Glossary

 

B C D E F G H I J K L M N O P Q R S T U V W Y Z

A

Abandonment: The voluntary surrender or release of a right, claim or interest in real property.

Abatement: A reduction or decrease in amount or worth.

Able: Refers to a buyer’s financial capability in the phrase, “Ready, Willing and Able”.

Abode: A home or place of residence.

Absentee Owner: An owner who does not reside on the subject property.

Abstract of Title: A legal history of a title and the current status of a title based on a title examination. Still used in some states, but being replaced by “Title Insurance”.

Abut: Bordering on or sharing a common boundary line.

Accelerated Depreciation: A method of calculating for income tax purposes the depreciation amount of a property used in trade or business, (to produce income), at a rate greater than the straight-line method. More depreciation could be taken in the early years and less in later years.

Acceleration Clause: A provision in a mortgage or Deed of Trust that permits the Lender to declare the entire principal balance of the debt immediately due and payable if the Borrower is in default, (Such as failure to pay an installment payment on time, or change of ownership without Lender’s consent, or destruction of the Property, or any other event which endangers the security of the Loan.)

Acceptance: Voluntary expression by the person receiving an Offer to be bound by the exact terms of the Offer; must be unequivocal and unconditional.

Access: The right to go onto, (Ingress), and leave, (Egress), a property.

Accessibility: The location of a site in terms of how easily it may be reached by customers, employees, and others necessary to the intended use of the Property.

Accession: The Owner’s right to all that the soil produces or all that is added to the land, intentionally or by mistake.

Accord: (also called “Accord and Satisfaction”). An agreement by which one accepts something different, (usually less), from what is owed as full satisfaction. The amount owed may be in dispute or simply accepted as full satisfaction by the Claimant or Creditor. The agreement and acceptance is called “Accord and Satisfaction”

Accretion: The gradual building up of land adjoining a waterway with deposits of silt, sand, gravel and minerals, caused by the motion of water over time.

Accompanied Showings: Those showings where the Listing Agent, or other authorized person, must accompany the Showing Agent and his or her clients when viewing a listing.

Accrue: To accumulate.

Accrued Depreciation: (a) The loss in value of a structure, measured by the cost of a new replacement. (b) Also, the amount of depreciation taken for tax purposes, as of a given date.

Accrued Expenses: Expenses a Seller owes on the day of closing, but for which the Buyer will take responsibility, (such as property taxes).

Acknowledgment: A formal declaration or statement made before an authorized official, (usually a notary public), by a person who signed a document, stating that the execution was voluntary.

Acquisition: The act of acquiring a property.

Acquisition Cost: (1) Costs of acquiring property other than the Purchase price; (Escrow Fees, Title Insurance, Lender’s Fees, etc.) (2) The basis used by the FHA to calculate the loan amount.

Acre: A land area containing 43,560 square feet.

Act of God: Damage caused by nature rather than by man, (such as Wind, Flood, etc.)

Action to Quiet Title: Removal of claims or clouds on a title to real property through a court of law.

Actual Age: Historical or chronological age.

Actual Authority: Power that a Principal has conferred on an Agent to act on the Principal’s behalf.

Actual Eviction: Violation of provisions in a Lease which deprives Tenant of possession of property.

Actual Notice: The knowledge a person has of a fact.

Actual Possession: The physical possession or occupancy of a piece of real estate.

Addendum: (also called “Amendment” and “Rider”). An addition to; a document which adds to and/or modifies another document. An Addendum should always identify the original document and the names of the Parties. Addendums are used for the purpose of adding new language to an existing document without having to rewrite the entire document. For example, if the parties to a Purchase Agreement agree to change the original Purchase Price, or to extend the Date of Closing,
or to add other conditions, this may be accomplished by having all the parties sign an Addendum.

Additional Principal Payment: A payment by a Borrower of more than the scheduled principal amount due, which, if applied against the principal, reduces the remaining balance on the loan. Borrowers who are not behind on regular payments and want to occasionally make payments to reduce their “Principal Balance”, should write “Apply To Principal” on such payments.

Add-On Interest: A method of charging Interest usually used in the financing of automobiles but not common in real estate financing. Interest is computed on the total amount borrowed and added on to the Principal. Each payment is then deducted from this total amount. In real estate Loans, Interest is usually figured based on the Balance Owing after each payment is made, (Declining Balance).

Adjacent: Bordering on, or immediately next to, a piece of real property.

Adjoining Lands: Lands sharing a common boundary line.

Adjunction: The process of adding a parcel of land to a larger parcel.

Adjustable Rate Mortgage (ARM): (also called “Adjustable Mortgage Loan” and “Flexible Rate Loan” and “Variable Rate Loan”). A type of mortgage loan whose interest rate changes periodically according to changes in a predetermined index and as agreed at the inception of the Loan. Interest rates may move up or down, as market conditions change. There are usually “Caps” that limit the frequency and amount of fluctuation. Typical ARM periods are one, three, five, and seven years.

Adjusted Cost Basis: The original cost of a property and improvements, plus all additional capital improvements made during the period of ownership, minus depreciation taken. Typically used at time of sale for calculating Capital Gains Tax.

Adjusted Gross Income: Gross Income of a building if fully rented, less an allowance for estimated vacancies.

Adjusted Sales Price: The amount realized minus repair expenses.

Adjustment Date: The date on which interest rate changes for an Adjustable Rate Mortgage, (ARM).

Adjustment Period: The period that elapses between the Adjustment Dates for an Adjustable Rate Mortgage, (ARM).

Adjustments: Additions or subtractions of dollar amounts to equalize comparables to the subject property when estimating property value using the market data approach.

Administrative Law Judge: A judge who hears complaints regarding violations of 1988 Fair Housing Act Amendments.

Administrator: A person appointed by the court to settle the estate of a deceased person.

Administrator’s Deed: A deed issued to a grantee from an estate.

Ad Valorem: Latin term meaning “According to Value”. This is how real property is usually taxed. (Taxes can be either “Ad Valorem” or “Specific”. EXAMPLE: A tax of $5.00 per $ $1,000.00 of value per house is “Ad Valorem”. A tax of $5.00 per house irrespective of value is “Specific”.)

Advance: The giving of consideration before it is due, such as when a Lender provides access to capital so that a Builder can proceed with construction.

Advance Fee: A Fee charged by a Broker to a Seller to cover all or a portion of the Broker’s costs of promoting the Property. The fee is generally credited against “Commissions”, but is not refunded if no commissions are received. Most frequently used in connection with

large offerings which require a substantial outlay of funds for promotion.

Adverse Possession: (also called “Notorious Possession” or “Prescriptive Title”). A method of acquiring title to a property through a court without consent of the owner. Claim to the title of the property must be by open, notorious and hostile possession of a property for a statutory period of time, as governed by state law.

Affidavit: A sworn, written statement by a Seller of real property, (Grantor), which certifies that no defects exist in the title being conveyed, other than those stated in the contract or deed.

Affidavit of Title: See Affidavit.

Affirm: To attest to the truth of a statement.

Affirmation: A formal declaration attesting to the truth of a statement.

Affirmative Fair housing Marketing Plan: A requirement by HUD for federal finance participation, which is designed to inform minority Buyers of property being offered for sale without discrimination.

Affordability Analysis: A detailed analysis of a Borrower’s ability to afford buying a home. Many factors are considered, including Income, Liabilities, Available Funds, Type of Mortgage, Geographic Area of the home and the expected Closing Costs.

Agency: A relationship created when one person, (Principal), authorizes another person, (Agent), to act as the Principal’s representative in transacting business with third parties.

