Real Estate Glossary

ACCELERATION CLAUSE (mortgage term) A condition in a written mortgage, note, bond or conditional sales contract giving the lender power to declare all sums owing lender immediately due and payable upon the happening of an event, such as the sale of the property, or a delinquency in the repayment of the note.

ACCELERATED DEPRECIATION (real estate term) A method of calculating for tax purposes, the depreciation of income property at a faster rate than would be achieved using the straight-line method. Note that any depreciation taken in excess of that which would be claimed using the straight-line rate is subject to recapture as ordinary income to the extent of gain resulting from the sale.

ADJUSTABLE RATE MORTGAGE (ARM) (mortgage term) A mortgage in which the interest rate changes at predetermined interval. The mortgage has caps or a ceiling that limits the amount it can change at the predetermined intervals.

AGENT (legal and real estate term) One who represents or has the power to act for another person (called the principal). The authorization may be express or implied. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.

AGENCY (legal and real estate term) A relationship in which the agent is given the authority to act on behalf of another person (Principal).

AIR RIGHTS (legal term) The right to use the open space above a property, generally allowing the surface to be used for another purpose.

AGREEMENT OF SALE (legal term) A written agreement whereby the purchaser agrees to buy certain real estate and the seller agrees to sell, upon terms and conditions set forth in the agreement.

AMERICANS WITH DISABILITIES ACT (legal term) The ADA is a federal law that became effective in 1992. It is designed to eliminate discrimination against individuals with disabilities by mandating equal access to jobs, public accommodations, public transportation, telecommunications, and government services.

AMORTIZED LOAN (mortgage term) A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity.

AMORTIZATION (mortgage term) The liquidation of a financial burden by installment payments.

ANNUAL PERCENTAGE RATE (APR) (mortgage-related term) Is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The A.P.R. allows homebuyers to compare different types of mortgages based on the annual cost for each loan.

APPRAISAL (mortgage and real estate term) An estimate of the quantity, quality or value of something. The process through which conclusions of property value are obtained; also refers to the report setting forth the process of estimation and conclusion of value.

APPRECIATION (real estate term) An increase in the worth or value of a property due to economic or related causes which may prove to be either temporary or permanent; opposite of depreciation.

ASKING PRICE (real estate term) The price at which the owner wishes to sell a property. It is not necessarily the selling price.

ASSESSOR (real estate term) Municipal or county official who determines the value of property for taxation.

ASSESSMENT (real estate term) The imposition of a tax, charge or levy, usually according to established rate.Also, in a condominium building or community an assessment is a fee, usually monthly, to pay for common services. These services might include: Common insurance, trash removal, water, heat, air conditioning, repair and maintenance, snow removal, parking, TV cable and others.

BALLOON MORTGAGE (mortgage term) Short-term loan, usually at a fixed interest rate, paid back in equal monthly payments, with a large, final “balloon” payment for the balance.

BALLLOON PAYMENT (mortgage term) The final payment of a balloon mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.

BREACH OF CONTRACT (legal term) The failure, without legal excuse, of one of the parties to a contract to perform according to the contract.

BROKER (real estate and mortgage term) Person licensed to represent homebuyers or sellers for a fee. A broker must pass a broker’s exam.

CASUALTY INSURANCE A type of insurance policy that protects a property owner or other person from loss or injury sustained as a result of theft, vandalism or similar occurrences.

CLOSING (real estate term) Final settlement, including the buyer’s signing of the mortgage and mortgage note, and exchange of title.

CLOSING COSTS (real estate term) Fees and other charges paid by both buyers and sellers at closing.

COMMISSION Percentage of the home’s sale price paid at closing to the listing agent and to cooperating agents.

COMMON ELEMENTS (real estate and legal term) Those parts of a property that are necessary or convenient to the existence, maintenance and safety of a condominium, or are normally in common use by all of the condominium residents. All condominium owners have an undivided ownership interest in the common elements.

COMPARABLES (real estate term) Houses and properties that are similar in style, appearance, construction quality and usefulness to a particular property in a certain location.

COMPETITIVE MARKET ANALYSIS (CMA) (real estate term) also Comparable Market Analysis. A realistic estimate of a home’s current market value based on recent comprarable listings and sales. This is not an appraisal. It is an opinion of value.

CONDOMINIUM (legal and real estate term) The absolute ownership of an apartment or a unit, generally in a multi-unit building, based on a legal description of the airspace which the unit actually occupies, plus an undivided interest in the ownership of the common elements which are owned jointly with the other condominium unit owners. The entire tract of real estate included in a condominium development is called a parcel, or development parcel. One apartment or space in a condominium building or a part of a property intended for independent use and having lawful access to a public way is a called a unit. Ownership of one unit also includes definite undivided interest in the common elements.

