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Real Estate Terms
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| A |
Abandonment
|
The voluntary
relinquishment of rights of ownership
or another interest (such as rights
to an easement) by failure to use
the property, coupled with an intent
to abandon (give up the interest).
|
Abatement |
A reduction or
decrease. Usually applies to a decrease
of assessed valuation of property
for ad valorem taxes. |
Abstract
of Judgment |
A summary of the
essential provisions of a court
judgment. (When this summary or
abstract is recorded in the county
recorder's office, in some states
the judgment becomes a lien on the
debtor's property, both presently
owned or after-acquired.) |
Abstract
of Title |
A summary of the
public records relating to the title
to a particular piece of land. An
attorney or title insurance company
reviews an abstract of title to
determine whether there are any
title defects which must be cleared
before a buyer can purchase clear,
marketable and insurable title.
|
Acceleration
Clause |
Condition in a
mortgage that may require the balance
of the loan to become due immediately,
if regular mortgage payments are
not made or for breach of other
conditions of the mortgage. |
Access
|
The right to enter
and leave a tract of land from a
public way. Can include the right
to enter and leave over the lands
of another. |
Accommodation
Recording |
Recording of instruments
with the county recorder by a title
company merely as a convenience
to a customer and without assumption
of responsibility for correctness
or validity. |
Accretion
|
The gradual addition
to the shore or bank of a waterway.
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Acknowledgement
|
A formal declaration
before a duly authorized officer
(such as a notary public) by a person
who has executed an instrument that
such execution is his own act and
deed. An acknowledgment is necessary
to entitle an instrument (with certain
specific exceptions) to be recorded,
to impart constructive notice of
its contents and to entitle the
instrument to be used as evidence
without further proof. The certificate
of acknowledgment is attached to
the instrument or incorporated therein.
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Acre
|
A measure, usually
of land, containing 43,560 square
feet in any shape. |
Ad Valorem
|
"According
to value". A method of taxation
using the value of the thing taxed
to determine the amount of the tax.
|
Adjustable-Rate
Mortgage (ARM) |
A loan with an
interest rate that changes periodically
in keeping with a current index,
like one-year treasury bills. Typically,
however, ARMs can't jump more than
two percentage points per year or
six points above the starting rate.
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Administrator
|
A person appointed
by the probate court to carry out
the administration of a decedent's
estate when the decedent has left
no will. If a woman is appointed,
she is called an administratrix.
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Adverse
Possession |
A process of acquiring
title to real property by possession
for a certain (statutory) period
of time, in addition to fulfilling
other conditions. |
Affidavit
|
A written statement
or declaration, sworn to before
an officer who has authority to
administer an oath. |
Agent
|
One who has authorization,
either expressed or implied, to
act for or represent another party,
usually in business matters. |
Agreement
of Sale |
Known by various
names, such as contract of purchase,
purchase agreement, or sales agreement
according to location or jurisdiction.
A contract in which a seller agrees
to sell and a buyer agrees to buy,
under certain specific terms and
conditions spelled out in writing
and signed by both parties. |
Amortization
|
A payment plan
which enables the borrower to reduce
his debt gradually through monthly
payments of principal and interest.
|
Annual
Percentage Rate (A.P.R.) |
The yearly interest
percentage of a loan, as expressed
by the actual rate of interest paid.
The A.P.R. is disclosed as a requirement
of federal truth in lending statutes.
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Appraisal
|
An expert judgment
or estimate of the quality or value
of real estate as of a given date.
|
Approved
Attorney |
In states where
attorneys examine the chain of title
before title insurance is issued,
the title company will approve certain
attorneys as those whose opinion
it will accept for the issuance
of a title policy. |
Appurtenance
|
A right or privilege
that is a part of the ownership
of property, such as a right of
way to a highway across the land
of another. Water rights are also
an example. |
Assessment
|
(1) The valuation
of real estate for purpose of taxes
or special improvement charges.
(2) The amount of taxes or special
improvement charges. Special improvement
charges are usually for the costs
of streets, sidewalks, sewers, etc.
