Real Estate Terms and Definitions

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1031 Exchange (1031 tax deferred exchange)
Under Section 1031 of the IRS Code, some or all of the realized gain from the exchange of one property for a like kind property may be deferred. It is not a tax-free event; however, in order to accumulate wealth, the payment is deferred.
Abandonment
The voluntary and permanent cessation of use or enjoyment with no intention to resume or reclaim one's possession or interest. May pertain to an easement of a property.
Abstract of title
A condensed version of the history of a title to a particular parcel of real estate as recorded in the county clerk's records; consists of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property.
Abutting
The joining, reaching, or touching of adjoining land. Abutting parcels of land have a common boundary.
Accelerated depreciation
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. Any depreciation taken in excess of what would be claimed using the straight-line rate is subject to recapture as ordinary income to the extent of the gain resulting from the sale.
Acceleration clause
A provision in a written mortgage, note, bond, or conditional sales contract that in the event of default, the whole amount of the principal and the interest may be declared due and payable at once.
Accession
Title to improvements or additions to real property is acquired as a result of the accretion of alluvial deposits along the banks of streams or as a result of the annexation of fixtures.
Accretion
An increase or addition to land by the deposit of sand or soil washed up naturally from a river, lake, or sea.
Accrued depreciation
The actual depreciation that has occurred to a property at any given date; the difference between the cost of replacement new (as of the date of the appraisal) and the present appraised value.
Acknowledgment
A declaration made by a person to a notary public or other public official authorized to take acknowledgments that an instrument was executed by him or her as a free and voluntary act.
Actual eviction
The result of legal action originated by a lessor, by which a defaulted tenant is physically ousted from the rental property pursuant to a court order.
Actual notice
Express information or fact; that which is known; actual knowledge.
Administrator
The party appointed by the county court to settle the estate of a deceased person who died without leaving a will.
Ad Valorem tax
A tax levied according to value; generally used to refer to real estate tax.
Adverse Possession
The actual, visible, hostile, notorious, exclusive, and continuous possession of another's land under a claim to title. Possession for a statutory period may be a means of acquiring title.
Affidavit
A written statement signed and sworn to before a person authorized to administer an oath.
Agent
One who represents or has the power to act for another person (called the principal). The authorization may be express, implied, or apparent. 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 her or his agent.
Agreement of sale
A written agreement by which the purchaser agrees to buy certain real estate and the seller agrees to sell, on the terms and conditions set forth in the agreement.
Air lot
A designated airspace over a piece of land. Air lots, like surface property, may be transferred.
Air rights
The right to use the open space above one's property. It can be sold to build a skywalk or for a utility company to erect power lines.
Alienation
The act of transferring property to another. Alienation may be voluntary, such as by sale, or involuntary, such as through eminent domain.
Alienation clause
Clause in a mortgage instrument that does not all the borrower to sell (without lender approval) on assumption or contract-for-deed. If an attempt is made to do so without prior approval, all of the mortgaged balance becomes due on the sale of the property.
Alluvion
The actual soil increase resulting from accretion.
Amendments
Changes to previously approved and adopted written agreements are amendments.
Amenities
Neighborhood facilities and services that enhance a property's value. They are always outside of the property. Swimming pools, three-car garages, decks, etc., that are on the property are called features.
Americans with Disabilities Act (ADA)
A federal law, effective in 1992, designed to eliminate discrimination against individuals with disabilities.
Amortization
The liquidation of a financial burden by installment payments, which include principal and interest.
Amortized loan
A loan in which the principal and interest are payable in monthly or other periodic installments over the term of the loan.
Anticipation
An appraising principle created by the expectation of certain future events causing values to either increase or decrease.
Antitrust laws
The laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Violation of antitrust laws in the real estate business generally involves either price fixing (brokers conspiring to set fixed compensation rates) or allocation of customers or markets (brokers agreeing to limit their trades or dealings to certain areas or properties).
Appraisal
An estimate of the quantity, quality, or value of something. The process through which conclusions about property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.
Appraised value
An estimate of a property's present worth.
Appreciation
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.
Appurtenant
Belonging to; incident to; annexed to.
Arbitrage
The simultaneous purchase and sale of a security with the purpose of obtaining a higher yield from the differential between its acquisition and selling price.
Arbitration
A means of settling a controversy between two parties through the medium of an impartial third party whose decision on the controversy (if agreed upon) will be final and binding.
Assessment
The imposition of a tax, charge, or levy, usually according to established rates.
Assignment
The transfer in writing of rights or interest in a bond, mortgage, lease, or other instrument.
Assumed name statute
The law, in effect in most states, that stipulates that no person shall conduct a business under any name other than his or her own individual name, unless such person files the desired name with the county clerk in each county where the business is conducted. In the case of brokers and salespeople, statement of such filing should be submitted to the state's real estate commission.
Assumption of mortgage
The transfer of title to property to a grantee, by which the grantee assumes liability for payment of an existing note secured by a mortgage against the property. Should the mortgage be foreclosed and the property sold for a lesser amount than that due, the grantee/purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally liable for the deficiency. Before a seller may be relieved of liability under the existing mortgage, the lender must accept the transfer of liability for payment of the note.
Attorney-in-fact
The holder of a power of attorney.
Attorney's opinion of title
An instrument written and signed by the attorney who examines the title, stating her or his opinion as to whether a seller may convey good title.
Avulsion
A sudden tearing away of land by the action of natural forces.
Balloon payment
The final payment of a mortgage loan that is considerably larger than the required periodic payments, because the loan amount was not fully amortized.
Bargain and sale deed
A deed that carries with it no warranties against liens or other encumbrances but that does imply the grantor has the right to convey title. The grantor may add warranties to the deed at his or her discretion.
Base fee
A determinable fee estate that may be inherited.
Base line
One of a set of imaginary lines running east and west and crossing a principal meridian at a definite point. Base lines are used by surveyors for reference in locating and describing land under the rectangular survey system (or government survey method) of property description.
Benchmark
A permanent reference mark or point established for use by surveyors when measuring differences in elevation.
Beneficiary
1. The person for whom a trust operates or in whose behalf the income from a trust estate is drawn. 2. A lender who lends money of real estate and takes back a note and deed of trust from the borrower.
Bequest
A provision in a will providing for the distribution of personal property.
Bilateral contract
A contract in which each party promises to perform an act in exchange for the other party's promise to perform.
Bill of sale
A written instrument given to pass title to personal property.
Binder
An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser's good faith and intent to complete the transaction.
Blanket mortgage
A mortgage that covers more than one parcel of real estate and provides for each parcel's partial release from the mortgage lien on repayment of a definite portion of the debt.
Blockbusting
The illegal practice of inducing homeowners to sell their properties by making representations regarding the entry, or prospective entry, of minority persons into the neighborhood.
Blue-sky laws
The common name for state and federal laws that regulate the registration and sale of investment securities.
Boycotting
Two or more businesses conspire against other businesses to reduce competition.
Branch office
A secondary place of business apart from the principal or main office from which real estate business is conducted. A branch office generally must be run by a licensed real estate broker, broker salesperson, or associate broker working on behalf of the broker operating the principal office.
Breach of contract
The failure, without legal excuse, of one of the parties to a contract to perform according to the contract.
Bridge loan
A loan that bridges the sale of property.
Broker
One who buys and sells for another for a commission.
Brokerage
The business of buying and selling for another for a commission.
Broker/Salesperson
A person who has passed the broker's licensing examination but it is licensed to work only on behalf of a licensed broker and who may be allowed to manage an office. In many states, known as (and licensed as) associate broker or broker/associate.
Brownfields
Deserted, defunct, and derelict toxic industrial sites in need of renewal. Federal legislation has diminished the innocent landowner's liability exposure and provided the landowner the opportunity to expense cleanup costs rather than capitalize them.
