Real Estate Terms
ABSTRACT OF TITLE
A listing of each real estate transaction regarding a piece of real estate. It will show each deed, easement, mortgage, lien, and transfer in the history of the title of a piece of real property. The abstract gives evidence of the chain of title and whether or not the title is clear.
The total of all interest earned or due but not yet paid.
A legal statement before a notary that the person signing a deed or real estate instrument is doing so by their free and voluntary act. Sometimes meaning to sign before a notary as proof of the proper signing of a document.
An unit of measure of land size. One acre equals 43,560 square feet.
A relationship of trust where the person who gives the agency (principal) gives the power to another (the agent) to act, negotiate and sign papers for the principal. Often created with a written document called a Power of Attorney. An agent may close a real estate transaction for someone who is not present at the closing.
The amount of time it takes for a fixed payment to pay off both loan principal and interest over time. For example, home mortgages usually provide for a 10, 15, 20, 25 or 30 year loan amortization. Many loans that would Amortize in full (be paid off in full) over 30 years will have a balloon payment due (need to be paid off in full, often by refinancing) after a shorter period has passed such as 5 years.
A loan in which the principal and interest are paid in full through the payment of a fixed amount over a period of time.
The "estimate" of the value of a piece of real property made by a professional trained to study the selling price, the income (rents) or the cost (land & construction) of comparable properties.
A trained professional who studies real estate sales and value. An appraiser is often hired to prove for a bank that a piece of property is worth the money a buyer has agreed to pay.
Growth in value over time. For example, if a piece of property purchased for $100,000.00 and one year later was worth $110,000.00, the you had "Appreciation" of 10% in value.
The payment of money after the debt has accrued. For example, you pay interest on a home mortgage after it is accrued, usually for one month at a time. The interest accrues each month and then it is paid. The opposite would be rent. Rent is paid at the beginning of the month or in advance.
The price that a seller wants to be paid for a piece of property.
The value placed on property by the governmental agency in order to determine the amount of taxes that should be paid annually by the owner of a piece of property.
A fee that has been charged to a piece of property to pay for a public improvement, such as streets, sidewalks, municipal water and/or sewer service.
The act of transferring one party’s rights, obligations and/or duties in an agreement such as a mortgage or lease to a second party.
ASSUMPTION OF MORTGAGE
To assume responsibility for the payment of a debt or home loan secured by an existing mortgage on real property. The bank or party that loaned the money may or may not agree to the Assumption. If the party that loaned the money does not agree to the assumption, the loan could possibly called due and owing.
ATTORNEY AT LAW
A person licensed to practice law. Some attorneys specialize in helping people buy and sell real estate. A real estate attorney can help assure that you are buying all of the property rights you are expecting, without any obligations or restrictions that you are not. The real estate attorney does this by examining the title (abstract or title insurance commitment), reviewing the deed, survey and closing statement, and contacting the local government office. At times the real estate attorney is asked to assist with environmental questions effecting the property.
The final payment due on a mortgage that has not been fully paid by the regular monthly payments. See "Amortization" above. Often a Balloon Payment is made by obtaining a new mortgage note to pay off the mortgage note that has the balloon payment due.
A legal proceeding in Bankruptcy Court filed by a person or business unable to pay debts. As soon as a Bankruptcy is filed, creditors are stayed (prevented) from collecting debts without approval of the Bankruptcy Court. A bank who holds a mortgage may get relief from the court to foreclose on a mortgage owing by a person who has filed bankruptcy. A home owner may also be able to "reaffirm" a home mortgage debt in order to save their home from being taken.
BILL OF SALE
A document that transfers title (ownership) of personal property.
Often used to refer to the preprinted sections of a contract. For example, most home mortgages are printed on forms dictated by the Federal National Home Loan Board. The dictated form language would be referred to as boilerplate.
A broker who a buyer has contracted with to find the buyer a home. Most broker’s or realestate agents represent the seller. Unless you as a buyer separately contract with a real estate agent, under the real estate agency laws the real estate agent/broker represents the seller who has listed the home. Usually, the seller pays the commission which is split with the buyer’s broker at closing.