CONTINGENCY (legal term) A provision in a contract that requires completion or that a certain event occurs before the contract becomes binding.

CONTRACT (legal term) An agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertakes to do or to refrain from doing some legal act or acts. A contract may be either unilateral, where only one party is bound to act, or bilateral, where all parties to the instrument are legally bound to act as prescribed.

CONVENTIONAL MORTGAGE (mortgage term) Mortgage not FHA insured or guaranteed by the VA, so-called because it is the most popular home financing method.

CONVENTIONAL LOAN(mortgage term) A loan that is not insured or guaranteed by a government or private source.

COOPERATIVE (legal and real estate term) A residential multi-unit building whose title is held by a trust or corporation, which is owned by and operated for the benefit of persons living within the building, who are the beneficial owners of the trust or stockholders of the corporation, each having a proprietary lease.

COUNTEROFFER (legal term) A new offer made as a reply to an offer received, having the effect of canceling the original offer, which cannot be accepted thereafter unless revived by the Offeror’s submitting it again.

CURB APPEAL (real estate term) Common term for everything prospective buyers can see from the street that might make them want to take a closer look at a house for sale.

DEBT SERVICE (mortgage term) A borrower’s periodic payment, comprised of principal and interest, on the unpaid balance of a mortgage.

DEED A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

DEED RESTRICTIONS The clauses in a deed limiting the future uses of the property. Deed restrictions may impose a vast variety of limitations and conditions, such as limiting the density of buildings, dictating the types of structures that can be erected and preventing buildings from being used for specific purposes or from being used at all.

DEFAULT (legal term) The nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due.

DELIVERY (legal term) The legal act of transferring ownership. Documents such as deeds and mortgages must be delivered and accepted to be valid.

DEMAND The willingness of a number of people to accept available goods at a given price; often coupled with supply.

DISCOUNT POINTS (mortgage term) An added loan fee charged by a lender to make the yield on a lower-than-market-value FHA or VA loan competitive with higher-interest conventional loans.

DOWN PAYMENT (mortgage term) Buyer’s payment to the seller at time of closing for that percentage of the purchase price required by the buyer’s mortgage loan.

EARNEST MONEY (real estate and mortgage term) Money paid by a buyer at the time of making an offer or entering into a contract to purchase which is intended to show the buyer’s good faith intention to complete the purchase. Generally, earnest money is applied against the purchase price, but may be at risk if the buyer fails to complete the purchase.

EARNEST MONEY DEPOSIT (real estate and mortgage term) An amount of money deposited by a buyer under the terms of a contract.

EASEMENT (real estate and legal term) A right to use the land of another for a specific purpose, such as for a right-of-way or utilities; an incorporeal interest in land. An easement appurtenant passes with the land when conveyed.

EQUAL CREDIT OPPORTUNITY ACT (legal and mortgage term) The ECOA is a federal act which prohibits discrimination by lenders on the basis of race, color, religion, sex, national origin, age or marital status in any aspect of a credit transaction.

EQUITY (mortgage term) The interest or value that an owner has in a property over and above any mortgage indebtedness.

ESCROW ACCOUNT (mortgage and real estate term) Third party account for holding money, such as a buyer’s earnest money and/or the owner’s taxes and insurance payment.

EXCLUSIVE RIGHT-TO-SELL (real estate and legal term) Sales contract in which sellers owe commission to the listing regardless of who finds the buyer.

EXECUTED CONTRACT (legal term) A contract in which all parties have fulfilled their promises and thus performed the contract.

FAIR MARKET VALUE (real estate term) Highest price an informed buyer will pay, assuming there is no unusual pressure to complete the purchase.

FHA INSURED MORTGAGE (mortgage term) Mortgage with low down payment requirements, insured by the Federal Housing Administration and made available through banks and other lenders.

FHA LOAN (mortgage term) A loan insured by the FHA and made by an approved lender in accordance with the FHA’s regulations. See above.

FEDERAL FAIR HOUSING LAW (legal and real estate term) The term for the civil rights act of 1968 that prohibits discrimination based on race, color, sex, religion or national origin in the sale and rental of residential property.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (mortgage term) “Fannie Mae” is the popular name for this federal agency that creates a secondary market for existing mortgages. FNMA does not loan money directly, but rather buys VA, FHA and conventional loans.

FIDUCIARY RELATIONSHIP (legal and real estate term) A relationship of trust and confidence, as between trustee and beneficiary, attorney and client and principal and agent.

FIXED RATE MORTGAGE (mortgage term) Mortgage that is locked in to a set interest rate and relatively unaffected by inflation and interest rate changes.

FIXTURE (real estate term) An article that was once personal property but has been so affixed to real estate that it has become real property.