Budget loan
A loan in which the monthly payments made by the borrower cover not only interest and a payment on the principal, but also 1/12 of such expenses as taxes, insurance assessments, private mortgage insurance premiums, and similar charges.
Buffer zone
A strip of land that separates one land use from another.
Building code
An ordinance specifying minimum standards of construction of buildings for the protection of public safety and health.
Building line
A line fixed at a certain distance from the front and/or sides of a lot beyond which no structure can project; a setback line used to ensure a degree of uniformity in the appearance of buildings and unobstructed light, air, and view.
Building restrictions
The limitations on the size or type of property improvements established by zoning acts or by deed or lease restrictions. Building restrictions are considered encumbrances and violations render the title unmarketable.
Bundle of legal rights
The theory that land ownership involves ownership of all legal rights to the land, such as possession, control within the law, and enjoyment, rather than ownership of the land itself.
Business plan
A three to five year blueprint for an organization or individual real estate practitioner.
Buydown
A payment made, often by the seller, to help the buyer qualify for the loan.
Canvassing
The practice of making telephone calls or visiting from door to door to seek prospective buyers or sellers; in the real estate business, generally associated with acquired listings in a given area.
Capacity of parties
The legal ability of persons to enter into a valid contract. Most persons have fully capacity to contract and are said to be competent parties.
Capital gain
Profit earned from the sale of an asset.
Capital investment
The initial capital and the long-term expenditures made to establish and maintain a business or investment property.
Capitalization
The process of converting into present value (or obtaining the present worth of) a series of anticipated future periodic installments of net income. In real estate appraisal, it usually takes the form of discounting. The formula is Income/Rate = Value
Capitalization rate
The rate of return a property will produce on the owner's investment.
Cash flow
The net spendable income from an investment, determined by deducting all operating and fixed expenses from the gross income. If expenses exceed income, a negative cash flow is the result.
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.
Caveat emptor
A Latin phrase meaning, "let the buyer beware."
Certificate of sale
The document generally given to a purchaser at a tax foreclosure sale. A certificate of sale does not convey title; generally, it is an instrument certifying that the holder may receive title to the property after the redemption period has passed and that the holder paid the property taxes for that interim period.
Certificate of title
The statement of opinion on the status of the title to a parcel of real property, based on an examination of specified public records.
Chain of title
The succession of conveyances from some accepted starting point by which the present holder of real property dervies his or her title.
Charrettes
Community planning tool that welcomes and improves public participation in discussions about a community's future growth and development.
Chattels
Personal property.
Check
Tracts of land located repetitively every 24 miles from a principal meridian and 24 miles from a defined base line. Guide meridians and correction lines define a check;s boundaries, consisting of 16 townships. A correction line "corrects" for the curvature of the earth, and guide meridians slant to compensate for North Pole directional movement.
City planning commission
A local government organization designed to direct and control the development of land within a municipality.
Claim of right
Used as a factor in determining adverse possession claims. Adversely occupying another's real estate for a statutory period of time may create a claim of right.
Cloud on title
A claim or encumbrance that may affect the title to land.
CLUE
An insurance company repository for reported claim activity and previous property damage. CLUE is an acronym for Comprehensive Loss Underwriting Exchange. Insurers use the report to ascertain patterns of possible future claims and adjust their insurance premiums according to risk.
Codicil
A testamentary disposition subsequent to a will that alters, explains, adds to, or confirms the will, but does not revoke it.
Coinsurance clause
A clause in insurance policies covering real property that requires the policyholder to maintain fire insurance coverage that is generally equal to at least 80% of the property's actual replacement cost.
Collateral
Something of value given or pledged to a lender as a security for a debt or obligation.
Color of title
Used as factor in an adverse possession claim when the occupying party actually received title but by a defective or incorrect deed (color of title).
Commercial property
A classification of real estate that includes income-producing property, such as office buildings, restaurants, shopping centers, hotels, and stores.
Commingled property
Property of a married couple that is so mixed or commingled that it is difficult to determine whether it is separate of community property. Commingled property becomes community property.
Commingling
The illegal act of a real estate broker who mixes the money of other people with that of his or her own; brokers are required by law to maintain a separate trust account for other parties' funds held temporarily by the broker.
Commission
The payment made to a broker for services rendered, such as in the sale or purchase of real property; this is usually a percentage of the selling price of the property.
Common elements
The parts of a property that are necessary or convenient to the existence, maintenance, and safety of a condominium, or that are normally in common use by all of the condominium residents. All condominium owners have an undivided ownership interest in the common elements.
Common law
A body of law based on custom, usage, and court decisions.
Community property
A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage.
Comparables
The sold properties, listed in an appraisal report, which are substantially equivalent to the subect property.
Competent parties
Persons who are recognized by law as being able to contract with others; usually those of legal age and sound mind.
Composite depreciation
A method of determining the depreciation of a multi-building property using the average rate at which all the buildings are depreciating.
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
Federal legislation passed in 1980 requiring owners of contaminated properties to bear the cleanup costs.
Condemnation
A judicial or administrative proceeding or process to exercise the power of eminent domain.
Condominium
The absolute ownership of an apartment or a unit, generally in a multi-unit building, based on a legal description of the airspace the unit actually occupies, plus an undivided interest in the ownership of the common elements, which are owned together 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 or part of a property intended for independent use and having lawful access to the public way is called a unit. Ownership of one unit also includes a definite undivided interest in the common elements.
Conforming mortgages
Securitized mortgages sold on the secondary market that meet certain requirements established by Fannie Mae and Freddie Mac.
Consideration
Something of value that induces one to enter into a contract. Consideration may be "valuable" (money or commodity) or "good" (love and affection"). Also, an act of forbearance, or the promise thereof, given by one party in exchange for something from the other. Forbearance is a promise not to do something.
Constructive eviction
1. Acts by the landlord that so materially disturb or impair the tenant's enjoyment of the leased premises that the tenant is effectively forced to move out and terminate the lease without liability for any further rent. 2. A purchaser's inability to obtain clear title.
Constructive notice
Notice given to the world by recorded documents. All persons are charged with knowledge of such documents and their contents, whether or not they have actually examined them. Possession of property also is considered constructive notice that the person in possession has an interest in the property.
Contingencies
A provision or condition in the purchase of real estate requiring a certain act to be done or an event to happen before the contract becomes binding.
Contract
An agreement entered into by two or more legally competent 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).
Contract for deed
A contract for the sale of real estate under which the sale price is paid in periodic installments by the purchaser, who is in possession and holds equitable title, although actual title is retained by the seller until final payment.
Contract for exchange of real estate
A contract for sale of real estate in which the consideration is paid wholly or partly in property.
Contributory value
An appraising principle where the value of a property's component parts are measured by their effect on the selling price of the whole. Appraisers use sold properties as "paired sales" to isolate component parts and to identify their monetary contribution to the whole.
Conventional loan
A loan that is not insured or guaranteed by a government agency.
Conveyance
A written instrument that evidences transfer of some interest to real property from one person to another.
Cooperative
A residential multi-unit building whose title is held by a trust or corporation that is owned by, and operated for, the benefit of persons living within the building. These persons are the beneficial owners of the trust or the shareholders of the corporation, each having a proprietary lease.
Corporation
An entity or organization created by operation of law whose rights of doing business are essentially the same as those of an individual. The entity has continuous existence until dissolved according to legal procedures.
Correction lines
The horizontal provisions in the rectangular survey system made to compensate for the curvature of the earth's surface. Every fourth township line is used as a correction line on which the intervals between the north and south range lines are remeasured and corrected to a full six miles.
