The following definitions
are offered for your convenience. These are terms that you
may encounter during your real estate projects. If there
are terms and acronyms that you would like to know the meaning
of, send me a message and I will be happy to reply.
Either click on the letter or just scroll down.
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- A unit of land measurement. There are 43,560 square
feet in an acre. A perfectly square acre has sides of 208.71
RATE MORTGAGE (ARM) - A mortgage without an expressed
fixed rate. This kind of mortgage has a rate that adjusts
up or down according to some specified economic index. Also
called a variable-rate mortgage (VRM).
POSSESSION - The act of acquiring title to property
by continuous and outright possession against the title
of another for a specific period of time.
- An agency relationship is created when you appoint
someone to act on your behalf. In so doing, the agent then
becomes bound by certain fiduciary duties, which include
obedience, loyalty, disclosure, confidentiality, accountability
and reasonable care and diligence. An agency relationship
can be created by a desire to be represented and a consent
to represent, however it is more often created as a result
of a listing agreement or a buyer representation agreement.
OF SALE - A written document or contract in which
a purchaser agrees to buy and a seller agrees to sell a
- The systematic repayment of a loan over a specific
period of time at a specific rate of interest.
SCHEDULE - A table showing how a loan is systematically
repaid during its term.
PERCENTAGE RATE (APR) - Sometimes called the “true”
rate of interest, it includes interest and certain loan
fees and discount points.
- An estimate of the fair market value of a specific
property arrived at through application of certain techniques
which consider many market condition and economic aspects.
- A person who conducts appraisals and writes reports
of the appraisal. Usually certified by a state regulatory
- An increase in property value, due to a variety
of market and economic conditions.
- Anything which is a part of, or annexed to real
property, either attached or not, such as a building, or
an easement, that it will pass as part of the property upon
VALUE - A value placed on property by the legal taxing
body for the purpose of determining real estate taxes.
- A specific one - event tax designated for a specific
- A person, usually an employee of, or an independent
contractor for a taxing body who estimates the value of
property for tax purposes. Very often this value is not
the fair market value.
- The act of transferring or assigning one’s rights
under a contract or agreement to another.
- The person to whom rights are assigned or transferred.
A LOAN - A buyer assumes the responsibility to repay
an existing loan under all of its existing terms and conditions.
MORTGAGE - A mortgage in which the final payment
is larger than any of the preceding payments. A balloon
mortgage is usually one in which the loan has been amortized
for a specific period of time, but which provides for a
balloon payment at some specific time prior to the expiration
of that period of time.
PAYMENT - The final payment on a balloon mortgage.
- A legal proceeding wherein one is granted relief
from debts due to the inability to pay the debts.
- Personal property received under a will.
MORTGAGE - A mortgage pledging more than one property
as collateral for a loan.
- A person licensed by the appropriate state regulatory
authority to act on behalf of another in the sale or purchase
of real estate. In most states, licensed salespeople must
be licensed under a broker.
CODES - Safety and fire codes adopted by municipal
bodies for the purpose of establishing minimum construction
criteria for buildings.
LIMIT LINE OR SETBACK - Distances from the ends and/or
sides of the lot beyond which construction may not extend.
- A payment required by a lender at the time a loan
is made to reduce the interest rate.
BROKER - A licensed real estate broker, together
with his or her affiliated agents, who represent buyers
and owe their buyer clients certain fiduciary duties.
MARKET - A real estate market in which the supply
exceeds the demand.
- An upper limit on the increase in the interest
rate on an Adjustable Rate Mortgage (ARM).
GAINS - The sale price less sales costs, basis and
capital improvements. Usually subject to income tax at a
rate less than ordinary income.
LOSS - Same as capital gains except that a loss occurs
rather than a gain.
FLOW - The amount of money remaining from an investment
property when all operating costs and loan costs are subtracted
from the gross income.
OF TITLE - A document prepared by an attorney or
a title company certifying that a property has good and
marketable title. Not title insurance, the certificate of
title only covers title defects normally evident in a title
- (Sometimes referred to as Settlement.) The process
of formally and finally exchanging all monies and documents
as a result of terms defined in an agreement of sale.
COSTS - All the expenses incurred by buyers and sellers
in closing a real estate transaction. (Not to be confused
with prepaid items.)
STATEMENT - (Sometimes referred to as Settlement
Statement.) A statement usually prepared by an attorney
or title company setting out all the financial details concerning
the costs of conveying property. The closing statement is
normally given at Closing.
ON TITLE - A defect in the title to property which
prevents the title from being good and marketable.
- A person who signs a loan document along with the
principal borrower and thereby becomes legally liable for
the debt also.
- The property pledged by a borrower to secure a
- The money a client pays their agent for services
performed. Usually a percentage of the sale price, however
other methods of determining the amount of money are frequently
used, especially between a buyer’s broker and his/her client.