Agency by Estoppel: (also known as “Ostensible Agency” or “Implied Agency”). A relationship that may be created when one person leads another person into believing they are the person’s agent, through their words or actions.

Agency Disclosure: (also known as “Disclosure Regarding Real Estate Agency Relationships”).
Real estate licensees are required to discuss all agency relationships allowed under Michigan law
and to provide the consumer with a document indicating the agency relationship they will have with
the licensee, (and affiliate licensees), and the brokerage.

Agent: The licensed real estate Salesperson or Broker who represents Buyers or Sellers.

Agreement: A contract requiring mutual assent between two or more parties.

Agreement of Sale: (also known as “Sales Contract” or “Purchase Agreement”). A contract between a Buyer and Seller in which both parties agree to the exact terms and conditions of the sale.

Air Rights: Rights in the open air space above the surface of land.

Alienation: The transfer of title to real property from one person to another.

Alienation Clause: (also known as “Due-On-Sale clause). A statement in a mortgage or Deed of Trust which entitles the Lender to declare the full principal balance of the debt to be due and payable immediately if the borrower sells the property during the mortgage term.

Allodial System: The type of land ownership existing in the United States today, whereby individuals may hold title to real property absolutely, (free from the rights of a feudal overlord).

Alluvion: An increase of soil or sand on the shores of a waterway due to the flow of the water.

Amendment: (see “Addendum”).

Amenities: Tangible and intangible features that benefit and add to the value of a property, although they are not essential to the property’s use. For example, Natural Amenities may include a pleasant location with scenic views of a lake or woods, etc. Human-made Amenities include swimming pools, tennis courts, recreational facilities, etc.

Americans With Disabilities Act (ADA): A federal law protecting the rights of individuals with physical or mental impairments.

Amortization: The repayment of a debt over a period of time in systematic installments. Payments apply first toward the Interest and then toward the Principal balance to eventually pay off a debt.

Amortization Schedule: A timetable for payment of a mortgage loan, which shows the amount of each payment applied to Interest and Principal, and the remaining balance after a payment is made.

Amortization Term: The time period required to amortize, (pay-in-full), a mortgage loan. This term is often expressed in months. For example, a 30-year fixed-rate mortgage, the Term is 360 months.

Amortized Loan: A debt that is fully paid off over a period of time through systematic installments.

Anchor Store: A well-known commercial retail business, such as a department store or national chain store, placed in a shopping center to generate increased traffic for all nearby stores.

Annexation: Addition of an area into another area.

Anticipation: A principle which holds that property value is based on expectations or hopes of the future benefits of ownership.

Annual Mortgagor Statement: A report sent out to the mortgagor, (Borrower), each year, showing how much was paid in Taxes and Interest during the year, as well as the remaining mortgage balance at the end of the year.

Annual Percentage Rate (APR): The actual effective rate of interest that is charged on a Loan, expressed on a yearly basis. (Not the same as Simple Interest Rate.) The total costs of a Loan, (interest rate, closing costs, fees, etc.), expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.

Annuity: A payment made or received at fixed intervals over a period of time.

Appel Loan: (“Accelerating Payoff Progressive Equity Loan”). A residential property loan which calls for a payment increase over the first 6 years. Level payments are made for the remaining years, and the Loan is paid off during the 15th year. There is no pre-payment penalty, and PMI is required.

Application Fees: Fees that mortgage companies charge buyers at the time of written application for a loan; for example, fees for running credit reports of borrowers, property appraisal fees, and lender-specific fees.

Apportionment: The division of charges and expenses between Buyer and Seller at closing. Also may be used to refer to the division of property into smaller, proportionate parts.

Appraisal: A written analysis of the estimated value of a property, prepared by a qualified Appraiser.

Appraisal Methods: Generally, three major methods of appraisal: Cost Approach, Income Approach and Market Value (comparables) Approach.

Appraisal Report: A report submitted to indicate and support the Appraiser’s opinion of value.

Appraiser: An individual qualified by education, training and experience, to estimate the value of real property and personal property. Real estate Appraisers must meet certain educational, licensing and certification requirements.

Appraised Value (AV): An opinion of a property’s fair market value, based on an Appraiser’s knowledge, experience and analysis of the property. Mortgage Lenders typically make loans to Buyers based on the lower of the Purchase Price or the Appraised Value.

Appreciation: An increase in property value. The opposite of “Depreciation”.

Approaches to Value: Methods of estimating real property value; Market Data, Income and Cost.

Appurtenances: Rights or privileges that result from ownership of a property and move with the title.

Arms-Length Transaction: A transaction in which the Buyer and Seller are independent and are bargaining on an equal footing. Arms-length real estate transactions may require that the parties attest they are not influenced by relationships or other factors that are not based on the free market. Banks and Investors may require that bank-owned properties be sold by Arms-Length transactions. Other examples where Arms-length Transactions may be required include when parents sell property to their children or family members. A court may classify such a transaction as a Gift rather than a bona fide Sale, which could have tax and other legal consequences. To avoid such issues, the parties may need to hire a disinterested third party, such as an Appraiser or real estate Broker, who can offer a professional opinion that the sale price is appropriate and reflects the true market value.

Arrears: Delinquent in meeting an obligation, such as making a payment or completing work. Also used when payment is made at the end of a period, such as the end of the month. Payments made in “arrears” may include “interest” for using the money during the previous period.

Artificial Person: A corporation or other legally-recognized entity.

“As-Is”: A clause in a real estate Offer to Purchase or Sales Contract stating that the Buyer accepts the property in its present condition. Also used in listings and marketing materials.

Asking Price: The price of a property specified in a listing contract.

Assessed Value: The dollar value of a real property as established by a Tax Assessor for the purpose of computing real property taxes.

Assessment: The process of placing a value on property for the purpose of taxation. May also refer to a Levy against a property for a special purpose, such as a sewer or paving assessment.

Assessment Rolls: The public record of taxable properties.

Assessor: A public official who establishes the value of real property for tax purposes.

Asset: Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others, such as bank accounts, stocks, mutual funds, etc.

Assignee: A person to whom contractual rights and benefits are transferred.

Assignment: Transfer of legal rights and obligations by one party, (Assignor), to another, (Assignee). Most real estate contracts contain a provision that addresses the rights of the parties to assign.

Assignor: A person transferring contractual rights to another.

Associate Broker: A person who is licensed as an individual broker but who works as part of a firm or corporation which holds a broker’s license.

Association of Real Estate license Law Officials (ARELLO): A group of real estate license law officials founded in 1929 that regulates about two million real estate licensees.

Assumable Mortgage: A mortgage that can be taken over (“assumed”) by the Buyer when a home is sold. This type of mortgage does not contain an “Alienation” or “Due-On-Sale” clause. Typically, the Buyer agrees to fulfill the obligations of the existing loan agreement that the Seller made with the Lender. When assuming a mortgage, a Buyer becomes personally liable for the payment of principal and interest. The original mortgagor should receive a written release from the liability when the buyer assumes the original mortgage.

Assumption: Transfer of the Seller’s existing mortgage to the Buyer. See “Assumable Mortgage”.

Assumption Clause: A provision in an, “Assumable Mortgage”, that allows a Buyer to assume responsibility for the mortgage from the Seller. The loan does not need to be paid in full by the original Borrower upon sale or transfer of the property.

Assumption Fee: The fee paid to a Lender, usually by the Buyer of real property, resulting from the assumption of an existing mortgage.

Attachment: The legal process of taking property into custody by court order.

Attestation: The witnessing of a document.

Attorney-at-Law: A person authorized by the state to practice law.

Attorney-in-Fact: A person appointed to perform legal acts for another under a “Power of Attorney”.

