state to engage in the practice of law.

Auction

A form of property sale in which people are bidding against each other.

B or C loans

The credit industry term used to describe loans that reflect less than the best possible interest rate, terms and conditions. Consumers with negative or derogatory credit may be offered "B" or "C" loans. These loans always impose a higher interest rate an

Back-up contract

Second contract for property on which there is already a legally binding contract. It is contingent on the failure of the prior contract.

Balloon mortgage

A type of mortgage in which the schedule payment will not fully amortize the loan over the mortgage term. Therefore, it requires a final payment called a balloon payment, larger then the uniform payments, to fully satisfy the debt.

Bank

A federally regulated financial institution that makes loans, cashes and pays checks, accepts deposits and provides other financial services.

Basis

The value of property for income tax purposes.

Beneficiary

Recipient of funds, property, or other benefits from an insurance policy, will, or other settlement.

Bequest

A gift of personal property by will.

Bilateral contract

An agreement based on mutual promises that provide the consideration.

Bill of sale

An instrument transferring ownership of personal property.

Blanket mortgage

One in which two or more parcels of real property are pledged to secure the payment of the note.

Blockbusting

For profit, to induce or attempt to induce any person to sell or rent any dwelling by representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, sex, or national origin.

Bond of deed

A contract of sale and a financing instrument in which the seller agrees to convey title when the buyer completes the purchase price installment payments.

Book value

The value as it appears on the books of the owner, usually for tax purposes.

Boot

Cash received in a tax-free exchange.

Breach of contract

Failure, without legal excuse, to perform any promise that forms the whole or part of a contract.

Broker

A person or organization acting as agent for others in negotiating the purchase and sale of real property or other commodities for a fee.

Building codes

Public controls regulating construction.

Bundle of rights

The rights of an owner of a free-hold estate to possession, enjoyment, control, and disposition of real property.

Buyer-agency agreement

Contract between a prospective home buyer and a real estate company in which the company agrees to locate property for and negotiate in the best interest of the buyer.

Bylaws

Rules governing the internal affairs of an association, such as those setting forth the offices in a condominium association, how officers are elected, and the method of amending the bylaws.

Capital improvement

An item that adds value to the property, adapts the property to new uses, or prolongs the life of property. Maintenance is not a capital improvement.

Capital/cash reserves

The cash reserves (savings), investments or assets possessed by an individual.

Capitalization

The process of converting future income into an indication of the present value of a property by applying a capitalization rate to net annual income.

Capitalization rate

The rate of interest appropriate to the investment risk as a return on the investment.

Carry-over clause

A clause in a listing contract protecting the broker's commission entitlement for a specified period of time after expiration of the contract. Also called extender clause.

Cash flow

The income produced by a rental property after deducting operating expenses and debt service.

Caveat emptor

Latin term meaning "let the buyer beware." Applies to "sales talk" and not to statements of material facts.

Certificate of eligibility

A statement provided to veterans of military service setting forth the amount of loan guarantee to which they are entitled at that time.

Certificate of occupancy

A document issued by a local government agency, after a satisfactory inspection of a structure, authorizing the occupancy of the structure.

Certificate of reasonable value

A document setting for the the value of a property as the basis for the loan guarantee by the Department of Veterans Affairs to the lender.

Certificate of title opinion

A report, based on a title examination, setting forth the examiner's opinion of the quality of a title to real property.

Chain

In land measurement, a distance of 66 feet.

Chain of title

The successive conveyances of title to a particular parcel of land.

Change

The principle stating that change is continually affecting land use and therefore continually altering value.

Charge-offs

Loans or debts that have gone unpaid by the creditor. The creditor "gives up" on collecting payment and reports the charge-off to the credit bureau for inclusion on an individual's credit report. Most lenders, however, regard charge-offs as debts that are

Chattel

Personal property.

Chattel mortgage

A type of mortgage in which personal property is pledged to secure the payment of a debt.

Civil action

A lawsuit between private parties.

Civil Rights Act of 1866

A federal law that prohibits all discrimination on the basis of race.

Closed mortgage

A type of mortgage that imposes a prepayment penalty.

Closed-end mortgage

A type of mortgage that cannot be refinanced.

Closing

The consummation of a real estate contract. Also called settlement.

Closing (or settlement) statement

An accounting of the funds received and disbursed in a real estate transaction. Many times referred to as HUD.

Closing costs

Expenses incurred in the purchase and sale of real property paid at the time of settlement or closing.

Cloud on a title

A claim against a title to real property.

Cluster zoning

A form of zoning providing for several different types of land use within a zoned area.

Coastal Wetlands Law

Law prohibiting dredging, filling, and erecting permanent structures in a coastal wetland without a permit from the Department of Environmental Protection.

Code of ethics

A standard of conduct required by license laws and by the National Association of REALTORS.

Collateral

Property pledged as security for the payment of a debt.

Collection account

A loan or debt that has been referred by a creditor to an agency whose primary business is to collect outstanding debt obligations. These types of accounts normally appear on the debtor's credit report.

Commercial property

Property producing rental income or used in business.

Commingle

To mix the money or property of others by an agent with the agent's personal or business funds or other property.

Commission

A fee paid for the performance of services, such as a broker's commission.

Commissioner's deed

A form of judicial deed executed by a commissioner.

Commitment

A promise, such as a promise by a lending institution to make a certain mortgage loan.

