I have put together a glossary with the most common terms used in
real estate. These terms are organized alphabetically. Click on a
letter for more definitions.
I hope this glossary will be useful to you. Let me know if there
are any other terms you want included. |
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| A |
| Abandonment: The voluntary
surrender of property rights, with no intention of reclaiming
them and without vesting interest in another person. Nonuse is
not necessarily abandonment. |
| Absorption rate: An estimate
of the rate at which a particular classification of space -
such as new office space, new housing, new condominium units
and the like - will be sold or occupied each year.
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| Abstract (or Abstract Of
Title): A summary of the public records relating to
the title to a particular property. An attorney or title
insurance company reviews an abstract of title to determine
whether there are any title defects which must be cleared
before a buyer can purchase clear, marketable, and insurable
title. The abstract also identifies encumbrances, easements
and covenants that affect the property. Also known as a Title
Report. |
| Abutter: A person whose
property abuts, is contiguous, or joins at a border or
boundary; where no other land, road or street
intervenes. |
| Acceleration Clause: Condition
in a mortgage that may require the balance of the loan to
become due immediately, if regular mortgage payments are not
made or for breach of other conditions of the mortgage. Many
states have statutes which limit the enforcement of these
provisions. |
| Acceptance: The expression of
the intention of the person receiving an offer (offeree,
usually the seller) to be bound by the terms of the offer. The
acceptance must be communicated to the offeror and must be in
writing to be enforceable. The buyer has the right to revoke
the offer anytime before the seller's acceptance.
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| Accession: Acquisition of
title to additional improvements to real property as a result
of annexation of fixtures or of accretion of alluvial
deposits. |
| Accretion: An increase in dry
land by gradual deposit of waterborne, solid material and
riparian land, i.e., accretion by alluvion. The owner of
riparian land becomes owner of title to land formed by
accretion. Antonym: erosion. |
| Accrued depreciation: The
difference between the present worth of improvements and the
reproduction or replacement cost new, both measured on the
appraisal date. |
| Acknowledgment: A formal
declaration made before an authorized official by a person
executing a document, that he signs the document by a free act
and deed. The official is usually a notary public who
witnesses the signature and verifies the identity of the
person. |
| Acquisition: The act of
becoming the owner of certain property; used also of the thing
or property acquired. |
| Acre: A measure of land
equaling 43,560 square feet; or 4,840 square yards; or 160
square rods; or a tract about 208.71 feet square.
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| Acre foot of water: A volume
of water that will cover an area of one acre to the depth of
one foot: 43,560 cubic feet. |
| Active installation: An
installation in continuous use by active Army
organizations. |
| Actual Cash Value: An amount
equal to the replacement value of damaged property minus
depreciation. |
| Ad
valorem tax: A tax on the value of the object or
thing subject to taxation. |
| Adjustable-Rate Mortgage
(ARM): Also known as a variable-rate loan, usually
offers a lower initial rate than fixed-rate loans. The
interest rate can change at specified time periods based on
changes in an interest rate index that reflects current
finance market conditions, such as the LIBOR index or the
Treasury index. The ARM promissory note states maximum and
minimum rates. When the interest rate on an ARM increases, the
monthly payments will increase and when the interest rate on
an ARM decreases, the monthly payments will be lower.
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| Adjustment Period: The time
between interest rate adjustment dates for an ARM. They are
usually the initial period between the time the ARM is
originated and the first interest rate change date, and
subsequent adjustment periods between each interest rate
change after the first interest rate change. |
| Administrator: A person
appointed by the court to manage and settle the estate of a
deceased person who has left no will. |
| Adverse possession:
Acquisition of title to real property owned by someone else,
by open, notorious, and continuous possession for the
statutory period of time. Burden to prove title is on the
possessor, who does not have a marketable title until he
obtains and records a judicial decree quieting title. No right
of adverse possession may be obtained against the United
States. |
| Affidavit: A written
declaration, sworn before an officer who has authority to
administer oaths. |
| Agreement of Sale: Known by
various names - such as contract of purchase, purchase
contract, purchase agreement, purchase & sales agreement,
or sales agreement - according to local custom. This is a
written contract in which a seller agrees to sell and a buyer
agrees to buy the subject property. This contract spells out
specific terms and conditions of the agreement and is signed
by both parties. |
| Air
rights: The rights vested by a grant of an estate in
real property to build upon, occupy, or use, in the manner and
degree permitted, all or any portion of space above the ground
or any other stated elevation within vertical planes, the
basis of which corresponds with the boundaries of the real
estate described in the grant. |
| Alienation: The voluntary
transfer of real property from one person to another.