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Assignment
|
(1) The act of
transferring an interest, such as
a loan secured by a mortgage, from
one person to another. (2) The instrument
or paper by which one person transfers
such ownership to another. |
Assumable
Mortgage |
A mortgage which,
by its terms, allows a new owner
to take over its obligations. |
Attachment
|
Legal seizure
of property to force payment of
a debt. |
Attorney
in Fact |
One who holds
a power of attorney from another
allowing him or her to execute legal
documents such as deeds, mortgages,
etc., on behalf of the grantor of
the power. |
Attorney's
Opinion |
A statement by
an attorney as to the validity of
a title, arrived at after investigation
of the history of the title as recorded
in the public records. |
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Back
Title Letter |
Also called
"back title certificate"
in some areas, and "starter"
in others. When titles previously
have been examined up to a certain
date by reliable examiners, title
companies sometimes give subsequent
examiners of such titles a letter
that sets forth the condition
of the title at the time of the
previous examination and authorizes
them to begin their subsequent
examination with the terminal
date of the previous examination.
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| Balloon Note |
| A form of promissory note that
calls for the minimum payment of
principal and the payment of interest
at regular intervals. This type
of note requires a substantial final
payment, which represents all the
principal. |
| Bankruptcy |
| A special proceeding under federal,
or in some instances state, laws
by which the property of a debtor
is protected by the court and may
be divided among the debtor's creditors
and the debtor. |
| Beneficiary |
| (1) One for whose benefit a trust
is created. (2) In states in which
deeds of trust are commonly used
instead of mortgages, the lender
(mortgagee) is called the beneficiary.
|
| Binder |
| An early agreement to buy a home
from a seller, which is usually
ensured with earnest money. |
| Binder |
| (1) A preliminary report as to
the condition of a title and a commitment
to issue a title insurance policy
in a certain manner when certain
conditions are met. Sometimes called
"preliminary certificate"
or "prelim" "commitment."
(2) A policy of title insurance
(used primarily by investors) calling
for a reduced rate for a future
policy if the property is sold within
a specified period. |
| Blanket Mortgage |
| A mortgage or trust deed that
covers more than one lot or parcel
of real property, and often an entire
subdivision. As individual lots
are sold, a partial reconveyance
or release from the blanket mortgage
is ordinarily obtained. |
| Bona Fide Purchaser |
| One who buys property in good
faith, for fair value, and without
notice of any adverse claim or right
of third parties. |
| Breach of Contract |
| Failure to perform a contract,
in whole or part, without legal
excuse. |
| Building Contract |
| An agreement between an owner
or lessee and a building contractor,
setting forth terms relative to
the construction of a proposed structure.
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| Buydown |
| A payment to the lender from the
seller, buyer, third party, or some
combination of these, causing the
lender to reduce the interest rate
during the early years of a loan.
The buydown is usually for the first
one to five years of the loan. (See
also: Certificate Backed Mortgage).
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Certificate
of Title |
In areas where
attorneys examine abstracts or
chains of title, a written opinion,
executed by the examining attorney,
stating that title is vested as
stated in the abstract. |
| Chain |
| In real estate measurements (surveying),
a chain is 66 feet long or 100 links,
each link being 7.92 inches. The
measurement may change when used
in fields other than surveying.
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| Chain of Title |
| The successive ownerships or transfers
in the history of title to a tract
of land. |
| Claim |
| An adverse right or interest asserted
by one party against another or
against an insurer or indemnitor.
Claims may arise from unpaid debts
or taxes, as well as from hidden
title defects such as fraud, forgery,
missing heirs, etc. |
| Clear Title |
| Real property ownership free of
liens, especially voluntary liens
such as mortgages. |
| Closing |
| Also known as "escrow"
or "settlement." The process
of executing legally binding documents,
such as deeds and mortgages most
commonly associated with the purchase
of real estate and the borrowing
of money to assist in the purchase
. |
| Closing Costs |
The numerous expenses which buyers
and sellers normally incur to complete
a transaction in the transfer of
ownership of real estate. These
costs are in addition to price of
the property and are items prepaid
at the closing day. This is a typical
list:
Buyer's Expenses:
Documentary Stamps on Notes, Recording
Deed and Mortgage, Escrow Fees,
Attorney's Fee, Title Insurance,
Appraisal and Inspection, Survey
Charge
Seller's Expenses:
Cost of Abstract, Documentary Stamps
on Deed, Real Estate Commission,
Recording Mortgage, Survey Charge,
Escrow Fees Attorney's Fees |
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Debt
|
Money owing
from one person to another. |
| Debtor |
| One who owes a debt. |
| Decree of Distribution
|
| A probate court decree which determines
how the estate of a decedent shall
be distributed. |
| Dedication |
| The setting aside of certain land
by the owner and declaring it to
be for public use. Examples: streets,
sidewalks and parks. |
| Deed |
| A formal written instrument by
which title to real property is
transferred from one owner to another.