A person realizes capital gains only when they sell a capital item such as real estate or stocks. The capital gain on the sale of a home bought in 1990 for $50,000 and sold in 2002 for $110,000 is $60,000 (the profit).
The gross income less all expenses of owning a property (including debt service).
This Latin phrase means "buyer beware". This statement is often carried forward in real estate purchase agreements by the addition of"as is" clauses. When a buyer purchases property "as is", the buyer bears the risk of problems with the real estate. Many states have laws that try to balance this burden in residential sales so the seller cannot take advantage of an unknowing buyer.
An old term for Personal property.
A mortgage or security interest on personal property to secure repayment of a debt.
This is the date set to "Close" on your property purchase or sale. The buyer receives the Deed to the property and the Seller receives the money. The buyer and the seller usually name a specific closing date in the real estate sale contract. This date set in the contract is the last date the buyer can buy the property unless the seller agrees in writing to allow more time to close. This is the date the sold home prices are paid to the seller by the buyer.
An accounting between a buyer and a seller of property which shows all expenses owing by the buyer and seller, credits owing back and forth between the buyer and seller, and balances to be paid by buyer at closing and to be received by seller at closing.
Real or personal property pledged by a party borrowing money as security for repayment of a loan or debt. The collateral document for a loan secured by real estate is called a "mortgage". If mortgage loans are not paid the lender conducts foreclosures to get the property in lieu of the payments. Mortgage payment calculators allow you determine how much a mortgage loan will cost you.
The commission is the amount of the sold home prices a real estate broker or agent receives for finding a buyer. The commission is usually a percentage of the purchase price. Real estate agents with houses for sale listings generally receive no payment (commission) until a buyer is found and closes on the sale.
When a seller has a home registered on the real estate listings or a business for sale, often during negotiations a buyer may want to buy a property, but only if the seller reduces the price or fixes the deficient items shown by a home inspection checklist. This price reduction or agreement to fix something is a "concession".
The giving of value in exchange for getting property or services of value. The sold home prices paid by buyers is the "consideration" paid in exchange for the purchased homes. Similarly, for small businesses for sale or large ones, the "consideration" is the amount you pay for the business.
A person who has a house for sale, mansion for sale or a business for sale in the real estate listings can expect the buyer to provide in the contract that closing is contingent upon certain events happening or facts being true. For example, the buyer may make the closing on the house for sale contingent upon the buyer getting a mortgage. The closing may be contingent upon the home passing the home inspection checklist prepared by the buyer. A business for sale closing may be contingent on the property passing an environmental inspection. For example, a mansion for sale or other house for sale would be contingent on the property appraising for the sale price.
A agreement between two or more parties which is binding. Whether your property is part of a real estate agent’s houses for sale listings (the real estate listings) or for sale by owner, you will need to sign a written contract for the realestate sale to be binding.
CONTRACT FOR DEED
A term often used interchangeably with Land Contract or Real Estate Installment Sale Contract. When a buyer pays over time for a house for sale or a business for sale the buyer will get a Deed at the end of payments.
CONTRACT FOR PURCHASE AND SALE
A term often used interchangeably with Real Estate Buy and Sell Agreement and Real Estate Sale Contract. This is the contract whereby a buyer who wants to purchase a property on the real estate property listings will agree to pay the owner (seller) a price for the property. The buyer also receives the promise of the seller to provide good title and have the home in good repair.
Whether selling local realestate or realestate far away, the conveyance is the act of transferring ownership of the property.
The act of responding to an offer with a new offer. Presenting a counteroffer acts as a rejection of the offer that has been made to you. A counteroffer regarding the purchase of real estate often involves accepting the terms of the base offer and presenting an alternate price.
Agencies that compile a credit history for individuals and businesses. Creditors, upon request, can obtain copies of an individual’s or business’s payment history on various credit accounts from the credit bureau.