Common areas

Property to which title is held by co-owners as result of ownership of a condominium unit.

Common law

By judicial precedent or tradition as opposed to a written statue.

Community planning

A plan for the orderly growth of a city or county to result in the greatest social and economic benefits to the people.

Community property

A form of co-ownership limited to husband and wife. Does not include the right of survivorship.

Comparable

A property that is similar to a property being appraised by the market data approach.

Compensatory damages

Court-awarded compensation to an injured party for any financial loss caused by a breach of contract.

Competent parties

Persons and organizations legally qualified to manage their own affairs, including entering into contracts.

Competition

Rivalry for customers or profits.

Competitive market analysis (CMA)

A comparison of property that is the subject of an appraisal with other properties offering comparable utility that have sold recently.

Complete performance

When all terms of a contract have been fully performed by all parties; the usual manner of terminating contracts.

Comprehensive plan

Compilation of policy standards, goals, maps, and pertinent data relative to the past, present, and future trends of a municipality with respect to its population, land use, and public facilities.

Condemnation

The exercise of the power of eminent domain. The taking of private property for public use.

Conditions

Restrictions or qualifications that provide for a reversion of title if they are violated.

Condominium

A form of ownership of real property recognized in all states that consists of individual ownership of some aspects and co-ownership in other aspects of the property.

Condominium declaration

The document which, when recorded, creates a condominium. Also called a master deed.

Conformity

The homogeneous uses of land within a given area results in maximizing land value.

Consideration

Anything of value as recognized by law offered as an inducement to contract.

Construction loan

A short-term loan, secured by a mortgage, to obtain the funds to construct an improvement on land.

Construction mortgage

A temporary mortgage used to borrow the money to construct an improvement on land.

Constructive eviction

Results from some action or inaction by the landlord that renders the premises unsuitable for the use agreed to in a lease or other rental contract.

Constructive notice

Everyone is bound by the knowledge of a fact even though they have not been actually notified of such fact.

Consumer price index (CPI)

An index of the change in prices of various commodities and services that provides a measure of the rate of inflation.

Consummation

Fulfillment of the terms of a contract, enforced by the courts as a legal remedy.

Contingency

A condition in a contract relieving a party of liability if a certain event occurs.

Contract

An agreement between competent parties upon legal consideration to do, or abstain from doing, some legal act.

Contract for deed

See Bond for deed

Conventional loan

One in which the federal government does not insure or guarantee the payment to the lender.

Conversion

Change in a form of ownership, such as changing rental apartments to condominium ownership.

Conveyance

Transfer of title to real property.

Cooperating broker

One who participates in the sale of a property through the listing broker.

Cooperative

A form of ownership in which stockholders in a corporation occupy property owned by the corporation under a lease.

Co-ownership

Title to real property held by two or more persons at the same time. Also called concurrent ownership.

Corporation

A form of organization existing as an entity.

Corporeal

Tangible things.

Co-signer

An individual who equally pledges his or her collateral or credit by signing on a loan or credit application with another person.

Cost

A measure of expenditures of labor and materials made some time in the past.

Cost approach

An appraisal method whereby the cost of constructing a substitute structure is calculated, depreciation is deducted, and land value is added.

Counteroffer

A new offer made by one rejecting an offer.

Covenant

A promise in writing.

Covenant against encumbrances

A promise in a deed that there are no encumbrances against the title except those set forth in the deed.

Covenant of quiet enjoyment

A promise in a deed (or lease) that the grantee (or lessee) will not be disturbed in his use of the property because of a defect in the grantor's (or lessor's) title.

Covenant of right to convey

A promise in a deed that the grantor has the legal capacity to convey the title.

Covenant of seisin

A promise in a deed ensuring to the grantee that the grantor has the title being conveyed.

Covenant of warranty

A promise in a deed that the grantor will guarantee and defend the title against lawful claimants.

Credit

The ability of a person to borrow money, or obtain goods with payments over time, as a consequence of the favorable opinion held by a lender as to the person's financial situation and reliability.

Credit bureau

Also known as a credit reporting agency, a company that gathers information on consumers who use credit and sells that information in the form of a credit report to credit lenders.

Credit counseling

Credit counseling can help you improve and build back your credit. A credit counselor can provide, credit education, confidential budget and debt counseling, debt repayment programs, and financial management education.

Credit report

A file maintained by a credit bureau that contains information about a person, such as where the person works and lives, information from creditors regarding money borrowed and payments made, and public record information such as whether the person has fi

Credit risk

The credit industry term meaning the level of risk or likelihood of future default by an individual borrower.

Credit score

A computer-generated number, based on a statistical model, that summarizes an individual's credit record and predicts the likelihood that a borrower will repay future obligations.

Credit Union

A federally regulated, not-for-profit cooperative financial institution that is owned and controlled by the people who use its services. Credit unions serve groups that share something in common, like where they work or go to church. You have to become a

Creditor

One to whom a debt is owed.

Creditworthiness

The ability to qualify for credit and repay debts.

Cul-de-sac

A dead-end street with a circular turn-around at the dead end.

Cumulative-use zoning

A type of zoning permitting a higher priority use even though different from the type of use designated for the area.

Curtesy

A husband's interest in the real property of his wife.

Debit

In a closing statement, an expense or money received against a credit.

Debit Card

A debit card is a plastic card, sometimes called a "check card." The card allows you to pay for goods and services at stores that accept these credit cards, but it is NOT a credit card.