FLOOR AREA RATIO (real estate term) The F.A.R. indicates the relationship between a building area and land, or the relationship between the square footage of the building and the square footage of the land.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (mortgage term) “Ginnie Mae”, a federal agency and division of HUD that operates special assistance aspects of federally aided housing programs and participates in the secondary market through its mortgage-backed securities pools.

GRADUATED MORTGAGE PAYMENT (mortgage term) A loan in which smaller payments are made in the early years and larger payments at some predetermined time. This may create negative amortization.

HOME WARRANTY Policy purchased by a buyer or seller as assurance against unexpected home repair costs.

HOMEOWNER’S POLICY Insurance policy covering at least the appraised value of a house and property.

INSPECTION (real estate term) Formal survey of a home’s structure and systems often performed by a licensed professional.

INSPECTION CLAUSE (legal and real estate term) Stipulation in an offer-to-purchase, that makes the contract contingent upon inspection by a professional home inspector.

INTEREST (mortgage term) Charge paid to a lender for borrowed money.

JOINT TENANCY (legal and real estate term) The ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, his or her interest passes to the surviving joint tenant or tenants by the right of survivorship,

LEASE PURCHASE AGREEMENT (legal term) Agreement between a tenant and landlord that a portion of monthly rent may be credited toward eventual purchase of the rental property.

LEGAL DESCRIPTION (legal term) A description of a specific parcel of real estate sufficient for an independent surveyor to locate and identify it. The most common forms of legal description are: rectangular survey, metes and bounds, and lot, block (plat) and subdivision.

LENDER’S AGENT (mortgage term) Person who represents the lender holding the mortgage at closing.

LISTING (legal and real estate term) Contract in which the seller agrees to pay a brokerage fee to the real estate brokerage firm that finds a purchaser who can meet the specified terms.

LOAN-TO-VALUE RATIO (mortgage term) The relationship between the amount of a loan and the appraised value of the property. It is expressed as a percentage of the appraised value.

MARKETABLE TITLE (real estate term) A good or clear saleable title reasonably frees from risk of litigation over possible defects; also called a merchantable title.

MARKET PRICE (real estate term) The actual selling price of a property.

MARKET VALUE (real estate term) The highest price that a property will bring in a competitive and open market under all conditions requisite to a fair sale. The price at which a buyer would buy and a seller would sell, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

MORTGAGE (mortgage term) A conditional transfer or pledge of real estate as security for a loan. Also, the document creating a mortgage lien.

MORTGAGE BANKER (mortgage term) A firm or individual who originates loans for sale to other investors.

MORTGAGE BROKER (mortgage term) Independent, third party broker who arranges transactions between borrowers and lenders by streamlining the application and approval process and finding favorable terms for the buyer.

MORTGAGE LIEN A lien or charge on a mortgagor’s property that secures the underlying debt obligations.

MORTGAGE NOTE (mortgage term) Signed promise to repay a mortgage loan in regular monthly payments.

MORTGAGEE (mortgage term) The lender who receives a pledge from a borrower to repay a loan.

MORTGAGOR (mortgage term) One who, having all or part of title to property, pledges that property as security for a debt; the borrower.

MULTIPLE LISTING SERVICE (MLS) (real estate term) System in which participating brokers agree to share commission on the sale of houses listed by any one of them.

NONCONFORMING LOAN (mortgage term) A loan that does not meet secondary market standards.

OFFER or OFFER TO PURCHASE (real estate and legal term) Legally binding, written contract that declares how much a buyer will pay for the house provided certain conditions are met.

OFFER AND ACCEPTANCE (real estate and legal term) The two components of a valid contract; a “meeting of the minds.”

OPEN HOUSE (real estate term) Opportunity for prospective buyers to view a house for sale in a low-pressure atmosphere.

ORIGINATION FEE (mortgage term) Similar to a “point”, a percentage of the loan or a flat fee; a supplemental fee paid to lenders.

OVER-IMPROVEMENT (real estate term) Addition or improvement in which the cost is greater than the increased value of the house.

PARTY WALL (real estate term) A wall that is located on or at a boundary line between two adjoining parcels for the use of the owners of both properties.

PAYMENT CAP (mortgage term) Protective device included in some adjustable rate mortgages that set a maximum amount monthly payments may rise in any given year.

PERSONAL PROPERTY (real estate term) Those items, called chattels, that are not classified as real property; tangible and movable objects.

PITI (mortgage term) Principal, Interest, Taxes, and Insurance, the four main parts of a monthly mortgage payment.

PMI (mortgage term) Private mortgage insurance, which protects the lender in case of default by the borrower. PMI is often used to allow buyers to obtain financing with less than 20% down payment.

POINTS (mortgage term) One point equals one percent of the total mortgage loan amount. Buyers often pay lenders a supplemental fee, calculated in points, to get a better mortgage interest rate.

POWER OF ATTORNEY (legal term) A written instrument authorizing a person (the attorney-in-fact) to act on behalf of the maker to the extent indicated in the instrument.