Cost approach
The process of estimating the value of a property by adding the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation, to the estimated land value.
Counseling
The business of providing people with expert advice on a subject, based on the counselor's extensive, expert knowledge of the subject.
Counteroffer
A new offer made as a reply to an offer received, having the effect of rejecting the original offer. The original offer cannot be accepted thereafter unless revived by the offeror repeating it.
Covenants, Conditions, and Restrictions (CC&Rs)
Condominium documents that serve as the operational procedures describing the rights and prohibitions of the co-owners in a condominium association.
Credit scoring
A three-digit score that assesses a borrower's credit risk and the probability of default based on his or her past pay performances, outstanding credit balances, credit mix, time on file, and number of search inquiries.
Cul-de-sac
A dead-end street that widens sufficiently at the end to permit an automobile to make a U-turn.
Curtesy
A life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his deceased wife. Most states have abolished curtesy.
Cycle
A recurring sequence of events that regularly follow one another, generally within a fixed interval of time.
Datum
A horizontal plane from which heights and depths are measured.
Defeasible fee estate
A qualified estate in which the grantee could lose his or her interest upon the occurrence or non-occurrence of a specified event. There are two types of defeasible fee estates: (1) Those known as a condition subsequent where the possibility of re-entry takes place, and (2) A qualified limitation, where the grantee's ownership automatically ends with the possibility of reverter (otherwise known as a fee simple determinable). The words as long as, while, or during are key to creating a qualified limitation defeasible fee estate.
DBA
Doing business as
Debenture
A note or bond given as evidence of debt and issued without security
Debt
Something owed to another; an obligation to pay or return something.
Declining balance method
An accounting method of calculating depreciation for tax purposes designed to provide large deductions in the early years of ownership.
Deed
A written instrument that when executed and delivered conveys title to, or an interest in, real estate.
Deed in lieu of foreclosure
A process by which the mortgagor can avoid foreclosure. Mortgagor gives a deed to mortgagee when mortgagor is in default according to terms of mortgage.
Deed of reconveyance
The instrument used to reconvey title to a trustor under a deed of trust once the debt has been satisfied.
Deed of trust
An instrument used to create a lien by which the mortgagor conveys her or his title to a trustee, who holds it as security for the benefit of the noteholder.
Deed restrictions
The clauses in a deed limiting the future users of the property. Deed restrictions may impose a 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 used at all.
Default
The nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due.
Defeasance clause
A clause used in leases or mortgages that cancels a specified right on the occurrence of a certain condition, such as cancellation of a mortgage on repayment of the mortgage loan.
Deficiency judgment
A personal judgment levied against the mortgagor when a foreclosure sale does not produce sufficient funds to to pay the mortgage debt in full.
Delinquent taxes
Unpaid taxes that are past due.
Delivery
The legal act of transferring ownership. Documents such as deeds and purchase agreements must be delivered and accepted to be valid.
Delivery in escrow
Delivery of a deed to a third person until the performance of some act or condition by one of the parties.
Demand
The willingness of persons to buy available goods at a given price; often coupled with supply.
Density zoning
The zoning ordinances that restrict the average maximum number of houses per acre that may be built within a particular area, generally a subdivision.
Depreciation
1. In appraisal, a loss of value in property due to all causes, including physical deterioration, functional obsolescence, and economic obsolescence. 2. In real estate investment, an expense deduction for tax purposes taken over the period of ownership of the income property.
Descent
The hereditary succession of an heir to the property of a relative who dies intestate.
Designed agency
An agency relationship where a client designates a broker to appoint an office agent to singularly represent his or her interest to the exclusion of all of the other agents in the broker's office.
Determinable fee estate
A fee-simple estate in which the property automatically reverts to the grantor on the occurrence of a specified event or condition.
Devise
A transfer of real estate by will or last testament. The donor is the devisor and the recipient is the devisee.
Diminishing returns
The principle that applies when a given parcel of land reaches its maximum percentage return on investment, and further expenditures for improving the property yield a decreasing return.
Discount points
An added loan free charged by a lender to make the yield on a lower-than-market-value loan competitive with higher-interest loans.
Discount rate
The rate of interest a commercial bank must pay when it borrows from its federal reserve bank. Consequently, the discount rate is the rate of interest the banking system carries within its own framework. Member banks may take certain promissory notes that they have received from customers and sell them to their district federal reserve bank for less than face value. With the funds received, the banks can make further loans. Changes in the discount rate may cause banks and other lenders to reexamine credit policies and conditions.
Dispossess
To oust from land by legal process.
Dominant tenement
A property that includes in its ownership the appurtenant right to use an easement over another's property for a specific purpose.
Dower
The legal right or interest recognized in some states that a wife acquires in the property her husband held or acquired during their marriage. During the lifetime of the husband, the right is only a possibility of an interest; on his death it can become an interest in land.
Duress
The use of unlawful constraint that forces action or inaction against a person's will.
DVA loan
A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs to limit possible loss by the lender.
Earnest money deposit
An amount of money deposited by a buyer under the terms of a contract. In the event that the buyer, for no valid or legal reason, backs out of the transaction, earnest money is sometimes used as liquidated damages.
Easement
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.
Easement by necessity
An easement allowed by law as necessary for the full enjoyment of a parcel of real estate.
Easement by prescription
An easement acquired by continuous, open, uninterrupted, exclusive, and adverse of the property for the period of time prescribed by state law.
Easement in gross
An easement that is not created for the benefit of any land owned by the owner of the easement but that attaches personally to the easement owner.
Economic life
The period of time over which an improved property will earn an income adequate to justify its continued existence.
Economic obsolescence
The impairment of desirability or useful life arising from factors external to the property, such as economic forces or environmental changes, that affect supply-demand relationships in the market. Loss in the use and value of a property arising from the factors of economic obsolescence is to be distinguished from loss in value from physical deterioration and functional obsolescence, both of which are inherent in the property.
Emblements
Growing crops that are produced annually through the tenant's own care and labor and that she or he is entitled to take away after the tenancy is ended. Emblements are regarded as personally property even prior to harvest, so if the landlord terminates the lease, the tenant may still reenter the land and remove such crops. If the tenant terminates the tenancy voluntarily, however, she or he generally is not entitled to the emblements.
Eminent domain
The right of a government or municipal quasi-public body to acquire property for public use through a court action called condemnation, in which the court determines that the use is a public use and determines the price or compensation to be paid to the owner.
Employee status
The status of one who works as a direct employee of an employer. An employer is obligated to withhold income taxes and Social Security taxes from the compensation of his or her employees.
Employment contract
A document evidencing formal employment between the employer and the employee or between the principal and the agent. In the real estate business, this generally takes the form of a listing or management agreement.
Encroachment
A fixture or structure, such as a wall or fence, that invades a portion of a property belonging to another.
Encumbrance
Any lien that may diminish the value of the property, such as a mortgage, tax, or judgment lien; easement; restriction on the use of the land; or an outstanding dower right.
Endorsement
The act of writing one's name, either with or without additional words, on a negotiable instrument or on a paper attached to such instrument.
Equal Credit Opportunity Act (ECOA)
Federal legislation requiring lenders to make credit equally available without discrimination based on race, sex, color, religion, marital status, age, national origin, or receipt of income from public assistance.
Equalization
The raising or lowering of assessed values for tax purposes in a particular county or taxing district to make them equal to assessments in other counties or districts.
Equitable title
The interest held by a vehicle under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another's name.
Equity
The interest or value that an owner has in a property over and above any mortgage indebtedness.
Erosion
The gradual wearing away of land by water, wind, and general weather conditions; the diminishing of property caused by the elements.
Errors and omissions insurance
Insurance coverage for real estate agents against claims for innocent and negligent misrepresentations.