Debt service

Principal and interest payments on a debt.

Debtor

The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.

Debt-to-income ratio

The percentage of gross monthly income that goes toward paying for the monthly housing expense, installment debts, alimony, child support, car payments and payments on revolving or open-ended accounts such as credit cards.

Decedent

A dead person.

Declaration of restrictions

The instrument used to record restrictive covenants on the public record.

Dedication

An appropriation of land or an easement therein by the owner to the public.

Deed

A written instrument that transfers an interest in real property when delivered to the grantee.

Deed in lieu of foreclosure

A conveyance of title to the mortgagee by a mortgagor in default to avoid a record of foreclosure. Also called friendly foreclosure.

Deed restrictions

Limitations on land use appearing in deeds.

Default

A failure to meet a payment or fulfill a credit obligation.

Default provision

Clause in a mortgage stating that mortgage will provide the right of foreclosure to the lender if the borrower fails to make payments as scheduled or fails to fulfill other obligations as set forth in the mortgage.

Defeasance clause

The clause in a mortgage or deed of trust giving the borrower the right to redeem the title and have the mortgage lien released at any time prior to default by paying the debt in full.

Defeasible

Subject to being defeated by the occurrence of a certain event.

Defeasible fee

A title that is subject to being lost if certain conditions occur.

Deficiency judgement

A judgement obtained by a mortgagee for the amount of money a foreclosure sale proceeds were deficient in fully satisfying the mortgage debt.

Demise

To convey an estate for years. Synonymous with lease or let.

Density

The number of persons or structures per acre.

Department of Housing and Urban Development (HUD)

A federal agency involved with housing.

Deposit

The money you add to your account using a deposit slip.

Depreciable asset

Property other than land held as an investment or for use in a business.

Depreciated value

The original basis of a property less the amount of depreciation taken at any point in time.

Depreciation

Loss in value from any cause.

Descent

The distribution of property of one who has died intestate to legally qualified heirs.

Devise

A gift of real property by will.

Devisee

The recipient of a gift of real property by will.

Direct Deposit

With direct deposit, your paycheck or benefit check is electronically transferred and directly deposited into your bank account. The amount of money is available immediately.

Discount points

A percentage of the loan amount required by the lender for making a mortgage loan.

Domestic corporation

Corporation within the state in which it is incorporated.

Dower

A wife's interest in the real property of her husband.

Down payment

Portion of sales price that is not mortgaged. Also known as due diligence.

Dual agency

The situation in which the real estate firm represents both the buyer and seller in the same transaction.

Due-on-sale-clause

See alienation clause

Duress

The inability of a party to exercise her free will because of fear of another party.

Earnest money

A deposit of money made by a buyer at the time of making an offer to demonstrate the earnest intent to purchase. Also called binder, good faith deposit, or escrow deposit.

Easement

A nonpossessory right of use in the land of another.

Easement by necessity

an easement created for the right to travel to a landlocked parcel of land.

Easement in gross

A personal right of use in the land of another without the requirement that the holder of the right own adjoining land.

Economic depreciation

Results from physical deterioration of property caused by normal use of the property.

Economic life

The period of time during which a property is economically beneficial to the owner.

Economic obsolescence

A loss in value caused by such things as changes in surrounding land-use patterns and failure to adhere to the principle of highest and best use.

Economic rent

The amount of rent established by the market value of a property.

Economic supply

Utilization of the physical supply of land.

Effective age

The age of a property based on the remaining economic life.

Effective interest rate

The actual rate of interest being paid.

Ejectment

A legal action to evict a tenant from property.

Eminent domain

The power of government to take private property for public use.

Enabling acts

Laws passed by state legislatures authorizing cities and counties to regulate land use within their jurisdictions.

Encroachment

A trespass on the land of another as a result of an intrusion by some structure or other object.

Encumbrance

A claim, lien, charge, or liability attached to and binding upon real property.

Enforceable

A contact in which the parties may legally be required to perform.

Environmental Protection Agency (EPA)

Federal agency responsible for protecting the public against abuses of the environment resulting from the use or development of land.

Equal Credit Opportunity Act (ECOA)

A federal law prohibiting discrimination in consumer loans.

Equity of redemption

The borrower's right to redeem the title pledged or conveyed in a mortgage or deed of trust after default and prior to a foreclosure sale by paying the debt in full, accrued interest, and lender's costs.

Escalation clause

A clause in a lease permitting the lessor to increase the rent.

Escheat

The power of government to take title to property left by a person who has died without leaving a will or qualified heirs.

Escrow account

An account maintained by the borrower with the lender in certain mortgage loans to accumulate the funds to pay an annual insurance premium, a real property tax, and/or a homeowner's association assessment.

Escrow agent

A neutral third party named to carry out the provisions of an escrow agreement.

Estate

An interest in real property sufficient to give the owner the right to possession of the property.

Estate at sufferance

Describes the situation of someone continuing to occupy property after lawful authorization has expired. A form of leasehold estate.

Estate at will

A leasehold estate that may by terminated at the will of either party.

Estate for life

An interest in land that is created for the duration of a tenant's life.

Estate for years

A leasehold estate of definite duration.

Estate from year-to-year

A leasehold estate that automatically renews itself for consecutive periods until terminated by notice given by either party. Also called estate from period-to-period or periodic tenancy.

Estate in remainder

Conveyance from grantor to A for life and then to a named person or persons upon the death of A.

