©1996 Copyright; N. Jeffrey Sorg
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A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z

A

Abstract of Title: A compilation of the recorded documents which relate to a parcel of land, from which an attorney may give an opinion of the condition of title.

Acceleration Clause: Clause used in a mortgage or deed of trust, which gives the lender the right to demand full payment upon a certain event, such as change of ownership without the lender's consent. 

Acceptance: Voluntary agreement to the price and terms of an offer, which creates a contract. 

Acre: A unit of land measure in any shape equal to 43,560 square feet. 

Acquisition Costs: The costs of acquiring property other than purchase price, such as escrow fees, title insurance, lenders fees, attorney fees, etc. 

Ad Valorem: A method of taxation using the value of the real estate to determine the amount of the tax. 

Addendum: Something added to a document, letter, escrow instructions, contractual agreement, etc. 

Adjustable Rate Loan: Loan in which the interest rate is periodically adjusted to more closely coincide with current rates. 

Adverse Possession: A method of acquiring title by possession under certain conditions. Generally, possession must be open, continuous, and hostile. Exact time of possession and specific requirements vary from state to state. 

Agency: Any relationship in which one party (Agent) acts for or represents another (Principal), under the authority of the latter. 

Alienation Clause: A type of acceleration clause, calling for a debt under a mortgage or deed of trust to be due in its entirety upon transfer of ownership of the secured property.

A.L.T.A. American Land Title Association, an organization composed of title insurance companies, which has adopted certain forms to standardize coverage on a national basis.

Amortization: The payment of debt in regular and periodic installments of principal and interest, as opposed to interest only payments. 

Annual Percentage Rate: The yearly interest percentage of a loan, as expressed by the actual rate of interest paid, including up-front loan fees. 

Appraisal: An opinion of value based upon factual analysis. 

Appreciation: An increased value of property due to either a positive improvement of the area or elimination of negative factors, but not due to an increase in value from inflation. 

Appurtenance: Any part of real property which passes upon the transfer, either attached or not, such as a barn or an easement.

Arbitration Clause: A clause in a contract calling for the decision of a third party in the event of a dispute. 

Asbestos: A hazardous material, used for fire resistance, once commonly used in insulation, flooring, and roofing materials. 

As Is Condition: Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects. 

Asking Price: The price at which the seller is offering property for sale. 

Assessment: Estimate of value for tax purposes.

Assessment District: An area whose boundaries are set for tax assessment purposes only. 

Assignment: A transfer to another of any property, real or personal, or of any rights or estates in said property. 

Assumption: Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust.

Assumption Fee: Lender's charge for paperwork involved in the processing for a new buyer to assume an existing loan. 

B

Backup Offer: A secondary offer to buy property, used in case the first offer fails. 

Balloon Note: A note calling for periodic payments which are insufficient to fully amortize the loan, so that a principal sum known as a balloon is due at maturity. 

Bill of Sale: An instrument by which one transfers personal property. 

Blanket Mortgage: A mortgage covering more than one property. 

Bridge Loan: An interim loan, generally made between a short term loan and long term loan, when the borrower needs to have more time before taking the long term, or permanent, financing. 

Brokerage: The act of bringing together principals (buyer-seller, landlord-tenant, etc.) for a fee. 

Building Code: A comprehensive set of laws which control the construction of buildings, including design, materials used, construction, use, and repair. 

Build to Suit: The building of a structure to meet the specifications of a purchaser. 

built-ins: Commonly, stoves, ovens, dishwashers, and other appliances, framed into the home construction. 

Bundle of Rights: All rights and interests of ownership in real property considered together, but separable. 

Buy Down: A payment to the lender for the purpose of  reducing the interest rate for the loan. 

Buyer's Market: A market condition favoring the buyer, usually when more homes are for sale than there are interested buyers. 

C

Call: To demand payment due to default. 

Cancellation Clause: A clause in a lease or other contract setting forth the conditions under which each party may cancel or terminate the agreement.

Cap: The maximum increase of an adjustable rate mortgage. 

Capital Gains: Gains realized from the sale of capital assets, and generally the difference between cost and selling price, less deductible expenses. Used mainly for income tax purposes. 

Capitalization: The determination of present value of income property by taking the annual net income, and dividing by a rate of return percentage which is commonly acceptable to buyers of similar properties (i.e. $10,000 / 11% = $90,909). 

Capitalization Rate: The percentage used to determine the value of income property through capitalization. 

Cash Flow: In investment property, the actual cash that the investor will receive after deduction of operating expenses and debt service from his gross income. 

Cash Out: To take the entire amount of a seller's equity in cash rather than to retain some interest in the property, such as in a deed of trust. 

C.C.& R.’s: Covenants, conditions, and restrictions. A term used to describe the limitations which may be placed on property. 

Chain of Title: The chronological order of conveying of a parcel of land, starting from original owner. 

Chattel: Personal property. 

Chattel Mortgage: A lien on personal property. 

Closing: Process by which all parties to the transaction conclude the details of a sale, including the signing and transfer of documents and the distribution of funds. 

Closing Costs: Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, recording fees, transfer fees, escrow fees, brokerage fees, and other related costs. 

Closing Statement: The computation of financial adjustment between buyer and seller as of the day of closing. 