Attorney’s Opinion of Title: An attorney’s opinion of the quality of title after examination. This is not a guarantee that title is good and clear. Conditions and limitations apply.

Attractive Nuisance: A potentially dangerous condition existing on a property which may be attractive to children and may cause the property owner to be liable for any resulting injuries.

Auction: A form of property sale in which people bid against each other. There are many types of auctions and participants are advised to learn the rules before bidding.

Authority: The power given by a Principal to an Agent.

Authorization To Sell: The power a Seller of property gives to a real estate Broker, as described in the Listing Agreement.

Availability: An economic characteristic of land denoting land a commodity with a fixed supply base.

Avigation Easement: An easement over private property abutting an airport runway, which limits the height of structures, trees, crops, etc. that may be in the aircraft’s path.

Avulsion: Sudden loss or gain of land as a result of water action or shift in the bed of a river that has been used as a boundary line.

B

Back On Market (BOM): When a property or listing is placed back on the market after being removed from the market recently.

Back-Up Agent: A licensed agent who works with clients when their agent is unavailable.

Back-Up Offer: When an offer is accepted, but is contingent on the cancellation or termination of an existing Agreement which has first priority.

Bad Title: A defective title that is not marketable.

Bail Bond: A bond given by a defendant under criminal charges to obtain release from custody.

Balance Sheet: A financial statement showing assets, liabilities, and net worth as of a specific date.

Balloon Mortgage: A type of mortgage wherein the regularly-scheduled payments will not fully pay off the loan balance at the end of the mortgage term. Therefore, to fully satisfy the debt, it requires Borrower to make a final payment, called the “Balloon Payment”, to bring the balance to zero.

Balloon Payment: The final payment of a note or obligation which has not been completely repaid through periodic payments. After the “Balloon Payment” is made, the loan balance is zero.

Bankrupt: A person, firm or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed Trustee.

Bankruptcy: A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve their debts by transferring any assets to a court-appointed Trustee. The Bankrupt’s property is distributed by the Court to the Creditors as full satisfaction of the

Debts, in accordance with certain priorities and exemptions. The Bankruptcy may be voluntary (petitioned by the Bankrupt), or Involuntary, (petitioned by creditors of the Bankrupt.)

Bargain and Sale Deed: A form of deed with or without covenants of title. Often used by Trustees, Fiduciaries, Executors, and Officers of the Court.

Base Lines: An imaginary set of lines running East and West, used by Surveyors to locate and describe land when using the U.S. Government’s Rectangular Survey System.

Base Rent: The fixed or minimum rent portion in a percentage lease. For example, a Tenant in a commercial building might pay a base rent of $5,000 per month but, under a NNN lease, the Tenant may also pay their portion of certain building expenses, such as Taxes, Insurance and Maintenance.

Basis: (also known as “Adjusted Basis”). The value of a property for income tax purposes. Consists of original costs plus all capital improvements, less accrued depreciation.

Beneficiary: (a) The person designated to receive income from a trust, estate, or Deed of Trust. (b) Recipient of a gift of personal property by will, or (c) Lender in a Deed of Trust.

Benchmark: A mark used by Surveyors to establish land elevations, which is affixed to a permanent object on the land, such as an iron post.

Betterment: (also called “Capital Improvement”). An improvement that increases property value, as opposed to repairs or replacements that simply maintain value.

Biennial: Occurring once every two years.

Bequest: A gift of personal property by will.

Bilateral Contract: An agreement based on mutual promises that provide the consideration. Each party promises to perform one or more specified acts in exchange for the other party’s promise to perform one or more specified acts. Listing Agreements and Purchase Agreements are examples of “Bilateral Contracts”.

Bill of Sale: An instrument which transfers ownership to personal property.

Binder: A preliminary agreement, secured by payment of an earnest money deposit, under which a Buyer offers to buy real estate.

Bi-Weekly Payment Mortgage: A mortgage that requires payments to reduce the debt every two weeks, (instead of the standard monthly payment schedule). Each Bi-Weekly payment is equal to One-Half of the monthly payment that would be required under the standard monthly schedule. Since the loan Balance is reduced faster, the Borrower saves a substantial amount of money in interest.

Blanket Insurance Policy: A single policy that covers more than one piece of property, or, more than one person.

Blanket Mortgage: A mortgage which covers more than one parcel of property. For example, Developers and Builders may pledge multiple parcels as collateral to secure payment of the Note. Blanket Mortgages may contain ‘Partial Release” clauses, which enable Builders to transfer ownership
one parcel at a time.

Blockbusting: The solicitation of real estate business in an area or neighborhood by representing the entry into the area of one or more persons of a particular Race, Color, Religion, Sex, National Origin or other persons in Protected Classifications, as defined by state and federal Fair Housing laws.

Blue Sky Laws: State regulations designed to protect the public in the sale of Securities.

Board of REALTORS® (local): An association of REALTORS® in a specific geographic area.

Bona fide: In good faith, without fraud.

Bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate Bond is a written obligation, typically secured by a mortgage or deed of trust.

Book Value: (also known as “Historic Value”). The dollar worth as it appears on the Owner’s books, usually for tax purposes.

Boot: The recipient of cash in an exchange.

Borough: A part of a city, having authority over certain local matters. The best-known boroughs are the five boroughs of New York City, (Brooklyn, Manhattan, Long Island, Queens, Harlem.)

Boundary: The border of a parcel of land.

Breach of Contract: (also known as “Default”). The failure to perform according to the terms and conditions of a Contract.

Bridge Loan: (also called “Gap Financing”). A temporary loan until a permanent loan is issued.

Broker: A person or legal entity, (partnership, corporation, etc.), acting as intermediary or agent for others in negotiating the purchase and sale of real property or other commodities for a fee.

Brokerage: The business of bringing Buyers and Sellers together and assisting in negotiations for the terms of sale of real estate or other commodities for a fee.

Broker of Record: The person registered with his or her state licensing authority as the managing broker of a specific real estate sales office.

Broker’s Market Analysis (BMA): The real estate broker’s opinion of the expected final net sale price, determined after acquisition of the property by the third-party company.

Broker’s Price Opinion (BPO): The real estate broker’s opinion of the expected final net sale price, determined prior to the acquisition of the property.

Broker’s Tour: A pre-set time and day when real estate sales agents can view listings by other brokerages in the market. Similar to Open Houses, but designed for salespeople.

Budget: An organized plan for systematic spending and receiving of income.

Budget Mortgage: Very common in residential mortgage loans, this type of loan includes the usual Principal and Interest, but also incorporates one-twelfth of the Property Taxes and Insurance into the monthly payments. This type of mortgage requires the Borrower to pre-pay pro-rated funds for Taxes & Insurance into an Escrow Account at closing. The Escrow Account is managed by the Lender, who pays Property Taxes & Insurance from the Escrow Account when they are due. This arrangement provides more security to the Lender and more convenience to the Borrower. When the mortgage is paid in full, the remaining balance in the Escrow Account is returned to the Borrower.

Buffer Zone: A strip of land which separates one type of land use or zoning from another.

Building and Loan Association: An organization formed for the purpose of accumulating a fund,
by subscription and savings of its members, to assist them with Loans for building or purchasing real estate property.

Building Codes: Public controls regulating construction.

Building Permit: A written permit required by local government before construction can begin.

Bundle of Rights: The rights of an owner to possess, control, enjoy and dispose of real property. These rights have conditions and limitations; for example, they are subject to the payment of taxes, subject to local codes and ordinances, and subject to Fair Housing laws.

Buydown: A payment to the Lender from the Seller, Buyer, third party, or a combination of those, causing the Lender to reduce the Interest Rate in the early years of a Loan (usually the first 5 years).