Estate tax

Tax upon the inheritance of real property.

Estoppel

The prevention of a person from making a statement contrary to a previous statement.

Estovers

The right of a life tenant or lessee to cut timber on the property for fuel or to use in making repairs.

Et al

Latin term for "and another."

Et ux

Latin term for "and wife."

Eviction

A landlord's action that interferes with the tenant's use or possession of the property. Eviction may be actual or constructive.

Exclusive agency listing

A listing given to one broker only (exclusive) who is entitled to the commission if a sale is effected by the broker or any agent of the listing broker, but imposes no commission obligation on the owner who sells the property by the listing broker or an a

Exclusive right to sell listing

A listing given to one broker only who is entitled to the commission if the property is sold by anyone during the term of the listing contract.

Exclusive-use zoning

A type of zoning in which only the specified use may be made of property within the zoned district.

Executed contract

An agreement that has been fully performed.

Execution

The signing of a contract or other legal document.

Executor

A man appointed in a will to see that the terms of the will are carried out. Also called personal representative.

Executory contract

An agreement that has not been fully performed.

Executrix

A woman appointed in a will to see that the terms of the will are carried out. Also called personal representative.

Exempt

Relieved of liability.

Exercise of option

The purchase of optioned property by the optionee.

Express contract

A contract created verbally or in writing by the parties.

Fair Housing Act of 1968

A federal prohibition on discrimination in the sale, rental, or financing of housing on the basis or race, color, religion, sex, or national origin.

Fair market value

A price for property agreed upon between buyer and seller in a competitive market with neither party being under undue pressure.

Fannie Mae

The shortened name for the Federal National Mortgage Association. A privately owned corporation that purchases FHA, VA, and conventional mortgages.

Federal estate tax

Tax imposed by the federal government on estates of deceased persons.

Federal Home Loan Bank System

The federal agency that regulates federally chartered savings and loan associations.

Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac)

A corporation that is wholly owned by the Federal Home Loan Bank System that purchases FHA, VA and conventional mortgages.

Federal Housing Administration (FHA)

The federal agency that insures mortgage loans to protect lending institutions.

Federal National Mortgage Association (FNMA) (Fannie Mae)

A privately owned corporation that purchases FHA, VA, and conventional mortgages.

Federal Reserve System

The federal agency that regulates monetary policy and, thereby, the money supply and interest rates.

Fee simple absolute

An inheritable estate in land providing the greatest interest of any form of title.

Feudal system

A type of land ownership in existence during the Middle Ages whereby only the king could hold absolute title to real property.

FHA-insured loan

A mortgage loan in which the payments are insured by the Federal Housing Administration.

Fiduciary

A person, such as an agent, who is placed in a position of trust in relation to the person for whose benefit the relationship is created. Essentially the same as a trustee.

Finance charge

A charge imposed on the borrower in a mortgage loan consisting of origination fee, service charges, discount points, interest, credit report fees, and finders' fees.

First mortgage

A mortgage that is superior to later recorded mortgages.

Fixed lease

A lease in which the rental amount remains the same for the entire lease term. Also called flat, straight, or gross lease.

Fixed-rate mortgage

A mortgage in which the interest does not change.

Fixing up expenses

Costs incurred by the seller of a principal residence in preparing it for sale.

Fixture

Personal property that has become real property by having been permanently attached to real property.

Foreclosure

The legal procedure of enforcing payment of a debt secured by a mortgage or any other lien.

Foreign corporation

A corporation doing business in another state.

Forfeiture clause

A clause in a contract for deed providing for forfeiture of all payments by a buyer in default.

Fraud

An intentional false statement of a material fact.

Fraudulent representation

A false statement or the concealment of a material fact with the intent to deceive or to gain unfair advantage over another.

Free market

A market in which there is ample time for buyer and seller to effect a mutually beneficial purchase and sale without undue pressure or urgency.

Freehold estate

A right of title to land.

Friendly foreclosure

An absolute conveyance of title to the lender by the mortgagor in default to avoid a record of foreclosure. Also called a deed in lieu of foreclosure.

Fruits of industry

Growing things that require planting and cultivation.

Fruits of the soil

Growing things that do not require planting and cultivation but grow naturally and are perennials;designated in law as real property.

Fully amortizing mortgage

A mortgage in which the scheduled uniform payments will pay off the loan completely over the mortgage term.

Functional obsolescence

A loss in value resulting from such things as faulty design, inadequacies, overadequacies, and equipment being out-of-date.

Future interest

An owner of an estate who will vest at some time in the future.

Gain realized

The excess of the amount realized over the adjusted basis.

Good faith estimate

The lender's estimate of a borrower's settlement costs that is required by RESPA to be furnished to borrowers at time of loan application.

Government National Mortgage Association (GNMA) (Ginnie Mae)

A government agency that purchases FHA and VA mortgages.

Graduated lease

Lease in which the rental amount changes from period to period over the lease term.

Graduated payment mortgage (GPM)

A mortgage in which the payments are lower in the early years but increase on a scheduled basis until they reach an amortizing level.

Grant

A transfer of title to real property by deed.

Grantee

One who receives title to real property by deed.

Granting clause

The clause in a deed containing words of conveyance.

Grantor

One who conveys title to real property by deed.

Gross income

Income received without the subtraction of expenses.

Gross lease

Lease in which the tenant pays a fixed rent and lessor pays all costs of operating and maintaining the property.