Cloud on Title: An invalid encumbrance on real property, which, if valid, would affect the rights of ownership. 

Common Walla wall erected on a property boundary as a common support to structures on both sides, but which are under separate ownership.

Comparables: Similar properties used as comparisons to determine the value of a specific property. 

Comparative Analysis: A comparison of similar properties to a subject property for the purpose of evaluating market value and proper pricing. 

Condemnation: The taking of private property for public use without the consent of the owner, but only upon payment of just compensation.

Condominium: A structure of two or more units, the interior space of which are individually owned, with the balance of the property (both land and building) owned in common by the owners of each unit. 

Construction Loan: Short term financing of real estate construction which is generally followed by a long term loan, issued upon completion of improvements.

Contingency: The dependence upon a stated event which must occur before a contract is binding. 

Contract for Deed: An installment contract for the sale of real estate, where the seller has legal title until paid in full. The buyer only has equitable title during the contract term. 

Conventional Loan: A mortgage or deed of trust not obtained under a government program. 

Conveyance: Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.

Cooperating Broker: The broker who finds the buyer and so shares in the commission with the listing broker. 

Cost Approach: An appraisal method, estimating the replacement cost of a structure, less depreciation, plus land value. 

Counter Offer: An offer (instead of acceptance) in response to an offer. 

Courtesy to Brokers: Willingness of a seller to pay a commission to any broker supplying a suitable buyer. 

Covenant: Assurances set forth in a deed by the grantor, or implied by law. 

Creative Financing: A general term which encompasses any method of financing property going beyond traditional real estate lending.

D

Debt Service: The amount of financing, including interest and principal payments, on a property. 

Deed: A conveying instrument used to pass title to property upon sale. 

Deed of Trust: Similar to a mortgage, a security instrument whereby real property is given as security for a debt. 

Deed Restrictions: Limitations on the use of property placed in the conveying deed by the grantor, which binds all future owners.

Deferred Maintenance: Repairs necessary to put a property in good condition. 

Delivery: In conveying, the placing of the property in the actual or constructive possession of the grantee, usually accomplished by delivery of a deed to the buyer, or by the recording of the deed. 

Depreciable Life: A tax term meaning the number of years used to determine the depreciation of an asset. 

Depreciation: A decrease in value to real estate improvements caused by deterioration or obsolescence, or a loss in value as an accounting procedure to use as a deduction for income tax purposes. 

Devise: Real estate left by will. 

Discount Points: The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. A point is equal to one percent of the loan amount. 

Distress Sale: A sale of property when the seller is under extreme pressure to sell, and which generally results in the property selling for less than market value. 

Down Payment: Cash portion paid by the buyer from his own funds, as opposed to that portion of the purchase price which is financed. 

Dual Agency: The representation by an agent of opposing principals (buyer and seller) at the same time. This practice is illegal in some states.

E

Earnest Money: The money from a purchaser which is deposited into escrow upon the signing of the agreement of sale to show that the purchaser is serious about buying the property. 

Easement: A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.

Economic Life: The profitable life of an improvement, which is generally shorter than the physical life. 

Economic Obsolescence: Loss of desirability and useful life of a property through economic forces, such as zoning changes, traffic pattern changes, etc., rather than deterioration. 

Economic Rent: The market rental value of a property at any given time, even though the actual rent may be different. 

Effective Age: Age of a structure as estimated by condition rather than actual age. 

Ejectment: A court action to recover real property. 

Elevation: The exterior design of a structure, usually but not always, viewed from the front. 

Eminent Domain: A governmental right to acquire property for public use by condemnation, and the payment of just compensation.

Encroachment: Generally, construction onto the property of another, as of a wall, fence, building, etc. 

Encumbrance: A claim, lien, charge, or liability attached to and binding real property. 

Equal Credit Opportunity: Federal act granting women certain independent status, and preventing lenders from considering such negative credit aspects as the possibility of a woman having children and dropping out of the labor market. 

 Equitable Ownership: Ownership by one who does not have legal title, such as a vendee under a land sales contract. 

Equity: Market value of real property, less the amount of existing loan balances. 

Equity Loan: A loan based upon the equity in a property. 

Escalation Clause: A clause in a lease providing for an increased rental at a future time. 

Escheat: A reversion of property to the state in the absence of an individual owner, usually when a property owner dies without a will.

Escrow: A neutral third party which receives all funds and instruments necessary to a sale, and which processes them according to instructions. 

Escrow Instructions: Instructions which are signed by both buyer and seller, and which enable an escrow agent to carry out the procedures necessary to transfer real property. 

Estate: The interest or nature of the interest which one has in property. 

Estate for Life: An estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party. 

Estate for Years: Any estate for a definite period of time, such as a lease. 

Estate of Inheritance: An estate which may descend to heirs. 

Estate in Remainder: An estate which vests in one other than a grantor, after the termination of an intermediate estate. 

Exchange: A reciprocal transfer of real property which has certain tax advantages over a sale. 

Exclusive Agency Listing: A listing under which the broker's commission is protected against a sale by other agents but not by a sale by the principal. 

Exclusive Right to Sell: A listing contract whereby the owner promises to pay a commission to the broker if property is sold during a stated period, regardless of whether or not the broker is the cause of sale. 

