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A B
C D E
F G H
I J K
L M N
O P Q
R S T
U V W
X Y Z
This glossary
is for informational purposes only and should not be used
without legal counsel for the purpose of reading/understanding
a contract.
- Abandonment
- The voluntary
relinquishment of rights of ownership or another
form of interest (an easement) by failure to use
the property over an extended period of time.
- ABR
- The Accredited
Buyer Representative designation indicates a
real estate agent specializing in representing
buyers in the real estate transaction.
- Abstract
(Of Title)
- A summary of the
public records relating to the title to a
particular piece of land. 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.
- 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.
- Acre
- A measure of
land, equal to 160 sq. rods (43,560 sq.ft.). An
acre is approximately 209' x 209'.
- Acknowledgment
- A formal
declaration before an authorized official
(usually a notary public) by a person who has
executed a document, that he did in fact execute
(sign) the document
- Addendum
- Something added.
A list or other items added to a document,
letter, contract, escrow instructions, etc.
- Adverse
Possession
- A method of
acquiring title by open and notorious possession
usually vary with each state.
- Agent
- Acts of behalf of
another, representing that person's interests
and serving as an intermediary.
- Agreement
of Sale
- Known by various
names, such as contract of purchase, purchase
agreement, or sales agreement according to
location or jurisdiction. A contract in which a
seller agrees to sell and a buyer agrees to buy,
under certain specific terms and conditions
spelled out in writing and signed by both
parties.
- Alienation
Clause
- A clause within a
loan instrument calling for a debt in its
entirety upon the transfer of ownership of the
secured property. Also called a "due on
sale" clause.
- Amortization
- A payment plan
which enables the borrower to reduce his debt
gradually through monthly payments of principal.
- Appraisal
- An expert
judgment or estimate of the quality or value of
real estate as of a given date.
- Assessed
Value
- Value placed on
property by the tax assessor.
- Assignment
- A transfer or
making over to another the whole of any
property, real or personal, or of any estate or
right therein. To assign is to transfer.
- 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, the mortgagee's consent is usually
required
- Attachment
- Seizure of
property by court order, usually done in pending
law suit to make property available in case of
judgment.
- Balloon
Payment
- The final
installment paid at the end of the term of a
note; used only when preceding installments were
not sufficient to pay off the note in full.
- Bill of
Sale
- An instrument
used to transfer personal property
- Binder or
"Offer to Purchase"
- A preliminary
agreement, secured by the payment of earnest
money, between a buyer and seller as an offer to
purchase real estate. A binder secures the right
to purchase real estate upon agreed terms for a
limited period of time. If the buyer changes his
mind or is unable to purchase, the earnest money
is forfeited unless the binder expressly
provides that it is to be refunded.
- Blanket
Mortgage (Trust Deed)
- A single mortgage
or trust deed which covers more than one piece
of real estate
- Bond
- An insurance
agreement by which one party is insured against
loss or default by a third party. In the
construction business a performance bond ensures
the interested party that the contractor will
complete the project. A bond can also be a
method of financing debt by a government or
corporation which is interest-bearing and has
priority over stock in terms of security.
- Breach
- Violation of an
obligation in a contract
- Broker,
Real Estate
- An agent licensed
by the state to carry on the business of
operating in real estate. He usually receives a
commission for his services of bringing together
buyers and sellers, owners and tenants, in
exchange agreements.
- Building
Code
- A set of
stringent laws that control the construction of
buildings, design, materials and other similar
factors
- Building
Line or Setback
- Distances from
the ends and/or sides of the lot beyond which
construction may not extend. The building line
may be established by a filed plat of
subdivision, by restrictive covenants in deeds
or leases, by building codes, or by zoning
ordinances.
- Built-Ins
- Items that are
not movable, such a stoves, ovens, microwave
ovens, dishwashers.
- Buyers
Market
- A market
condition which occurs in real estate where more
homes are for sale than there are interested
buyers
- Capital
Gains
- A term used for
income tax purposes which represents the gain
realized from the sale of an asset less the
purchase price and deductible expense.
- Capitalization
- An appraising
term used in determining value by considering
net operating income and a percentage of
reasonable return on investment.