Buyer: The Purchaser of a Property.

Buyer Agency: (also known as “Buyer Broker”) An agency relationship between a Buyer and a Broker in which the Broker has a fiduciary duty to the Buyer they are retained by.

Buyer Broker: (also known as “Buyer Brokerage”. See “Buyer Agency”).

C

Cancellation Clause: A clause in a Lease or other Contract, setting forth the conditions under which each party may cancel or terminate the agreement. Such conditions may be as simple as a party “giving notice” or they may be complex and may require payment by the party desiring to cancel.

Capacity: The legal ability of a person to enter into a binding Contract.

Capital: In finance terms, a sum of money and/or property.

Capital Assets: Assets of a permanent nature which are used to produce Income, such as Buildings, Land, Equipment, Machinery, etc. MUST be distinguished from “Inventory”. EXAMPLE: A machine which makes Pencils would be a “Capital Asset” to a pencil manufacturer, but it would be “Inventory” to a company whose business is to sell such machines.

Capital Gains: The profit realized from the sale of real estate or other “Capital Assets”. Generally, the difference between Cost and Selling Price, less certain deductible expenses. Used mainly for Income Tax purposes.

Capital Gains Tax: A tax on the profits of a qualified Capital Asset. The tax rate may be different than the rate of tax on ordinary income.

Capital Improvement: (also called “Betterment”). An item that adds value to the property, adapts the property to new uses, or prolongs the life of the property. For tax purposes, Maintenance is not a “Capital Improvement”.

Capitalization: Used in the “Income Approach” to the valuation of real property. A mathematical process for converting future Net Income into a present estimate of value.

Cap. Rate: An abbreviation of “Capitalization Rate”.

Capitalization Formula: (a) The Annual Net Income of a property divided by the Purchase Price gives you the Capitalization Rate. (b) The Purchase Price of an investment multiplied by the “Capitalization Rate” equals the Annual Net Income.

Capitalization Rate: The return on investment. The percentage or rate of interest considered to be a reasonable return on improved income property, given the degree of risk involved.

Caravan: A tour of newly-listed Properties by the Sales staff of one or more real estate Brokerages, conducted to familiarize the staff with the available property inventory.

Carrying Costs: Cost incurred to maintain a property (taxes, interest, insurance, utilities, etc.).

Carryover Provision: (also called “Carryover Clause” or “Extender Clause” or “Protection Period”). Provision in a Listing Agreement protecting the Broker’s commission entitlement for a specified period of time after the Agreement expires.

Cash Flow: Income produced by an investment property after deducting Operating Expenses and Debt Service.

Caveat Emptor: Latin term meaning, “Let The Buyer Beware”. Applies to certain “sales talk” and not necessarily to statements of material facts.

Certificate of Eligibility: A statement provided to Veterans of military service to let them know the amount of loan guarantees to which they are entitled at that time.

Certificate of Estoppel: (also called “Certificate of No Defense”). A document signed by the Mortgagor which states the exact unpaid balance of the loan, the interest rate and the date to which interest has been paid. Once signed, the Mortgagor cannot claim the amount owed is not true.

Certificate of No Defense: (see “Certificate of Estoppel”)

Certificate of Occupancy: A document issued by a local government agency after a satisfactory inspection of a structure, authorizing that the structure can be occupied.

Certificate of Reasonable Value (CRV): A document setting forth the value of a property, as the basis for the Loan guarantee by the Veterans Administration to a Lender.

Certificate of Title: In areas where attorneys examine Abstracts or chains of Title, this is a written opinion by the examining attorney, stating that title is vested as stated in the Abstract.

Chain: In land measurement, a distance of 66 feet.

Chain of Title: The successive history of conveyances and encumbrances affecting a specific parcel of land, including all previous owners of record.

Chattel: Personal property.

Chattel Mortgage: A mortgage secured by personal property.

Chattel Real: Non-Freehold interests in real property, such as a Leasehold; also includes fixtures.

Chronological Age: Actual age of an item.

City Certification: City ordinances that require an inspection by the city when property is transferred.

Civil Action: A lawsuit between private parties.

Civil Rights Act of 1866: A federal law that prohibits all discrimination on the basis of race.

Civil Rights Act of 1968: See Fair Housing Act of 1968.

Classified Property Tax: Property tax which varies in rate depending on the use of the Property, (the Property’s Zoning Classification).

Clean Air Act (CAA): Provides air quality standards to protect human health and the environment.

Clean Water Act (CWA): Governs discharge of oil and hazardous substances into U.S. waters.

Clerk of County Court: The public official who records legal instruments for a county.

Client: The “Principal” in a real estate transaction.

Closed Mortgage: A mortgage that cannot be prepaid before maturity without pre-payment penalty.

Closed-End Mortgage: A mortgage that cannot be refinanced.

Closing: (also called “Settlement”). (1) In real estate sales, the end of a transaction process, where documents are signed, title is transferred, the deed is delivered, and funds are disbursed. (2) Also used in the general field of Sales, and refers to “the point at which a client or customer is asked to agree to the sale and to sign the contract.”

Closing Costs: (also called “Settlement Costs”). Expenses incurred in the purchase and sale of real property, paid at the time of Settlement or Closing.

Closing Date: (also called “Settlement Date”). The date on which a transaction is completed, documents are signed, title is transferred, the deed is delivered, and funds are disbursed.

Closing Statement: (also called “Settlement Statement”). An accounting of the funds received and disbursed in a real estate transaction.

Cloud on a Title: Any claim against title to real property.

Cluster Zoning: A form of zoning allowing several different types of land use within a zoned area.

CLUE: CLUE (Comprehensive Loss Underwriting Exchange) is the insurance industry’s national database that assigns individuals a risk score. CLUE also has an electronic file of a property’s insurance history. These files are accessible by insurance companies nationally. These files could impact the ability to sell property as they might contain information that a prospective buyer might find objectionable, and in some cases, not even insurable.

Code of Ethics: A written standard of ethical conduct in the practice of real estate sales required by real estate license laws and by the National Association of REALTORS.

CoInsurance: A sharing of the risk of an insurance policy by more than one Insurer. Usually, one Insurer is liable up to a certain amount, the other is liable over that amount.

Coinsurance Clause: A requirement of hazard insurance policies that property be insured for a certain percent of value in order to obtain the full amount of Loss.

Collateral: Something of value pledged as security for payment of a debt.

Color of Title: Deceptive appearance of claim to a title.

Commercial Property: A classification of real estate zoned for the production of income.

Commingling: To mingle or mix; for example, to mix personal funds with a client’s funds.

Commission: Compensation paid for the performance of services, such as a Broker’s commission.

Commission Split: The percentage split of commission compensation between the real estate sales brokerage and the real estate Salesperson or Associate Broker.

Commitment: A pledge or promise to act, such as a Lender making a Mortgage Commitment.

Common Areas: (also called “Common Elements”). Parts of a property in a condominium complex that are shared with all owners in that complex.

Common Law: Law that is based on judicial precedent, custom, or tradition, as contrasted with law based on a written statute.

Community Planning: A plan for the orderly growth of a city or county to create the greatest social and economic benefits to the people.

Community Property: A form of Co-Ownership which is limited to husband and wife and does not include right of survivorship.

Comparable: Recently “Sold” similar properties used in the “market approach” to appraisal.

Comparable Sales Approach: See ‘Market Data Approach”.

Comparative Market Analysis (CMA): A study done by real estate sales agents and brokers using active, pending, and sold comparable properties to estimate a listing price for a property.

Compensatory Damages: The amount of money actually lost, which will be awarded by a court in the event of a breach of contract.