PREPAYMENT (mortgage term) Paying off an entire mortgage before the scheduled date.

PREQUALIFY (mortgage term) Informal determination by a lender or broker of how large a mortgage a buyer can afford.

PRINCIPAL (mortgage term) Money borrowed from a lender, not including any fees or interest.

PROPERTY TAX Those taxes levied by the government against either real or personal property. The right to tax real property in the United States rests exclusively with the states, not with the federal government.

PRORATION The proportionate division or distribution of expenses of property ownership between two or more parties. Closing statement prorations generally include taxes, rents, insurance, interest charges and assessments.

QUALIFY (mortgage term) Ability to meet a lender’s mortgage approval requirements.

RATE CAP (mortgage term) Protective device in some ARMS that sets a maximum amount that interest rates may rise or decrease annually and over the life of the loan.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) (mortgage, legal, real estate term) The federal law ensuring that the buyer and seller in a real estate transaction have knowledge of all settlement costs when the purchase of a one- to four-family residential dwelling is financed by a federally related mortgage loan. Federally related loans include those made by savings and loans; insured by the FHA or VA; administered by HUD; or intended to be sold by the lender to an agency.

REAL PROPERTY (real estate term) Real property, or real estate as it is often called, consists of land, anything affixed to it a to be regarded as a permanent part of the land, that which is appurtenant to the land and that which is immovable by law.

REALTOR (real estate and legal term) A registered trademark term reserved for the sole use of active members of local realtor boards affiliated with the National Association of Realtors.

RECORDING (legal term) The act of entering or recording documents affecting or conveying interests in real estate in the recorder’s office established in each county. Until recorded, a deed or mortgage generally is not effective against subsequent purchases or mortgage liens.

RECISSION (legal term) The termination of a contract by mutual agreement of the parties.

REFERRAL (real estate term) One agent’s recommendation of a potential buyer or seller to another cooperating agent.

REFINANCING (mortgage term) Applying for a new mortgage in order to gain better terms – usually a lower interest rate.

RELOCATION SERVICE An organization that aids a person in selling a property in one area and buying another property in a different area.

RETURN ON INVESTMENT Value or profit gained as a result of dollars spent, as in an improvement or addition.

SETTLEMENT DISCLOSURE STATEMENT (mortgage term) A list giving a complete breakdown of costs involved in a real estate transaction, prepared by the lender’s agent at closing.

SHARED APPRECIATION MORTGAGE (mortgage term) Arrangement in which a third-party investor provides a percentage of the buyer’s down payment and retains the same percentage of ownership and appreciation until paid back.

STATUTE OF FRAUDS (legal term) That part of a state law, which requires that certain instruments, such as deeds, real estate sales contracts and certain leases, be in writing in order to be legally enforceable.

SUBROGATION (legal term) The substitution of one creditor for another, with the substituted person succeeding to the legal rights and claims of the original claimant. Subrogation is used by title insurers to acquire rights to sue from the injured party to recover any claims they have paid.

SUPPLY (real estate term) The amount of goods available in the market to be sold at a given price. The term is often coupled with demand.

SURVEY (real estate term) The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and positions of a building on a lot, including the determination of any existing encroachments or easements.

TAX LIEN A charge against property created by operation of law. Tax liens and assessments take priority over all other liens.

TIME IS OF THE ESSENCE (legal term) A phrase in a contract that requires the performance of a certain act within a stated period of time.

TITLE (legal term) The legal evidence of ownership rights to real property.

TITLE INSURANCE An insurance policy that is designed to indemnify the holder for loss sustained for reason of defects in a title, up to and including the policy limits.

TRUTH-IN-LENDING ACT (mortgage and legal term) Also known as Regulation Z, this act requires the lender to disclose the true cost of credit to individual borrowers for certain types of loans. It also regulates the advertisement of creditors.

VA MORTGAGE or VA LOAN (mortgage term) Mortgage guaranteed by the department of veteran’s affairs and made available through banks and other lending institutions. Reserved for active military personnel, veterans, or spouses of veterans who died of service-related injuries.

VALID CONTRACT (legal term) A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.

VALID DEED enforceable deed which has a competent grantor and grantee, consideration, conveyance, legal description of land, signature of grantor, acknowledgement, delivery and acceptance.

VARIANCE The permission obtained from zoning authorities to build a structure or conduct a use that is expressly prohibited by the current zoning laws; an exception from the zoning ordinances.

WALK-THROUGH INSPECTION (real estate term) Final inspection of a property’s condition by the buyer, usually to ensure that all conditions noted in the offer-to-purchase have been met.

ZONING (real estate term) Local restrictions for neighborhood building and land use.

ZONING ORDINANCE (real estate term) An exercise of police power by a municipality to regulate and control the character and use of property.