The deed should contain an accurate
description of the property being
conveyed, should be signed and witnessed
according to the laws of the State
where the property is located, and
should be delivered to the purchaser
at closing day. There are two parties
to a deed: the grantor and the grantee.
(See also deed of trust, general
warranty deed and quitclaim deed.)
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| Deed of Trust |
| Like a mortgage, a security instrument
whereby real property is given as
security for a debt. However, in
a deed of trust there are three
parties to the instrument: the borrower,
the trustee and the lender (or beneficiary).
In such a transaction, the borrower
transfers the legal title for the
property to the trustee who holds
the property in trust as security
for the payment of the debt to the
lender or beneficiary. If the borrower
pays the debt as agreed, the deed
of trust becomes void. If, however,
he defaults in the payment of the
debt, the trustee may sell the property
at a public sale, under the terms
of the deed of trust. In most jurisdictions
where the deed of trust is in force,
the borrower is subject to having
his property sold without benefit
of legal proceedings. A few States
have begun in recent years to treat
the deed of trust like a mortgage.
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| Deed Restrictions |
| Limitations in the deed to a property
that dictate certain uses that may
or not be made of the property.
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| Defective Title |
| (1) Title to a negotiable instrument
obtained by fraud. (2) Title to
real property which lacks some of
the elements necessary to transfer
good title. |
| Delivery |
| In conveyancing, 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 agent of the buyer,
or by recording the deed. The transfer
of a deed from seller to buyer in
such a manner that it cannot be
recalled by the seller. A necessary
requisite to the transfer of title.
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| Demand Note |
| A note having no date for repayment,
but due on demand of the lender.
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| Deposit |
| (1) Money given by the buyer with
an offer to purchase. Shows good
faith. Also called earnest money.
(2) A natural accumulation of resources
(oil, gold, etc.) which may be commercially
recovered and marketed. |
| Depreciation
|
| Loss in value occasioned by ordinary
wear and tear, destructive action
of the elements, or functional or
economic obsolescence. |
| Description |
| The exact location of a piece
of real property stated in terms
of lot, block, tract, part lot,
metes and bounds, recorded instruments,
or U.S. Government survey (sectionalized).
This is also referred to as legal
description of property. |
| Devise |
| A disposition of property made
by a will. |
| Documentary Stamps |
| A State tax, in the forms of stamps,
required on deeds and mortgages
when real estate title passes from
one owner to another. The amount
of stamps required varies with each
state. |
| Dominant Estate |
| The property for the benefit of
which a right-of-way easement exists
across another's adjoining piece
of land is said to be the dominant
estate. The land across which the
easement runs is said to be the
servient estate. |
| Dower |
| A right that a wife has in her
husband's property at the time of
his death. Does not exist in all
states. |
| Due on Sale Clause |
| Provision in a mortgage or deed
of trust which requires loan to
be paid in full if property is sold
or transferred. |
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Earnest
Money |
The deposit money
given to the seller or his agent
by the potential buyer upon the
signing of the agreement of sale
to show that he is serious about
buying the house. If the sale goes
through, the earnest money is applied
as part of the down payment. If
the sale does not go through, the
earnest money will be forfeited
or lost unless the binder or offer
to purchase expressly provides that
it is refundable. |
Easement
Rights |
A right-of-way
granted to a person or company authorizing
access to or over the owner's land.