CREDIT BUREAU REPORT
The report issued by a credit bureau showing a party’s payment history and timeliness of making payments on various credit accounts.
The party that lends money to the borrower is called a creditor.
The deed is the document by which title or ownership to real property is transferred. A deed must be signed by the grantor (seller) and witnesses and/or notarized as required by the laws of the state where the property is located.
DISCOUNTING A NOTE
The act or process of selling a promissory note or a debt obligation for less than its face value.
A home with two living units, usually sharing a common wall.
Property that has not been properly cared for or is in damaged condition. Often referring to bargain property that can be bought below market value as fixed up.
DUE ON SALE CLAUSE
A paragraph in almost all home mortgages requiring the mortgage to be paid off in full if the property is sold.
The deposit of money given to a seller of property (or the seller’s real estate agent) in order to bind the seller to the contract. Usually, the earnest money deposited by a buyer is credited towards the sale price.
An easement is a non-possessory interest in real property that allows one party (not the owner) to use or cross over, the owner’s property. An example of common easements often granted are: driveway easements (where one party will grant a second party the right to drive over their property to reach a second parcel) and utility easements (that allow utilities to run utility lines, such as electric or gas lines over the property owned and possessed by others).
EFFECTIVE INTEREST RATE
Effective interest rate is the rate arrived at when calculating the total interest to be paid by a party and adding to it the points or price paid to obtain a loan.
The authority of the government to take private property for public use. To take a party’s property the government should pay the owner the property’s fair market value. A party must sue the government if fair value is not paid. Condemnation is the taking of property by eminent domain.
The property of another being on a parcel without the legal right to be there. Fences often encroach onto the neighboring property. Encroachments are discovered through a survey
A claim against property. With real estate its often used to describe a claim against the title.
ENTIRETIES OWNERSHIP OF PROPERTY
Entireties is a form of ownership for a husband and wife who own real estate together.
A person’s equity in property is the value of the property less any mortgage or lien against the property.
A clause or paragraph in a contract that allows a party to the contract the option of canceling the contract. Often referred to in real estate contracts as a contingency.
The reversion of property to the state when an owner dies with no known descendants or heirs.
Money or documents held in trust by a neutral third party by the agreement of the parties to a contract or sale of property.
With respect to real estate, often used to refer to the quality of ownership. A buyer generally wants the seller to own the property by a "fee simple" estate. Fee simple being complete and unencumbered ownership.
Property can be traded instead of sold for cash. Trading one piece of business or investment property for another is called an exchange. If an exchange is structured very carefully within the requirements of the tax code you can save the capital gain tax that would be owing if the property were sold.
FAIR MARKET VALUE
The price (or value) a willing and voluntary seller would sell a piece of property for to a willing and voluntary buyer.
The highest quality of ownership for real property. Fee simple being complete and unencumbered ownership.
A Fiduciary is an agent for a party that has a duty of loyalty imposed by law or agreement to that party.
Often referred to as the borrowed funds obtained by a buyer to purchase real estate.
FIRST DEED OF TRUST
Another name used in some states for a first mortgage.
Personal property attached to real estate and so connected to its use that it is considered a part of the real estate. A furnace and water heater in a home are examples.
The process by which a mortgage holder (a bank or other secured lender) sells property when the debt secured by the mortgage is in default. Very strict procedures must be followed.
FRONTAGE OR FRONT FOOT
Usually the width of a lot at the street line or front line of the property.
GOING CONCERN VALUE
The value of a business, assuming the organization and assets remain intact and are used to generate future income.
GOOD FAITH PURCHASER
A purchaser who buys without notice of facts that would put a person on notice that the seller of property may not have complete ownership of the property being sold.
The period after a payment is due in which the payment can be made without penalty. Most Mortgage Notes state the number of grace period days allowed to the borrower.
The provision in most new laws or rules that allows properties to remain non-conforming to the new law. Inquiry should be made on whether the grandfather clause permits the non-conformity in the property for a permanent or limited time period.
