Glossary of Real Estate Terms
This page will help you
make sense of some of the jargon used in the Real Estate industry. While this
is not complete by any means, it does define the most common terms used.
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
ABSTRACT
The notes made by a title examiner based on his
examination of the land records. These notes are a concise summary of the
transactions affecting the property. The title agency produces a BINDER from
the information in the abstract.
ACCRETION
The buildup of land from natural forces such as wind or water.
ACKNOWLEDGMENT
As a verb, the confirmation by a party executing a
legal document that this is his signature and voluntary act. This confirmation
is made to an authorized officer of the Court or notary public who signs a
statement also called an acknowledgment.
ACRE
43,560 square feet of land.
adjustable
rate mortgage (ARM)
A loan with an interest rate that is periodically adjusted to reflect changes
in a specified financial index.
ADMINISTRATOR
A person appointed by the Court to settle the estate of a person who dies
without a will. The feminine form is Administratrix.
Compare, EXECUTOR.
ADVERSE
POSSESSION
A claim made against land titled in another person
based on open, notorious and hostile possession and use of the land to the
exclusion of the titled owner.
AGENCY
A relationship created when one person, the
"principal," delegates to another, the "agent," the right
to act on the principal's behalf in business transactions and to exercise some
degree of discretion while so acting. An agency gives rise to a fiduciary
relationship and imposes on the agent, as the fiduciary of the principal,
certain duties, obligations and high standards of good faith and loyalty.
AGENT
One who is authorized to represent and to act on
behalf of another person (called the principal). A real estate broker is the
agent of his client, be it the seller or buyer, to whom he owes a fiduciary
obligation. A salesman is the agent of his broker and does not have a direct
personal contractual relationship with either the seller or buyer.
AMORTIZATION
The periodic principal pay down of a loan.
APPROVED ATTORNEY
An attorney authorized by a title insurance company to
handle closings and render title opinions.
APPURTENANCE
Anything attached to the land or used with it passing to the new owner.
ASSIGNEE
One who receives an assignment or transfer of rights.
An assignment of a contract transfers the right to buy property.
ASSIGNOR
The one who assigns to another person.
ASSUMPTION
Taking over a loan and becoming personally liable for the repayment.
Compare, SUBJECT To.
ATTACHMENT
Seizure of property through Court process to repay a debt.
ATTORNEY IN FACT
A type of agency relationship where one person holds a POWER OF ATTORNEY allowing
him to execute legal documents on behalf of another. Decisions made by the
attorney in fact are binding on the principal.
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BANKRUPTCY
A provision of Federal Law whereby a debtor surrenders his assets
to the Bankruptcy Court and is relieved of the future obligation to repay his
unsecured debts. A Trustee in Bankruptcy administers the assets, selling
them to pay as much of the debt as possible. If your seller is in bankruptcy,
the Trustee in Bankruptcy owns the property and is the party to sign the
contract and make decisions. After bankruptcy, the debtor is discharged and his
unsecured creditors may not pursue further collection efforts against him.
Secured creditors, those holding deeds of trust or judgment liens, continue to
be secured by the property but they may not take other action to collect from
the debtor.
BENEFICIARY
A person named to receive a benefit from a TRUST. A contingent beneficiary has
conditions attached to his rights, usually someone
else must die first. BINDER A title insurance binder
is the written commitment of a title insurance company to insure title to the
property subject to the conditions and exclusions shown on the binder.
BOND
An amount of money, often posted with the Court, to guarantee against loss as a
result of a possible claim. For example, if there is a LIEN against the
property, the owner may post a bond and the lien is removed from the property
and the parties
argue over the money rather than the property.
BUILDING RESTRICTION LINE
A required set-back a certain distance from the road within which no building
may take place. This restriction may appear in the original plat of
subdivision, restrictive covenants or by building codes and zoning ordinances.