An electric company obtaining a
right-of-way across private property
is a common example. |
Effective
Demand |
A qualifying term
meaning the ability to pay as well
as desire to buy. |
Egress
|
The right to leave
a tract of land. Usually used as
part of the term "ingress and
egress" and interchangeably
with "access." |
Eminent
Domain |
The right of a
government to take privately owned
property for public purposes under
condemnation proceedings upon payment
of its reasonable value. See Condemnation.
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Encroachment
|
An obstruction,
building or part of a building that
intrudes beyond a legal boundary
onto neighboring private or public
land, or a building extending beyond
the building line or into an easement.
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Encumbrance
|
A legal right
or interest in land that affects
a good or clear title and diminishes
the land's value. It can take numerous
forms, such as zoning ordinances,
easement rights, claims, mortgages,
liens, charges, a pending legal
action, unpaid taxes or restrictive
covenants. An encumbrance does not
legally prevent transfer of the
property to another. A title search
is all that is usually done to reveal
the existence of such encumbrances,
and it is up to the buyer to determine
whether he wants to purchase with
the encumbrance or what can be done
to remove it. |
Endorsement
|
Addition to or
modification of a title insurance
policy which expands or changes
coverage of the policy, fulfilling
specific requirements of the insured.
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Equity
|
The market value
of real property , less the amount
of existing liens.. |
Escheat
|
The reversion
of property to the state when an
owner dies leaving no legal heirs,
devisees or claimants. |
Escrow
|
Funds paid by
one party to another (the escrow
agent) to hold until the occurrence
of a specified event, after which
the funds are released to a designated
individual. In FHA mortgage transactions,
an escrow account usually refers
to the funds a mortgagor pays the
lender at the time of the periodic
mortgage payments. The money is
held in a trust fund, provided by
the lender for the buyer. Such funds
should be adequate to cover yearly
anticipated expenditures for mortgage
insurance premiums, taxes, hazard
insurance premiums and special assessments.
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Estate
|
(1) The interest
or nature of the interest which
one has in property, such as a life
estate, the estate of a decreased,
real estate, etc. (2) A large house
with substantial grounds surrounding
it, giving the connotation of belonging
to a wealthy person. |
Estoppel
|
A legal restraint
that stops or prevents a person
from contradicting or reneging on
his previous position or previous
assertions or commitments. |
Examination
(of Title) |
The study of the
instruments incident to a chain
of title to determine their effect
and condition in order to reach
a conclusion as to the status of
the title. |
Exception
|
A provision in
a title insurance binder or policy
that excludes liability for a specific
title defect or an outstanding lien
or encumbrance. |
Execute
|
To sign a legal
instrument. A deed is said to be
executed when it is signed, sealed,
witnessed and delivered. |
Execution
Sale |
Sale of real property
under a writ of execution by a court.
A judicial mortgage foreclosure
sale is in this category. |
Executor
|
A person appointed
in a will and affirmed by the probate
court to cause a distribution of
the decedent's estate in accordance
with the will. (The one who makes
the will is called a "testator.")
If a woman is appointed, she is
referred to as the "executrix."
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Fannie
Mae |
Federal National
Mortgage Association (also FNMA)
is a private corporation, federally
chartered to provide financial
products and services that increase
the availability and affordability
of housing by purchasing mortgage
loans. |
| Federal Housing Administration
(FHA) Guarantee |
| An insurance contract in which
HUD through FHA insures that the
named lender will recover a specific
percentage of the loan amount from
the insurer (FHA) in the event that
the loan goes bad. |
| Fee Simple |
| An estate under which the owner
is entitled to unrestricted powers
to dispose of the property, and
which can be left by will or inherited.
Commonly, a synonym for ownership.
|
| In most states, title insurers
file rate schedules, title insurance
policies and endorsement forms with
the State Insurance Department or
other state agency and then may
use such items or rates starting
within a specified period of time
after filing. Rates so filed usually
are mandatory. |
| A document filed with the Register
of Deeds or Secretary of State securing
the title to personal property. |
| Fixed Rate Loan |
| A loan that carries an unchangeable
interest rate over its entire termtypically
a period of 15-30 years. |
| Fixtures |
| Personal property that is attached
to real property and is legally
treated as real property while it
is so attached. Examples: medicine
cabinets, window blinds and chandeliers. |
| Flood Certification |
| A common term for a Federal Emergency
Management Agency (FEMA) Standard
Flood Hazard Determination Form
(SFHDF). This determines whether
land or a building is located within
a Special Flood Hazard Area for
purposes of flood insurance requirements
under the National Flood Insurance
Program. |
| Foreclosure |
| A proceeding in or out of court,
to extinguish all rights, title,
and interest, of the owner(s) of
property in order to sell the property
to satisfy a lien against it. |
| Forfeiture of Title |
| A common penalty for the violation
of conditions or restrictions imposed
by the seller upon the buyer in
a deed or other proper document.