A person obtaining title to real property by deed. The buyer.
One who conveys/transfers title to real property by deed. The seller.
Water in the subsoil or of a spring or shallow well. If property needs a well, the buyer should make sure that the ground water is accessible for the well. If a property needs a septic system, the buyer should make sure the ground water is not so close to the surface that the septic system cannot be installed.
A person who promises in writing to pay the debt of borrower in the event the borrower fails to pay. Often a parent will be a Guarantor to help a child buy their first home and establish credit.
Condition of a premises which permits inhabitants to live free of serious defects to health and safety. In most areas a new home cannot be occupied for living until the building inspector has issued a Certificate of Occupancy or Habitability.
Solid wastes or chemicals which may cause or contribute significantly to mortality or disease. A hazard to human health.
The persons who inherit the property (whether real or personal) of deceased person. Real estate is often sold by heirs in order to turn the estate into cash.
An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area.
A warranty or insurance policy offered by most home builders and by real estate offices upon the sale of a home to protect the new owner from defects or failures covered by the warranty
An owner occupied primary residence.
To triumph over; overcome; beat; bedevil. What often happens to a buyer when they purchase real property without the assistance of a real estate agent and a real estate lawyer.
Buildings or other structures place on real estate.
A loan that is repaid in scheduled installments.
See installment loan.
A sale of property where the seller is paid the purchase price by the buyer in installments over time.
The percentage charge over a given period a borrower must pay for not repaying a debt. Interest rates are usually stated on an annual basis.
A person who has died without leaving a valid will.
JOINT AND SEVERAL LIABILITY
A liability is said to be joint and several when the creditor may demand payment or sue one or more of the parties who have agreed to pay a liability or debt, at the creditor’s option.
A form of common ownership by which two or more people can jointly own property. Property owned jointly passes to the survivor(s) on the death of one joint tenant. Tenancy by the Entireties is a special form of joint ownership between a husband and wife. This is the opposite of Tenancy in Common which is also a form of common ownership, however on death of a common owner, the owner’s estate succeeds to the party’s ownership interest not the other owner(s).
JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP
A joint tenancy where none of the joint tenants can sell or transfer their partial joint interest in the jointly held property without the consent of all the joint owners.
JUNIOR SECURITY INTEREST/MORTGAGE
A lien or mortgage which is junior or subordinate to a first mortgage interest. In the event property with a junior mortgage were sold to pay the liens against the property, the first mortgage is paid off first and the junior mortgage is paid or partially paid with whatever sale proceeds are left over.
Compensation which is both fair to the owner and to the public when private property is taken for public use.
KEEP IN REPAIR
When a lessee is bound to keep the premises in repair, he must have them in repair at all times during the term; and if the lessee allows them to be out of repair the lessee is in default.
Acquaintance with fact or truth. A state of knowing or understanding. Often sellers will be asked to fill out disclosure forms on property based upon the seller’s knowledge. Actual knowledge is positive knowledge as opposed to imputed or inferred knowledge.
A contract whereby the owner (seller) agrees to transfer legal title to real estate to a buyer when the buyer has paid the purchase price over time. In most states the Land Contract buyer obtains an equitable ownership interest that must be foreclosed like a mortgage.
A special trust allowed in some states that allows an owner of real property to place legal ownership of property in the name of a trustee, usually a financial institution's trust department. This is a means used to keep the names of the true owners of the property confidential. One caution, after transfer to a land trust, the owner then has only an interest in the trust, which is governed by the trust and personal property laws, not the real estate laws. Sometimes called an Illinois Land Trust.
A contract between the owner (lessor) and the tenant (lessee), which allows the tenant the use and occupancy of the property for a specified period of time. The lease (contract) spells out the rights and duties of the parties. A lease can be an unwritten (oral) agreement, in which case the provable understanding of the parties and state law where the property is located detail the terms of the lease.
LEASE WITH AN OPTION TO PURCHASE
A written Lease with an added contract provisions providing that the Lessee under certain circumstances and for a price agreed upon may purchase the property.