Competence: The mental and emotional capacity to legally enter into binding contracts.

Competition: Others who do what you do.

Competitive Market Analysis (CMA): The analysis used to provide market information to the Seller and assist the real estate broker in securing the listing.

Complete Performance: Execution of a contract by virtue of all parties having fully performed all the terms and conditions.

Compound Interest: Interest computed and applied both on the principal amount plus on the accrued interest.

Concession: A discount or credit given by a Seller to a Buyer to induce them to act.

Concurrent Ownership: Simultaneous ownership of real property by two or more people.

Condemnation: The process of exercising the power of “Eminent Domain” through judicial or administrative action, when government takes private property for public use.

Condemnation Value: The market value of the condemned property.

Condition: Any act or event which, if it occurs or fails to occur, automatically creates or extinguishes a legal obligation.

Conditional Sales Contract: A sale in which the Title to the Property or Goods remains with the Seller until the Purchaser has fulfilled the terms of the Contract, usually payment in full.

Condition Concurrent: When the parties are to exchange performances at the same time.

Condition Precedent: An act or event that must exist or occur before a duty of immediate performance of a promise arises.

Condition Subsequent: Any fact, the existence or occurrence of which, by agreement of the parties, operates to discharge a duty of performance after it has become absolute.

Conditional Fee Estate: An interest in real property which exists as long as the specified condition. For example, Mary Jones has ownership rights in a property for as long as she remains unmarried.

Condominium: A structure of two or more property units, the interior space of which are individually owned; The balance of the property, (both Land and Building), is owned in common by the owners of the individual units and is called the “Common Area”. (see: “Horizontal Real Property Act”)

Condominium Association: An association of all owners in a condominium.

Condominium Budget: A financial forecast and report of a condominium association’s expenses and savings.

Condominium By-Laws: Rules passed by the condominium association used in administration of the condominium property.

Condominium Declaration: (also called “Master Deed”). A document that legally establishes a condominium.

Condominium Rules and Regulations: Rules of a condominium association by which owners agree to abide.

Confidentiality: The duty of Agents not to disclose any information about their Principals, (Clients), except as permitted by the Principal.

Confiscation: Seizing property without just compensation.

Consideration: Anything of value offered to induce someone to enter into a contract.

Construction Lien Act and Recovery Fund: Protects and enforces, by lien, the rights of persons performing labor, or providing materials or equipment, for the improvement of real estate.

Construction Loan: (also called, “Construction Mortgage”). A short-term loan, secured by a mortgage, to obtain funds for the purpose of construction of an improvement on land.

Constructive Eviction: Results from some action or inaction by a Landlord that renders the premises unsuitable for the purposes agreed to in a lease or other rental contract and impairs the Tenant’s enjoyment of the property. Thus, the Tenant is forced to terminate the Lease.

Constructive Mortgage: See “Equitable Mortgage”.

Constructive Notice: Notice of certain facts discovered by looking in the public records. This is knowledge the law presumes a person has, even if they have not been actually notified of such fact.

Contingency: A provision placed in a contract which requires certain acts to be completed before the contract is binding.

Continue To Show: When a property is under contract, (Sold), with contingencies, but the Seller requests the property continue to be shown to prospective Buyers until contingencies are released.

Contract: A legally-enforceable Agreement between competent parties.

Contract Buyer’s Policy: Title insurance that protects a Contract Buyer against defects in a Contract Seller’s title.

Contract For Deed: (see “Land Contract” or “Installment Sale Contract”). A sales contract in which the buyer takes possession of the property but the Seller holds title until the loan is paid. Typically, the Deed is held in Escrow by a third party, such as a title agency or attorney, until the loan is paid.

Contractual Lien: A lien created by agreement of the parties.

Conventional Life Estate: One created by intentional act of the parties.

Conventional Mortgage: A type of mortgage secured by real estate that has certain limitations placed on it to meet secondary market guidelines, so the mortgage can be re-packaged and sold. Conventional Mortgages are underwritten by private financial firms such as Mortgage companies, banks, and savings and loans. Unlike with FHA or VA mortgages, the federal government does not insure or guarantee payment to the Lender.

Conversion: Change in a form of ownership, such as changing rental apartments to condominium ownership.

Convey: To pass to another, as in title to real property.

Conveyance: The transfer of title in real property from one party to another by means of a written instrument, such as a Deed or a Lease.

Cooling-Off Period: A three-day right of rescission applying to certain loan transactions.

Cooperating Broker: (also called “Co-Op Broker”). A Broker who participates in the sale of a property through the Listing Broker.

Cooperating Commission: (also called “Co-Op” Commission). A commission offered by the Listing Broker to the Broker who procures a Buyer, (Selling Broker), to induce the effort and cooperation of other brokers in locating a Buyer.

Cooperative (Co-op): A corporation in which the tenants purchase shares that give them the right to occupy a specific unit in the building.

Co-Ownership: (also called “Concurrent Ownership”). When title to real property is owned by two or more persons at the same time.

Corporate Client: A Principal who is not an actual person but is a legal entity.

Corporation: A form of business organization existing as a legal entity.

Corporeal: Tangible.

Corrective Maintenance: Repairs of a non-functioning item.

Cost Approach: An appraisal method based on a property’s “reproduction” or “replacement” cost.

Cost Basis: A property’s original Purchase Price, used for tax and accounting purposes.

Cost Recovery: An expense deduction taken for an income property for tax purposes.

Co-Tenants: A Co-Owner of an interest in real property.

Counteroffer: The response to an offer or a bid by the Seller, or Buyer, after the original offer or bid has been rejected.

Courtyard: An outdoor space faced by a building.

Covenant: A promise in writing.

Covenant Against Encumbrances: A promise by the Grantor to the Grantee in a Deed which warrants that no encumbrances exist except those specifically noted in the Deed.

Covenant of Further Assurance: A promise by the Grantor to the Grantee in a Deed which warrants that Grantor will perform any further acts necessary to correct any defects in the Title or Deed.

Covenant of Quiet Enjoyment: A promise by the Grantor to the Grantee in a Deed which warrants that the Grantee will not be disturbed in Grantee’s use and enjoyment of the property because of a defect in the Grantor’s title. (A similar promise may also be made by the Landlord in a Lease).

Covenant of Right To Convey: A promise by the Grantor to the Grantee in a Deed which warrants that the Grantor has the legal right, authority and power to convey the title being granted.

Covenant of Warranty: A promise by the Grantor to the Grantee in a Deed which warrants that the Grantor will bear the expense of defending the title against any lawful claimants.

Credit: (1) A value to be received. (2) The ability to secure financing.

Creditor: One to whom a debt is owed.

Credit Report: A report maintained by a Credit Bureau which includes the history for a borrower’s credit accounts, outstanding debts, and payment timelines on past or current debts. Often used by potential Creditors to determine the level of risk that a Borrower may pose in the future. Recently, the widespread use of Credit Reports by non-traditional users who are not actually “Creditors”, (such as Landlords, Insurance Companies and Employers), has created great controversy.

Credit Score: A score assigned to a Borrower’s credit report based on information contained therein.

Cubic Foot Method: A means of estimating reproduction or replacement cost, using the volume of a structure, (L x W x H).

Cul-De-Sac: A street which is open at one end only and has a circular turn-around at the other end.

Cumulative Zoning: A type of zoning which permits a higher priority use even when such use is different from the type of use normally designated for the area.

Curable Depreciation: A condition of a property that exists when the cost of repairs is less than the resulting increase in value.

Curb Appeal: The visual impact a property projects from the street.

Curtesy: A husband’s interest in real property owned by his wife.

Customer: A user or potential user of real estate services who is not a Principal or Client.

