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Glossary of Real Estate-related Terms


Select the first letter of the word from the list above to jump to the appropriate section of the glossary.

- A -

A relationship between a principal and the principal's agent which arises out of a contract, either express or implied, written or verbal, wherein the agent is employed by the principal to do certain acts dealing with a third party.

One who acts for and with the authority of another called the principal.

An exchange of promises, a mutual understanding or arrangement, a contract.

ALTA Owner's Policy
An owner's extended coverage policy that provides buyers and owners the same protection the ALTA policy gives to lenders.

ALTA Title Policy
(American Land Title Association)  A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy to include items such as unrecorded mechanic's liens;   unrecorded physical easements;  facts a physical survey would show;   water and mineral rights;  and rights of parties in possession, such as tenants and buyers under unrecorded instruments.

Satisfaction of enjoyable living to be derived from a home; conditions of agreeable living or a beneficial influence from the location of improvements, not measured in monetary consideration but rather as tangible and intangible benefits attributable to the property, often causing greater pride in ownership.

The liquidation of a financial obligation on an installment basis; also, recovery over a period of cost or value.

Amortized Loan
A loan to be repaid, interest and principal, by a series of regular payments that are equal, without any special balloon payment prior to maturity.  Also called a Level Payments Loan.

Annual Percentage Rate
The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for Implementing the Federal Truth in Lending Act.

An estimate of the value of property resulting from an analysis of facts about the property.  An opinion of value.

One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes.

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- B -

A person employed for a fee by another to carry on any of the activities listed in the license law definition of a broker.

Building Code
A systematic regulation of construction of buildings within a municipality established by ordinance or law.

Building Restrictions
Zoning, regulation requirements or provisions in a deed limiting, size and use of a building.

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- C -

Covenants, conditions and restrictions.  The basic rules establishing the rights and obligations of owners  (and their successors in interest) of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

(1) The process by which all the parties to a real estate transaction conclude the details of the sale or mortgage.  The process includes the signing and transfer of documents and distribution of funds.  (2) Condition of description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.

Closing Costs
The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.

Closing Statements
An accounting of funds to the buyer and seller separately.   Required by law to be made at the completion of every real estate transaction.

An agent's compensation for performing the duties of the agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc.  A fee for services.

An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan.  The areas within the boundaries may be filled  with air, earth, water or any combination and need not be attached to the land except by easements for access and support.

An agreement to do or not to do a certain thing.  It must have four essential elements:  parties capable of contracting, consent of the parties, a lawful object, and consideration.  A contract for sale of real property must also be in writing and signed by the party or parties to be charged with performance.

Conventional Mortgage
A mortgage securing a loan made by investors without government underwriting, i.e., which is not FHA insured or VA guaranteed.  The type customarily made by a bank or savings and loan association.

An instrument in writing used to transfer (convey) title to property from one person to another, such as a deed or trust deed.

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- D -

Written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).

Deferred Maintenance
Existing but unfulfilled requirements for repairs and rehabilitation.  Postponed or delayed maintenance causing decline in a building's physical condition.

Deposit Receipt
A term used by the real estate industry to describe the written offer to purchase real property upon stated terms and conditions, accompanied by a deposit toward the purchase price, which becomes the contract for the sale of the property upon acceptance by the owner.

Discount Points
The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate.  The amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the note would pay the original lender for it under market conditions.  A point equals one percent of the loan.

Documentary Transfer Tax
A state enabling act allows a county to adopt a documentary transfer tax on all transfers of real property located in the county.  Notice of payment is entered on the face of the dead or on a separate paper filed with the deed.

Dual Agency
An agency relationship in which the agent acts concurrently for both principals in a transaction.

Unlawful constraint exercised upon a person whereby he or she is forced to do something against his or her will.

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- E -

Earnest Money
Down payment made by the purchaser of real estate as evidence of good faith.   A deposit or partial payment.

A right, privilege or interest limited to a specific purpose which one party has in the land of another.

The interest or value which an owner has in real estate over and above the liens against it.

The deposit of instruments and/or funds with instructions with a third neutral party to carry out the provisions of an agreement or contract.

Escrow Agent
The neutral third party holding funds or something of value in trust for another or others.

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- F -

Fair Market Value
This is the amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under pressure to buy or sell.

A person in a position of trust or confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

Fiduciary Duty
The duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation concealment, duress or pressure.

First Mortgage
A document pledging collateral for a loan (See "mortgage") that has the first priority over all other claims against the property except taxes and bonded indebtedness.  That mortgage superior to any other.

First Trust Deed
A document pledging collateral for a loan  (See "trust deed") that has first priority over all other claims against the property except taxes and bonded indebtedness.  The trust deed superior to all others.

Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default in payments or terms.

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- G -

Grant Deed
A limited warranty deed using the word "grant" or like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the owner.

A person to whom the grant is made.

A person who transfers his or her interest in property to another by grant.

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- H -

(exemption) A statutory protection of real property used as a home from the claims of creditors and judgments up to a specified amount.

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- I -

A trust type account established by lenders for the accumulation of borrowers funds to meet periodic payment of taxes, FHA mortgage insurance premiums, and/or future insurance premiums, required to protect their security.  Impounds are usually collected with the note payment.  The combined principal, interest, taxes and insurance payments is commonly termed a PITI payment.  

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- J -

Joint Tenancy
Undivided ownership of a property interest by two or more persons each of whom has a right to an equal share in the interest and a right of survivorship, i.e., the right to share equally with other surviving joint tenants in the interest of the deceased joint tenant.

