Real Estate Terms

Acre
A measure, usually of land, equal to 160 sq. rods (43, 560 sq. ft.) in any shape.

Action to Quiet Title
A court action to establish ownership to real property. Although technically not an action to remove a cloud on a title, the two actions are usually referred to as “Quiet Title” actions.

Adjustable Rate Mortgage (ARM)
A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate.

Agent
The person who is acting on behalf of the principal or client.

Agreement of Sale
In some states it is synonymous with a purchase agreement (Purchase Agreement). In other states, it is synonymous with a land contract (Land Contract).

Amortize
To reduce a debt by regular payments of both principal and interest, as opposed to interest only payment.

Annual Percentage Rate (APR)
A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.

Appraised Value
An option of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

Arrears
Payment made after its due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.

Assumability
When a property is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to the new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your property or home.

Assumption of Mortgage
Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust.

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.

Balloon Payment
The final payment of a mortgage which is larger than the regular payment; it usually extinguishes the debt.

Binder
A report issued by a title insurance company setting forth the condition of title and setting forth conditions, which, if satisfied, will cause will cause a policy of title insurance to be issued.

Blanket Mortgage
A mortgage covering more than one property of the mortgage.

Bridge Financing
A form of interim loan, generally made between a short term loan and a long term load, when the borrower needs to have more time before taking on long term financing.

Buydown
With a buydown, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period of a loan. The seller may increase the sales price to cover the cost of the buydown.

Certified Copy
A true copy, attested to be true by the officer holding the original.

Cestui que Trust
One having an equitable interest in property, legal title being vested in trustee.

Chain of Title
The chronological order of conveyance of a parcel of land, from the original owner to the present owner.

Chattel
Personal property.

Closing Statement
The statement which lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

Co-Maker
Equally responsible for repayment as the borrower.

Commitment
A written promise to make or insure a load for a specified amount and on specified items.

Comparables
Properties used as comparisons to determine the value of a specified property.

Condominium
A structure of two or more units, the interior space of which are individually owned.

Construction Loan
Short term financing of real estate construction. Generally followed by the long term financing called a “take out” loan, issued upon completion of improvements.

Contingency
The dependence upon a stated event which must occur before a contract is binding.

Contract of Sale
Depending on area of country, it may be a Land Contract or a Purchase Agreement.

Closing Cost
Expenses incurred in the closing of a real estate or mortgage transaction.

Cost Plus Contract
A building contract setting the builder’s profit at a set percentage of actual cost of labor and materials.

Contract Sales Price
The full purchase price as stated in the contract.

Declaration of Restrictions
A set of restrictions filed by a subdivider to cover an entire tract or subdivision.

Defective Title
Title to a negotiable instrument obtained by fraud. Title to real property which lacks some of the elements necessary to transfer a good title.

Depreciation
Decrease in value to real property improvements caused by deterioration or obsolescence.

Devise
Real estate by will.

Devisee
One to whom real estate is given by will.

Devisor
A testator who leaves real estate.

Direct Reduction Mortgage
An amortized mortgage. One on which principal and interest being computed on the remaining balance.

Disbursements
Payments made during the course of an escrow or at closing.

Documentary Tax Stamps
Stamps, affixed to a deed, showing the amount of transfer tax.

Easement
A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.

Eminent Domain
A government right to acquire private property for public use by condemnation, and the payment of just compensation.

Encroachment
Construction onto the property of another, wall, fence, etc.

Encumbrance
A claim, line charge, attached to and binding real property.

Equity
The difference between the market value of the property and the homeowners mortgage debt.

Escrow
Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event.

Fee Simple
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited.

Foreclosure
A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.

Full Disclosure
Revealing all the known facts which may affect the decision of a buyer or tenant.

General Lien
A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific deed.

Grandfather Clause
The clause in a low permitting the continuation of a use, business, etc., which, when was permissible but, because of a change in the law is now not permissible.

Ground Rent
Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.

Heir and Assigns
Words usually found in a deed, showing interest the grantee is receiving.

Home Owner Association
An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.

Impound Account
Account held by a lender for payment of taxes, insurance or other.

Independent Contractor
The term is most important as used to describe the relationship of broker and salesperson, employee or independent contractor. If employee, the broker must withhold income tax and pay social security, provide workmen’s compensation, and may be liable for some negligent acts of the salesperson while on the job. All of this is avoided by the broker is salesperson is an independent contractor.