Gross rent multiplier

A method of estimating the value of income property. Also called gross income multiplier.

Ground lease

A lease of unimproved land only.

Habendum clause

The clause in a deed beginning with the words "to have and to hold" and describing the estate granted.

Habitable

Suitable for the type of occupancy intended.

Hazard insurance

Insurance that protects owner of property from partial or total destruction of property.

Heirs

Persons legally eligible to receive property of a decendent.

Heterogeneous

A variety of dissimilar uses of property. Nonhomogeneous.

Highest and best use

The use of land that will preserve its utility and yield a net income flow in the form of rent that forms, when capitalized at the proper rate of interest, the highest present value of the land.

Holding over

The act of a tenant remaining in possession of property after the termination of a lease.

Holding period

The length of time a property is owned.

Homeowner's association

The organization of owners having the responsibility of providing for the operation and maintenance of the common areas of a condominium or residential subdivision.

Homestead

The land and dwelling of a homeowner.

Homestead exemption

An exemption of a specified amount of value of a homestead from the claims of creditors provided by state statute.

Homogeneous

Similar and compatible land uses.

Housing and Urban Development (HUD)

An agency of the federal government concerned with housing programs and laws.

Housing ratio

The ratio of housing expenses to the gross monthly income.

HUD Form No. 1

A standard settlement form required by RESPA.

Implied contract

A contract created by deduction from the conduct of the parties rather than from the direct words of the parties. Opposite of an express contract.

Implied warranty

A warranty presumed by law to exist in a deed though not expressly stated.

Improved land

Land on which structures or roads exist.

Improvements

Structures, walls, roads, etc.

Inchoate

In suspension or pending, possibly occurring at some future time.

Income approach

The primary method of estimating the value of properties that produce rental income. Also called appraisal by capitalization.

Income property

Property that produces rental income.

Incompetent

A person who is not capable of managing his own affairs.

Incorporeal

Intangible things such as rights.

Incurable depreciation

That which is not physically correctable or not economically practical to correct.

Indestructibility

A physical characteristic of land describing that land is a permanent commodity and cannot be destroyed.

Index lease

A lease and rent is tied to an economic condition, such as inflation or profits.

Ingress and egress

The right to enter (ingress) and to return (egress) from a parcel of land.

Inheritance basis

The tax basis for all real property received by heirs, which is the market value of the property on the date of the death of the decedent and not the market value at the time the decedent acquired the property.

Injunction

An instruction of a court to discontinue a specified activity.

Installment sale

A transaction in which the seller does not receive all of the sale price in the calendar year of the sale.

Instrument

A written legal document such as a contract, note, or mortgage.

Insurance value

The cost of replacing a structure completely destroyed by an insured hazard.

Interest

Money paid for the use of money. Also an ownership or right.

Intestate

A person who has died without leaving a valid will.

Intestate succession

Distribution of property by descent as provided by statute.

Invalid

Not legally enforceable.

Irrevocable

That which cannot by changed or canceled.

Land

The surface of the earth, the area above and below the surface, and everything permanently attached thereto.

Land contract

See bond for deed.

Land grant

The conveyance of land, as a gift for the benefit of the public.

Land trust

The condition of a title to land being held by a trustee for the benefit of others.

Land use regulations

Governmental controls over land use (e.g., zoning laws and building codes).

Landlocked

An adjective to describe property with no access to a public road.

Landlord

Owner or lessor of the property leased.

Late payments

Loan to credit payments that do not reach the lender or creditor on or before the payment due date. The indication of late payments on a credit report are very damaging to an individual's credit report.

Lawful

Legal, not prohibited by law.

Lease

A contract wherein a landlord gives a tenant the right of use and possession of property for a limited period of time in return for rent.

Leasehold estates

Nonfreehold estate. One of limited duration that provides the right of possession and control but not title.

Legal description

A description of land recognized by law.

Legal entity

A person or organization with legal capacity.

Lender

The person or entity providing credit or a loan to a borrower at specific terms and conditions. May be used interchangeably with the term creditor.

Lessee

A tenant under a lease.

Lessor

A landlord under a lease.

Leverage

The use of borrowed funds. The larger the percentage of borrowed money, the greater the leverage.

Levy

Imposition of a tax, executing a lien.

License

A personal privilege to do a particular act or series of acts on the land of another.

Lien

A claim that one person has against the property of another for some debt or charge which entitles the lienholder to have the claim satisfied from the property of the debtor.

Lien theory

the legal theory that a mortgage creates a lien against the real property pledged in the mortgage to secure the payment of a debt.

Lienee

One whose property is subject to a lien.

Lienor

The one holding a lien against another.

Life estate

A freehold estate created for the duration of the life or lives of certain named persons. A noninheritable estate.

Life estate in remainder

A form of life estate in which certain persons called remaindermen are designated to receive the title upon termination of the life tenancy.

Life estate in reversion

A form of life estate that reverts to the creator of the estate in fee simple upon termination.

Life estate pur autre vie

An estate in which the duration is measured by the life of someone other than the life tenant. See also pur autre vie.

Life tenant

One holding a life estate.

Like-kind property

Real of personal property that qualifies for tax treatment as a tax-free exchange.

Limited partnership

An organization consisting of one or more general partners and several limited partners.

Limited warranty deed

A term for warranty deed with covenants.

Line of credit

A preauthorized amount of credit offered to an individual, business or institution that is commonly secured against an asset such as a home (real estate).

