Glossary of Real Estate Terms
A
Acre - A measure of land equal to 43,560 square feet, 5,840 square yards or 160 square rods. A square parcel of land measuring 208.71 feet on each side contains one acre.
Adjustable Rate Mortgage (ARM) - Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. The extent and number of these adjustments are agreed to at the inception of the loan.
Affidavit - A sworn statement in writing.
Agent - A person or company that has the power to act on behalf of another or to transact business for another.
Annual Percentage Rate (APR) - The actual yearly cost of credit stated as a percentage. Any lender subject to the federal Truth-In-Lending Act must fully disclose the APR to the borrower.
Appraisal - A report from an independent third party detailing the estimated value of real estate.
Appurtenance - Anything so annexed to land or used with it that it will pass with the conveyance of the land.
Assessment - The imposition of a tax, charge or levy, usually according to established rates.
Assessor - A public official who evaluates property for the purpose of taxation.
Assumable Mortgage - A mortgage which, by its terms, allows a new owner to take over its obligations.
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.
B
Balloon Mortgage - A mortgage that is amortized over a specific period of years but requires a lump sum payment in full at an earlier date.
Binder - Sometimes called "preliminary certificate" or "commitment." (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, or (2) A deposit in escrow of a small part of the purchase price of real estate as evidence of good faith and to bind an agreement to purchase.
Blanket Mortgage - A single mortgage that covers more than one parcel of real estate.
Broker - A state licensed agent who, for a fee, acts for property owners in real estate transactions, within the scope of state law.
C
C C & R ' s - Covenants, Conditions and Restrictions. See Conditions and Restrictions.
Chain of Title - A term applied to the past series of transactions and documents affecting the title to a particular parcel of land.
Clear Title - One which is not encumbered or burdened with defects.
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 .
Clouded Title - An encumbered title.
Collateral - Personal property pledged as the security for a debt. The mortgage is usually the collateral for the property itself.
Commitment to Insure - Also called a "Binder". A report issued by a title insurance company, or its agent, committing the title insurance company to issue the form of policy designated in the commitment upon compliance with and satisfaction of requirements set forth in the commitment.
Conditions and Restrictions - A common term used to designate conditions and restrictions on the use of land. Includes penalties for failure to comply. Commonly used by land subdividers on newly platted areas.
Condominium - A system of individual fee ownership of units in a multi-unit structure, combined with joint ownership of common areas of the structure and land.
Contingency - (1) An event which may (or may not) happen in the future. (2) A condition that must be fulfilled before a contract becomes firm and binding.
Convey - The act of deeding or transferring title to another.
Conveyance - An instrument by which title is transferred; a deed. Also, the act of transferring title.
Covenant - An agreement written into deeds and other instruments promising performance or non-performance of certain acts, or stipulating certain uses or non-uses of the property.
D
Deed - A written document by which the ownership of land is transferred from one person to another.
Dower - The inchoate right to life estate in the lands of one's spouse, which vests (if not released) at the death of such spouse.
E
Earnest Money - Advance payment of part of the purchase price to bind a contract for property.
Easement - An interest in land owned by another that entitles its holder to a specific limited use, such as laying a sewer, putting up electric power lines, or crossing the property.
Egress - The right to exit a parcel of land.
Encroachment - A trespass or intrusion onto another's property, usually by a structure, wall or fence.
Encumber - To burden a parcel of land with a lien or charge, e.g., a mortgage.
Encumbrance - A lien, liability or charge upon a parcel of land.
Equity - The interest or value that the owner has in real estate over and above the liens against it.
Escrow - A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer, and delivers them upon performance by the parties.
Examination of Title - The investigation and interpretation of the record title to real property based on the title search or abstract.
Executor/Executrix - A person appointed by the probate court to carry out the term of a will.
F
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.
Fee Simple Estate - The greatest interest in a parcel of land that it is possible to own. Sometimes designated simply as "Fee."
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.
Fiduciary - One acting in the capacity of trust; trustee.
Financing Statement - A document prepared for filing with the county recorder and Secretary of State indicating that property or fixtures are encumbered by debt.
Fixtures - Any item of property so attached to real property that it becomes a part of the real property.
Flip - The near simultaneous buying and selling of a parcel of real estate at a price for the purpose of leveraging a transaction.
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 - The court action by which an interest in land is extinguished in favor of another interest.
Freddie Mac - Federal Home Loan Mortgage Corporation (also FHLMC) is a stockholder owned corporation chartered by Congress that purchases mortgage loans.
G
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).
Grantee - A person who acquires an interest in land by deed, grant, or other written instrument.
Grantor - A person, who, by a written instrument, transfers to another an interest in land.
H
Hazard Insurance - Often confused with "Homeowner's" insurance, it's designed to compensate for specific hazards including fire and wind. An "all-risk home owner's policy" provides more complete coverage.
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.
Homestead - The exemption of certain real estate from forced sale for payment of debts if occupied by a debtor as a home.
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.
I
Ingress - The right to enter a tract of land.
Insurance - A contract of indemnity against specified perils.
J
Joint Tenancy - An estate where two or more persons hold real estate jointly for life, the survivors to take the interest of the one who dies.
Judgment - A decree of a court. In practice this is the lien or charge upon the lands of a debtor resulting from the court's award of money to a creditor.
Judgment Lien - The charge upon the lands of a debtor resulting from the decree of a court properly entered into the judgment docket.
L
Land Contract - An agreement providing for the installment sale of realty with title to pass when payment is complete.
Lease - A grant of the use of lands for a term of years in consideration of the payment of a monthly or annual rental.