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CAVEAT EMPTOR
Buyer beware. The buyer must inspect the
property and satisfy himself it is adequate for his needs. The seller is under
no obligation to disclose defects but may not actively conceal a known defect
or lie if asked.
CERTIFICATE OF SATISFACTION
A document signed by the Noteholder
and recorded in the land records evidencing release of a DEED OF TRUST,
MORTGAGE or other lien on the property.
CERTIFICATE OF TITLE
A written opinion by an attorney setting forth the
status of title to the property as shown on the public records. The certificate
does not certify as to matters not of record and affords no protection unless
the author was negligent.
Compare, TITLE INSURANCE.
CHAIN
OF TITLE
The series of transactions from GRANTOR to GRANTEE as
evidenced in the land records.
COINSURANCE
When more than one insurance company shares the risk
of a particular transaction or series of transactions. Lenders may require
co-insurance on large commercial projects.
COLLATERAL
Property pledged to secure a loan.
CONDEMNATION
Taking of private property for a public use through
exercise of the power of EMINENT DOMAIN. The Constitution protects against
taking without fair compensation.
CONDOMINIUM
A system of individual FEE SIMPLE ownership of
portions (units) in a multi-unit structure, combined with joint ownership of
common areas. Each individual may sell or encumber his own unit.
Compare, COOPERATIVE.
CONSERVATOR
Also called a Committee or Guardian, a person
designated by the Court to protect and preserve the property of someone who is
not able to manage their own affairs. Examples include the mentally
incompetent, minors and incarcerated persons.
contingency
A condition specified in a purchase contract, such as
a satisfactory home inspection or sale of a previous home.
CONTRACT FOR DEED
Also known as a Land Contract or Land Installment Contract. A method of financing
where title remains in the Seller's name until the Buyer has paid the full
purchase price. A Contract for Deed will normally trigger the DUE ON SALE CLAUSE in a DEED OF
TRUST or MORTGAGE but Veterans Administration regulations specifically allow
Contracts for Deed without invoking the DUE ON SALE CLAUSE.
COOPERATIVE
A system of individual ownership of stock in a
corporation that in turn, owns the structure. Each owner has an exclusive right
to use his individual unit and must pay his portion of the debt encumbering the
entire building.
Compare, CONDOMINIUM.
COTENANCY
Ownership in the same land by more than one person. See, TENANCY IN
COMMON, JOINT TENANTS, TENANCY BY THE ENTIRETIES.
COVENANT
A written agreement or restriction on the use of land
or promising certain acts. Homeowner Associations often enforce restrictive
covenants governing architectural controls and maintenance responsibilities.
However, land could be subject to restrictive covenants even if there is no
homeowner's association.
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DEED
The written document conveying real property. The Deed
must be executed (signed), ACKNOWLEDGED, and DELIVERED to the Grantee. Once
recorded at the Courthouse, the original piece of paper is not needed to convey
title in the future.
DEED OF TRUST
A voluntary lien to secure a debt deeding the property
to Trustees who foreclose, sell the property at public auction, in the event of
default on the Note the Deed of Trust secures.
Compare, MORTGAGE.
DEFICIENCY
JUDGMENT
If the foreclosure sale does not bring sufficient proceeds to pay the costs of
sale and the note in full, the holder of the note may obtain a judgment against
the maker for the difference.
DELIVERY
The final, unconditional and absolute transfer of a DEED to the Grantee so that
the Grantor may not revoke it. A Deed, signed but held by the Grantor, does
not pass title.
DOWER
A spouse's interest in the property of a deceased
spouse.
DUE
ON SALE CLAUSE
A clause in the DEED OF TRUST or MORTGAGE that makes the loan
non-assumable by providing the noteholder may call
the loan immediately due and payable upon a sale or conveyance of an interest
in the property. The FNMA/FHLMC form provides that a lease of more than three
years or a lease with an option to buy also triggers this provision.