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| Allotment: Authorization by
the head of an agency to subordinates to incur financial
obligations up to a specified amount. An agency makes
allotments under the regulations in OMB Circular No. A-34, and
not to exceed the amount allowed by OMB. |
| Alluvion: a kind of accretion
on riparian land by action of water which deposits sediment.
See also alluvium, avulsion. |
| Alluvium: Sand, clay or mud
deposited as sediment on riparian land. |
| Amenities: Tangible and
intangible benefits generated and received through exercise of
rights to real property, not necessarily in the form of
money. |
| Amortization: A term used to
describe the process of paying off a loan over a predetermined
period of time at a specific interest rate. The amortization
of a loan includes payment of interest and a portion of the
outstanding principal balance during each payment
cycle. |
| Amortization period: The
period of time for economic recovery of the net investment in
a project. This period is the lesser of 1) the period of time
over which the plan can be expected to serve a useful purpose,
or 2) the period of time when further discounting of
beneficial and adverse effects will not appreciably influence
design. |
| Amortization Schedule:
Provided by mortgage lenders, the schedule shows how over the
term of your mortgage the principal portion of the mortgage
payment increases and the interest portion of the mortgage
payment decreases. |
| Animal Unit: A measure of
numbers of livestock equivalent to a mature cow. One A.U.
equals 1,000 pounds live weight, or one cow, horse, or mule;
five sheep or swine; six goats. |
| Animal unit month: A measure
of forage or feed sufficient to feed one animal unit for 30
days. Usually expressed relative to acres of land.
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| Annexation: The act of
attaching, adding or joining one thing to another, generally a
smaller or subordinate thing with a large or principal thing.
Usually with respect to land or fixtures. |
| Annual Percentage Rate (APR):
The cost of credit expressed as a yearly rate. The APR
includes the interest rate, points, broker fees and certain
other credit charges that the borrower is required to
pay. |
| Application Fee: The fee that
a mortgage lender charges to apply for a mortgage to cover
processing costs. |
| Apportionment: A distribution
by OMB of amounts available for obligation in an appropriation
or fund account, including budgetary reserves established by
law. An apportionment divides amounts by specific time periods
(quarters), activities, projects, objects, or a
combination. |
| Appraisal: A professional
analysis, including references to sales of comparable
properties, used to estimate the value of the property.
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| Appraiser: A professional who
conducts an analysis of the property, including references to
sales of comparable properties in order to develop an estimate
of the value of the property. The appraiser's report is called
an "appraisal". |
| Appreciation: An increase in
the market value of a home due to changing market conditions
and/or home improvements. |
| Appropriation: Authorization
by act of Congress permitting Federal agencies to incur
obligations and make payments out of the 'treasury for
specific purposes. |
| Appropriations bill: A bill
that gives legal authority to spend or obligate money from the
Treasury. An appropriations bill usually provides the actual
monies approved by authorization bills, but not necessarily
the full amount permissible. |
| Appurtenance: Something
annexed to another principal thing and which passes as
incident to it, for example a right of way or barn passing
with a principal property. |
| Arbitration: A process where
disputes are settled by referring them to an impartial third
party (arbitrator) chosen by the disputing parties who agree
in advance to abide by the decision of the arbitrator. There
is a hearing where both parties have an opportunity to be
heard, after which the arbitrator issues the decision.