Liquidated damages

An amount of money to be paid and received as compensation for a breach of contract.

Liquidity

The fact that an asset can be converted to cash.

Lis pendens

Latin term meaning "a lawsuit pending."

Listing contract

A contract whereby a property owner employs a real estate broker to market the property described in the contract.

Litigation

A lawsuit.

Loan commitment

The obligation of a lending institution to make a certain mortgage loan.

Loan origination points (fee)

Charge to cover the lender's expenses in originating the loan and offset any losses when mortgage is sold.

Loan-to-value ratio

The relationship between the amount of a mortgage loan and the lender's opinion of the value of the property pledged to secure the payment of the loan.

Location (situs)

An economic characteristic of land having the greatest effect on value of any other characteristic.

Market data approach

The primary method of estimating the value of vacant land and single-family owner-occupied dwellings. Also called comparable approach.

Market value

The value in terms of price agreed upon by a willing buyer and seller with neither being under any undue pressure and each being knowledgeable of market conditions at the time.

Marketable title

Title that is free from reasonable doubt and that a court would require a purchaser to accept.

Master deed

The instrument that legally establishes a condominium. Also called condominium declaration.

Material fact

An important fact that may affect a person's judgment.

Mechanic's lien

A statutory lien available to persons supplying labor (mechanics) to the construction of an improvement on land if they are not paid.

Metes and bounds

A system of land description by distances and directions.

Mill

One tenth of a cent.

Mineral rights

The right of the landowner to take minerals from the earth or to sell or lease this right to others.

Minor

A person who has not attained the statutory age of majority.

Misrepresentation

A false statement of a material fact.

Mortgage

A written instrument used to pledge a title to real property to secure the payment of a promissory note.

Mortgage assumption

The transfer of mortgage obligations to a purchaser of the mortgaged property.

Mortgage banker

A form of organization that makes and services mortgage loans.

Mortgage broker

One who arranges a mortgage loan between a lender and borrower for a fee.

Mortgage discharge fee

An assessment by the Registry of Deeds to record the discharge of the mortgage by the lending institution.

Mortgage interest

Interest that accrues on the mortgage form the date of closing to the first of the next month.

Mortgage loan value

The value sufficient to secure the payment of a mortgage loan.

Mortgage qualifying ratio

Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ratio is 28:36.

Mortgage satisfaction

Full payment of a mortgage loan.

Mortgagee

The lender in a mortgage loan receiving a mortgage from the borrower mortgagor.

Mortgagee's title insurance policy

A policy that insures a mortgagee against defects in a title pledged by a mortgagor to secure payment of a mortgage loan.

Mortgaging clause

The clause in a mortgage or deed of trust that demonstrates the intention of the mortgagor to mortgage the property to the mortgagee.

Mortgagor

The borrower in a mortgage loan who executes and delivers a mortgage to the lender.

Multiple exchange

A transaction in which more than two like-kind properties are exchanged.

Multiple listing service (MLS)

A system that pools the listed properties of all member companies.

Mutual agreement

The voluntary agreement of all parties to a contract as evidenced by an offer and acceptance.

Mutual rescission

The agreement of all parties to an executory contract to release each other.

Mutual savings banks

Similar to savings and loan associations. These banks provide a substantial source of financing for housing.

Negative amortization

A situation that occurs when a payment does not cover the interest owed and the interest is added to the balance of the loan.

Negative easement

A right in the land of another prohibiting the servient owner from doing something on the servient land because it will affect the dominant land.

Net income

Your take-home pay after taxes and other deductions. It is the amount of money that you actually received in your paycheck.

Net lease

Lease in which the tenant pays a base rent plus a percentage of the expenses.

Net listing

Not a type of listing but a method of establishing the listing broker's commission as all money above a specified net amount to the seller.

Nonconforming use

A use of land that does not conform to the use permitted by a zoning ordinance for the area. It may be lawful or unlawful.

Nonexclusive listing

A listing given to more than one real estate agency for the purpose of procuring a buyer.

Nonjudicial foreclosure

A form of foreclosure that does not require court action to conduct a foreclosure sale. Also called foreclosure under power of sale.

Nonrecourse note

A note in which the borrower has no personal liability for payment.

Notary public

A person authorized by a state to take oaths and acknowledgements.

Notice

Result of recording of a deed or document so as to afford it priority over documents filed at a later date; or, information required by the terms of a contract (such as notice to terminate a rental contract).

Notice of lis pendens

A notice on the public record warning all persons that a title to real property is the subject of a lawsuit and any lien resulting from the suit will attach to the title held by a purchaser from the defendant.

Novation

The substitution of a new contract for a prior contract.

Null and void

Invalid, without legal force or effect.

Obligee

One to whom an obligation is owed.

Obligor

One who owes an obligation to another.

Obsolescence

A loss in property value caused by economic or functional factors.

Occupancy

Physical possession of property.

Offer

A promise made to another conditional upon acceptance by a promise or act made in return.

Offer and acceptance

Necessary elements for the creation of a contract.

Offeree

One to whom an offer is made.

Offeror

One making an offer.

Open listing

A listing given to one or more brokers wherein the broker procuring a sale is entitled to the commission but imposes no commission obligation on the owner in the event the owner sells the property to a person who was not interested in the property by one

Open mortgage

A mortgage that does not impose a prepayment penalty.