Junior Mortgage
A mortgage recorded subsequently to another mortgage on the same property and made subordinate by agreement to a later-recorded mortgage.

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- K -


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- L -

The material of the earth, whatever may be the ingredients of which it is composed, whether soil, rock, or other substance and included free or occupied space for an indefinite distance upwards as well as downwards.

Land Contract
A contract used in the sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid.  Also commonly called a conditional sales contract, installment sales contract or real property sales contract.  (See also Real Property Sales Contract for statutory definition).

A contract between owner and tenant, setting forth conditions upon which tenant may occupy and use the property and the term of the occupancy.   Sometimes used as an alternative to purchasing property outright, as a method of financing right to occupy and use real property.

One who contracts to rent, occupy, and use property under a lease agreement; a tenant.

An owner who enters into a lease agreement with a tenant; a landlord.

Liquidated Damages
A sum agreed upon by the parties to be full damages if certain events occur.

Liquidated Damages Clause
A clause in a contract by which the parties by agreement fix the damages in advance for a breach of contract.

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- M -

Market Value
The highest price in terms of money which a property will bring on the open market and under all conditions required for a fair sale, i.e., the buyer and seller acting prudently, knowledgeably and neither affected by undue pressures.

Material Fact
A fact is material if it is one which the agent should realize would be likely to affect the judgment of the principal in giving his or her consent to the agent to enter into a particular transaction on the specified terms.

An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation;  a procedure for foreclosure in the event of default as established by statute.

Multiple Listing Service
An association of real estate agents providing for a pooling of listings and the sharing of commissions on a specified basis.

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- N -

Negative Amortization
Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.

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- O -

Offer to Purchase
The proposal made to an owner of property by a potential buyer to purchase the property under stated terms.

Open Housing Law
Congress passed a law in April 1968 which prohibits the discrimination in the sale of real estate because of race, color, or religion of buyers.

An improvement which is not the highest and best use for the site on which it is placed by reason of excess size or cost.

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- P -

Personal Property
Any property which is not real property.

Power of Attorney
A written instrument whereby a principal gives authority to an agent.   The agent acting under such a grant is sometimes called an attorney in fact.

Everything capable of being owned and acquired lawfully.  The rights of ownership.  The right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights.   Property is classified into two groups, personal property and real property.

Adjustments of interest, taxes, and insurance, etc., on a pro rata basis as of the closing or agreed upon date.  Fire insurance is normally paid for three years in advance.  If a property is sold during this time, the seller wants a refund on that portion of the advance payment that has not been used at the time the title to the property is transferred.  For example, if the property is sold two years later, seller will want to receive 1/3 of the advance premium that was paid.  Usually done in escrow by escrow holder at time of closing the transaction.

Proration of Taxes
To divide or prorate the taxes equally or proportionately to time and use, between seller and buyer.

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- Q -

Quit Claim Deed
A deed to relinquish any interest in property to which the grantor may have, without warranty of title or interest.

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- R -

Real Estate
(See Real Property)

Real Property
In the strict sense, land appurtenances, that which is affixed to the land, and that which by law is immovable.  It usually refers to the "bundle of rights"  inherent to ownership.

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- S -

Sale and Leaseback
A financial arrangement wherein at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser.  The seller receives cash while the buyer is assured a tenant and a fixed return on buyer's investment.

Septic Tank
An underground tank in which sewage from the house is reduced to liquid by bacterial action and drained off.

Specific Performance
An action to compel performance of an agreement, e.g., sale of land as an alternative to damages or rescission.

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- T -

Tenancy in Common
Co-ownership of property by two or more persons who hold undivided interest, without right of survivorship; interests need not be equal.

Ant-like insects which feed on wood and are highly destructive to wooden structures.

Indicates "fee" position or lawful ownership and right to property.   "Bundle of Rights" possessed by the owner.   Combination of elements constituting proof of ownership.

Title Insurance
Insurance to protect a real property owner or lender up a specified amount against certain types of loss, e.g., defective or unmarketable title.

Title Insurance Report
A report which discloses condition of the title made by a title company preliminary to issuance of a title insurance policy.

Trust Deed
Just as with a mortgage, this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan.   However, it differs from the mortgage in a number of important respects.  For example, instead of there being two parties to the transaction there are three.   There is the borrower who signs the trust deed and who is called the trustor.   There is a third, neutral party, to whom the trustor deeds the property as security for the payment of the debt, who is called the trustee.  And finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the e sale to the lender as payment of the debt.  

One who holds property in trust for another to secure the performance of an obligation.  Third party under a deed of trust.

One who borrows money from trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under the terms of the deed of trust.

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- U -

An improvement which, because of its deficiency in size or cost, it is not the highest and best use of the site.

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- V -

Vacancy Factor
The percentage of a building's space that is not rented over a given period.

Variable Interest Rate
(VIRs or VRMs, Variable Mortgage Rates).  An interest rate in a real estate loan by which the terms of the note varies upward or downward over the term of the loan depending on money market conditions.

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- W -

Wrap  Around Mortgage
A financing device whereby  a lender assumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deeds and the additional amount of money borrowed.

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- X -


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- Y -


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- Z -

The area set off by the proper authorities for specific use; an area subject to certain restrictions or restraints.

Act of city or county authorities specifying type of use to which property may be put in specific areas.

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