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| Asbestos: A toxic material
that was once used to make insulation and fireproofing
material in houses. Because some forms of asbestos have been
linked to certain lung diseases, it is no longer used in new
homes. However, some older homes may still have asbestos in
these materials. |
| Assets: Everything of value an
individual owns. |
| Assumption of Mortgage: An
obligation undertaken by the purchaser of property to be
personally liable for payment of an existing mortgage. In an
assumption, the purchaser is substituted for the original
mortgagor in the mortgage instrument and the original
mortgagor is to be released from further liability in the
assumption. T mortgagee's consent is required to release the
original mortgagor. The original mortgagor should always
obtain a written release from further liability if he desires
to be fully released under the assumption. Failure to obtain
such a release renders the original mortgagor liable if the
person assuming the mortgage fails to make the monthly
payments. An "Assumption of Mortgage" is often confused with
"purchasing subject to a mortgage." When one purchases subject
to a mortgage, the purchaser agrees to make the monthly
mortgage payments on an existing mortgage, but the original
mortgagor remains personally liable if the purchaser fails to
make the monthly payments. Since the original mortgagor
remains liable in the event of default, the mortgagee's
consent is not necessarily required for a sale subject to a
mortgage. |
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| C |
| Capacity: Your ability to make
your mortgage payments on time. This depends on your income
and income stability, your assets and reserves, and the amount
of your income each month that is available after you have
paid for your housing costs, debts and other
obligations. |
| Certificate of Title: A
certificate issued by a title company or a written opinion
rendered by an attorney that the seller has good marketable
and insurable title to the property which he is offering for
sale. A certificate of title offers no protection against any
hidden defects in the title which an examination of the
records could not reveal. The issuer of a certificate of title
is liable only for damages due to negligence. The protection
offered a homeowner under a certificate of title is not nearly
as great as that offered in a title insurance policy.
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| Closing: The actual process
whereby all parties to a real estate transaction conclude the
details of a sale or mortgage. This process includes the
signing and transfer of documents and the distribution of
funds. |
| Closing (Closing Date): When
the real estate transaction between buyer and seller is
completed. The buyer signs the mortgage documents and the
closing costs are paid. Also known as the settlement
date. |
| Closing Agent: A person that
coordinates closing-related activities, such as recording the
closing documents and disbursing funds. |
| Closing Costs: The expenses
which buyers and sellers normally incur to complete a
transaction in the transfer of ownership or mortgage of real
estate. These costs are in addition to price of the property
and are items prepaid at the closing day. This is a general
list of buyer's and seller's expenses: Loan Fees, Documentary
Stamps on Notes, Cost of Abstract, Recording Deed and
Mortgage, Documentary Stamps on Deed, Escrow Fees, Real Estate
Commissions, Attorney's Fees, Title Insurance, Survey Charge,
Appraisal Fees, Inspection Fees. The agreement of sale
negotiated previously between the buyer and the seller should
state in writing who will pay each of the above costs or how
they will be split. Most areas have local customs that guide
which party typically pays which expense. |
| Closing Statement: An
accounting of funds made at the completion of every real
estate transaction. |
| Cloud On Title: An outstanding
claim, condition or encumbrance which adversely affects the
marketability of title. |
| Collateral: Property which is
pledged as security for a debt. In the case of a mortgage, the
collateral would be the land, the house, and other buildings
and improvements. |
| Commission: Money paid to a
real estate agent or broker by the seller as compensation for
finding a buyer and completing the sale. Usually it is a
percentage of the sale price -- 5 to 7 percent on houses, and
can be up to 10 percent on land. |
| Commitment Letter: A letter
from your lender that states the amount of the mortgage, the
number of years to repay the mortgage (the term), the interest
rate, the loan origination fee, the annual percentage rate and
the monthly charges. |