The name of the estate or interest held by a lessee in the property of the lessor pursuant to a lease.
The detailed description referring to recorded documents and/or surveyed monuments that identify the exact boundaries of a piece of real property.
Another name for Tenant. A party that leases property for a term from an owner (Lessor/Landlord).
LETTER OF INTENT
A letter stating a buyer’s intention to make an offer to acquire a certain property. Often used to detail the scope of a potential buyer’s investigation. It is not a binding contract.
Regarding real estate, a lien is a recorded document by a creditor claiming the right to the value of property. A lien creditor may have the right to foreclose the lien to obtain funds to pay the debt.
Money damages stated in a contract to be paid in the event a party defaults. Liquidated damages is often used a way to limit damages.
The real estate broker that has been engaged by the property owner (pursuant to a written contract) to sell a piece of property.
A title free and clear of liens, encumbrances and encroachments that are objectionable.
A lien right existing in favor of builders, mechanics, suppliers, or other persons who have supplied materials or performed work in connection with the construction or repair of a building or other improvement. A buyer must be careful that the seller does not have any unpaid bills for work performed on the property within the (usually) 90 days prior to closing. Mechanics liens do not always need to be recorded. Sometimes call construction liens.
Measures such as inches, feet, yards, or miles.
METES AND BOUNDS
A way to measure the boundaries of property by the length of a boundary line and the direction the boundary is running.
A document that grants of an interest in property to secure a debt.
A lender who obtains a mortgage from a property owner to secure a debt.
The owner of the property who grants (transfers) the interest in the property to secure the debt to the lender (mortgagee).
MULTIPLE LISTING SERVICE
A central real estate for sale listing service created and maintained by members of the local Board of Realtors. A multi-listed home may be shown by realtors from all of the multi-listing real estate offices and not just the listing office.
NET INCOME APPROACH
A technique used to estimate the value of commercial or investment properties based upon the net income earned by the owner and the anticipated rate of return the owner of such a property would anticipate.
A written promise to pay money. Usually a note will specify the amount to be paid, the amount to be paid each period, the interest to be charged the borrower, and the term of the note.
The act of a notary public verifying that a document is signed by who it purports to be signed.
That which a person is bound to do. A duty imposed by law or contract.
The person in favor of whom some obligation is contracted.
The promisor. The person who is obligated to perform under a contract.
Taking possession of property and use of the same. Both leases and purchase agreements will define the date of occupancy for the tenant or purchaser.
In real estate, the act of presenting terms pursuant to which a buyer will purchase a property. A contract is based upon the buyer making an offer and the seller accepting the offer.
In zoning and land use, the authorized map for the determination of proper land use in the local unit of government where property is located, showing the zones and areas and their authorized uses.
The failure to perform what the law requires.
This signifies a note payable on request at any time.
OPEN AND NOTORIOUS
Acts on the land of another sufficient to alert the owner of a claim to the owner’s land which may ripen into title under adverse possession.
OPEN END MORTGAGE
A mortgage that allows for the borrowing of additional sums.
An agreement giving the right but not the obligation to a party to lease or buy property at a specified time, usually for a pre agreed to price. The potential buyer having an option to purchase need not buy, but a seller granting an option must sell at the buyer’s election.
OWNERS OF RECORD
The owners of real estate as established by the documents recorded in the land records of the county where the property is located.
Property that is not real property. A car and a piece of furniture are examples of tangible (things you can hold) personal property. A note and a patent are examples of intangible personal property.
The amount paid to obtain a mortgage loan. For example, one point would equal one percent of the amount of the mortgage loan.
POWER OF ATTORNEY
A written authorization from a principal to an agent to perform specified acts for the principal. Many parties that cannot attend a real estate closing at certain time and place will give their power of attorney to person they trust to attend the closing an sign documents in their stead.
PRELIMINARY TITLE SEARCH
Usually a title search done at the time of listing property for sale to make sure there will be no problems with title when a buyer is found.