Escheat
The reversion of property to the state in the event that its owner dies without leaving a will and has no heirs to whom the property may pass by lawful descent.
Escrow
The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered on the performance of certain conditions in the escrow agreement.
Estate for years
An interest for a certain, exact period of time in property leased for a specified consideration.
Estate in land
The degree, quantity, nature, and extent of interest that a persona has in real property.
Estate in severalty
An estate owned by one person.
Estoppel certificate
A legal instrument executed by a mortgagor showing the amount of the unpaid balance due on a mortgage and stating that the mortgagor has no defenses or offsets against the mortgagee at the time of execution of the certificate.
Estovers
Legally allowed necessities, such as the right of a tenant to use timber on leased property to support a minimum need for fuel or repairs.
Ethical
Conduct conforming to professional standards.
Et al
Latin, meaning "and others".
Et ux / Et uxor
Latin, meaning "and wife".
Et vir
Latin, meaning "and husband".
Eviction
A legal process to oust a person from possession of real estate.
Evidence of title
A proof of ownership of property, which is commonly a certificate of title, a title insurance policy, an abstract of title with lawyer's opinion, or a Torrens registration certificate.
Exchange
A transaction in which all of part of the consideration for the purchase of real property is the transfer of like-kind property. Ex. real estate for real estate.
Exclusive-agency listing
A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property on the owner's stated terms for a commission. The owner, however, reserves the right to sell without paying anyone a commission by selling to a prospect who has not been introduced or claimed by the broker.
Exclusive-right-to-sell listing
A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property on the owner's stated terms and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner, or another broker.
Executed contract
A contract in which all parties have fulfilled their promises and thus performed the contract.
Execution
The signing and delivery of an instrument. Also, a legal order directing an official to enforce a judgment against the property of a debtor.
Executor
The person designated in a will to handle the state of the deceased. The probate court must approve any sale of property by the executor.
Executory contract
A contract under which something remains to be done by one of more of the parties.
Expenses
The short-term costs that are deducted from an investment property's income, such as minor repairs, regular maintenance, and renting costs.
Expressed contract
An oral or written contract in which the parties state their terms and express their intentions in words.
Fair Housing Act of 1968
The term for Title VIII of the Civil Rights Act of 1968 as amended, which prohibits discrimination based on race, color, sex, religion, national origin, handicaps, and familial status in the sale and rental of residential property.
Federal Home Loan Mortgage Corporation (FHLMC)
A federally chartered corporation created to provide a secondary mortgage market for conventional loans (Freddie Mac).
Federal Housing Administration (FHA)
A federal administrative body created by the National Housing Act in 1934 to encourage improvement in housing standards and conditions, to provide an adequate home-financing system through the insurance of housing mortgages and credit, and to exert a stabilizing influence on the mortgage market.
Federal income tax
An annual tax based on income, including monies dervied from the lease, use, or operation of real estate.
Federal National Mortgage Association (FNMA)
"Fannie Mae" is the popular name for this federally chartered corporation, which creates a secondary market for existing mortgages. FNMA does not loan money directly, but rather buys DVA, FHA, and conventional loans.
Fee-simple estate
The maximum possible estate or right of ownership of real property continuing forever.
FHA appraisal
An FHA evaluation of a property as a security for a loan. Includes the study of the physical characteristics of the property and the surroundings, and the location of the property.
FHA loan
A loan insured by the FHA and made by an approved lender in accordance with FHA regulations.
Fiduciary relationship
A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, principal and agent.
First mortgage
A mortgage that creates a superior voluntary lien on the property mortgaged relative to other charges or encumbrances against the property.
Fiscal policy
The government's policy in regard to taxation and spending programs. The balance between these two areas determines the amount of money the government will withdraw or feed into the economy in an attempt to counter economic peaks and slumps.
Fixture
An article that was once personal property but has been so affixed to real estate that it has become real property.
Forcible entry and detainer
A summary proceeding for restoring to possession of land one who is wrongfully kept out or has been wrongfully deprived of the possession.
Foreclosure
A legal procedure by which property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property either to the holder of the mortgage or to a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.
Foreign acknowledgment
An acknowledgment taken outside of the state in which the land lies.
Franchise
A private contractual agreement to run a business using a designated trade name and operating procedures.
Fraud
A misstatement of a material fact made with intent to deceive or made with reckless disregard of the truth and that actually does deceive.
Freehold estate
An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.
Functional obsolescence
The impairment of functional capacity or efficiency; the inability of a structure to perform adequately the function for which it currently is employed. Functional obsolescence reflects the loss in value brought about by factors that affect the property, such as overcapacity, inadequacy, or changes in the art.
Funding fee
A fee required by the Department of Veterans Affairs for making a VA guaranteed loan. The funding fee is added in with the loan and then forwarded to the VA to guarantee a veteran's loan.
Future interest
A person's present right to an interest in real property that will not result in possession or enjoyment until sometime in the future, such as a reversion or right of reentry.
Gap
A defect in the chain of title of a particular parcel of real estate; a missing document or conveyance that raises doubt as to the present ownership of the land.
General contractor
A construction specialist who enters into a formal construction contract with a landowner or master lessee to construct a real estate building or project. The general contractor often contracts with several subcontractors specializing in various aspects of the building process to perform individual jobs.
General lien
A lien on all real and personal property owned by a debtor.
General warranty deed
A deed that states that the title conveyed therein is good from the sovereignty of the soil to the grantee therein and that no one else can successfully claim the property. This type of deed contains several specific warranties sometimes referred to as the English Covenants of Title.
Government lots
Fractional sections in the rectangular survey system (government survey method) that are less than one full quarter-section in area.
Government National Mortgage Association (GNMA)
"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 lease
Lease that provides for rent increases at set future dates.
Graduated payment mortgage
A mortgage loan for which the initial payments are low but increase over the life of the loan.
Grant
The act of conveying or transferring title to real property.
Grant deed
A type of deed that includes three basic warranties: (1) the owner warrants that she or he has the right to convey the property, (2) the owner warrants that the property is not encumbered other than with those encumbrances listed in the deed, and (3) the owner promises to convey any after-acquired title to the property. Grant deeds are popular in states that rely heavily on title insurance.
Grantee
A person to whom real estate is conveyed; the buyer.
Grantor
A person who conveys real estate by deed; the seller.
Gross lease
A lease or property under which a landlord pays all property charges regularly incurred through ownership, such as repairs, taxes, insurance, and operating expenses. Most residential leases are gross leases.
Gross national product (GNP)
The total value of all goods and services produced in the United States (or other country) in a year.
Gross rent multiplier (GRM)
A figure used as a multiplier of the gross monthly rental income of a property to produce an estimate of the property's value.
Ground lease
A lease of land only, on which the tenant usually owns a building or is required to builder her or his own building as specified in the lease. Such leases are usually long-term net leases; a tenant's rights and obligations continue until the lease expires or is terminated through default.
Guaranteed sale plan
An agreement between the broker and the seller that if the seller's real property is not sold before a certain date, the broker will purchase it for a specified price.
Guardian
One who guards or cares for another person's rights and properties. A guardian has legal custody of the affairs of a minor or a person incapable of taking care of his or her own interests, called a ward.
Habendum clause
The deed clause beginning "to have and to hold," which defines or limits the extend of ownership in the state granted by the deed.
Heir
One who might inherit or succeed to an interest in land under the state law of descent when the owner dies without leaving a valid will.
Hereditaments
Every kind of inheritable property, including person, real corporeal, and incorporeal.
Highest and best use
The possible use of land that will produce the greatest net income and thus develop the highest land value.
Holdover tenancy
A tenancy by which a lessee retains possession of a leased property after her or his lease has expired and the landlord, by continuing to accept rent from the tenant, agrees to the tenant's continued occupancy as defined by state law.