| Concession: Something yielded
or conceded in negotiating a transaction. |
| Condemnation: The taking of
private property for public use by a government unit with
payment of just compensation under the government's power of
eminent domain. Condemnation may also be a determination by a
governmental agency that a particular building is unsafe or
unfit for use. |
| Condominium: A unit in a
multiunit building. The owner of a condominium unit owns the
unit itself and has the right, along with other owners, to use
the common areas but does not own the common elements such as
the exterior walls, floors and ceilings or the structural
systems outside of the unit; these are owned by the
condominium association. There are usually condominium
association fees for maintenance for building and property
upkeep, taxes and insurance on the common areas and reserves
for improvements. |
| Contractor: In the
construction industry, a contractor is one who contracts to
erect buildings or portions of them. There are also
contractors for each phase of construction: heating,
electrical, plumbing, air conditioning, road building, bridge
and dam erection, and others. |
| Conventional Mortgage: A
mortgage loan not insured by HUD (FHA loans) or guaranteed by
the Veterans' Administration (VA loans). It is subject to
conditions established by the lending institution and State
statutes. The mortgage rates may vary with different
institutions and between States. |
| Cooperative Housing: An
apartment building or a group of dwellings owned by a
corporation, the stockholders of which are the residents of
the dwellings. It is operated for their benefit by their
elected board of directors. In a cooperative, the corporation
or association owns title to the real estate. A resident
purchases stock in the corporation which entitles him to
occupy a unit in the building or property owned by the
cooperative. While the resident does not own his unit, he has
an absolute right to occupy his unit for as long as he owns
the stock. |
| Counter-offer: An offer made
in return by the person who rejects the previous offer.
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| 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: 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 History: A credit
history is a record of credit use. It is comprised of a list
of individual consumer debts and an indication as to whether
or not these debts were paid back in a timely fashion or "as
agreed." Credit institutions have developed a complex
recording system of documenting your credit history. This is
called a credit report. |
| Credit Report: A document used
by the credit industry to examine an individual's use of
credit. It provides information on money that individuals have
borrowed from credit institutions and a history of
payments. |
| Credit Score: A
computer-generated number that summarizes an individual's
credit profile and predicts the likelihood that a borrower
will repay future obligations. |
| Creditworthy: Your ability to
qualify for credit and repay debts. |
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| D |
| Debt: A sum of money owed from
one person or institution to another person or
institution. |
| Debt-to-Income Ratio: The
percentage of gross monthly income that goes toward paying for
your monthly housing expense, installment debts, alimony,
child support, car payments, and payments on revolving or
open-ended accounts such as credit cards. |
| Deed: The legal documents
conveying title to a property. |
| Deed of Trust: A legal
document in which the borrower conveys the title to a 3rd
party (trustee) to hold as security for the lender. When the
loan is paid in full the trustee reconveys the deed to the
borrower. If the borrower defaults on the loan the trustee
will sell the property and pay the lender the mortgage
debt. |
| Default: Failure to perform a
legal obligation; a default includes failure to pay on a
financial obligation, but may also be a failure to perform
some action or service that is nonmonetary. |
| Deposit: The amount of money
you put down on a house to hold it. |
| Depreciation: A decline in the
value of a house due to changing market conditions, decline of
a neighborhood or lack of upkeep on a home. |
| Documentary Stamps: A State
tax, in the forms of stamps, required on deeds and mortgages
when real estate title passes from one owner to another. The
amount of stamps required varies with each State and in some
States stamps are no longer used. In some States these are
also known as Transfer Taxes. |
| Downpayment: The amount of
money to be paid by the purchaser to the seller upon the
signing of the agreement of sale, also known as Earnest Money.