D

Damages: The amount of financial loss incurred as a result of another person’s action. This amount is usually determined by a court.

Datum: A surface which is level and to which heights are referenced. (see “Benchmark”).

D.B.A.: An abbreviation for, “Doing Business As”, under a Certificate of Assumed Name.

Days on Market: The number of days a property has been listed on the market.

Debenture: A type of note which is given as evidence of a debt and not secured by a property.

Debit: Money owed, or a charge. Opposite of “Credit”.

Debit Financing: Using borrowed money to purchase real estate.

Debt Service: Principal and Interest payments on a debt.

Decedent: A deceased person.

Declaration of Trust: A written acknowledgment by one holding legal title to property stating that the property is held in trust for the benefit of another.

Decree: A judgment of the court that sets out the agreements and rights of the parties.

Dedication: (also called “Gift”). The voluntary transfer of privately-owned property, or an easement therein, to the government without consideration.

Deduction: An allowable adjustment which reduces taxable income.

Deed: A written instrument which transfers an interest in real property when signed by the Grantor and delivered to the Grantee.

Deed In Lieu of Foreclosure: (also called “Friendly Foreclosure”). This Deed is intended to avoid the record of foreclosure by allowing the Mortgagor, (Borrower), to convey the property directly to the Mortgagee, (Lender), as a result of a default.

Deed In Trust: A Deed conveyed to a Trustee to be held for another, usually in a land trust.

Deed of Bargain and Sale: A Deed with or without Warranties, except an implied covenant that Grantor has title and possession.

Deed of Trust: A form of mortgage that includes a third party, who is called a Trustee.

Deed Restriction: A clause in a Deed which limits and restricts the use of the property, as specified.

For example, John deeds land to Mary, but the “Deed Restriction”, prohibits the sale of alcoholic products and beverages on the land. Years later, Mary is offered a very high price for the land by a potential Buyer who wants to build an establishment that includes the sale of alcohol. When title is examined and the Buyer learns of the “Deed Restriction”, the sale is cancelled. This example shows that “Deed Restrictions” can have very serious impact on land values.

Default: A failure or breach of performance, obligation or duty that is part of an agreement.

Defeasance Clause: A statement in a mortgage or Deed-of-Trust which gives Borrower the right to redeem the title and have mortgage liens released any time prior to default by paying the debts in full.

Defeasible: Subject to being defeated by the occurrence of a certain event.

Defeasible Fee Title: A title which can be voided or lost if certain conditions occur. For example, a Fee Ownership Title with Deed Restrictions.

Deferred Gain Rollover: A homeowner who wants to defer the tax obligation on their resale profit must purchase a replacement home of equal or greater value.

Deferred Interest Mortgage: This type of mortgage would give Borrower a lower interest rate, resulting in a lower payment. The deferred interest is then added to the amount owed the Lender upon the sale and closing of the home in the future.

Deferred Maintenance: Physical depreciation, such as maintenance and repairs, which has been neglected by the Owner.

Deficiency Judgment: A personal claim against a Borrower to satisfy the balance of a debt. These are court judgments obtained by a Mortgagee, (Lender), for the amount of money they have lost when Foreclosure Sale proceeds did not fully satisfy the debt.

Delivery and Acceptance: The transfer of a title by Deed requires the Grantor to deliver and the Grantee to accept a given Deed.

Demand: A measure of desire for a product or service by the general public. When many Buyers are active in the marketplace, the “Demand” is said to be “High”.

Demand Note: A Note having no date for repayment, but due on demand of the Lender.

Demise: To convey an estate for years. The transfer of an interest of possession, (not ownership), in real property by a lease or a will.

Demographic Information: A compilation of data about the make-up of population in a given area, such as density, age ranges, income distribution, etc. Often used by investors of income-producing properties to evaluate future potential.

Density: A term used in planning which refers to the number of persons or structures per acre or other specified unit of measurement.

Department of Housing and Urban Development (HUD): A federal agency involved with housing.

FHA and VA mortgages are insured by HUD, which reduces the risk to private Lenders and makes home ownership more affordable for people of limited income and for U.S. Veterans.

Deposit: (also called “Earnest Money” or “Earnest Money Deposit” or “Good Faith Deposit”). Money given by the Buyer with an Offer to Purchase which shows the Buyer’s “Good Faith”.

Depreciable Asset: Property, other than land, held as an investment or for use in a business.

Depreciated Value: The original cost of a property less the amount of depreciation taken.

Depreciation: A loss or decrease in value from any cause. The opposite of “Appreciation”.

Descent: The distribution of property to legally-qualified heirs of a person who has died “intestate”.

Description by Reference: Property description that may refer to a map and lot number that has been recorded, or to a previous Deed conveying the same property.

Designated Agency: Under this type of agency relationship, the Client, (Buyer or Seller), has an agency relationship with only those persons specifically named in the Listing Contract or the Buyer Agency Agreement.

Desk Fees: A fee charged by a real estate company or brokerage for the real estate agent to use a desk or other facilities within the office.

Destination Services: In Relocation terms, services provided to the Transferee at the new location. They can include familiarization tours, temporary housing, school searches, and so on.

Deterioration: A gradual loss in value to a property due to the elements, aging or wear and tear.

Devise: A gift of real property by will.

Devisee: The recipient of a gift of real property by will.

Direct Home-Selling Costs (DHSC): In Relocation terms, these can include carrying costs, loss on sale, repairs and improvements, commission, closing costs, principal, interest, taxes and insurance, interest on equity loans, and utilities.

Direct Reduction Mortgage: An amortized mortgage on which Principal and Interest payments are paid at the same time, usually monthly, and Interest is computed on the remaining Balance. Commonly used in real estate Loans.

Direct Sales Comparison Approach: see “Market data Approach”.

Disability: A physical or mental impairment that substantially limits a person’s ability to perform one or more major life activities.

Disclosures: Federal, state, county, and local requirements of Disclosures regarding a property that the Seller provides and the Buyer acknowledges.

Disclosure of Information: In agency relationships, the prompt and total communication by an Agent to their Principal of any information material to the transaction for which the Agency is created.

Disclosure Statement: In residential mortgage loans, an accounting of all the financial aspects of a loan, which Lenders must provide to Borrowers under regulation Z of the Federal Reserve Board.

Discount Points: An added fee charged by a lender to increase the yield on a loan. One discount point is equal to one percent of the loan amount. Many Lenders allow Borrowers to pay “Discount Points” at closing in return for a reduction in the rate of interest on their loan. This may benefit the Borrower if they don’t plan to sell the home or refinance in the first few years.

Discrimination: Failing to treat all people equally. Favoring a person or making a distinction against a person based on prohibited provisions in state and federal laws.

Discriminatory Advertising: Any advertising in offering housing for sale or rent which states or indicates a preference, limitation or discrimination, on the basis of race, color, religion, sex, national origin, handicap, familial status, or other protected class of people under the law.

Disintermediation: The loss of funds available to lending institutions for making mortgage loans, cause by depositors’ withdrawal of funds in order to make higher-yield investments.

Dispossession: The act of removing a person from a property through legal procedure.

Distraint: (also called “Distress”). The right of a Landlord, through a court order, to take a Tenant’s personal property in order to satisfy unpaid rent.

Divorce: The legal separation of a husband and wife, effected by a court decree, that totally dissolves the marriage relationship.

Doctrine of Equitable Conversion: Under this doctrine, the Vendor, (Seller), cannot do anything to jeopardize the interests of the Vendee, (Buyer).

Documentary Stamps: (also called “Revenue Stamps” or “Transfer Tax”). A tax on the conveyance of title to real property by Deed. This tax is levied through local or state governments and attached to the documents at the time of recording.