F

Fair Credit Reporting Act: A federal law giving one the right to see his or her credit report, among other rights. 

Fair Housing Law: Title VIII of the Civil Rights Act, which forbids discrimination in the sale or rental of residential property because of race, color, sex, religion, or national origin. 

Fee Simple: An estate under which the owner is entitled to unrestricted powers to dispose of the property, and can be left by will or inherited. 

F.H.A.:A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sales price. 

F.H.A. Escape Clause: A clause stating that the borrower shall not be obligated to buy nor shall any deposit be lost if the appraisal is less than purchase price.

F.H.L.M.C.Federal Home Loan Mortgage Corporation, also called Freddie Mac. A federal agency which purchases first mortgages, both conventional and federally insured, from members of the Federal Reserve System and the Federal Home Loan Bank System. 

Fiduciary: One acting in a relationship of trust, usually regarding financial transactions. 

First Mortgage: A mortgage having priority over all other voluntary liens against certain property. 

First Refusal Right: A right which gives the lessee a first chance to buy the property if the owner decides to sell, whereby the lessee can match a legitimate offer. 

Fixed Rate Loan: A loan having a rate of interest which remains the same for the life of the mortgage. 

Fixtures: Personal property which is attached to real property, and is legally treated as real property while it is so attached. 

F.N.M.A.Federal National Mortgage Association, also called Fannie Mae. A private corporation which deals in the purchase of first mortgages, at discounts. 

Foreclosure: A procedure in or out of court, to extinguish all rights, title, and interest of the owners of property in order to sell the property to satisfy a lien against it. 

Free and Clear: Real property against which there are no liens, especially voluntary liens. 

Freehold: An estate, at least of duration of a lifetime. 

Front Footage: Linear measurement along the front of a parcel, that is, the portion fronting on a major road. 

Front Foot Cost: The determination of the value of real property based on a value per foot as measured along the frontage of a parcel. It is usually used for commercial property. 

Full Disclosure: The act of revealing all known facts which may affect the decision of a buyer, including any known property defects or problems. 

Functional Obsolescence: The need for replacement because a structure or equipment has become inefficient because of improvements since discovered or invented. 

Future Advance Clause: A clause in a mortgage or deed of trust which allows the borrower to borrow additional sums at a future time, secured under the same instrument and by the same real property. 

G

Gap Financing: Loans secured as interim financing until more permanent financing can be obtained. 

Grace Period: A period of time past the due date for a payment, during which time a payment may be made and not considered delinquent. 

Graduated Lease: A lease calling for a varying rental, usually based on periodic appraisal or simply the passage of time. 

Grandfather Clause: The clause in a law permitting the continuation of a use, business, etc., which, when established, was permissible, but because of a change in the law, is not now permissible. 

Grantee: One to whom property or property rights is given, generally the buyer. 

Grantor: One who transfers property or property rights. One who gives a deed. 

Gross Acre: An acre (43,560 square feet), as distinguished from a net (usable) acre. 

Gross Area: In building measurement, the outside dimensions determine the gross area, irrespective of the area inside actually usable or rentable. 

Gross Income: The scheduled total income, either actual or estimated, derived from a business or property. 

Gross Income Multiplier: A figure which, when multiplied by the annual gross income, will theoretically determine the market value. A general rule of thumb which varies with specific properties and areas. 

Gross Lease: A lease which obligates the lessor to pay all or part of the expenses of the leased property, such as taxes, insurance, utilities, etc.

Gross Rent Multiplier: A method of obtaining an approximate value of income property by using gross yearly rents. 

Ground Lease: A lease of vacant land, or land exclusive of any buildings on it. 

Ground Rent: Rent paid for vacant land. If the property is improved, ground rent is that portion which is attributable to the land only.

Growing Equity Mortgage: A fixed rate, graduated payment loan, allowing low beginning payments and a shorter term because of higher payments as loan progresses. 

H

Habendum Clause: The clause in a deed which defines the extent of the estate of the grantee. 

Hazard Insurance: Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending upon the terms of the policy. 

Hectare: A unit of measurement, equaling 10,000 square meters (2.471 acres). 

Highest and Best Use: The use of land which will bring the greatest economic return over a given time. 

Holdback: Portion of a loan held back by the lender until a certain contingency is met. 

Holding Period: The time period used by the I.R.S. to determine a long or short term capital gain. The period during which the taxpayer owns the asset. 

Homeowners' Association: An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. 

Homeowners' Insurance: Includes the coverage of personal liability and theft from the home, and other such coverage. 

Homestead: The dwelling (house and contiguous land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of creditors. 

Home Warranty Insurance: Private insurance insuring a buyer against defects (usually in plumbing, electrical, and heating) in the home he has purchased. 

H.U.D.The Department of Housing & Urban Development. A federal cabinet department responsible for the major housing programs in the United States, such as F.H.A. 

Hypothecate: To mortgage or pledge without delivery of the security to the lender. 

I

Implied Agency: An agency which is not expressly set out but must be deduced from the circumstances. 

Impound Account: Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. 

Improved Land: Land having either on-site improvements, offsite improvements, or both. 

Improvements: Generally, buildings, but may include any permanent structure or other development, such as a street, utilities, etc.

Income Approach: An appraisal method to determine the value of rental property by use of the estimated net income over the life of the structure. 