- Data about properties recently sold, currently
on the market, expired listings, and pending sales which
are similar to the property whose value is being determined.
Used most often in appraisal reports and in competitive
- The taking of private property for public purposes.
Condemnation can take place when a building is unfit for
habitation, or when needed for a public use.
- The ownership in one unit of a building or buildings
containing many units. Ownership includes the unit itself
and a share of the ownership of common elements.
LOAN - A temporary loan used to pay construction
costs during the construction period. A construction loan
is usually followed by a permanent mortgage.
- A condition in an agreement of sale specifying
certain events that must take place prior to closing.
- A legally binding agreement made between two or
LOAN - A mortgage loan which is NOT insured by a
government agency such as HUD or FHA.
- The act of transferring title from one person to
- An apartment building owned by a group of people
in which each person occupies one of the apartments. While
the group together owns all the units, each individual has
absolute rights to the occupation of a single unit.
- An offer made in response to a person who has made
an initial offer.
REPORT - A report from a company which specializes
in keeping credit histories on people. Lenders base the
decision on an applicant’s credit worthiness based on the
information in a credit report. Credits reports cannot be
given except with the consent of the person being reported
- The legal document used to convey title to real
property. The deed is the strongest evidence of legal title
and therefore should be recorded by the proper legal authority.
OF TRUST - Very much like a mortgage, a deed of trust
pledges specific real estate as collateral for a loan.
RESTRICTION - A deed carries with it the right to
use property in any legal manner. Deed restrictions are
used by the seller to provide restrictions over and above
those imposed by law. Deed restrictions are often imposed
by developers to protect the value of the yet undeveloped
property and to provide protections for other property owners
in the development.
JUDGMENT - The judgement against a person when they
default on a mortgage and the sale of the property does
not fully satisfy the obligation. The amount of the judgement
is usually the unsatisfied portion of the loan.
LOAN - A loan with payments that are past due.
OF HOUSING AND URBAN DEVELOPMENT - (HUD) - A federal
agency that helps homebuyers by providing mortgage insurance
on mortgage loans that might otherwise be too high risk
for the lender. HUD also has a number of other programs
designed to provide housing.
- A sum of money placed into an escrow account to
bind a buyer to an agreement of sale. The deposit becomes
part of the purchase price at closing. In the event the
transaction fails to close, the deposit is usually refunded
unless the buyer defaults under the terms of the agreement.
- A decrease in the value of real property due to
a number of causes such as deterioration of the neighborhood.
- The amount of money at time of purchase a buyer
will invest in the purchase. The down payment is the difference
between the purchase price and the mortgage amount.
ON SALE CLAUSE - A mortgage clause that specifies
that a mortgage loan must be paid in full when title to
the mortgaged property is conveyed.
MONEY - See DEPOSIT.
- A right granted from a property owner to another
for a specific use of a portion of the owners land. Public
utilities often use easements for the purpose of installing
their utility lines.
DOMAIN - A governmental right to acquire private
property for public use provided the owner is properly compensated.
A number of court cases exist which attempt to define acquisition
of real property and compensation.
- When a part of a building or other improvement
from an adjoining property reaches beyond the property line
- A term used to describe any claim to title such
as a lien, mortgage, easement, etc.
- An amount of money which is the fair market value
less the amount of any liens against the property.
- Money being held by an agent or another third party
pending closing on the property.
AGENCY - The type of agency relationship in which
the broker represents either the buyer or the seller, but
not both in the same transaction.
AGENCY LISTING - A listing agreement between a broker
and a seller in which the broker is given the exclusive
right to sell a property with the sole exception that the
seller reserves the right to sell the property himself.
In this type of listing, the broker earns his fee unless
the seller sells the property himself.
RIGHT TO SELL - A listing agreement between a broker
and a seller in which the broker is given the exclusive
right to sell the property. In this type of listing, the
broker earns his fee regardless of who sells the property
including the owner.
MARKET VALUE - The price an informed buyer will pay
an informed seller with neither party being under duress.
MAE - Federal National Mortgage Association.
HOME ADMINISTRATION (FmHA) - The government agency
responsible for guaranteeing mortgage loans on farms and
HOME LOAN MORTGAGE CORPORATION (FHLMC) - The federal
agency which buys mortgage loans from savings and loans
HOUSING ADMINISTRATION (FHA) - The federal agency
which insures mortgage loans.
SIMPLE TITLE - The normal type of title to property.
It means full and unrestricted title.
MORTGAGE - A mortgage recorded in first place on
a property and having priority over all other mortgages
RATE MORTGAGE - A mortgage with a specified rate
of interest which cannot be changed throughout the entire
term of the mortgage.
- The legal act of a lender or lienholder seizing
title to a property when the obligation is in default
SALE - A sale held for the purpose of liquidating
a property in satisfaction of a debt.