- Cash Flow
- The owner's
spendable income after operating expenses and
debt service is deducted
- 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 as
great as that offered in a title insurance
policy.
- Chain Of
Title
- A history of
conveyances and encumbrances affecting the title
as far back as records are available
- Client
- One who employs
another's services, as in an attorney, real
estate agent, insurance agent, etc.
- Closing
- In the sale of
real estate it is the final moment when all
documents are executed and recorded and the sale
is complete. Also a general selling term where a
sales person is attempting to sell something and
the buyer agrees to purchase
- Closing
Costs
- The numerous
expenses which buyers and sellers normally incur
to complete a transaction in the transfer of
ownership of real estate. These costs are in
addition to price of the property and are items
prepaid at the closing day.
- Closing
Statement
- A list of the
final accounting of all Moines of both buyer and
seller prepared by an escrow agent which notes
all costs each must pay at the completion of a
real estate transaction.
- Cloud (On
Title)
- An outstanding
claim or encumbrance which adversely affects the
marketability of title.
- 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- - 6 to 7 percent on houses, 10 percent on
land.
- Common
Area
- That area owned
in common by owners of condominiums and planned
sight development homes within a subdivision.
- Community
Property
- Both real and
personal property accumulated by a husband and
wife after marriage through joint efforts of
both living together.
- Condemnation
- A declaration by
governing powers that a structure is unfit for
use.
- Conditional
Sales Contract
- A contract for
the sale of property where the buyer has
possession and use, but the seller retains title
until the conditions of the contract have been
fulfilled. Also known as a land contract.
- Condominium
- Individual
ownership of a dwelling unit and an individual
interest in the common areas and facilities
which serve the multi- unit project.
- Consideration
- Anything of value
given to induce someone into entering into a
contract.
- Construction
Loan
- The short-term
financing of improvements on real estate. Once
the improvements are completed a 'take out' loan
for a longer term is usually issued.
- Contingency
- A condition upon
which a valid contract is dependent. For
example; the sale of a house is contingent upon
the buyer obtaining adequate financing.
- Contract
- An agreement
between tow or more parties, written or oral, to
do or not to do certain things.
- 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 or guaranteed by the
Veterans' Administration. It is subject to
conditions established by the lending
institution and State statutes. The mortgage
rates may vary with different institutions and
between States. (States have various interest
limits.)
- Conveyance
- The transfer of
the title to land from one to another.
- Counter
Offer
- An offer in
response to an offer. 'A' offers to by 'B's'
house for $20,000 which is listed for $22,000.
'B' counter offers 'A's' offer by stating that
he will sell the house to 'A" for $21,000.
The $21,000 is the counter offer.
- Covenants
- Agreements
written into deeds and other instruments stating
performance or non-performance of certain acts
or noting certain uses or non-uses of property.
- Deed
- A formal written
instrument by which title to real property is
transferred from one owner to another. The deed
should contain an accurate description of the
property being conveyed, should be signed and
witnessed according to the laws of the State
where the property is located, and should be
delivered to the purchaser at closing day. There
are two parties to a deed: the grantor and the
grantee. (See also deed of trust, general
warranty deed, quitclaim deed, and special
warranty deed.)
- Default
- Failure to make
mortgage payments as agreed to in a commitment
based on the terms and at the designated time
set forth in the mortgage or deed of trust. It
is the mortgagor's responsibility to remember
the due date and send the payment prior to the
due date, not after. Generally, thirty days
after the due date if payment is not received,
the mortgage is in default. In the event of
default, the mortgage may give the lender the
right to accelerate payments, take possession
and receive rents, and start foreclosure.
Defaults may also come about by the failure to
observe other conditions in the mortgage or deed
of trust.
- Depreciation
- Decline in value
of a house due to wear and tear, adverse changes
in the neighborhood, or any other reason.
- 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.
- Down
Payment
- The amount of
money to be paid by the purchaser to the seller
upon the signing of the agreement of sale.
- Earnest Money
- The deposit money given to
the seller or his agent by the potential buyer
upon the signing of the agreement of sale to
show that he is serious about buying the house.
If the sale goes through, the earnest money is
applied against the downpayment. If the sale
does not go through, the earnest money will be
forfeited or lost unless the binder or offer to
purchase expressly provides that it is
refundable.