Income Property: Property which produces income, usually from rental. 

Indexing: Altering the mortgage term, payment or rate, according to inflation or suitable rate index. 

Insurable Value: Value of property for insurance purposes, normally including improvements but not land or other indestructible parts. 

Insured Mortgage: A mortgage which is insured against loss to the mortgagee in the event of default and a failure of the property to satisfy the balance owing plus the costs of foreclosure. 

Interest: Money charged for the use of money (principal). 

Interest Extra Note: A note requiring an equal (usually monthly) payment on principal, plus interest. As the interest decreases, based on declining principal balance, the total payment decreases. The amount applied to principal remains the same.

Interest Included Note: A note having equal payments (usually monthly). Interest is figured on the declining principal balance. As the principal decreases, interest also decreases, applying more of each payment to the principal. 

Interest Only Mortgage: A mortgage under which the principal amount borrowed is repaid in one payment. Periodic interest payments are made. 

Interest Rate: The percentage of an amount of money which is paid for its use for a specified time. Usually expressed as an annual percentage.

Interim Financing: Temporary financing, usually for construction. 

Intestate: Without leaving a will. 

Investment Yield: The gain from an investment in real property, including both income and resale. Expressed as a percentage of the amount invested.

Involuntary Lien: A lien, such as a tax lien or judgment lien, which attaches to property without the consent of the owner, rather than a mortgage lien, to which the owner agrees. 

J

Joint Tenancy: An undivided interest in property, taken by two or more joint tenants. The interests must be equal, occurring under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased. 

Judgment Lien: An involuntary lien against the property of someone who has been made a debtor on the basis of a judgment. 

Junior Mortgage: Any mortgage of lesser priority than a first mortgage. 

K

L

Land Sales Contract: An installment contract for the sale of land. The seller (vendor) has legal title until paid in full. The buyer (vendee) has equitable title during the contract term. 

Landlord: An owner of leased real estate. 

Landlord's Warrant: A warrant enabling a landlord to levy upon a tenant's personal property, and to sell property at a public sale to collect delinquent rent. 

Land Use Planning: The development of long range plans for the use of land in a given area, such as through zoning plans. 

Latent Defect: A hidden or concealed defect, which could not be discovered by inspection, using reasonable care. 

Lease: An agreement by which the owner of real property gives the right of possession to another, for a specified period of time, and for consideration. 

Leasehold: An estate held under a lease for a fixed term. 

Lease-Purchase Option: A lease under which the lessee has the right to purchase the property, under certain conditions. 

Legal Description: A method of geographically identifying a parcel of land, which is acceptable in a court of law. 

Lessee: The party to whom a lease is given in return for consideration (rent). 

Lessor: The party (usually the owner) who gives the lease in return for consideration (rent). 

Letter of Intent: A formal method of stating that a prospective developer, buyer, or lessee, is interested in property. Not an offer and creates no obligation. 

Leverage: The use of financing to allow a small amount of cash to purchase a large property investment. 

Lien: An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances, but not all encumbrances are liens. 

Lien Theory: A theory followed in several states that assumes a mortgage has only a lien on the mortgaged property, and the mortgagor has legal title. 

Like Kind Property: A tax term used in exchanges. Property may be exchanged for like in kind property and the tax deferred. The term does not refer to the physical similarity of the properties, but to purpose and intent (investment) of the taxpayer. 

Lis Pendes: A legal notice recorded to show pending litigation related to real property, and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation. 

Listing: An agreement between the owner of real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee. 

Listing Agent: A real estate agent who obtains a listing, as opposed to a selling agent, who finds a buyer. 

Loan Origination Fee: A one time set-up fee charged by the lender, and usually a percentage of the loan amount. 

Loan Package: The file of all items necessary for the lender to consider giving a loan. These items would include the information on the prospective borrower (loan application, credit report, financial statement, employment letters, etc.), and information on the property (appraisal, survey, etc.). 

Loan Ratio: The ratio, expressed as a percentage, of the amount of a loan to the value or selling price of real property. 

Lock-In: The prohibition of a loan secured by a mortgage or deed of trust, so that the borrower is 'locked-in' to the loan for a specified period. 

Long Term Financing: A mortgage or deed of trust for a term of ten years or more, as distinguished from interim loans or construction loans. 

Long Term Lease: A general term which may refer to a lease ten years or longer in term, or in some areas, five years or longer. 

Lot: Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision. 

M

Market Approach: Appraising the value of property by comparing the price of similar properties (comparables) recently sold. 

Market Value: The highest price a willing buyer would pay and a willing seller would accept, both being fully informed, and the property exposed for a reasonable period of time. 

Marketable Title: Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances. 

Master Lease: A lease controlling subsequent leases. 

Master Plan: A zoning plan for an entire governmental entity. 

Master Policy: An insurance policy to a lender covering property in more than one location. 

Maturity: Termination period of a note. 

Mechanic's Lien: A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements, and which attaches to land as well as improvements. 

Metes and Bounds: Description of land by boundary lines, with their terminal points and angles. 

M.I.P.Mortgage insurance premium. The price paid for insurance protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to loan a higher percentage of the sales price. The federal government writes this form of insurance through the F.H.A. and the V.A. 