Open-end mortgage

A mortgage that may be refinanced without rewriting the mortgage.

Operating expenses

The costs of operating a property held as an investment.

Option to purchase

A contract whereby a property owner (optionor) sells a right to purchase her property to a prospective buyer (optionee).

Ordinance

A law enacted by a local government.

Origination fee

A service charge made by a lending institution for making a mortgage loan.

Owner's title insurance policy

A policy insuring an owner of real property against a financial loss resulting from a title defect.

Ownership

The right to use, control, possess, and dispose of property.

Ownership in severalty

Title to real property held in the name of one person only.

Package mortgage

A mortgage in which personal property as well as real property is pledged to secure the payment of the note.

Partition

A legal proceeding dividing property of co-owners so that each holds title in severalty.

Partner

One of two or more owners of a partnership.

Partnership

A form of co-ownership for business reasons.

Party wall

A common wall used by two adjoining structures.

Percentage lease

A lease that is based on a portion of the sales.

Perch

A surveyor's measure 16 1/2 feet in length.

Percolation test

A test of soil to determine if it is sufficiently porous for the installation of a septic tank.

Periodic tenancy

A lease that automatically renews for successive periods unless terminated by either party. Also called an estate from year-to-year.

Personal property

All property that is not land and is not permanently attached to land. Everything that is moveable.

Physical deterioration

A loss in value caused by unrepaired damage or inadequate maintenance.

PITI

Principal, interest, taxes, and insurance.

Plan

Graphic representation of building details.

Planned unit development (PUD)

A form of cluster zoning providing for both residential and commercial land uses within a zoned area.

Planning

A program for the development of a city or county designed to provide for orderly growth.

Planning board

Local government organization that deals with the orderly growth and development of a town or city.

Plat

A property map.

Plat books

Books wherein plats are recorded on the public record.

Pledge

To provide property as security for the payment of a debt or for the performance of a promise.

Plottage

Combining two or more parcels of land into one tract having a value exceeding the total value of the individual parcels.

Points

A one-time charge by a lender to lower the interest rate.

Population density

The relationship of the number of people to a given land area.

Power of attorney

An instrument appointing an attorney-in-fact.

Predatory lending

Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and "packaging" credit insurance onto a loan.

Prepaid interest

Interest on the mortgage from the date of the closing to the first of the next month.

Prepaid items

Funds paid at closing to start an escrow account required in certain mortgage loans. Also called prepaids.

Prepayment penalty

A financial penalty imposed on a borrower for paying a mortgage prior to the expiration of the full mortgage term.

Prescription

A method of acquiring an easement by continuous and uninterrepted use without permission.

Prescriptive easement

An easement obtained by prescription.

Price

The amount of money paid for a property.

Prima facie

Latin term meaning "on the face of it." A fact presumed to be true unless disproved by contrary evidence.

Primary mortgage market

The activity of lenders making mortgage loans to individual borrowers.

Prime rate

The interest rate a lender charges the most creditworthy customers.

Principal

The amount of money borrowed to by a house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest paid to borrow that money.

Principal residence

The home the owner or renter occupies most of the time.

Private corporation

Corporation not organized to perform governmental functions.

Private land use control

The regulations of land use by individuals or nongovernment organizations in the form of deed restrictions and restrictive covenants.

Private mortgage insurance (PMI)

A form of insurance coverage required in high loan-to-value ratio conventional loans to protect the lender in case of borrower default in loan payments.

Private property

Property that is not owned by the government.

Probate

The procedure for proving a will.

Profit a prendre

The right to participate in the profits of the land of another.

Promissory note

A written promise to pay a debt as set forth in the writing.

Promulgate

To put in effect by public announcement.

Proration

Division of certain settlement costs between buyer and seller.

Public corporation

Governmental corporation, such as cities, towns, counties, school districts, and special bodies for public improvements.

Public land use control

The regulation of land use by government organizations in the form of zoning laws, building codes, subdivision ordinances, and environmental protection laws.

Public offering statement

Condominium documents that must be presented on the first sale of any unit.

Public property

Property owned by the government.

Public record

Record providing constructive notice of real property conveyances and other matters.

Pur autre vie

Latin term meaning "for the life of another." A life estate measured by the life of someone other than the life tenant.

Purchase and sale contract

Contracts in which there is an exchange of promises between buyer and seller. The buyer promises to pay an agreed-upon price and the seller promises to deliver a deed to that property.

Purchase money mortgage

A mortgage given by a buyer to a seller to secure the payment of all or part of the purchase price.

Qualifying the buyer

Determination of the loan amount a buyer may obtain based on income, debts, credit history, and money available for a down payment.

Quarter section

One-forth of a section containing 160 acres.

Quiet enjoyment

The use or possession of property that is undisturbed by an enforceable claim of superior title.

Quiet title action

A lawsuit to remove a cloud on a title.

Quitclaim

To relinquish or release a claim to real property.

Quitclaim deed

A deed of release that contains no warranty of title. It is used to remove a cloud on a title.

Quitclaim with convenant.

See limited warranty deed.

Radius

The distance from the center of a circle to the perimeter. A part of a metes and bounds description.

Range

An area of land defined by the rectangular survey system of land description.

Rate of return

The percentage of the net income produced by a property or other investment.

Ready, willing, and able

Describes a buyer who is ready to buy, willing to buy, and financially able to purchase.

Real estate

Land and everything that is permanently attached to land. Interchangeable with the terms real property and realty.