- Easement Rights
- A right- of- way granted
to a person or company authorizing access to or
over the owner's land. An electric company
obtaining a right- of- way across private
property is a common example.
- Economic
Obsolescence
- Loss of useful life and
desirability of a property through economic
forces, such as change in zoning, changes in
traffic flow, etc., rather than deterioration.
- Encroachment
- An obstruction, building,
or part of a building that intrudes beyond a
legal boundary onto neighboring private or
public land, or a building extending beyond the
building line.
- Encumbrance
- A legal right or interest
in land that affects a good or clear title, and
diminishes the land's value. It can take
numerous forms, such as zoning ordinances,
easement rights, claims, mortgages, liens,
charges, a pending legal action, unpaid taxes,
or restrictive covenants. An encumbrance does
not legally prevent transfer of the property to
another. A title search is all that is usually
done to reveal the existence of such
encumbrances, and it is up to the buyer to
determine whether he wants to purchase with the
encumbrance, or what can be done to remove it.
- Equity
- The value of a homeowner's
unencumbered interest in real estate. Equity is
computed by subtracting from the property's fair
market value the total of the unpaid mortgage
balance and any outstanding liens or other debts
against the property. A homeowner's equity
increases as he pays off his mortgage or as the
property appreciates in value. When the mortgage
and all other debts against the property are
paid in full the homeowner has 100% equity in
his property.
- Escalation Clause
- A clause in a lease
providing for an increased rent at a future time
due to increased costs to lessor, as in cost of
living index, tax increases, etc.
- Escheat
- The reverting of property
to the state in the absence of heirs.
- Escrow
- Funds paid by one party to
another (the escrow agent) to hold until the
occurrence of a specified event, after which the
funds are released to a designated individual.
In FHA mortgage transactions an escrow account
usually refers to the funds a mortgagor pays the
lender at the time of the periodic mortgage
payments. The money is held in a trust fund,
provided by the lender for the buyer. Such funds
should be adequate to cover yearly anticipated
expenditures for mortgage insurance premiums,
taxes, hazard insurance premiums, and special
assessments.
- Estate
- The ownership interest of
a person in real property. Is also used to refer
to a deceased person's property. And often used
to describe a large home with spacious grounds
- Fair
Market Value
- That price a property will
bring given that both buyer and seller are fully
aware of market conditions and comparable
properties.
- Fee Simple
- Ownership of title to
property without any limitation, which can be
sold, left at will, or inherited.
- Fixtures
- Items affixed to buildings
or land usually in such a way that they cannot
be moved without damage to themselves or the
property, such as plumbing, electrical fixtures,
trees, etc.
- Foreclosure
- A legal term applied to
any of the various methods of enforcing payment
of the debt secured by a mortgage, or deed of
trust, by taking and selling the mortgaged
property, and depriving the mortgagor of
possession.
- Front Footage
- The linear measurement
along the front of a parcel. That portion of the
parcel which fronts the street or walkway.
- Functional
Obsolescence
- Loss in value due to
out-of-date or poorly designed equipment while
newer equipment and structures have been
invented since it's construction.
- 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.
- Grantee
- That party in the deed who
is the buyer or recipient.
- Grantor
- That party in the deed who
is the seller or giver.
- Ground Lease
- A lease of vacant land
- Hazard Insurance
- Protects against damages
caused to property by fire, windstorms, and
other common hazards.
- Home Owners
Association
- An association of
homeowners within a community formed to improve
and maintain the quality of the community. An
association formed by the developer of
condominiums or planned developments.
- HUD
- U.S. Department of Housing
and Urban Development. Office of Housing/Federal
Housing Administration within HUD insures home
mortgage loans made by lenders and sets minimum
standards for such homes.
- Interest
- A charge paid for
borrowing money. (See mortgage note)
- Involuntary Lien
- A lien which attaches to
property without the consent of the owner such
as tax liens as opposed to voluntary liens
(mortgages).
- Joint Tenancy
- Joint ownership by two or
more persons with right of survivorship. Upon
the death of a joint tenant, his/her interest
does not go to his/her heirs, but to the
remaining joint tenants.