Month to Month Tenancy: A tenancy where no written lease is involved, rent being paid monthly. 

Mortgage: The instrument by which real estate is hypothecated as security for the repayment of a loan. 

Mortgage Banker: A company providing mortgage financing with its own funds rather than simply bringing together lender and borrower, as does a mortgage broker. 

Mortgage Broker: One, who for a fee, brings together borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust. 

Mortgage Insurance: Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to loan a higher percentage of the sales price. The federal government writes this type of insurance through the F.H.A. and V.A. 

Mortgage Life Insurance: A term life insurance policy for the amount of the declining balance of a loan secured by a mortgage or deed of trust. The beneficiary is the mortgagee. In the event of death of the insured, the mortgage is paid in full. 

Mortgage Servicing: Controlling the necessary duties of a mortgagee, such as collecting payments, releasing the lien upon payment in full, foreclosing if in default, making sure taxes are paid and insurance is in force, etc. Servicing may be done by the lender or a company acting for the lender, for a fee. 

Mortgagee: The party lending the money and receiving the mortgage. 

Mortgagor: The party who borrows the money and gives the mortgage. 

Multifamily Dwelling: A building designed as a dwelling for more than one family. 

Multiple Listing:An exclusive listing, submitted to all members of an association, so that each may have the opportunity to sell the property.

N

N.A.R. National Association of Realtors®, an association of people dedicated to the betterment of the real estate industry, through legislation, education, and high ethical standards. 

Negative Amortization: A condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases. 

Negative Cash Flow: When the income from an investment property does not equal the usual expenses. 

Net Acre: An acre which may be used for the building of structures, as opposed to that area which is not usable or must be used for off-site improvements such as streets, sidewalks, etc. 

Net Income: The difference between adjusted gross income and operating expenses, but before debt service. 

Net Lease: A lease requiring the tenant to pay, in addition to a fixed rental, the expenses of the property leased, such as taxes, insurance, etc. 

Net Listing: A listing under which a real estate broker receives any amount over a given net amount to the seller. Illegal in some states.

Non-recourse Loan: A loan not allowing for a deficiency judgment, with the secured property as the only recourse. 

Non recurring Expense: An expense, which does not usually repeat itself, such as a fire or other natural disaster. 

Note: A unilateral agreement containing an express and absolute promise of the signer to pay a named person a definite sum of money at a specified date. Usually provides for interest and is secured by a mortgage or deed of trust. 

Notice of Cessation: A notice stating that work has stopped on a construction project. 

Notice of Completion: A notice, recorded to show that a construction job has been completed. 

Notice to Quit: A notice by a landlord to a tenant to vacate rented property. 

Novation: Substitution of a new contract, debt, or obligation, for an existing one, between the same or different parties. 

O

Offer: A presentation or proposal for acceptance, in order to form a contract. To be legally binding an offer must be definite as to price and terms.

Offer and Acceptance: Necessary elements of a contract to sell real estate. 

Open-End Mortgage: A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage. 

Open House: A house which is open without an appointment to prospective buyers or tenants, for inspection, during certain hours and days of the week. 

Open Listing: A written authorization to a real estate broker by a property owner, stating that a commission will be paid to the broker upon presentation of an offer which meets a specified price and terms. However, the broker has no exclusive right to sell, and must bring in his offer before any other offer is accepted. 

Open Mortgage: A mortgage that can be prepaid without penalty. 

Open Space Ratio: Ratio of land area to floor area of an apartment building. Used in zoning requirements. 

P

Partial Release: A release of a portion of property covered by a mortgage. 

Participation: Lender involvement in a development for a percentage of the gross sales or profit, as well as interest on the loan. 

Partition: Any division of real property between co-owners, resulting in individual ownership and interests. 

Patent Defect: A defect plainly visible, or one that would be discovered by the exercise of ordinary care. 

Payment Cap: The maximum amount for a payment under an adjustable mortgage loan, regardless of the increase in the interest rate. If the payment is less than the interest alone, negative amortization is created. 

Payoff: The payment in full of an existing loan balance or other lien. 

Payoff Escrow: An escrow specifically for the purpose of paying off an existing loan. Usually part of an existing escrow, and called a sub escrow. 

Percentage Lease: A lease, usually on a retail business property, using a percentage of the gross or net sales to determine the rent. There is usually a minimum base rental, in the event of poor sales. 

Perfect Escrow: A complete escrow. When the escrow agent has all instruments and instructions necessary to carry out the transaction. 

Performance Bond: A bond posted by a builder to insure completion of a project. 

Permanent Mortgage: A mortgage on completed construction for a long period of time, usually over ten years. Also called a take out loan. 

Physical Life: An improvement's life, when properly maintained. 

P.I.Principal and interest. Used to indicate what's included in a monthly payment on real property. 

Piggyback Loan: Loan made jointly by two or more lenders on the same property under one mortgage or trust deed. 

P.I.T.I.Principal, interest, taxes, and insurance. The four main portions of a usual monthly payment. 

Planned Unit Development: A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels.

Plat Book: A book which contains the plat maps for an area. 

Plat Map: A map dividing a parcel of land into lots, as in a subdivision. 

Plottage Increment: The increase in value created by joining smaller adjacent properties into one large parcel, under a single ownership. 