For example, a deed may be granted
upon the condition that if liquor
is sold on the land, the title to
the land will be forfeited (that
is, lost) by the buyer (or some
later owner) and will revert to
the seller. |
| Forgery |
| The fraudulent signing of another's
name to an instrument such as a
deed, mortgage or check. |
| Freddie Mac |
| Federal Home Loan Mortgage Corporation
(also FHLMC) is a stockholder owned
corporation chartered by Congress
that purchases mortgage loans. |
| Full Disclosure |
| In real estate, revealing all
the known facts which may affect
the decision of a buyer or tenant.
A broker must disclose known defects
in the property for sale or lease. |
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General
Warranty Deed |
A deed which conveys
not only all the grantor's interests
in and title to the property to
the grantee, but also warrants that
if the title is defective or has
a "cloud" on it (such
as mortgage claims, tax liens, title
claims, judgments, or mechanic's
liens against it) the grantee may
hold the grantor liable. |
Ginnie
Mae |
Government National
Mortgage Association (also GNMA)
is a wholly-owned United States
corporation that guarantees privately
issued securities backed by pools
of mortgages insured by FHA (Federal
Housing Administration), FMHA (Farmers
Home Administration) or VA (Veterans
Administration). |
Good Faith
Purchaser or Mortgagee |
A person who buys
or lends in good faith, that is,
without knowledge of fraudulent
circumstances, or reason to inquire
further, where value is paid or
lent. |
Graduated
Payment Mortgage |
A loan in which
monthly payments are relatively
small in the beginning and gradually
increase in dollar amount over the
life of the mortgage. |
Grant
|
To transfer an
interest in real property, either
the fee simple or a lesser interest,
such as an easement. A transfer
of real estate from a sovereign
is accomplished by patent or royal
decree. |
Grantee
|
That party in
the deed who is the buyer or recipient. |
Grantor
|
That party in
the deed who is the seller or giver. |
Guardian
|
A person appointed
by a court to manage the person
and/or property of one who is legally
incompetent to handle his/her own
affairs. |
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Harbor
Line |
An arbitrary
line set by authorities on navigable
rivers, beyond which wharves and
other structures may not be built.
Also designated as line of navigation. |
| Hazard Insurance |
| Real estate insurance that protects
against damages caused to property
by fire, windstorms and other common
hazards. |
| Heir |
| One who might inherit or succeed
to an interest in land of an individual
who dies without leaving a will
(intestate). |
| Home Equity Conversion
Mortgage |
| A reverse or reverse annuity mortgage
in which HUD through FHA guarantees
that the borrower will receive monthly
payments from the insurer (FHA)
in the event the lender is unable
to make payments to the borrower. |
| Home Repair Loan |
| A loan used for repairs and additions
to existing structures without affecting
existing mortgage. Typically 10
years or less in length. May also
be called a "Home Improvement
Loan". |
| Homeowner's Insurance
|
| Real estate insurance protecting
against loss caused by fire, some
natural causes, vandalism, etc.,
depending on the terms of the policy.
Also includes coverage such as personal
liability and theft away from home. |
| Homestead |
| The dwelling (house and contiguous
land) of the property owner. Some
states grant statutory protection
for homestead property against the
rights of creditors. Property tax
exemptions are also available in
some states. |
| HUD |
| U.S. Department of Housing and
Urban Development. The federal department
responsible for the major housing
programs in the United States, such
as FHA. |
| HUD 1 |
| A form settlement (closing) statement
required by the U.S. Department
of Housing and Urban Development
(HUD) where federally related mortgages
are being made on residential properties.