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EASEMENT
The right to use the land of another for a specific limited purpose. Examples include
utility lines, driveways, and INGRESS AND EGRESS. Easements can be temporary or
permanent.
EMINENT DOMAIN
The power of the state to take private property for public use upon payment of
just compensation.
ENCROACHMENT
The physical intrusion of a structure or improvement on the land of another. Examples include a
fence or driveway over the property line.
ENCUMBRANCE
Any lien, liability or charge against a property.
EQUITY
SHARING
A form of joint ownership between an owner/occupant
and an owner/investor. The investor takes depreciation deductions for his share
of the ownership. The occupant receives a portion of the tax write-offs for
interest and taxes and a part of his monthly payment is treated as rent. The
co-owners divide the profit upon sale of the property.
Compare, JOINT OWNERSHIP.
ESCHEAT
Property that reverts to the state when an individual dies without heirs and
without a will.
ESCROW
A disinterested third party holds funds or documents on behalf of others and
subject to their instructions.
EXECUTOR
A person named in a will to carry out its terms and
administer the estate. The feminine form is Executrix.
Compare, ADMINISTRATOR.
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FEE SIMPLE
The absolute total interest in real property.
Compare, LIFE ESTATE, REVERSION.
FINANCING
STATEMENT
Lenders
record financing statements to evidence personal property, such as a new
furnace, siding or windows, is subject to a lien.
FIXTURES
An item of personal property attached to real property
so that it can not be removed without damage to the real property. A FIXTURE
becomes part of the real property.
FORECLOSURE
The process by which a lender sells property securing
a loan in order to repay the loan. Under a DEED OF TRUST, foreclosure is by
public auction after appropriate advertisement. A MORTGAGE may require the
lender to obtain Court approval prior to sale.
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GENERAL WARRANTY DEED
The Grantor warrants title against all claims.
GRANTEE
The person receiving an interest in property.
Compare, GRANTOR
GRANTOR
The person granting, selling or giving up an interest
in property. Compare, GRANTEE.
GROUND
LEASE
The owner grants a long term lease of the land (usually 99 years) and allows
the lessee to build and use the land as agreed. At the end of the term, the
land and all improvements revert to the owner.
GUARDIAN
One appointed by the Court to administer the affairs
of a minor. A guardian ad litem is appointed to protect
one's interest in a particular legal action. See, CONSERVATOR.
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HIATUS A gap or space left between two parcels of
land and
not included in the legal description of either parcel. Similar terms are Gaps
and Gores.
HOMESTEAD
DEED
A declaration filed in the land records that an
individual is asserting his homestead exemption. That exemption allows one to
protect some assets (amount varies by state) against the claims of creditors.
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INDEMNITY
A protection against actual loss or damage as a result
of the matter mentioned. An indemnity is not an absolute guarantee that
something won't happen, it states the terms under which an actual loss will be
compensated.
INGRESS
AND EGRESS
Applied to EASEMENTS, meaning the right to go in and out over a piece of
property but not the right to park on it.
INSURABLE TITLE
Title subject to a defect or claim which a title insurance company is willing
to insure against.
Compare, MARKETABLE TITLE.
INSURED
CLOSING LETTER
An Indemnity given to a lender from a title insurance
company, agreeing to be responsible if the closing agent does not follow the
lender's instructions or misappropriates the loan proceeds. Lender's
usually require an insured closing letter be on file for each settlement.
INTESTATE
An estate without a Will.
Compare, TESTATE
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JOINT OWNERSHIP AGREEMENT
An agreement between owners defining their rights,
ownership, monetary obligations and responsibilities. This could be between and
investor and an occupant or the occupants. If an investor is involved, the
investor does not take depreciation deductions and none of the occupant's
payment is deemed rent for tax purposes.
Compare, EQUITY SHARING.
JOINT
TENANCY
Two or more persons own a property. Joint tenants with the
common law right of survivorship means the survivor inherits the
property without reference to the decedent's will. Creditors may sue to have
the property divided to settle claims against one of the owners.