P.M.I. see Private Mortgage Insurance. 

Point: One percent of the amount of the loan. 

Power of Sale: Clause in a mortgage or deed of trust giving the mortgagee or trustee the power to sell the property in the event of default. 

Preliminary Title Report: A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued. 

Prepaid Interest: Interest paid before coming due. 

Prepaid Items: Those expenses of property which are paid in advance and will usually be prorated upon sale, such as taxes, insurance, rent, etc. 

Prepayment Penalty: A penalty under a note, mortgage, or trust deed imposed when the loan is paid before it is due. 

Prepayment Privilege: The right to prepay a loan without penalty, either in full or in part. 

Prescriptive Easement: The granting of an easement by a court, based on the presumption that a written easement was given, although none existed, after a period of open and continuous use of land. 

Prime Lending Rate: The most favorable interest rates charged by a commercial bank on short term loans. 

Prime Tenant: The major tenant in an office building or shopping center. It may be necessary to have a prime tenant to obtain construction financing. 

Principal: 1. The person who gives authority to an agent or attorney. 2. Debt amount, less the interest. 

Proration: The dividing of property tax, insurance, rental income, and other items between buyer and seller proportionately to time of use, closing date, or other agreed upon time. 

Prospectus: A brochure, which presents for a prospective investor, the details of an offering. 

Public Housing: A governmental housing project, usually to accommodate low income families. 

Puffing: An opinion not made as a representation of fact, but intended to enhance the value of property. 

Purchase Agreement: An agreement between a buyer and seller or real property, setting forth price and terms of sale. 

Purchase Money Mortgage: A mortgage given from buyer to seller to secure all or a portion of the purchase price. 

Q

Quitclaim Deed: A deed operating as a release, intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title by the grantor. 

R

Range: A division of land in the government survey system, being a six mile wide row of townships, running North and South, and used in legal descriptions. 

Rate Index: An index used to adjust the interest rate of an adjustable rate mortgage. 

Rate of Return: The annual percentage of return on investment of income property. 

Raw Land: Land in its natural state, which has not been subdivided into lots, and does not have streets, utilities, or other improvements. 

Real Estate: Land and anything permanently affixed to the land, such as buildings, fences, trees, and those things attached to the buildings, such as heating and plumbing fixtures, light fixtures, or other such items. 

Realtor®: A designation given to a real estate broker or agent who is a member of a board associated with the National Association of Realtors®. 

Reassessment: Re-estimating the value of all property in a given area for tax assessment purposes. 

Recapture: The return of money invested in property. It is usually realized when the property is sold, from the reduction of loan principal, appreciation, and income received. 

Reclamation: A process of bringing economically unusable land to a higher value by physically changing it. 

Reconditioning: Restoring a property to good condition without changing its plan or character, as distinguished from remodeling. 

Reconveyance: An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as secured collateral. 

Recordation: Filing instruments for public record and notice with a county recorder. 

Recorded Map: A map recorded in a county recorder's office. May be a subdivision map or describe a nonsubdivided parcel. 

Recorded Plat: A subdivision map filed as a matter of public record. 

Recorder's Office: A county office where instruments are recorded. 

Recording: Filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors, or other interested parties. 

Recording Fee: An amount paid to the recorder's office in order to make a document a matter of public record. 

Redemption: The process of canceling a defeasible title to land, such as created by a mortgage foreclosure or tax sale. 

Redemption Period: A time period during which a mortgage, deed of trust, or contract can be redeemed. Usually set by statute, and after judicial foreclosure.

Red Lining: An outlining on a map of certain high risk areas for real estate loan purposes, meaning that lenders will not extend credit in those areas. Illegal in most states. 

Refinance: The renewing of an existing loan with the same borrower and lender, at current market rates. 

Regulation Z: A regulation issued under the Truth-In-Lending Law, which requires that a credit purchaser be advised in writing of all costs connected with the credit portion of the purchase. 

Rehabilitation: Synonymous with reconditioning, except when used in connection with urban renewal, at which time it encompasses all types of changes, including structural, and even street changes. 

Reinstatement: Payment of a note, deed of trust, or mortgage to bring it from default to good standing. 

Reissue Rate: A charge for a title insurance policy if a previous policy on the same property was issued within a specified time period. The reissue rate is less than the original charge. 

R.E.I.T. Real estate investment trusts. A method of investing in real estate in a group, with certain tax advantages. 

Release: An instrument releasing property from a lien of a mortgage, judgment, etc. When a deed of trust is used, the instrument's called a reconveyance. 

Release Clause: A clause in a blanket encumbrance allowing for the release of certain parcels upon payment of a specified amount. 

Remaining Economic Life: Number of years between the time of an appraisal and the point in time when an improvement becomes economically valueless. 

Remodeling: Improving the structure by changing the plan, characteristics, or function, as opposed to reconditioning. 

Rent: Consideration paid for the occupancy and use of real property. 

Rentable Area: The area (square footage) for which rent can be charged, and not including stairways, elevators hallways, public restrooms, etc. 

Replacement Cost: In appraising, the cost of a substitute property, either identical or of equal utility. 

Reproduction Cost: The cost of reproducing a property at current prices using similar materials. 

Reservation: A right, either permanent or temporary, created and retained by a grantor of property. 