It is a balance sheet showing the
source of funds and the distribution
of funds in connection with the
purchase and/or mortgaging of residential
property. |
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Impounds
|
A trust type of
account established by lenders for
the accumulation of borrower's funds
to meet periodic payments of taxes,
mortgage insurance premiums, and/or
future insurance policy premiums,
required to protect their security. |
Inchoate
Dower |
The dower interest
of a wife during the life of her
husband. It is an interest which
upon the death of the husband may
ripen into possession and use. Most
states have abolished dower rights. |
Inchoate
Curtesy |
The curtesy interest
of a husband during the life of
her wife. It is an interest which
upon the death of the wife may ripen
into possession and use. Most states
have abolished curtesy rights. |
Indemnity
|
Insurance against
possible loss or damage. A title
insurance policy is a contract of
indemnity. |
Index
|
(1) An alphabetical
listing in the public records of
the names of parties to recorded
real estate instruments together
with the book and page number of
the record. (2) The listing in abstract
and title plants of recorded real
estate instruments in groups according
to land descriptions, known as a
geographic index. (3) The alphabetical
listing in abstract and title plants,
by names of the parties, of all
recorded instruments that affect
but do not describe particular real
estate, such as judgments, powers
of attorney, wills and probate proceedings.
Such indexes are known by various
names, such as "general index,"
"judgment index" and "name
index." |
Ingress
|
The right to enter
a tract of land. Usually used as
part of the term "ingress and
egress" and interchangeably
with "access." |
Instrument
|
Any writing having
legal form and significance, such
as a deed, mortgage, will or lease. |
Insurance
|
A contract under
which, for a consideration, one
party (the insurer) agrees to indemnify
another (the insured) for a possible
loss under specific conditions. |
Interest
|
(1) A share or
right in property. (2) A charge
paid for borrowing money. |
Interim
Financing |
Temporary or short
term loans. Often used with new
construction. |
Intestate
|
Without leaving
a will, or leaving an invalid will
so that the property of the estate
passes according to the laws of
succession rather than by direction
of the deceased. |
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| Joint Tenancy |
| An undivided interest in property,
taken by two or more joint tenants.
The interests must be equal, accruing
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 |
| The determination of a court regarding
the rights of parties in an action.
Money judgments, when recorded,
become a lien on the real property
of the party whom the judgment is
against. |
| Judgment Lien |
| A lien against the property of
a judgment debtor. An involuntary
lien. |
| Junior Mortgage |
| A mortgage lower in lien priority
than another. |
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| Land Contract |
| An installment contract for the
sale of land whereby the seller
(vendor) holds legal title and the
buyer (vendee) has equitable title
until the sales price is paid in
full. |
| Landmark |
| Any conspicuous object that helps
establish land boundaries. |
| Lease |
| An agreement by which an owner
of real property (lessor) gives
the right of possession to another
(lessee), for a specified period
of time (term) and for a specified
consideration (rent). |
| Leasehold |
| An estate in real property held
under a lease for a fixed term.
|
| Legal Description |
| A description of land recognized
by law, based on government surveys,
spelling out the exact boundaries
of the entire piece of land. It
should so thoroughly identify a
parcel of land that it cannot be
confused with any other. |
| Lender |
| Any person or entity advancing
funds which are to be repaid. A
general term encompassing all mortgagees,
and beneficiaries under deeds of
trust. |
| Lender's Policy |
| A title insurance policy which
insures the validity, enforceability
and priority of a lender's lien.
This policy does not provide protection
for the owner. |
| Lessee |
| A party to whom a lease (the right
to possession) is given in return
for a consideration (rent). |
| Lessor |
| A landlord; one who gives a leasehold
to a lessee. |
| License |
| Permission to go upon or use the
land of another, the permission
being a personal privilege and not
constituting an interest in the
land. |
| Lien |
| A claim by one person on the property
of another as security for money
owed. Such claims may include obligations
not met or satisfied, judgments,
unpaid taxes, materials or labor.
|
| Lien Waver |
| Also called "waiver of liens."
A waiver of mechanic's lien rights,
signed by contractors or subcontractors
so that the owner or general contractor
can receive funds from a construction
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