WARRANTY DEED - A deed in which the grantor grants
all his rights, title and interests, but also warrants the
title of the property from the beginning of its recorded
NATIONAL MORTGAGE ASSOCIATION (GNMA) - The government
agency which provides funding for all or parts of certain
residential mortgage loans.
PERIOD - That period of time from the due date of
a payment until the payment is recorded as late.
- The person named in a deed who is the recipient
- The person named in a deed who surrenders title.
INSURANCE - An insurance policy that covers losses
due to fires, windstorms, etc. This type of policy is commonly
referred to as a homeowner’s policy.
- The United States Department of Housing and Urban
APPROACH - A technique used in appraising property
determines fair market value by capitalizing net income.
- To reimburse one as a result of any damages or
losses they suffer.
- The result of debts being equal to or greater than
SALES CONTRACT - A contract providing for a buyer
to purchase a property by making installment payments to
a seller. Title remains vested in the seller until the contracted
purchase price is paid in full.
- The money a lender earns for use of his money.
- A contract providing for financial protection against
a loss. For example, a homeowner’s insurance policy provides
for reimbursement if the owner suffers a loss due to fire
or a number of other causes.
TENANCY - When two or more people hold equal undivided
interest in title to a property.
- Court order which results from one person suing
another for money.
- A contract which permits a person to occupy and
use a property for a specific time period in return for
a specified sum of money.
- The process of selling a property and also entering
into a lease to continue using that property.
- The tenant.
- The landlord.
- A claim against a property assuring the lienholder
of their right to payment in the event the property is sold.
ESTATE - A right granted to a person to use a property
for the rest of their life. Upon the demise of the holder
of the life estate, use of the property reverts to the holder
of legal title.
PARTNER - A partner in an investment property or
properties who makes an investment, expects a return, but
cannot make management decisions.
PARTNERSHIP - A partnership comprised of limited
partners who put up the cash with which to purchase an investment
property and one or more general partners who manage and
operate the investment property.
DAMAGES - The damages a party suffers as a result
of the breach of a contract by the other party.
AGREEMENT - An agreement which authorizes a broker
to sell an owner’s property for a certain price within a
specific time period for which the broker will be compensated
a specific fee.
ORIGINATION FEE - A flat fee a lender may charge
for lending money. A fee which may be in addition to points.
TO VALUE RATIO - The percent of fair market value
a lender will lend on the purchase of a property.
- The contractually specified rate difference between
an index and the rate of a variable rate mortgage.
TITLE - Typically defined as such title that is insurable
by a title company, it is a title free of liens and defects.
APPROACH - A technique used in appraising property
which compares recently sold comparable properties in arriving
at a conclusion as to fair market value.
VALUE - The price an informed buyer will pay an informed
seller with neither party being under duress.
LIEN - A lien which usually results from a contractor
or supplier not being paid for services rendered or materials
delivered in the construction, remodeling, expansion, etc.
of a building.
AND BOUNDS - A method used in describing property
which starts at an identifiable starting point and then
describes the succeeding sides by their bearing (direction)
and length (distance).
- A document which legally pledges a property or
properties as collateral for a loan.
BANKER - A thrift institution which makes mortgage
BROKER - A person who matches buyers with lenders.
COMPANY - A company which makes mortgage loans.
GUARANTY INSURANCE CORPORATION - (MGIC) A company
which insures private mortgages against default.
INSURANCE - Life insurance on the borrower which
will pay the mortgage loan off in the event of the borrower’s
- The lender in a mortgage document.
- The person(s) or company who has borrowed the money
in a mortgage document.
LISTING SERVICE - (MLS) A service operated by a (sometimes
privately operated) by a board of REALTORS? in which members
offer cooperation and compensation to other brokers on their
ASSOCIATION OF REALTORS? - (NAR) The national trade
association of real estate practitioners. REALTORS? distinguish
themselves from non-REALTOR? practitioners by subscribing
to a strict Code of Ethics.
AMORTIZATION - A condition which occurs when the
interest due each period exceeds the amount being paid thereby
increasing the mortgage balance.
LISTING - A listing agreement which provide that
the seller receive a specified amount of money regardless
how much is paid for the property. In a net listing, it
is anticipated the sale price will be higher than the net
and the broker will receive the difference. This type of
listing is illegal in some states.
- The document which usually accompanies a mortgage
and is the promise to re - pay the loan.
TO PURCHASE - An offer made in writing by a buyer
to purchase a specific property and establishing all the
terms of the sale. When accepted by the seller, it becomes
the agreement of sale.
LISTING - A listing agreement which provides that
a broker will be paid if he sells the property, but will
not get paid if sold by another including other brokers.
Owners sometimes enter into multiple open listings.
- A clause in a lease agreement which allows the
lessee the right to purchase the leased property at a specified
sale price and terms. An option may also be granted absent
a lease agreement.