Holographic will
A will that is written, dated, and signed in the handwriting of the maker.
Homeowner's insurance policy
A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.
Homeowner's warranty program
An insurance program offered to buyers by some brokerages, warranting the property against certain defects for a specified period of time.
Homestead provision
The land and the improvements thereon designated by the owner as his or her homestead and, therefore, protected by state law, either in whole or in part, from forced sale by certain creditors of the owner.
HUD
The Department of Housing and Urban Development; regulates FHA and GNMA.
Hypothecation
The pledge of property as security of a loan in which the borrower maintains possession of the property while it is pledged as security.
Implied contract
A contract under which the agreement of the parties is demonstrated by their acts and conduct.
Implied grant
A method of creating an easement. One party may be using another's property for the benefit of both parties.
Improvement
1. Improvements on land: any structure, usually privately owned, erected on a site to enhance the value of the property; 2. Improvements to land: usually a publicly owned structure.
Inchoate right
Incomplete right, such as a wife's dower interest in her husband's property during his life.
Income approach
The process of estimating the value of an income-producing property by capitalization of the annual net income expected to be produced by the property during its remaining useful life.
Incorporeal right
A nonpossessory right in real estate.
Increasing returns
The principle that applies when increased expenditures for improvements to a given parcel of land yield an increasing percentage return on investment.
Independent contractor
One who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result, and not as to how he or she performs the act. Unlike an employee, an independent contractor pays all of his or her expenses, pays his or her income and Social Security taxes, and receives no employee benefits. Many real estate salespeople are independent contractors.
Index lease
Lease that allows the rent to be increased or decreased periodically, based on changes in the a selected economic index, such as the Consumer Price Index.
Industrial property
All land and buildings used or suited for use in the production, storage, or distribution of tangible goods.
Installment sale
A method of reporting gain received from the sale of real estate when the sale price is paid in two or more installments over two or more years. If the sale meets certain requirements, a taxpayer can spread recognition of the reportable gain over more than one year, which may result in tax savings.
Insurable title
A title to land that a title company will insure.
Insurance
The indemnification against loss from a specific hazard or peril through a contract (called a policy) and for a consideration (called a premium).
Interest
A charge made by a lender for the use of money.
Interim financing
A short-term loan usually made during the construction phase of a building project, often referred to as a construction loan.
Intestate
The condition of a property owner who dies without leaving a will. Title to such property passes to his or her heirs as provided in the state law of descent.
Invalid
Having no force or effect.
Invalidate
To render null and void.
Investment
Money directed toward the purchase, improvement, and development of an asset in expectation of income or profits. A good financial investment has the following characteristics: safety, regularity of yield, marketability, acceptable denominations, valuable collateral, acceptable duration, required attention, and potential appreciation.
Joint tenancy
The ownership of real estate by two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, her or his interest passes to the surviving joint tenant or tenants by the right of survivorship.
Joint venture
The joining of two or more people to conduct a specific business enterprise. A joint venture is similar to a partnership in that it must be created by agreement between the parties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only, rather than for a continuing business relationship.
Judgment
The official and authentic decision of a court on the respective rights and claims of the parties to an action or suit. When a judgment is entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant for a ten-year period.
Judgment clause
A provision that may be included in notes, leases, and contracts by which the debtor, lessee, or obligor authorizes any attorney to go into court to confess a judgment against him or her for a default in payment. Also called a cognovit.
Laches
An equitable doctrine used by the courts to bar a legal claim or prevent the assertion of a right because of undue delay, negligence, or failure to assert the claim or right.
Land
The earth's surface extending downward to the center of the earth and upward infinitely into space.
Lease
A contract between a landlord (the lessor) and a tenant (the lessee) transferring the right to exclusive possession and use of the landlord's real property to the lessee for a specified period of time and for a stated consideration (rent). By state law, leases for longer than a certain period of time (generally one year) must be in writing to be enforceable.
Leasehold estate
A tenant's right to occupy real estate during the term of a lease, generally considered to be a personal property interest.
Legacy
A disposition of money or personal property by will.
Legal description
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 subdivision lot and block (plat).
Legality of object
An element that must be present in a valid contract. If a contract has for its object an act that violates the laws of the United States or the laws of a state to which the parties are subject, it is illegal, invalid, and not recognized by the courts.
Lessee
The tenant who leases a property.
Lessor
One who leases property to a tenant
Leverage
The use of borrowed money to finance the bulk of an investment.
Levy
To assess, seize, or collect. To levy a tax is to assess a property and set the rate of taxation. To levy an execution is to seize officially the property of a person to satisfy an obligation.
License
1. A privilege or right granted to a person by a state to operate as a real estate broker or salesperson. 2. The revocable permission for a temporary use of land - a personal right that cannot be sold.
Lien
A right given by law to certain creditors to have their debt paid out of the property of a defaulting debtor, usually by means of a court sale.
Life estate
An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person.
Life tenant
A person in possession of a life estate.
Liquidated damages
Liquidated damages occur when, by contractual agreement, defaulted earnest money becomes the personal property of the seller.
Liquidity
The ability to sell an asset and convert it into cash at a price close to its true value.
Lis pendens
A public notice that a lawsuit affecting title to or possession, use, and enjoyment of a parcel of real estate has been filed in either a state or federal court.
Listing agreement
A contract between a landowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed as agent to list and sell real estate on the owner's terms within a given time, for which service the landowner agrees to pay a commission.
Listing broker
The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the selling broker, from whose office negotiations leading to a sale are initiated. The listing broker and the selling broker may, of course, by the same person.
Littoral rights
1. A landowner's claim to use water in large lakes and oceans adjacent to her or his property. 2. The ownership rights to land bordering these bodies of water up to the high-water mark.
Lot and block description
A description of real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as identified on a subdivided plat duly recorded in the county recorder's office.
Management agreement
A contract between the owner of income property and a management firm or individual property manager outlining the scope of the manager's authority.
Marginal lease
A lease agreement that barely covers the costs of operation for the property.
Marginal real estate
Land that barely covers the costs of operation.
Marketable title
A good or clear salable title reasonably free from risk of litigation over possible defects.
Market/data approach
A method of appraising or evaluating real property based on the proposition that an informed purchaser would pay no more for a property than the cost to him or her of acquiring an existing property with the same utility. This approach is applicable when an active market provides sufficient quantities of reliable data that can be verified from authoritative sources. The approach is relatively unreliable in an inactive market or in estimating the value of properties for which no real comparable sales data are available. It also is questionable when sales data cannot be verified with principals to the transaction. Also referred to as the market comparison or direct sales comparison approach.
Market price
The actual selling price of a property.
Market value
The most profitable price 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.
Mechanic's lien
A statutory lien created in favor of contractors, laborers, and materialmen or material suppliers who have performed work or furnished materials in improving real property.
Metes-and-Bounds description
A legal description of a parcel of land that begins at a well-marked point and follows the boundaries, using direction and distances around the tract, back to the point of beginning.
Mill
A tax rate used by municipalities to compute property tax.
Millage rate
A property tax rate obtained by dividing the total assessed value of all the property in the tax district into the total amount of revenue needed by the taxing district. This millage rate then is applied to the taxable value of each property in the district to determine individual taxes.
Misrepresentation
To represent falsely; to give an untrue idea of a property. May be accomplished by omission or concealment of a material fact.
Monetary policy
The government regulation of the amount of money in circulation through such institutions as the Federal Reserve Board.
Money judgment
A court judgment ordering payment of money rather than specific performance of a certain action.
Money market
Those institutions, such as banks, savings-and-loan associations, and life insurance companies, who supply money and credit to borrowers.