- Lease
- A contract between the
owner of real property, called the lessor, and
another person referred to as the lessee,
covering all conditions by which the lessee may
occupy and use the property.
- Lease With Option
To Purchase
- A lease where the lessee
has the option to purchase the leased property.
The terms of the purchase option must be set
forth in the lease.
- Legal Description
- The geographical
identification of a parcel of land
- Lessee
- One who contracts to rent
property under a specified lease>
- Lessor
- An owner who contracts
into a lease with a tenant (lessee).
- Lien
- A claim by one person on
the property of another as security for money
owed. Such claims may include obligations not
met or satisfied, judgments, unpaid taxes,
materials, or labor. (See also special lien.)
- Life Estate
- A estate in real property
for the life of a person
- Listing
- A contract between owner
and broker to sell the owner's property
- Marketable Title
- A title that is free and
clear of objectionable liens, clouds, or other
title defects. A title which enables an owner to
sell his property freely to others and which
others will accept without objection.
- Mechanic's Lien
- A lien created by statute
on a specific property for labor or materials
contributed to an improvement on that property.
- Mortgage
- A lien or claim against
real property given by the buyer to the lender
as security for money borrowed. Under
government- insured or loan- guarantee
provisions, the payments may include escrow
amounts covering taxes, hazard insurance, water
charges, and special assessments. Mortgages
generally run from 10 to 30 years, during which
the loan is to be paid off.
- Mortgage
Commitment
- A written notice from the
bank or other lending institution saying it will
advance mortgage funds in a specified amount to
enable a buyer to purchase a house.
- Mortgage Insurance
Premium
- The payment made by a
borrower to the lender for transmittal to HUD to
help defray the cost of the FHA mortgage
insurance program and to provide a reserve fund
to protect lenders against loss in insured
mortgage transactions. In FHA insured mortgages
this represents an annual rate of one- half of
one percent paid by the mortgagor on a monthly
basis.
- Mortgage Note
- A written agreement to
repay a loan. The agreement is secured by a
mortgage, serves as proof of an indebtedness,
and states the manner in which it shall be paid.
The note states the actual amount of the debt
that the mortgage secures and renders the
mortgagor personally responsible for repayment.
- Mortgage (Open-
End)
- A mortgage with a
provision that permits borrowing additional
money in the future without refinancing the loan
or paying additional financing charges. Open-
end provisions often limit such borrowing to no
more than would raise the balance to the
original loan figure.
- Mortgagee
- The lender in a mortgage
agreement.
- Mortgagor
- The borrower in a mortgage
agreement.
- Multiple Listing
- A listing taken by a
member of an organization of brokers, whereby
all members have an opportunity to find a buyer.
- Negative
Amortization
- When monthly payments are
not enough to cover interests costs, they are
added to the principal balance, and you may end
up owing more than when you started. This is
most likely to occur with ARMs
that have payment caps.
- Notary Public
- One who is authorized by
federal or local government to attest authentic
signatures and administer oaths.
- Note
- A written instrument
acknowledging a debt and promising payment
- Offer
- A presentation to form a
contract or agreement.
- Option
- A right given, for
consideration, to purchase or lease property
upon stipulated terms within a specific period
of time
- Origination Fee
- Application fee(s) for
processing a proposed mortgage.
- 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.
- P.M.I.
(Private Mortgage Insurance)
- Insurance which covers a
portion of the first mortgage allowing the
lender to offer more lenient terms to a
borrower.
- Points
- Sometimes called
"discount points." A point is one
percent of the amount of the mortgage loan. For
example, if a loan is for $25,000, one point is
$250. Points are charged by a lender to raise
the yield on his loan at a time when money is
tight, interest rates are high, and there is a
legal limit to the interest rate that can be
charged on a mortgage. Buyers are prohibited
from paying points on HUD or Veterans'
Administration guaranteed loans (sellers can
pay, however). On a conventional mortgage,
points may be paid by either buyer or seller or
split between them.
- 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
penalty for prepayment. The Federal Housing
Administration does not permit such restrictions
in FHA insured mortgages.
- Prepayment Penalty
- A penalty within a note,
mortgage, or deed of trust imposing a penalty if
the debt is paid in full before the end of its
terms.