Compare, TENANTS IN COMMON, TENANTS BY THE ENTIRETY.
JUDGMENT
LIEN
A judgment is a lien against all real property owned
by the judgment debtor in the county where the judgment is docketed (recorded).
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kick-out
clause
A clause in a sales contract that allows a seller to accept one
buyer's contingent offer, then back out without penalty if a second buyer makes
a better offer.
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LAND CONTRACT
See, CONTRACT FOR DEED.
LIEN
A claim or charge against property. Property is said to be encumbered by a lien
and the lien must be removed to clear title.
LIFE ESTATE
The right to use, occupy and own for the life of an
individual.
Compare, FEE SIMPLE.
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MAJORITY
The age at which a person may handle his own affairs.
MARKETABLE TITLE
Title without defects or claims so as to be readily accepted without fair or
reasonable doubt.
Compare, INSURABLE TITLE.
MECHANIC'S
LIENS
The right of an unpaid contractor, laborer or supplier
to file a lien against property to recover the value of his work.
METES
AND BOUNDS
A means of describing land by directions and distances
rather than reference to a lot number. Generally used when
land has not been subdivided into lots.
MORTGAGE
A voluntary lien filed against property to secure a
debt, usually a loan. To foreclose, the lender must often institute a court
action and the borrower may have the right to reclaim the property after
foreclosure.
Compare, DEED OF TRUST.
MULTIPLE LISTING SERVICE
The multiple listing service, or MLS, is a local database that lists homes for
sale. Member real estate agents can access the MLS and show listed homes to
potential buyers.
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NOTE
A written promise to pay a certain sum of money at a
certain time. A negotiable note starts "Pay to the order of" and is
transferable by endorsement similar to a check.
NOTARY PUBLIC
One authorized by law to acknowledge and certify documents and signatures.
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OFFER
A bid for a home purchase. Generally, it is made in
writing. Offers may be withdrawn without penalty prior to acceptance or
rejection; if accepted, the offer becomes binding.
OFFER AND ACCEPTANCE
The two components of a valid contract; a "meeting of
the minds."
OPTION
The right to buy or sell property or sign a contract,
based upon certain terms and conditions. Usually applicable to specific time
frames during which the "option" may be exercised.
ORIGINATION FEE
The fee charged by a lender to prepare loan documents, make credit checks,
inspect and sometimes appraise a property; usually computed as a percentage of
the face value of the loan.
PARTITION
The forced division of land among parties who were
formerly co-owners. A partition suit may ask to divide the land or if that is
not practical, sell the land and divide the proceeds.
PITI
The amount of principal, interest, taxes and insurance which are the bases for
monthly mortgage payments.
PLAT
A map showing the division of piece of land with lots,
streets and, if applicable, common area.
PIPESTEM
LOT
A lot connected to a public street by a narrow strip of land. Usually several
adjacent pipestems are combined to form one driveway
with each owner having a mutual-reciprocal easement to use and maintain the
driveway to the street.
POWER OF ATTORNEY
A written document authorizing another to act on his
behalf as an ATTORNEY IN FACT. One does not need to be a licensed attorney to
act as an attorney in fact but, power of attorney forms are powerful legal
documents that should be used only under advice of a licensed attorney at law.
PREPAYMENT
PENALTY
An additional charge imposed by the lender for paying off a loan before the due
date.
private
mortgage insurance (PMI)
A form of insurance required by a lender when the borrower's down payment or
home equity percentage is less than 20 percent of the home value. This insurance
partially protects the lender if the borrower defaults on the loan.
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QUIET TITLE
A suit brought to remove a claim or objection on
title.
QUITCLAIM
DEED
A deed releasing whatever interest you may hold in a
property but making no warranty whatsoever.
Compare, SPECIAL WARRANTY DEED and GENERAL WARRANTY DEED.