Month-to-Month tenancy
A periodic tenancy - the tenant rents for one period at a time. In the absence of a rental agreement (oral or written), a tenancy generally is considered to be from month to month.
Monument
Fixed natural or artificial objects, used in metes-and-bounds description, to establish the boundaries; located at the corners.
Mortgage
A conditional transfer or pledge of real estate as security for a loan. Also, the document creating a mortgage lien.
Mortgage lien
A lien or charge on a mortgagor's property that secures the underlying debt obligations.
Mortgagor
One who, having all or part of title to property, pledges that property as security for a debt; the borrower
Multiple listing
An exclusive listing (generally an exclusive right to sell) with the additional authority and obligation on the part of the listing broker to distribute the listing to other brokers in the multiple-listing organization.
Municipal ordinances
The laws, regulations, and codes enacted by the governing body of a municipality.
Mutual rescission
The act of putting an end to a contract by mutual agreement of the parties.
Negligence
Carelessness and inattentiveness resulting in violation of trust. Failure to do what is required.
Net operating income
The gross income of the property minus vacancy, collection losses, and operating expenses (not including debt service).
Net lease
A lease requiring the tenant to pay not only rent but also costs incurred in maintaining the property, including taxes, insurance, utilities, repairs. If the tenant pays for everything, it is referred to as a triple net lease.
Nonconforming use
A use of property that is permitted to continue after a zoning ordinance prohibiting it has been established for the area.
Nonhomogeneity
A lack of uniformity; dissimilarity. Because no two parcels of land are geographically alike, real estate is said to be nonhomogeneous, or heterogeneous.
Notarize
To certify or attest to a document, as by a notary public.
Notary public
A public official authorized to certify and attest to documents, take affidavits, take acknowledgments, administer oaths, and perform other such acts.
Note
An instrument of credit given to attest a debt.
Novation
Acceptance by parties to an agreement to replace an old debtor with a new one. A novation releases liability.
Offer and notification of acceptance
The two components of a valid contract; a "meeting of the minds."
Officer's deed
A deed by sheriffs, trustees, guardians, etc.
One hundred percent commission plan
A salesperson compensation plan by which the salesperson pays his or her broker a monthly service charge to cover the costs of office expenses and receives 100% of the commissions from the sales that he or she negotiates.
Open-end mortgage
A mortgage loan expandable by increments up to maximum dollar amount, all of which is secured by the same original mortgage.
Open listing
A listing contract under which the broker's commission is contingent on the broker producing a "ready, willing, and able" buyer before the property is sold by the seller or another broker; the principal (owner) reserves the right to list the property with other brokers.
Option
The right to purchase property within a definite time at a specified price. No obligation to purchase exists, but the seller is obligated to sell if the option holder exercises the right to purchase.
Optionee
The party that receives and holds an option.
Optionor
The party that grants or gives an option.
Ownership
The exclusive right to hold, possess or control, and dispose of a tangible or intangible thing. Ownerships may be held by a person, corporation, or governmental entity.
Package mortgage
A method of financing in which the purchase of the land also finances the purchase of certain personal property items.
Parol evidence rule
A law that states that no prior or contemporary oral or extraneously written agreement can change the terms of a contract.
Partial eviction
A case in which the landlord's negligence deprives the tenant of the use of all or part of the premises.
Participation financing
A mortgage in which the lender participates in the income of the mortgaged venture beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate.
Partition
The division of cotenants' interests in real property when the parties do not all voluntarily agree to terminate the co-ownership; takes place through court procedures.
Partnership
An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law, a partnership is regarded as a group of individuals rather than as a single entity. A general partnership is a typical form of joint venture in which each general partner shares in the administration, profits, and losses of the operation. A limited partnership is a business arrangement by which the operation is administered by one or more general partners and funded by limited or silent partners, who are by law responsible for losses only to the extent of their investment.
Party wall easement
A wall that is located on or at a boundary line between two adjoining parcels for the use of the owners of both properties.
Payee
The party that receives payment.
Payor
The party that makes payment to another.
Percentage lease
A lease commonly used for retail property in which the rental is based on the tenant's gross sales at the premises; often stipulates a base monthly rental plus a percentage of any gross sales above a certain amount.
Performance bond
A binding agreement, often accompanied by surety and usually posted by one who is to perform work for another, that assures that project or undertaking will be completed as per the agreement or contract.
Periodic estate
An interest in leased property that continues from period to period - week to week, month to month, or year to year.
Permanent reference marker
Referred to as a PRM, it is a fixed object that leads the surveyor to the point of beginning (POB). In most surveys, two different PRMs are used to locate the POB.
Personal assistant
An individual working for a broker or salesperson who handles non-sales-related aspects of real estate transactions. However, if the personal assistant is licensed, then he or she can also handle the sales-related aspects of the transaction.
Personal property
Items, called chattels, that do not fit into the definition of real property; movable objects.
Physical deterioration
A reduction in utility resulting from an impairment of physical condition. For purposes of appraisal analysis, it is most common and convenient to divide physical deterioration into curable and incurable components.
Plat
A map of a town, section, or subdivision indicating the location and boundaries of individual property.
Plat book
A book containing recorded subdivisions of land.
Point
A unit of measurement used for various loan charges; one point equals one percent of the amount of the loan.
Point of beginning
The starting point of the survey situated in one corner of the parcel in a metes-and-bounds description. All metes-and-bounds descriptions must follow the boundaries of the parcel back to the point of beginning.
Police power
The government's right to impose laws, statutes, and ordinances to protect the public health, safety, and welfare, including zoning ordinances and building codes.
Power of attorney
A written instrument authorizing a person (the attorney-in-fact) to act on behalf of the maker to the extent indicated in the instrument.
Premises
The specific section of a deed that states the names of the parties, recital of consideration, operative words of conveyance, legal property description, and appurtenance provisions.
Prepayment clause
In a mortgage, the statement of the terms on which the mortgagor may pay the entire or stated amount of the mortgage principal at some time prior to the due date.
Prepayment penalty
A charge imposed on a borrower by a lender for early payment of the loan principal to compensate the lender for interest and other charges that would otherwise be lost.
Principal
1. A sum lent or employed as a fund or investment, as distinguished from its income or profits. 2. The original amount (as in a loan) of the total due and payable at a certain date. 3. A main party to a transaction - the person for whom the agent works.
Principal meridian
One of 35 north and south survey lines established and defined as part of the rectangular survey system (government survey method)
Principle of conformity
The appraisal theory stating that buildings that are similar in design, construction, and age to other buildings in the area have a higher value than they would have in a neighborhood of dissimilar buildings.
Priority
The order of position or time. The priority of liens generally is determined by the chronological order in which the lien documents are recorded; tax liens (like special assessments), however, have priority, even over previously recorded liens.
Probate
The formal judicial proceeding to prove or confirm the validity of a will or proof of heirship and to settle the affairs of the deceased.
Procuring cause
The effort that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission.
Property disclosure acts
State mandated seller's property disclosure reports. These reports place the burden of defect disclosure on the seller. Agents are not required to discover property defects but are required to disclose them if they are known.
Property management
The operation of the property of another for compensation. Includes marketing space; advertising and rental activities; collecting, recording, and remitting rents; maintaining the property; tenant relations; hiring employees; keeping proper accounts; and rendering periodic reports to the owner.
Property tax
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 proportional 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.
Prospectus
A printed advertisement usually in pamphlet form, presenting a new development, subdivision, business venture, or stock issue.
Public utility easement
A right granted by a property owner to a public utility company to erect and maintain poles, wires, and conduits on, across, or under her or his land for telephone, electric power, gas, water, or sewer installation.
Pur autre vie
Latin, meaning "for the life of another." A life estate pur autre vie is a life estate measured by the life of a person other than the grantee.