FEE - A fee charged by a lender to cover costs associated
with a new mortgage.
- An acronym used to describe the total sum paid
each month for principal, interest, taxes and insurance.
- A term used to describe a fee charged by a lender
based on the mortgage amount. One point equals one percent
of the mortgage amount. Points are often charged in consideration
of a lower interest rate.
OF ATTORNEY - The power one person or legal entity
grants to another to act on behalf of the person granting
authority. The document granting such power normally specifies
exactly how much power the attorney-in-fact (recipient of
the power of attorney) will have.
PENALTY - A penalty a lender may charge in the event
a loan is paid prior to it being due.
- The actual amount of a loan or the actual amount
paid to reduce the actual amount of a loan.
MORTGAGE INSURANCE (PMI) - Insurance guaranteeing
the payment of a loan. This type of mortgage insurance is
normally charged when the loan exceeds 80% of the property
TAX - Taxes due each year by various municipal bodies
based on an assessed value of the property.
RECORDS - Records relating to ownership and liens
on real estate. Usually kept and maintained by the county
AGREEMENT - A contract setting forth the parties,
the property being conveyed, the consideration (sale price)
and other terms of the sale. In many states, having a written
agreement is required by law.
DEED - A deed in which the grantor surrenders title
(if any) to a parcel of property.
LOCK - A guaranteed rate of interest for a specific
time frame on a mortgage loan.
OF RETURN - The rate at which an investor recaptures
his investment in income - producing property.
ESTATE - Land and its appurtenances (attachments
such as buildings or other structures or improvements)
ESTATE BROKER - A person licensed by his/her particular
state to charge a fee for bringing a buyer and a seller
together to purchase real estate.
- A real estate licensee who is a member of the National
Association of REALTORS?.
- The act of placing a document on the public records
(usually the county records). Recording is usually done
to give public notice of a conveyance or the placement of
OF LIEN - A legal and recordable document which serves
notice that a lienholder has released his lien.
OF MORTGAGE - Same as Release of Lien, except that
it is granted by a mortgagee to release a mortgage.
COVENANTS - Provisions included in a deed which limits
the grantee in the use of the conveyed property. Most of
these type covenants expire at a date certain, are binding
on all subsequent grantees, and are most frequently created
by a developer in a development project to protect the quality
of the development.
OF WAY - A right granted by a property owner to another
to build, maintain and use a road, utility line or similar
improvement over his property.
- The act of selling property and then leasing the
property from the buyer. Owners of commercial property often
do this to liquidate assets to be invested for other purposes.
COMPARABLES - A sale of another property which may
be used to indicate the value of a property. Comparable
sales are normally similar in condition, style, size, location
and utility to the property being evaluated.
MORTGAGE - A mortgage placed on a property after
the first mortgage and subordinate to the first mortgage.
People often take a second mortgage on a residential property
to recapture some of their gain and/or appreciation to be
used for other investments or expenses.
MARKET - A market in which the demand for housing
exceeds the supply.
TANK - A tank (usually concrete) on a property into
which raw sewage is discharged. The sewage stays in the
septic tank long enough for all solids to decay and liquid
is drained off to an attached leach bed for the purpose
of purifying the liquid.
DEED - A sale of property ordered by the court and
carried out by the sheriff. A sheriff sale is most common
with mortgage foreclosures or in sales of property resulting
from delinquent taxes.
WARRANTY DEED - The most common kind of deed used
in conveying title to property. In a special warranty deed,
the grantor warrants the title for the period of time in
which he held title, but does not warrant it with regard
to previous owners.
DEPRECIATION - An accounting method in which a depreciable
asset is depreciated by a like amount each year over a specified
period of time.
- The act of legally dividing a parcel of land into
two or more smaller parcels. In most areas, subdividing
land requires the approval of a governmental body.
- An accurate graphic depiction of the boundaries
of a property. At the least, a survey will show the metes
and bounds of all property lines. It can also show buildings,
other improvements, topographic features, utility lines,
LIEN - A kind of lien placed on property by a taxing
authority when real estate taxes have not been paid.
- An agreed upon length of time in which a loan is
to be repaid.
- Title in a property held by several owners, each
entitled to the use of the property for specified time periods
each year. Common in resort areas.
- Evidence of ownership of real property. A properly
executed deed is generally deemed to be adequate evidence
DEFECT - Any title problem which “clouds” the property’s
title. A title defect can be a lien, a person or entity
who may have had interest in the property and never surrendered
it, or any number of other situations making title less
INSURANCE - An insurance policy issued for the protection
of all parties against any unresolved title defects.
SEARCH - A search of all public records to determine
if any title defects or liens exist.
MORTGAGE - A mortgage given by a conventional lending
institution, but guaranteed by the U.S. Veterans Administration.