DOM: An abbreviation for “Days On Market”.

Domicile: The state in which a person maintains their legal residence.

Dominant Estate: (also called “Dominant Tenement”). Land which benefits from a “Servient Estate” through an Easement Appurtenant. For example, there are two adjoining properties and one has an Easement over the other in order to access the road. The property on which an Easement is imposed is the “Servient Estate” and the property which benefits from the Easement is the “Dominant Estate”.

Donor: One who donates or gives a gift.

Dormant Minerals Act: Provides a three-year grace period in which to preserve unexercised Mineral Rights. The non-title holder of the Mineral Rights must file the interest every 20 years.

Double Escrow: Two concurrent Escrows on the same property, having the same party as both Buyer and Seller of the property. EXAMPLE: Escrow 1 – A buys from B. Escrow 2 – A sells the same property to C. Thus, A is using C’s money to buy B’s property. NOTE: Consult an attorney as this process is illegal in many states and requires full disclosure.

Dower: A wife’s interest in her husband’s real property.

Down Payment: The amount of cash a Buyer pays at closing towards the total purchase price. This amount, when added to the mortgage amount, should equal the purchase price of a property.

Drive-By: When a real estate Licensee drives by a property listing or potential listing.

Dual Agent: A state-licensed person who represents both Seller and Buyer in the same transaction. This should not be done without a “Dual Agency Agreement”.

Dual Agency Agreement: When a real estate Broker or Salesperson intends to represent both the Seller and Buyer in the same transaction, this document explains that Dual Agency does not include the full range of fiduciary duties, explains the terms, limitations and services of the Dual Agency, and obtains the signed consent of the parties.

Due Diligence: In real estate, a Buyer’s examination of the property’s condition and research of facts about the property prior to closing. This is usually done during the “Inspection Contingency” period.

Duplex: Two properties joined by one common wall

Duress: The inability of a party to exercise their free will because of fear from another party.

E

Earnest Money Deposit (EMD): (also called ‘Binder” or “Good Faith Deposit” or “Escrow Deposit”). A deposit made by a Buyer at the time of submitting an offer, to demonstrate the Buyer’s true intent to purchase a property. Contracts should state who will hold the Deposit and how it will be applied. There are also state laws governing Earnest Money Deposits.

Easement: A property interest which allows the holder a right to limited use of a portion of property that is owned by another. Good examples are “Utility Easements”, allowing a Utility company to install and maintain pipes underground in order to deliver gas or electricity to neighboring properties. However, many types of Easements are possible, and real estate Buyers should know that some Easements may affect their own use of the property or may lower the property’s value. Easements are typically shown by a Survey and search of public records.

Easement Appurtenant: A right of use in the adjoining land which is owned by another. This right moves with the title to the property that benefits from the easement, the “Dominant Estate”.

Easement By Condemnation: Created by exercise of the government’s right of “Eminent Domain”.

Easement By Grant: Created by the express written agreement of land owners, usually in a Deed.

Easement By Implication: Arising by implication from the conduct of the parties.

Easement By Necessity: (also called “Easement for Ingress and Egress”). Grants access when a Landowner has no access to roads and is landlocked.

Easement By Prescription: Obtained through court order by an adverse user who used the Land of another for the legally-prescribed length of time.

Easement In Gross: A right to use the land of another without the requirement that the holder of such right own adjoining land.

Economic Life: The period of time during which a property is financially beneficial to the owner.

Economic Obsolescence: A loss in value due to factors outside the subject property’s boundaries, such as changes in surrounding land use patterns.

Effective Age: The age of a property based on its remaining “Economic Life”.

Effective Interest Rate: The actual percentage rate of interest being paid.

Egress: The right to have access to exit a property. Opposite of “Ingress”. This right is provided to all landowners by law. See “Easement By Necessity”.

Ejectment: A legal action by an owner to regain possession of their property.

Elevator Building: One that has one or more elevators to reach the units.

Elliott-Larsen Civil Rights Act: Replaced the 1968 Michigan Fair Housing Act in prohibiting discrimination in the sale, rental or lease of housing accommodation.

E-mail: Electronic or Internet-based communication.

Emblements: Growing crops, (Personal Property), which require planting and cultivation.

Eminent Domain: The power of government to take private property for public use and pay just compensation to the owner. This power is exercised through a court procedure, “Condemnation”.

Enabling Acts: Laws passed by states legislatures which authorize cities and counties to regulate land use within their jurisdiction.

Encroachment: The unauthorized extension of some object or improvement across the boundary of another property.

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

Endorsement: Additional coverage on an insurance policy to include a specific risk, such as for example, a swimming pool.

Enforceable: A contract in which the parties may legally be required and compelled to perform.

Environmental Impact Statement: A report required by law prior to changing land use, which analyzes how a proposed development will affect the ecology and environment.

Environmental Policy Act: A federal law which requires filing an “Environmental Impact Statement” with the EPA prior to changing or initiating land use or development.

Environmental Protection Agency (EPA): The federal agency that oversees and enforces federal legislation protecting the environment.

Equal Credit Opportunity Act (ECOA): A federal law prohibiting discrimination in consumer loans.

Equalization Board: A state or county review board established to hear property owner complaints regarding the assessment of their property for tax purposes.

Equitable Conversion: Applied to a Land Contract, to treat the Vendee’s (Buyer’s) interest as a “real property interest”, even though the Seller holds legal title, and treat the Seller’s interest as a “security interest” (personal property). This enables the Buyer to act as the “Owner’ of the property without having “legal” title.

Equitable Mortgage: Also called a “Constructive Mortgage”. (1) A lien against real property (mortgage) which is enforceable in a court of Equity, but does not legally constitute a mortgage.(2) A Deed given as security for a debt will be held to be a mortgage rather than a transfer of title.

Equitable Redemption: (also called “Redemption”). A mortgage Borrower’s right to redeem their title and rights to a property after default and foreclosure, by paying the debt in full, along with accrued interest and Lender costs.

Equitable Redemption Period: The time period that a Borrower has in which to pay off a mortgage default and recover their right to the property. The Foreclosure process and the Redemption Period may vary according to state laws.

Equitable Title: An interest in real property such that a court will take notice and protect the owner’s rights. This is similar to the interest held by a Buyer in a “Land Contract” sale.

Equity: The value of one’s investment in a property less the total amount of debts or liens against it. Example: If Bill’s home is worth $200,000 and he owes $130,000, his Equity in the home is $70,000.

Equity Line of Credit: A combination of a Line of Credit and Equity Loan. A maximum loan amount is established based on credit and equity in a property. Then, a mortgage (Deed of Trust) is recorded against the Borrower’s property for said maximum loan amount. Then, the Borrower has the right to borrow, as needed, any amount up to the maximum loan amount.

Erosion: The gradual loss of soil from natural causes, such as water and wind.

Escalation Clause: (1) Leasing: A provision in a Lease which permits the Landlord to adjust the payments based on the occurrence of specified conditions. For example, the Escalation Clause might state that the rent amount will automatically increase by 2% on a specified date each year.
(2) Finance: A provision which permits the Lender to adjust the interest rate based on the occurrence of specified conditions.

Escape Clause: A clause placed in a contract which may permit a party to free themselves from certain responsibilities or obligations imposed by the contract.

Escheat: The power of government to take title to property that is left by a person who has died without leaving a valid will, (intestate), or qualified heirs.

Escrow: The deposit of funds and/or documents with a neutral third party, who is instructed to carry out the provisions of an Escrow Agreement.