Purchase-money mortgage
A note secured by a mortgage or deed of trust given by a buyer, as a mortgagor, to a seller, as a mortgagee, as part of the purchase price of the real estate.
Qualifying
The act of determining a prospect's motivation, then matching his or her needs with the available inventory.
Quitclaim deed
A conveyance by which the grantor transfers whatever interest he or she has in the real estate without warranties or obligations.
Range
A six-mile strip of land measured east and west from the meridian lines.
"Ready, willing, and able" buyer
One who is prepared to buy property on the seller's terms and is ready to take positive steps to consummate the transaction.
Real estate
Land; a portion of the earth's surface extending downward to the center of the earth and upward infinitely into space, including all things permanently attached thereto, whether by nature or by man.
Real estate broker
Any person, partnership, association, or corporation that sells (or offers to sell), buys (or offers to buy), or negotiates the purchase, sale, or exchange of real estate, or that leases (or offers to lease) or rents (or offers to rent) any real estate or the improvements thereon for others and for a compensation or valuable consideration. A real estate broker may not conduct business without a real estate broker's license.
Real Estate Investment Trust (REIT)
Ownership of real estate by a group of individual investors who purchase certificates of ownership in a trust. The trust invests in real property and distributes the profits back to the investors free of corporate income tax.
Real Estate Settlement Procedures Act (RESPA)
The federal law ensuring that the buyer and seller in a real estate transaction have knowledge of all the settlement costs when the purchase of a one to four-family residential dwelling is financed by a federally related mortgage loan. Prohibits kickbacks.
Reality of consent
An element of all valid contracts. Offer and acceptance in a contract usually are taken to mean that reality of consent also is present. This is not the case, however, if any of the following are present: mistake, misrepresentation, fraud, undue influence, or duress.
Real property
Real property consists of land, anything affixed to it so as to be regarded as a permanent part of the land, that which is appurtenant to the land, and that which is immovable by law, including all rights and interests.
REALTOR®
A registered trademark term reserved for the sole use of active members of local REALTORS® boards affiliated with the National Association of REALTORS®.
Recapture
In the year of sale, all depreciation or cost recovery taken on depreciable property in excess of the amount allowed by the straight-line method is subject to recapture provisions as established by the IRS, which has the effect of taxing the excess at ordinary income rates. Recapture is designed to prevent a taxpayer from taking advantage of both accelerated depreciation and capital gain treatment.
Receiver
The court-appointed custodian of property involved in litigation, pending final disposition of the matter before the court.
Reconciliation
1. The final step in the appraisal process in which the appraiser reconciles the estimates of value received from the market/data, cost, and income approaches to arrive at a final estimate of market value for the subject property. 2. An accounting procedure that balances a trust account by comparing the general ledger with the combined total of the account's individual ledger balances.
Recording
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.
Recovery fund
A fund established in some states from real estate license funds to cover claims of aggrieved parties who have suffered monetary damage through the actions of a real estate licensee. To protect the public, some states mandate errors and omissions insurance as a requirement for licensure.
Rectangular survey system
A system established in 1785 by the federal government that provides for surveying and describing land by reference to principal meridians and base lines.
Redemption period
A period of time established by state law during which a property owner has the right to redeem her or his real estate from a foreclosure or tax sale by paying the sales price, interest, and costs. Many states do not have mortgage redemption laws.
Redlining
The illegal practice of denying loans or restricting their number for certain areas of a community.
Regulation Z
A regulation of the Federal Reserve Board designed to ensure that borrowers and customers in need of consumer credit are given meaningful information with respect to the cost of credit.
Release
To relinquish an interest in or claim to a parcel of property.
Relocation service
An organization that aids a person in selling a property in one area and buying another property in another area.
Remainder
The remnant of an estate that has been conveyed to take effect and be enjoyed after the termination of a prior estate, such as when an owner conveys a life estate to one party and the remainder to another.
Renegotiable rate mortgage
A mortgage loan that is granted for a term of 3 to 5 years and secured by a long-term mortgage of up to 30 years with the interest rate being renegotiated or adjusted each period.
Rent
A fixed, periodic payment made by a tenant of a property to the owner for possession and use; usually by prior agreement of the parties.
Rent schedule
A statement of proposed rental rates, determined by the owner or the property manager or both, based on a building's estimated expenses, market supply and demand, and the owner's long-range goals for the property.
Replacement cost
The cost of construction at current prices of a building having utility equivalent to the building being appraised but built with modern materials and according to current standards, designs, and layout.
Reproduction cost
The cost of construction at current prices of an exact duplicate or replica using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and obsolescences of the subject building.
Recission
The termination of a contract by mutual agreement of the parties.
Reservation in a deed
The creation by a deed to property of a new right in favor of the grantor. Usually involves an easement, a life estate, or a mineral interest.
Restriction
A limitation on the use of real property, generally originated by the owner or subdivider in a deed.
Reverse annuity mortgage
A mortgage loan that allows the owner to receive periodic payments based on the equity in the home.
Reversion
The remnant of an estate that the grantor holds after he or she has granted a life estate to another person; the estate will return or revert to the grantor. Also called a reverter.
Reversionary right
An owner's right to regain possession of leased property on termination of the lease agreement.
Rezoning
The process involved in changing the existing zoning of a property or area.
Right of first refusal
A person's right to have the first opportunity to either lease or purchase real property.
Riparian rights
An owner's rights in land that borders flowing water, such as a stream or river. These rights include access to and use of the water.
Rural development
A federal agency of the U.S. Department of Agriculture that channels credit to farmers and rural residents and communities; formerly known as the Farm Service Agency and Farmer's Home Administration (FmHA).
Sale and leaseback
A transaction in which an owner sells her or his improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises.
Sales contract
A contract containing the complete terms of the agreement between buyer and seller for the sale of a particular parcel or parcels of real estate.
Salesperson
A person who performs real estate activities while employed by or associated with a licensed real estate broker.
Satisfaction
A document acknowledging the payment of a debt. Once filed, the collateral pledged (mortgage) is returned to the mortgagor for a "mortgage burning party."
Secondary mortgage market
A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called the secondary money market. Mortgages are originated in the primary mortgage market.
Section
A portion of a township under the rectangular survey system (government survey method). A township is divided into 36 sections numbered 1 to 36. A section is a square with mile-long sides and an area of one square mile, or 640 acres.
Self-proving will
A will in which the witnesses give their testimony at the time of signing. This testimony is preserved in a notarized affidavit to eliminate the problem of finding the witnesses at the maker's death and to assist in the probating procedure.
Separate property
The real property owned by a husband and wife prior to their marriage.
Servient tenement
The land on which an easement exists in favor of an adjacent property; also called a servient estate.
Setback
The amount of space local zoning regulations require between a lot line and building line.
Severalty
The ownership of real property by one person only; also called sole ownership.
Short sale
A sale of secured property that produces less money than is owed to the lender, but in order to expedite the sale and avoid foreclosure expense, the lender releases its interest so the property can be sold.
Situs
The personal preference of people for one area of land over another, not necessarily based on objective facts and knowledge.
Sovereignty of the soil
The beginning of the record of ownership of land by conveyance from the sovereign or the state. Historically, this is known also as a patent.
Special assessment
A tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement, such as a street or sewer.
Special warranty deed
A deed in which the grantor warrants or guarantees the title only against defects arising during the period of his or her tenure and ownership of the property and not against defects existing before that time, generally using the language "by, through, or under the grantor but not otherwise."
Specific lien
A lien affecting or attaching only to a certain, specific parcel of land or piece of property.