Resident Manager: A manager of an apartment project who lives at the property. 

R.E.S.P.A. Real Estate Settlement Procedures Act, a federal statute, which requires disclosure of certain costs in the sale of residential property that is financed by a federally insured lender. 

Restoration: Repair to a building to cause it to look like it did at an earlier time.

Restriction: A use or uses prohibited to the owner of land. Restrictions are set forth by former orders in a deed or by a recorded declaration of restrictions by a developer of a subdivision. 

Revaluation Clause: A clause in a lease calling for a periodic revaluation (appraisal) of the leased property, and subsequent adjustment of rent. 

Revenue Stamps: Formerly federal tax on the sale of real estate. Replaced by state tax stamps, they are affixed to the deed to show the amount of the tax. 

Right of Anticipation: The right to prepay without penalty. 

Right of Survivorship: The right of the survivor of a deceased person to the property of the deceased. 

S

Sale-Leaseback: A sale and subsequent lease, as part of the same transaction, from the buyer back to the seller. 

Satisfaction: Discharge of an obligation by payment of the amount due, as on a mortgage or trust deed, or payment of a debt awarded, such as satisfaction of a judgment. 

Secondary Financing: A loan secured by a mortgage or trust deed, which lien is secondary to another mortgage or trust deed. 

Secondary Mortgage Market: The buying and selling of first mortgages or trust deeds, enabling lenders to keep adequate supplies of money for new loans. The mortgages are normally sold at a discount. 

Second Mortgage: A mortgage which ranks after a first mortgage in priority. 

Section: A division or parcel of land on a government survey, comprising one square mile (640 acres). Thirty-six sections comprise a township. 

Security: Real or personal property pledged or hypothecated by a borrower, as additional protection for the lender's interest.

Selling Agent: The real estate agent obtaining the buyer rather than listing the property. The listing and selling agent may be the same person or company. 

Set Back Ordinance: Part of a zoning ordinance, which regulates the distance from the lot line to the point where improvements may be constructed. 

Settlement Statement: A statement prepared by the broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale. The seller and buyer receive separate settlement statements. 

Severalty: An estate of property held by one person alone. 

Shared Appreciation: The gaining or retaining of equity in a property by someone other than the buyer. By agreement, some expenses are shared, as well as any increase in value when the property is sold. 

Sheriff's Deed: Deed given at sheriff's sale in foreclosure of mortgage. The giving of said deed begins a statutory redemption period. Also given at a court ordered sale, pursuant to the execution of a judgment. 

Short Term Capital Gain: Profit from the sale of a capital asset not held long enough to qualify as a long term capital gain. 

Short Term Lease: A general term, indicating a lease under five years in some states, under ten in others. 

Special Assessment: Lien assessed against real property by a public authority to pay costs of public improvements which directly benefit the assessed property. 

Specific Performance: An action to compel the performance of a contract when money damages are inadequate. 

Square: A unit of measure in roofing or siding which equals ten feet by ten feet (100 square feet). 

Square Foot: The area contained by boundaries of one foot long by one foot wide. There are nine square feet in one square yard. 

Square Foot Cost: The cost of one square foot of floor space in a building or of land. Usually used to determine rental price of a building. 

Standard Coverage Policy: Title insurance policy used in some states, not having as broad of coverage as A.L.T.A. policy. 

Standard Depth: Depth of a lot considered to be the normal depth, for appraisal purposes. Traditionally, 100 feet for a residential lot. 

Standby Commitment: A commitment to issue a loan, usually for a term of one to five years, after completion of construction, in the event a permanent loan can not be obtained. The standby loan is usually at a higher interest rate than a permanent loan, and a standby fee is charged. 

Standing Loan: A loan requiring interest payments only, the principal being paid in full at maturity. 

Statute of Frauds: Laws requiring certain types of contracts to be in writing. All contracts for the sale of real property must be in writing, and leases for more than one year must be in writing. 

Statutory Lien: An involuntary lien, created by law rather than by contract, including tax liens, judgment liens, mechanic's liens, etc. 

Step-Up Lease: A lease calling for set increases in rent at set intervals. 

Straight Lease: A lease calling for the same amount of rent to be paid periodically for the entire lease term. 

Straight-Line Depreciation: A method of replacing the capital investment of income property, by reducing the value of the property by a set amount annually from the income, over the economic life of the property.

Subcontractor: One who works under a general contractor, such an electrical, plumbing, or cement contractor. 

Subdivision: A division of a single parcel of land into smaller parcels or lots, by filing a map which describes the division, and obtaining approval from a governmental commission. 

Sublease: A lease, under which the lessor is the lessee of a prior lease of the same property. 

Sweat Equity: A program which allows a purchaser to do work on the property in place of all or part of the down payment and other costs of the purchase. 

Survey: The measurement of the boundaries of a parcel of land, its area, and sometimes its topography. 

Survivorship: Gaining an interest in property by outliving another who had the interest. 

T

Take Out Loan: The permanent or long term financing of real estate after completion of construction. 

Tax Lien: 1. A lien for nonpayment of property taxes, attaching only to the property upon which the taxes are unpaid. 2. A federal income tax lien, attaching to all property of one owing taxes. 