Real estate broker

A person or organization who negotiates real estate sales, exchanges, or rentals for others for compensation or a promise of compensation.

Real estate commission

A state agency charged with the obligation of enforcing real estate license laws.

Real Estate Investment Trust (REIT)

A form of business trust owned by shareholders making mortgage loans.

Real estate market

A local activity in which real property is sold, exchanged, leased, or rented at prices set by competing forces.

Real Estate Settlement Procedures Act (RESPA)

A federal law regulating activities of lending institutions in making mortgage loans for housing.

Real property

Land and everything permanently attached to land.

Realized gain

Actual profit resulting from a sale.

REALTOR

A registered trademark of the National Association of REALTORS. Its use is limited to members only.

Reciprocity

The mutual agreement by states to extend licensing privileges to licensees in each state.

Recognized gain

The amount of profit that is taxable.

Recording

The registration of a document on the public record.

Recording fees

An assessment by the Registry of Deeds for the recording of the warranty deed and mortgage.

Referral fee

A percentage of a broker's commission paid to another broker for referring a buyer or seller.

Refinancing

Obtaining a new mortgage loan to pay and replace an existing mortgage.

Reject

To refuse to accept an offer.

Release clause

A provision in a mortgage to release certain properties from the mortgage lien when the principal is reduced by a specified amount.

Remainder

A future interest in a life estate.

Remainderman

One having a future interest in a life estate.

Remise

To release or give up.

Replacement cost

The amount of money required to replace a structure with another structure of comparable utility.

Repossession

Regaining possession of property as a result of a breach of contract by another.

Reproduction cost

The amount of money required to build an exact duplicate of a structure.

Rescission

Cancellation of a contract when another party is in default.

Residual income

The income allocated to the land under the principle of highest and best use.

Restrictive covenants

Limitations on land use binding on all property owners. A form of private land-use control.

Reversion

A return of title to the holder of a future interest, such as the grantor in a life estate not in remainder.

Revocation

The withdrawl of an offer.

Right of alienation

Right of life tenant to transfer title to another person or to pledge the title as security for a debt.

Right of first refusal clause

A clause in a lease or condominium articles of association that provides for a lessee or an association to have the first opportunity to purchase the property before it is offered to anyone else.

Right of survivorship

The right of an owner to receive the title to a co-owner's share upon death of the co-owner, as in the case of joint tenancy and tenancy by the entirety.

Right to emblements

The right of a former owner or former tenant to reenter property to cultivate and harvest annual crops that were planted by her.

Riparian rights

The rights of an owner of property adjoining a water course such as a river, including access to, and use of, the water.

Rollover rule

A mandatory provision in the tax law providing that the tax on any gain realized in the sale of a principal residence must be postponed if the sale and purchase qualifies.

Run with the land

Rights that move from grantor to grantee along with a title.

Sales agent

Any person employed by or on behalf of an agency to perform real estate brokerage services and licensed by the commission as a sales agent.

Sales and leaseback

A transaction whereby an owner sells her property to an investor who immediately leases the property to the seller as agreed in the sales contract.

Sales contract

An agreement between buyer and seller on the price and other terms and conditions of the sale of property.

Salvage value

The amount estimated by an owner that will be realized from the sale of an asset at the end of the useful life of the asset.

Sandwich lease

New lease created when lessee sublets the premises.

Second mortgage

A mortgage first in priority after a first mortgage.

Secondary mortgage market

The market in which mortgages are sold by lenders.

Section

An area of land described by the rectangular survey system consisting of 640 acres and being one mile square.

Secured loan

A loan backed by collateral and secured against something tangible such as a home (real estate).

Seisin

Possession of a freehold estate in land.

Seizin

An alternate spelling for "seisin."

Setback

The distance from a front or interior property line to the point where a structure can be located.

Settlement

The consummation of a real estate contract. Also called closing.

Settlement costs

Expenses paid by buyers and sellers at the time of consummation of a real estate sales contract. Also called closing costs.

Shared appreciation mortgage (SAM)

A mortgage in which the lender shares in the appreciation in property value in return for making the loan at a fixed rate lower than the rate in effect at the time the loan is made.

Single agency

Relationship in which the agent is representing one client, either the seller or the buyer, in any one transaction.

Sole proprietorship

A business owned by one person.

Special assessment

A levy by a local government against real property for part of the cost of making an improvement to the property such as street paving, installing water lines, or making sidewalks.

Specific performance

An instruction of a court requiring a defaulting party to a contract to buy and sell real property to specifically perform his obligations under the contract.

Spot zoning

Rezoning of a particular property in a zoned area to permit a different type of use than that authorized for the rest of the area.

Square foot method

A method of estimating reproduction or replacement costs, calculated by multiplying the number of square feet in the structure being appraised by the cost per square foot to construct the building using the current cost per square foot.

Starker exchange

A tax-free exchange in which the proceeds of a sale of property are held beyond the control of the seller until the seller can locate a like-kind property in which to invest the proceeds.

Statute of Frauds

A law in effect in all states requiring certain contracts to be in writing to be valid.

Statute of limitations

State laws establishing the time period within which certain lawsuits may be brought.

Statutory foreclosure

A statutory time period after a foreclosure sale during which the borrower may still redeem the title.

Steering

The practice of directing prospective purchasers toward specific neighborhoods to avoid changing the ethnic and/or racial makeup of neighborhoods.