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REISSUE RATE
A discounted rate for title insurance when the title
was previously insured with an owner's title insurance policy issued within the
last ten years.
REMAINDER
An interest in land that is postponed until the
termination of some other interest such as a LIFE ESTATE.
Compare, FEE SIMPLE.
REVERSION
A provision in a conveyance that the land will return to the grantor upon the
happening of an event or contingency.
Compare, FEE SIMPLE.
RIPARIAN RIGHTS
The rights of an owner of land adjacent to water.
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SPECIAL WARRANTY DEED
The seller warrants he has done nothing to impair title but makes no warranty
before his ownership.
Compare, GENERAL WARRANTY DEED AND QUITCLAIM DEED.
STATUTE
OF LIMITATIONS
The time period to file a law suit to enforce a claim
or it is barred by law.
SUBDIVISION
Dividing land into lots and streets. The owner signs a
PLAT and Deed of Resubdivision which is recorded
among the land records. The state and county have strict requirements for
subdivision of land.
SUBJECT TO
Taking title to property with a lien but not agreeing to be personally
responsible for the lien. If the holder who
forecloses the lien can take the property but may not collect any money from
the owner who took "subject to." Compare, ASSUMPTION.
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TENANTS BY THE
ENTIRETY
A husband and wife own the property with the common
law right of survivorship so, if one dies, the other automatically inherits.
One may not sue the other to PARTITION the property. A creditor of one may not
claim the property or the proceeds of sale.
Compare, TENANT IN COMMON, JOINT TENANTS.
TENANT
IN COMMON
Two or more persons own the property with no right of survivorship. If one
dies, his interest passes to his heirs, not necessarily the co-owner. Either
party, or a creditor of one, may sue to PARTITION the property.
Compare, TENANTS BY THE ENTIRETY, JOINT TENANTS.
TESTATE
To die with a Will.
Compare, INTESTATE.
TESTATOR
One who makes out a last will and testament. The
feminine form is Testatrix.
TITLE INSURANCE
Insurance that provides an INDEMNITY against loss or damage as a result of
defect in title ownership to a particular piece of property. Title insurance
covers mistakes made during a TITLE SEARCH as well as matters which could not
be found or discovered in the public records such as missing heirs, mistakes,
fraud and forgery.
Compare, CERTIFICATE OF TITLE.
TITLE
SEARCH
An examination of the public records, including court
decisions, to disclose facts concerning the ownership of real estate. The title
examiner prepares an ABSTRACT and the title agent prepares a BINDER but
decisions regarding the legal sufficiency of title or questions requiring legal
interpretation must be resolved by a licensed attorney at law.
TRUST
A right to or in property held for the benefit of
another. A trust may be written or implied. An implied trust is called a
Constructive Trust.
TRUSTEE
One who holds property in Trust for another.
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USURY
Charging more than the maximum legally permitted rate
of interest.
VALUE
The power of a good or service to command other goods in exchange for the
present worth of future rights to income or amenities; the present worth to
typical users and investors of future benefits arising out of ownership of a
property.
VARIANCE
Permission obtained from governmental zoning authorities to build a structure
or conduct a use which is expressly prohibited by the current zoning laws; an
exception from the zoning laws.
WALK-THROUGH
A final tour of a home after the sale closing in which
any defects are noted.
WARRANTY
A protection plan, generally paid for by the seller,
that protects the buyer against major repair expenses and breakdowns.
Warranties are assigned to specific items, usually major appliances or systems
on the property.
WRAPAROUND
The debt secured includes an existing debt already on
the property. The payments made to the holder of the wraparound include
payments due on the existing loan and the holder must forward the appropriate
portion of each payment to the existing noteholder. Often used to avoid a PREPAYMENT PENALTY or a DUE ON SALE
CLAUSE. Can refer to a wraparound DEED OF TRUST or
CONTRACT FOR DEED.
ZONING
Regulation of private land use and development by local government.