Tax Rate: Traditionally, the ratio of dollars of tax per hundred or per thousand dollars of valuation. Modernly, has become to be expressed as a percentage of valuation. 

Tax Roll: A list, usually published by the county, which contains the descriptions of all parcels within the county, the names of the owners, the assessed values, and the tax amounts. 

Tenancy by the Entirety: A form of ownership by husband and wife whereby each owns the entire property. In the event of the death of one, the survivor owns the property without probate. 

Tenancy for Years: Any estate for a definite time period (a lease). 

Tenancy in Common: An undivided ownership in real estate by two or more persons. The interests need not be equal, and in the event of the death of one, the survivor owns the property without probate. 

Tenant at Sufferance: One who comes into possession lawfully, but who holds over after termination of his interest. 

Tenant at Will: One who holds possession by permission of the owner or landlord, but without agreement for a fixed term of possession. 

Tenant for Life: An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party.

Tenant in Severalty: One who owns property alone. 

Terms: The considerations, other than price, in a sale, lease, mortgage, etc. For example, the specific payment schedule, possession and closing dates, pro ration dates, conditions of sale, etc. 

Testate: Having written a last will and testament.

Time-Share: The purchase of an undivided interest (usually in a resort area condominium) for a fixed or variable time period. 

Title: Evidence one has of right to land possession. 

Title Insurance: Insurance against loss resulting from defects of title to a specifically described parcel of real property. 

Title Plant: A filing of all recorded information to real property, paralleling the records of the county recorder's office. 

Title Search: A review of all recorded documents affecting a specific piece of property to determine the present condition of title. 

Title Theory: A theory followed in several states that the mortgagee has legal title to the mortgaged property and the mortgagor has equitable title. 

Township: A territorial division of land established by federal survey, being six miles square and containing 36 sections, each one mile square.

Tract: A parcel of land. In some states, synonymous with a subdivision. 

Tract House: A house built using the plan of the builder, as one of many similar homes in a subdivision, as opposed to a custom house, which is built to the specifications of the owner. 

Transfer Tax: A state tax on the transfer of real property. 

Trust Account: An account used by brokers, escrow agents, or anyone holding money in trust for another. 

Trust Deed: An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of a lender (beneficiary), and reconveyed upon full payment. 

Trustee: One who holds title to real property under the terms of a deed of trust. 

Trustee's Deed: A deed by a trustee under a deed of trust, pursuant to foreclosure. 

Trustor: The borrower under a deed of trust. One who deeds his property to a trustee as security for the repayment of a loan. 

U

Underlying Financing: A mortgage, deed of trust, or contract prior to new security instruments on the same property.

Underwriter: One who insures another. For example, a small title company may buy insurance from a larger one (underwriter) for all or part of the liability of its policies. 

Undivided Interest: A partial interest by two or more people in the same property, whether the interest of each is equal or unequal. 

Unencumbered: Free of liens and other encumbrances. Free and clear. 

Unimproved Land: Most commonly, land without buildings. It can also mean land in its natural state. 

Upset Price: A legal term signifying the minimum price at which a property can be sold at auction, usually foreclosure. 

Use Density: The relationship of the number of buildings of a particular use to a given land area. 

Useful Life: 1. In appraisal, for sale purposes, the true economic value of a building in terms of years use to the owner. 2. For tax purposes, the life set for depreciation. At any time during that period, a new life could begin with a new owner. 

V

Vacancy Factor: The estimated percentage of vacancies in a rental project. 

Vacant Land: Land without buildings. May or may not have improvements, such as grading, sewers, etc. 

V.A. Escape Clause: A clause stating that the borrower shall not be obligated to buy nor shall any deposit be lost if appraisal is less than the agreed upon price. 

V.A. Loan: Housing loan to a veteran by a bank, savings and loan, or other lender which is insured by the Veteran's Administration, enabling the veteran to buy with little or no down payment. 

Valuation: The estimating of value. An appraisal. 

Variable Interest Rate: An interest rate which fluctuates as the prevailing rate moves up or down. In mortgages, there are usually maximums as to the frequency and the amount of fluctuation. 

Variance: Change of a portion of zoning requirements for a specific property, without changing the zoning. 

Vendee: The purchaser, especially on a land contract. 

Vendor: The seller or person who transfers property by sale. Commonly used in land contract sales. 

Voluntary Lien: A lien placed against real property by the voluntary act of the owner. Most commonly, a mortgage or deed of trust. 

W

Warehousing: The depositing of loans by a lender such as a mortgage company, in a bank, for sale at a later date. The mortgage company then borrows against these loans. This is done when the mortgage company wishes to assemble a block of loans for sale, or when the company believes that the discount rate is dropping and the loans may be sold for a higher price in the future. 

Warranty Deed: A deed used in many states to convey fee title to real property. 

Wrap-Around Mortgage: A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. 

Writ of Ejectment: An action for the recovery of real property. 

Writ of Execution: An action to carry out the judgment or decree of a court. 

X

Y

Yield: Ratio of income from an investment to the total cost of the investment over a given time period. 

Z

Zero Lot Line: The construction of a building on any of the boundary lines of a lot. Usually built on the front line, such as a store built to a sidewalk. 

Zoning: The division of a city or county by legislative regulations into areas or zones, specifying the uses allowable for the real property in those areas. 

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