The rate of interest stated by banks to be charged to their best customers who borrow money.
The original balance owing on a note less any payments made by the borrower or credits given by the lender.
See Note above.
PURCHASE MONEY MORTGAGE
A mortgage given to secure repayment of the money used to purchase real estate.
Generally 160 acres, a quarter of a section of land according to the divisions of the government survey. A quarter of a square mile of land. The amount of land originally granted to a homesteader.
To quiet title means to clear out all the competing ownership interests in real property; except for the interest of the party claiming ownership.
QUIT CLAIM DEED
A deed transferring whatever interest in the property, if any, that the grantor may have. They are usually used to clear title. The party signing a quit claim deed does not warrant that they have any ownership interest in the property described on the deed.
REAL ESTATE AGENT
A real estate salesperson associated with a broker, who acts in behalf of a broker.
A broker or real estate agent who is a member of the National Association of Realtors.
The act of filing in the public real estate records a document.
The buying back of one’s own property after a forced sale, usually after a foreclosure. The foreclosed party generally has a limited period to repurchase the property. Local law should always be consulted.
A clause in a deed or other recorded document limiting or restricting an owner of real property from taking certain actions.
An agreement to sell property. See contract for purchase and sale.
SATISFACTION OF MORTGAGE
A signed instrument filed in the public records which acknowledges payment of an indebtedness secured by a mortgage.
Generally a home owned by persons in addition to their primary place of residence. Usually a second home is located in a place of recreation or relaxation.
See Junior Security Interest/Mortgage above.
Money paid to a Lessor prior to moving into leased property to be held by the Lessor to cover any damage caused by the Lessee during the Lessee’s occupancy.
A court may order buyer or a seller of real property to perform the party’s obligations under a purchase agreement rather than awarding dollar damages.
TENANCY IN COMMON
A form of common ownership by which two or more people can own property together. Property owned in common passes to the estate of the common owner upon death and not to the other common owners. This is the opposite of Joint Tenancy which is also a form of common ownership, however on death of a joint tenant, the joint tenants interest in the property passes to the remaining joint owners.
A statement of the agreements made between the parties to a contract.
One who dies leaving a will.
Insurance issued by a title company guaranteeing the title to be good and marketable. Title insurance policies can be issued to protect the mortgagee only, the full interest of the buyer, or both.
TITLE INSURANCE COMPANY
Companies that perform title searches on real estate parcels and provide an insurance policy to parties such as purchasers, owners, and mortgagees to insure there interest in the property.
Lands which either were never improved, or which if they have been improved at one time have been allowed to revert back to a state of nature.
Exists when there is a fair probability of persons laying claim to ownership of real property and the possibility of serious loss due to such claims.
Not fit for occupancy or rental.
A loan of money that is not secured by collateral such as a real estate mortgage.
The lending of money at an interest rate above the legal limit. Most states have limits on the amount of interest that can be charged, check local laws.
The value used by the local tax assessor’s office for the purpose of levying local taxes.
See Fair Market Value above.
A buyer, usually referring to a Land Contract buyer.
A seller, usually referring to a Land Contract seller.
A lien created by equity, being a lien impliedly belonging to a seller of property for the unpaid purchase price of land, where the seller has not taken any other lien or security beyond the personal promise to pay of the buyer.
The intentional or voluntary act which relinquishes a known right.
WARRANT OR WARRANTY
To guarantee something to be as represented.
A deed transferring ownership in the property described in the deed. The party signing a warranty deed provides a warranty that merchantable title is being transferred to the buyer.
Action or inaction by a possessor of land causing unreasonable injury to land and the interests of the holders of other interests in the land.
A mark used in place of a signature by one who is unable to otherwise affix his or her signature.
In real estate, a piece of land enclosed for the use of the inhabitants of a house. Grounds of a building.
Current return upon an investment.
Laws which regulate and control the uses of property.
In the civil law, a measure or quantity of land. As much land as a yoke of oxen could plow in a day