Installment Sale
A tax term used to describe a sale which is usually accomplished by a use of a land contract.

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

Interest Rate
The percentage of an amount of money which is paid for its use for a specific time.

Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. The interests must equal, accruing under the same conveyance, and beginning at the same time. Upon 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.

Late Charge
A penalty for failure to pay an installment on time.

Legal Description
A description by which property can be definitely located by reference to surveys or recorded maps. Sometimes referred to simply as the legal.

Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.

Lender
A general term encompassing all mortgages, and beneficiaries under deeds of trust.

Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee, is interested in property.

Lien
An encumbrance against property for money, either voluntary or involuntary.

Life Estate
An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party.

Limited Partnership
A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, contributing capital and liable only to the amount contributed.

Lis Pendens
A legal notice recorded to show pending litigation relating to real property and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.

Loan Package
The information given to the lender regarding the borrower and the property necessary to decide to give or not to give the loan.

Loan Ratio
The amount of a load to the value or selling price of real property.

Loan-to-Value Ratio
The ration of the mortgage load amount to the properties appraised value (or the selling price, whichever is less).

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

Mortgage or Deed of Trust
Written pledge of real property given by the mortgagor to secure a debt. Should be recorded in the County Recorders Office.

Mortgagee
The lender of money or the receiver of the mortgage amount.

Mortgagor
The borrower of money or the receiver of the mortgage document.

Mortgage Insurance
Insurance required for loans with a loan above 80.01%

Nonconforming Use
A property which does not conform to the zoning of an area.

Note
A written promise to repay a certain sum of money on specified terms.

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.

Origination Fee
A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.

Owners Policy
Title insurance for the owner of property, rather than a lien holder.

Package Mortgage
Mortgage covering both real and personal property.

Paper
A mortgage, deed of trust, or land contract, which is given instead of cash.

Partial Release
A release of a portion of property covered by a mortgage.

Perc Test (Percolation)
The test to determine the capability of the soil to absorb liquid, both for construction and septic systems.

Permanent Mortgage
A mortgage on a completed construction on the same property under one mortgage or trust deed.

Property Tax
Generally, tax levied on both real and personal property.

Prorate
To divide in proportionate shares, such as taxes, insurance, rent or other items.

Purchase Money Mortgage
A mortgage given by the buyer to the seller as part of the purchase consideration, as opposed to a hard money mortgage.

Quit Claim Deed
A deed operating as a release; intended to pass any title, interest, or claim with the grantor may have in the property.

Real Estate
Land anything permanently affixed to the land, and those things attached to the building.

Recital
Setting forth in a deed or other writing some explanation for the transaction.

Recourse
The right of the holder of a note secured by a mortgage or deed of trust to look personally at the borrower or endorser for payment.

Refinancing
The repayment of a debt from the proceeds of a new loan using the same property as security.

Release
An instrument releasing property from the lien of the mortgage, judgment, etc.

Recision of Contract
Annulling a contract and placing the parties to it in a position as if there had not been a contract.

Revenue Stamps
Municipal tax on a sale of real property.

Secondary Financing
A loan secured by a mortgage or trust deed, which lien is junior to another mortgage or trust deed.

Security
Real or personal property pledged by a borrower, as additional protection for the lender’s interest.

Septic System
A sewage system, whereby waste is drained through pipes and a tile field into a septic field.

Set Back Ordinance
Regulates the distance from the lot line to the point where improvements may be constructed.

Settlement Statement
A statement prepared by broke, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale.

Signed Sealed and Delivered
A phrase indicating that everything necessary to convey has been done by the grantor.

Specific Performance
An action to compel the performance of a contract, when money damages for breach would not be satisfactory.

Substitute of Trustee
A document which is recorded to change the trustee under the deed of trust.

Tax Lien
Lien for nonpayment of taxes.

Tax Sale
Public sale of property at auction by government authority, after a period of nonpayment of property taxes.

Tenancy by the Entirety
A form of ownership by husband and wife whereby each owns the entire property. In event of death of one, the survivor owns the property without probate.

Title
Often used interchangeably with the work ownership. It indicated the accumulation of all rights in property, the owner and others.

Title Insurance
An insurance policy which protects the insured (purchaser and lender) against loss arising from defects in the title.