Leasehold - The right to possession and use of land for a fixed period of time. The lease is the agreement that creates the right.
Lender's Policy - A form of title insurance policy which insures the validity, enforceability and priority of a lender's lien. This form does not provide protection for the owner.
Lessee - One who takes lands upon a lease.
Lessor - One who grants lands under a lease.
Lien - A hold, claim, or charge allowed a creditor upon the lands of a debtor. Some examples are mortgage liens, judgment liens, mechanics' liens.
Loan Policy - See Lender's Policy
Loss Payable Clause - Provision added to a Fire and Casualty Policy which says any loss will be paid to two or more parties as their interest may appear. Usually the owner and the mortgage lender.
M
Marketable Title - A good title about which there is no fair or reasonable doubt.
Mechanic's Lien - A lien allowed by statute to contractors, laborers and material suppliers on buildings or other structures upon which work has been performed or materials supplied.
Mortgage - An instrument used to encumber land as security for a debt.
Mortgagee - The mortgage lender.
Mortgagee's Policy - See Lender's Policy
Mortgage Insurance - See P.M.I.
Mortgagor - The mortgage borrower.
N
Note - The instrument evidencing the indebtedness secured by a security instrument such as a mortgage or deed of trust.
O
Owner's Policy - A policy of title insurance which covers the owner of the property from title defects and other flaws which were not apparent at the time of the purchase.
P
Plat or Plot - A map representing a piece of land subdivided into lots with streets shown there on.
P.M.I. - Private Mortgage Insurance. An insurance contract which insures that the named lender will recover a specific percentage of the loan amount from the insurer in the event the loan goes bad. Many lenders require this on higher percentage loans.
Points - A one-time special fee or extra charge paid to a lender in order to secure a loan. Expressed as a percentage of face amount of mortgage.
Policy - A written contract of title insurance.
Policyowner - The insured on a title insurance policy.
Power of Attorney - An instrument authorizing another to act on one's behalf as his or her agent or attorney.
Premium - The amount payable for an insurance policy.
Prorate - To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a proration of real property taxes or fire insurance premiums.
Q
Quit Claim Deed - A deed that does not imply that the grantor holds title, but that surrenders and gives to the grantee any possible interest or rights that the grantor may have in the property.
R
Real Property - Land, together with fixtures, improvements and appurtenances.
Realtor® - A federally registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors (®) and subscribes to its strict Code of Ethics.
Recording - The noting in a public office of the details of a legal document - such as a deed or mortgage - affecting the title to real estate. When such an instrument is properly recorded, it is considered to be a matter of public record. Legally, that means that all subsequent purchasers are deemed to have constructive knowledge of that information.
Reverse or Reverse Annuity Mortgage - A mortgage for which the borrower pledges home equity in return for regular (monthly) payments, rather than a lump sum distribution of loan proceeds. Repayment is usually not required until the home is sold or the borrower's estate is settled, provided the borrower continues to live in the home and keeps current all taxes and insurance. See also Home Equity Conversion Mortgage.
S
Second Mortgage - A second loan on real estate that already has a mortgage. It is subordinate to the first mortgage. Usually of shorter term and often at a higher interest rate.
Set Back Lines - Those lines which delineate the required distances for the location of structures in relation to the perimeter of the property.
Settlement - This term relates to all legal and financial transactions required to finalize the contract between buyer and seller, at the conclusion of which closing takes place.
Survey - The process of measuring land to determine its size, location and physical description and the resulting drawing or map.
Survivorship Rights - A form of grant under which two or more grantees obtain interest in real estate for life with the remainder to the survivor(s) when one of the grantees dies.
T
Tenancy in Common - An estate or interest in land held by two or more persons, each having equal rights of possession and enjoyment, but without any right of succession by survivorship between the owners.
Tenant - Any person occupying real property with the owner's permission.
Title - (1) The evidence of right which a person has to the ownership and possession of land. Commonly considered as a history of rights. (2) A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate or an inheritable right or interest therein.
Title Defect - Any legal right held by others to claim property or to make demands upon the owner.
Title Insurance - Insurance against loss or damage resulting from defects or failure of title to a particular parcel of real property.
Title Search - An examination of public records, laws, and court decisions to disclose the current facts regarding ownership of real estate.
Torrens Title - A system whereby, after court proceedings, a certificate is issued setting forth the extent of the applicant's estate in land subject to the exceptions shown. Most popular in the early 1900's, the system was adopted in 19 states. It is presently used only in parts of six states.
Tract - An area of land.
Trustee - A person holding property in trust.
V
VA Guarantee - An insurance contract in which the Veterans Administration (VA) insures that the named lender will recover a specific percentage of the loan amount from the insurer in the event the loan goes bad.
Variable Rate Mortgage - A loan in which the interest rate fluctuates with the cost of funds or some other index.
Vendee - A purchaser of real property under land contract.
Vendor - A seller of real property under land contract.
Vest - To pass to a person an immediate right or interest. Title may be said to vest in John Smith.
W
Warranty - In a broad sense, an agreement or undertaking by a seller to be responsible for present or future losses of the purchaser occasioned by deficiency or defect in the quality, condition or quantity of the thing sold. In a stricter sense, the provision or provisions in a deed, lease or other instrument conveying or transferring an estate or interest in real estate under which the seller becomes liable to the purchaser for defects in or encumbrances on the title.
Will - A written document properly witnessed, providing for the distribution of property owned by the maker thereof upon the maker's death.
Z
Zoning - The right of a municipality to regulate and determine the compatible character and use of property.