Specific performance suit
A legal action brought in a court of equity in special cases to compel a party to carry out the terms of a contract. The basis for an equity court's jurisdiction in breach of a real estate contract is that land is unique, and mere legal damages would not adequately compensate the buyer from the seller's breach.
Sponsoring broker
A duly licensed real estate broker who employs a salesperson. Under law, the broker is responsible for the acts of her or his salespeople.
Squatter's rights
Those rights acquired through adverse possession. By "squatting" on land for a certain statutory period under prescribed conditions, one may acquire title by limitations. If an easement only is acquired, instead of the title to the land itself, one has title by prescription, or easement by prescription.
Statute of frauds
The part of a state law that requires certain instruments, such as deeds, real estate sales contracts, and certain leases to be in writing to be legally enforceable.
Statute of limitations
That law pertaining to the period of time within which certain actions must be brought to court.
Statutory lien
A lien imposed on property by statute, for example, a tax lien; in contrast to a voluntary lien, which an owner places on his or her own real estate, for example, a mortgage lien.
Steering
The illegal practice of channeling home seekers to particular areas or avoiding specific areas, either to maintain or to change the character of an area, or to create a speculative situation.
Stigmatized property
A property regarded by some as undesirable because of events that have occurred on the property, like murder or suicide, or present paranormal activities. Sometimes, proximity to undesirable property causes a property to become stigmatized, too.
Straight-line method
A method of calculating depreciation for tax purposes computed by dividing the adjusted basis of a property less its estimated salvage value by the estimated number of years of remaining useful life.
Subagency
An agent appoints a subagent to help the agent in a specified transaction and to act on the principal's behalf.
Subdivision
A tract of land divided by the owner, known as the subdivider, into blocks, building lots, and streets according to recorded subdivision plat that must comply with local ordinances and regulations.
Subletting
The leasing of premises by a lessee to a third party for part of the lessee's remaining term.
Subordination
A relegation to a lesser position usually in respect to a right or security.
Subordination agreement
An agreement that changes the order of priority of liens between two creditors.
Subrogation
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 the right the sue from the injured party to recover any claims they have paid.
Substitution
An appraisal principle stating that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution.
Suit for possession
A court suit initiated by a landlord to evict a tenant from leased premises after the tenant has breached one of the terms of the lease or has held possession of the property after the expiration of the lease.
Suit for specific performance
A legal action brought by either a buyer or a seller to enforce performance of the terms of a contract.
Suit to quiet title
A legal action intended to establish or settle the title to a particular property, especially when there is cloud on the title.
Summation appraisal
An approach under which value equals estimated land value plus reproduction costs of any improvements after depreciation has been subtracted.
Supply
The amount of goods available in the market to be sold at given price. The term often is coupled with demand.
Surety bond
An agreement by an insurance or bonding company to be responsible for certain possible defaults, debts, or obligations contracted for by an insured party; in essence, a policy insuring one's personal and/or financial integrity. In the real estate business, a surety bond generally is used to ensure that a particular project will be completed at a certain date or that a contract will be performed as stated.
Survey
The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and positions of buildings on a lot, including the determination of any existing encroachments or easements.
Syndicate
A combination of two or more persons or firms to accomplish a joint venture of mutual interest. Syndicates dissolve when the specific purpose for which they were created has been accomplished.
Taxation
The process by which a government or municipal quasi-public body raises monies to fund its operation.
Tax lien
A charge against property created by the operation of law. Tax liens and assessments take priority over all other liens.
Tax rate
The rate at which real property is taxed in a tax district or county.
Tax sale
A court-ordered sale of real property to raise money to cover delinquent taxes.
Tenancy at sufferance
The tenancy of a lessee who lawfully comes into possession of a landlord's real estate but who continues to occupy the premises improperly after her or his lease rights have expired.
Tenancy at will
An estate that gives the lessee the right to possession until the estate is terminated by either party; the term of this estate is indefinite.
Tenancy by the entirety
The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. On the death of one spouse, the survivor becomes the owner of the property.
Tenancy in common
A form of co-ownership by which each owner holds an undivided interest in real property as if he or she were the sole owner. Each individual has the right to partition. Unlike a joint tenancy, there is no right of survivorship between tenants in common, and owners may have unequal interests.
Tenant
One who holds or possesses lands or tenements by any kind of right of title.
Tenement
Everything that may be occupied under a lease by a tenant.
Termination (lease)
The cancellation of a lease by the action of either party. A lease may be terminated by expiration of the term, surrender and acceptance, constructive eviction by lessor, or option, when provided in the lease for breach of covenants.
Termination (listing)
The cancellation of a broker-principal employment contract. A listing may be terminated by death or insanity of either party, expiration of listing period, mutual agreement, sufficient written notice, or the completion of performance under the agreement.
Testate
Having made and left a valid will.
Testator
A will maker
"Time is of the essence"
A phrase in a contract that requires the performance of a certain act within a stated period of time.
Title insurance
Insurance designed to indemnify the holder for loss sustained by reason of defects in a title, up to and including the policy limits.
Torrens system
A method of evidencing title by registration with the proper public authority, generally called the registrar.
Township
The principal unit of the rectangular survey system. A township is a square with six-mile sides and an area of 36 square miles.
Township lines
The horizontal lines running at six-mile intervals parallel to the base lines in the rectangular survey system.
Trade fixtures
The articles installed by a tenant under the terms of a lease and removable by the tenant before the lease expires.
Trust
A fiduciary arrangement by which property is conveyed to a person or institution, called a trustee, and held and administered on behalf of another person, called a beneficiary.
Trust deed
An instrument used to create a lien by which the trustor conveys his or her title to a trustee, who holds it as security for the benefit of the note holder (the lender).
Trustee
One who as agent for others handles money or holds title to their land
Trustee's deed
A deed executed by a trustee conveying land held in a trust to the beneficiary.
Unearned increment
An increase in the value of a property caused by increased population, development, or demand for which the owner is not responsible.
Uniform Commercial Code
A codification of commercial law, adopted in most states, that attempts to make uniform laws relating to commercial transactions, including chattel mortgages and bulk transfers. Security interests in chattels are created by an instrument known as a security agreement. Article 6 of the code regulates bulk transfers, that is, the sale of a business as a whole, including all fixtures, chattels, and merchandise.
Uniform Residential Appraisal Report (URAR)
Standard Fannie Mae Form 1004 used by appraisers.
Uniform Residential Loan Application Report (URLA)
Standard Fannie Mae Form 1003 used by loan originators.
Unilateral contract
A one-sided contract by which one party makes a promise to induce a second party to do something. The second party is not legally bound to perform; if the second party does comply, however, the first party is obligated to keep the promise.
Unity of ownership
The four unities traditionally needed to create a joint tenancy - unity of title, time, interest, and possession.
Urban renewal
The acquisition of run-down city areas for purposes of redevelopment.
Useful life
In real estate investment, the number of years a property will be useful to the investors.
Usury
The practice of charging more than the rate of interest allowed by law.
Valid contract
A contract that complies with all the essential elements on a contract and is binding and enforceable on all parties to it.
Valid lease
An enforceable lease that has the following essential parts: lessor and lessee with contractual capacity, offer and acceptance, legality of object, description of the premises, consideration, signatures, and delivery. Leases for more than one year also must be in writing.
Value
The present worth of future benefits arising from the ownership of real property. To have value, a property must have utility, scarcity, effective demand, and transferability.
Variable rate mortgage
A mortgage loan that contains an interest rate provision related to a selected index. Under this provision, the interest rate may be adjusted annually either up or down.
Variance
An exception from the zoning ordinances; permission granted by zoning authorities to build a structure or conduct a use that is expressly prohibited by zoning ordinance.
Writ of attachment
The method by which a debtor's property is placed in the custody of the law and held as security, pending the outcome of a creditor's suit.
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