The downpayment may not be refundable if the purchaser fails
to buy the property without good cause. If the purchaser wants
the downpayment to be refundable, he should insert a clause in
the agreement of sale specifying the conditions under which
the deposit will be refunded, if the agreement does not
already contain such clause. If the seller cannot deliver good
title, the agreement of sale usually requires the seller to
return the downpayment and to pay interest and expenses
incurred by the purchaser. Downpayment also refers to the
difference between the sales price and maximum mortgage
amount. It is expressed as a dollar figure or a percentage of
the purchase price. For example, when a house is purchased for
$100,000 and $90,000 is borrowed to finance the purchase, then
the downpayment is said to be 10% ($10,000). |
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| E |
| Earnest Money Deposit: The
deposit you make to show that you are committed to buying the
home. The deposit will not be refunded to you after the seller
accepts your offer, unless one of the sales contract
contingencies is not satisfied. |
| Encroachment: An obstruction,
building, or part of a building or other improvement that
intrudes beyond a legal boundary onto neighboring land. A
common example would be fences or walls that are built on the
other side of a property line and thereby "encroach" on the
neighbors property. |
| Encumbrance: A legal right or
interest in land that affects or limits complete ownership and
control over property. It can take numerous forms, such as
zoning ordinances, easement rights, claims, mortgages, liens,
charges, a pending legal action, unpaid taxes or restrictive
convenants. An encumbrance does not necessarily prevent
transfer of the property to another, but may diminish its
value. A title search will usually reveal the existence of
such encumbrances, and it is up to the buyer to determine
whether he wants to purchase the property with the
encumbrance. |
| Equity: The value in your home
above the total amount of the liens against your home. If you
owe $100,000 on your house but it is worth $130,000, you have
$30,000 of equity. |
| Escrow: The holding of money
or documents by a neutral third party prior to closing. It can
also be an account held by the lender (or servicer) into which
a homeowner pays money for taxes and insurance. |
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| G |
| General Warranty Deed: A deed
which conveys not only all the grantor's interests in and
title to the property to the grantee, but also warrants that
if the title is defective or has a "cloud" on it (such as
mortgage claims, tax liens, title claims, judgments, or
mechanic's liens against it) the grantee may hold the grantor
liable. |
| Gift Letter: A letter that a
family member writes verifying that he/she has given you a
certain amount of money as a gift and that you do not have to
repay it. You can use this money towards a portion of your
down payment through some mortgage products. |
| Good-Faith Estimate: A written
statement itemizing the approximate costs and fees for the
mortgage. |
| Grantee: That party in the
deed who is the buyer or recipient. |
| Grantor: That party in the
deed who is the seller or giver. |
| Gross Monthly Income: The
income you earn in a month before taxes and other deductions.
Under certain circumstances, it may also include rental
income, self-employed income, income from alimony, child
support, public assistance payments, and retirement
benefits. |
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| H |
| Hazard Insurance: Protects
against damages caused to property by fire or other common
hazards. |
| Home Inspection: A
professional inspection of a home to review the condition of
the property. The inspection should include an evaluation of
the plumbing, heating and cooling systems, roof, wiring,
foundation and pest infestation. |
| Homeowner's Insurance: A
policy that protects you and the lender from fire or flood,
which damages the structure of the house; a liability, such as
an injury to a visitor to your home; or damage to your
personal property, such as your furniture, clothes or
appliances. |
| Housing Expense Ratio: The
percentage of your gross monthly income that goes toward
paying for your housing expenses. |
| HUD: The United States
Department of Housing and Urban Development. Federal Housing
Administration (FHA) is a division of HUD which insures home
mortgage loans made by lenders and sets minimum standards for
such homes. |
| HUD-1 settlement statement: A
final listing of the costs of the mortgage transaction. It
provides the sales price, and down payment, as well as the
total settlement costs required from the buyer and
seller. |
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| P |
| Plat: A map or chart of a lot,
subdivision or community drawn by a surveyor showing boundary
lines, buildings, improvements on the land, and easements.
Plats are generally kept as records of the county, parish or
other local government entity. |
| Points (also Discount Points):
An amount of money paid to a lender to obtain a loan at a
certain interest rate. A point is one percent of the principal
amount of the loan. For example, if a loan is for $100,000,
one point is $1,000. Points are paid at closing. Buyers are
prohibited from paying points on FHA or VA guaranteed loans;
however sellers can pay. On a conventional mortgage, points
may be paid by either buyer or seller or split between
them. |
| Pre-approval Letter: A letter
from a mortgage lender indicating that you qualify for a
mortgage of a specific amount. It also shows a home seller
that you are a serious buyer. |
| Pre-qualification letter: A
letter from a mortgage lender that states that you are
pre-qualified to buy a home but does not commit the lender to
a particular mortgage amount. |
| 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 "packing" credit insurance on to a loan.