- Principal
- The basic element of the
loan as distinguished from interest and mortgage
insurance premium. In other words, principal is
the amount upon which interest is paid.
- Purchase Agreement
- An agreement between buyer
and seller denoting price and terms of the sale.
- Real Estate Agent
- a licensed person who
works under the direction of a broker selling
and renting real estate.
- Real Estate Broker
- A middle man or agent who
buys and sells real estate for a company, firm,
or individual on a commission basis. The broker
does not have title to the property, but
generally represents the owner.
- Realtor
- A real estate broker
holding membership with the National Association
of Realtors.
- Refinancing
- The process of the same
mortgagor paying off one loan with the proceeds
from another loan.
- Restrictive
Covenants
- Private restrictions
limiting the use of real property. Restrictive
covenants are created by deed and may "run
with the land," binding all subsequent
purchasers of the land, or may be
"personal" and binding only between
the original seller and buyer. The determination
whether a covenant runs with the land or is
personal is governed by the language of the
covenant, the intent of the parties, and the law
in the State where the land is situated.
Restrictive covenants that run with the land are
encumbrances and may affect the value and
marketability of title. Restrictive covenants
may limit the density of buildings per acre,
regulate size, style or price range of buildings
to be erected, or prevent particular businesses
from operating or minority groups from owning or
occupying homes in a given area. (This latter
discriminatory covenant is unconstitutional and
has been declared unenforceable by the U.S.
Supreme Court.)
- Seller's Market
- More buyers than sellers.
- Special
Assessments
- A special tax imposed on
property, individual lots or all property in the
immediate area, for road construction,
sidewalks, sewers, street lights, etc.
- Special Lien
- A lien that binds a
specified piece of property, unlike a general
lien, which is levied against all one's assets.
It creates a right to retain something of value
belonging to another person as compensation for
labor, material, or money expended in that
person's behalf. In some localities it is called
"particular" lien or
"specific" lien. (See lien.)
- Special Warranty
Deed
- A deed in which the
grantor conveys title to the grantee and agrees
to protect the grantee against title defects or
claims asserted by the grantor and those persons
whose right to assert a claim against the title
arose during the period the grantor held title
to the property. In a special warranty deed the
grantor guarantees to the grantee that he has
done nothing during the time he held title to
the property which has, or which might in the
future, impair the grantee's title.
- 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 often
required by the lender to assure him that a
building is actually sited on the land according
to its legal description.
- Tax
- As applied to real estate,
an enforced charge imposed on persons, property
or income, to be used to support the State. The
governing body in turn utilizes the funds in the
best interest of the general public.
- Title
- As generally used, the
rights of ownership and possession of particular
property. In real estate usage, title may refer
to the instruments or documents by which a right
of ownership is established (title documents),
or it may refer to the ownership interest one
has in the real estate.
- Title Insurance
- Protects lenders or
homeowners against loss of their interest in
property due to legal defects in title. Title
insurance may be issued to a "mortgagee's
title policy." Insurance benefits will be
paid only to the "named insured" in
the title policy, so it is important that an
owner purchase an "owner's title
policy", if he desires the protection of
title insurance.
- Title Search or
Examination
- A check of the title
records, generally at the local courthouse, to
make sure the buyer is purchasing a house from
the legal owner and there are no liens, overdue
special assessments, or other claims or
outstanding restrictive covenants filed in the
record, which would adversely affect the
marketability or value of title.
- Trustee
- A party who is given legal
responsibility to hold property in the best
interest of or "for the benefit of"
another. The trustee is one placed in a position
of responsibility for another, a responsibility
enforceable in a court of law. (See deed of
trust.)
- Variable Interest
Rate
- A fluctuating interest
rate which can go up or down depending on the
going market rate.
- Voluntary Lien
- A voluntary lien by the
owner such as a mortgage, as opposed to
involuntary liens (taxes).
- Waive
- To relinquish, or abandon.
To forego a right to enforce or require
anything.
- Wrap-Around
Mortgage
- A second mortgage which is
subordinate to but includes the face value of
the first mortgage.
- Zoning Ordinances
- The acts of an authorized
local government establishing building codes,
and setting forth regulations for property land
usage.
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