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| Prepayment: Payment of
mortgage loan, or part of it, before due date. Mortgage
agreements often restrict the right of prepayment either by
limiting the amount that can be prepaid in any one year or
charging a prepayment penalty. The Federal Housing
Administration does not permit such restrictions in FHA
insured mortgages. |
| Principal: The amount of money
borrowed to buy your house or the amount of the loan that has
not yet been paid back to the lender. This does not include
the interest you will pay to borrow that money. The principal
balance (sometimes called the outstanding or unpaid principal
balance) is the amount owed on the loan at any given time. It
is the original loan amount minus the total repayments of
principal you have made to date. |
| Private Mortgage Insurance:
See Mortgage Insurance. |
| Property Appreciation: See
Appreciation. |
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| R |
| Radon: A toxic gas found in
the soil beneath a house that can contribute to cancer and
other illnesses. |
| Rate Cap: The limit on the
amount that the interest rate on an ARM can increase or
decrease during any one adjustment period. |
| Ratified Sales Contract: A
contract that shows both you and the seller of the house have
agreed to your offer. This offer may include sales
contingencies, such as obtaining a mortgage of a certain type
and rate, getting an acceptable inspections, making repairs,
closing by a certain date, and the like. |
| Real Estate Broker: A licensed
middle man or agent who represents buyers and/or sellers in
real estate transactions. Brokers' fees for their services are
usually charged on a commission basis. |
| Real Estate Professional: An
individual who provides services in buying and selling homes.
The real estate professional is paid a percentage of the home
sale price by the seller. Unless you have specifically
contracted with a buyer's agent, the real estate professional
represents the interest of the property seller. Real estate
professionals may be able to refer you to local lenders or
mortgage brokers, but are generally not involved in the
lending process. |
| Refinance: Obtaining a new
mortgage with all or some portion of the proceeds used to pay
off the original mortgage. |
| Refinancing: The process where
a borrower pays-off one loan with the proceeds from another
loan. A property can be refinanced with a new loan from the
current holder of the mortgage or from a new lender.
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| Replacement Cost: The cost to
replace damaged personal property without a deduction for
depreciation. |
| Restrictive Covenants (or
Covenants): Private restrictions limiting the use of
real property. Restrictive covenants may bind all subsequent
purchasers of the land or may be binding only between the
original seller and buyer. Restrictive covenants may affect
the property's value and marketability of title. Restrictive
covenants are used for many purposes and may limit the use of
the property, regulate size, style or price range of buildings
to be erected, or prevent particular businesses from operating
or activities occurring. Covenants are widely used today
because of the proliferation of privately planned communities
which use them as a tool to control and guide future
development. |
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| S |
| Securities: A financial form
that shows the holder owns a share or shares of a company
(stock) or has loaned money to a company or government
organization (bond). |
| Special Assessments: A special
tax imposed on property, individual lots or all property in
the immediate area, for road construction, sidewalks, sewers,
street lights, or other public projects that benefit
particular property owners. In the context of condominium and
private community association, special assessments are charges
to property owners, over and above their customary periodic
payments, to fund special projects |
| Special Warranty Deed: A deed
in which the grantor warrants or guarantees the title only
against defects arising during grantor's ownership of the
property and not against title defects existing before the
time of the grantor's ownership. |
| State Stamps: See Documentary
Stamps. |
| Survey: A map or plat made by
a licensed surveyor showing the results of measuring the land
with its elevations, improvements, boundaries, and its
relationship to surrounding tracts of land. A survey is
sometimes required by the lender to assure him that a building
is actually sited on the land according to its legal
description. |
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