Escrow Account (Broker): Also called “Trust Account”. An account maintained by a real estate Broker, (or authorized third-party such as title company or attorney), in an insured bank for the deposit of other people’s money. The funds kept in the Escrow Account are typically Earnest Money Deposits made by Buyers of property at the time they submit an offer to purchase. Funds in an Escrow Account are not to be commingled with Broker’s other funds. Disbursements from the Escrow Account are made in accordance with provisions in the Purchase Agreement or with state laws.

Escrow Account (Lender): An account maintained by the Borrower with the Lender in certain mortgage loans in order to accumulate the funds needed to pay for items beyond the Principal and Interest. These additional costs, (also called pre-paids), may include real estate Taxes, Insurance, Association Dues, Mortgage Insurance, etc. Borrowers pay an initial amount to set up the Escrow Account and then pay monthly pro-rations, which may be adjusted from time to time. Funds in this Escrow Account belong to the Borrower and are returned shortly after the loan is paid off.

Escrow Agent: A neutral third party named to carry out the provisions of an Escrow Agreement.

Escrow Agreement: A set of instructions the parties agree will be followed by a neutral third-party who deposits funds and/or documents to an Escrow Account until such time as the terms are satisfied.

Estate: (1) The property owned by a deceased person. (2) The legally-recognized nature and degree of ownership a person has in real property.

Estate at Sufferance: (also called “Tenancy at Sufferance”). A form of leasehold estate wherein a Tenant continues to occupy a property after legal authorization has expired.

Estate at Will: (also called “Tenancy at Will”). A leasehold estate that may be terminated at the request of either party with proper notice.

Estate for Years: A leasehold estate of definite duration, as stated in the Lease Agreement.

Estate from Year to Year: (also called “Estate from Period to Period” or “Periodic Tenancy”).
A leasehold estate that automatically renews itself for consecutive periods until terminated by notice from either party.

Estate in Fee: See “Fee Simple Absolute”.

Estoppel: Preventing a person from making a statement contrary to a previous statement.

Estoppel Certificate: See “certificate of Estoppel”.

et al: Latin term for “and others”.

et ux: Latin term for “and wife”.

Evaluation: A study of the usefulness or utility of a property that may or may not include an estimate of its value.

Eviction: The legal process of removing a Tenant from a Leased property.

Evidence of Title: Proof of property ownership.

Excess Condemnation: Taking by right of Eminent Domain, more property than is actually needed for the intended purpose. This happens frequently, and the excess property is usually sold at Auction after completion of the project.

Exclusionary Zoning: Zoning which establishes certain lot sizes and home square footage for areas within the city. This type of zoning has been ruled discriminatory because it tends to exclude poor and minority members from the area who cannot afford to meet the zoning requirements.

Exclusions: Fixtures or personal property that are excluded from the contract or offer to purchase.

Exclusive Agency Listing: A Listing Agreement whereby an Owner (the Principal), employs one sole Broker, (the Agent), to sell the property, but still retains the right to sell the property “By Owner”, without paying a commission to the Listing Broker. If the property is sold by another Broker, the two Brokers would split the commission on a cooperative basis, as agreed.

Exclusive Right-To-Sell Listing: A Listing Agreement whereby an owner (the Principal), employs one Exclusive Broker to market and sell the property for a specified time. If the property sells during the term of the listing, the Listing Broker is entitled to the agreed compensation, regardless of who sells the property. For example, the Seller would pay the Exclusive Broker the agreed amount even if another Broker or the Seller himself finds the Buyer.

Exclusive Use Zoning: Zoning which restricts use of property within that district to the specified type.

Executed Contract: An agreement that has been fully performed.

Execution: The signing of a contract or other legal document.

Executor: A man appointed in a will to see that the terms of the will are carried out.

Executor’s Deed: A quitclaim deed given by the person appointed to carry out the terms of a will.

Executory Contract: An agreement that has not been fully performed.

Executrix: A woman appointed in a will to see that the terms of the will are carried out.

Exemplary Damages: See “Punitive Damages”.

Exempt: Relieved from some duty or liability.

Expert Testimony: Testimony by one who is acknowledged to have special training and knowledge in a particular subject. Only testimony on the subject in which the witness is “expert” is considered to be “expert testimony”.

Expired (Listing): A property listing that has expired per the terms of the Listing Agreement.

Exposure: (1) The degree to which a property which is for Sale, Lease, etc., is made noticeable, (exposed) to potential Buyers, Tenants, etc., through advertising, Multiple Listing Services, etc. (2) The direction in which a property faces. EXAMPLE: Does a store depending on walk-in trade face the sun in the morning, when people walk in the sun to get warm (Eastern Exposure), or does it face the sun in the afternoon, when people walk in the shade to keep cool, (Western Exposure).

Extender Clause: (also called “Safety Clause” or “Carryover Clause” or “Protection Period”). Provision in a Listing Agreement protecting the Broker’s commission entitlement for a specified period of time after the Agreement expires.

F

Face Amount: The amount of insurance coverage shown on the Declarations Page.

Fair Housing Act of 1968: A federal prohibition on discrimination in the sale, rental or financing of housing on the basis of race, color, religion, sex, or national origin.

Fair Housing Act of 1988: A federal prohibition on discrimination in the sale, rental, financing or appraisal of housing on the basis of race, color, religion, sex, national origin, or handicap.

Fair Housing Amendments Act of 1988: A law adding provisions to the Fair Housing Act to prohibit discrimination based on physical handicap or familial status.

Fair Market Value: A price for property agreed upon between Buyer and Seller in a competitive market, with neither party being under undue pressure to act.

Familial Status: Persons who may not be discriminated against based on the Fair housing Act include: an adult with children under 18, a pregnant person, a person who has or will have legal custody of a child.

Fannie Mae: Nickname for Federal National Mortgage Association, (FNMA). Originally established as a federal agency that is now a semi-private corporation. FNMA purchases qualifying FHA, VA and Conventional loans at a discount from approved Lenders and sells them to investors to raise additional capital. FNMA is currently the primary source of money in the secondary mortgage market.

Fax Rider: A document that treats facsimile transmission as having the same legal effect as the original document.

Federal Deposit Insurance Corporation (FDIC): A federal agency which insures deposits held in commercial banks up to a certain amount.

Federal Home Loan Bank System (FHLBS): The federal agency which regulates all federally-chartered Savings & Loan Associations.

Federal Home Loan Mortgage Corporation (FHLMC): (also nicknamed “Freddie Mac”). A federal agency, owned and established by the Federal Home Loan Bank System in 1970 to purchase FHA, VA and Conventional mortgages in the secondary market for qualified savings and loan members.

Federal Housing Administration (FHA): A federal agency established in 1934 to stimulate the housing market by providing a source of funds. FHA increases home affordability and ownership by insuring Lenders against default, thus encouraging Lenders to make more affordable loans.

Federal National Mortgage Association (FNMA): See Fannie Mae.

Federal Lead-Based Disclosure Act: Legislation concerning the disclosure of Lead-Based Paint that applies to all residential Leases and the sale of One-to-Four family residential units.

Federal Reserve System (FRS): The U.S. agency that regulates the country’s monetary policy, monetary supply and thereby interest rates. All federally-chartered commercial banks must be members of the FRS and comply with its rules and regulations.

Federal Savings and Loan Insurance Corporation (FSLIC): A federal agency that insures deposits, similar to FDIC, in member federal Savings & loan association.

Federal Tax Lien: This federal lien attaches to a person or to real property when federal income or estate taxes are not paid.

Federal Trade Commission (FTC): A federal agency which investigates and handles unfair trade practices or methods in interstate commerce.

Feedback: The reaction of a real estate Agent or the potential Buyer to a listed property they viewed. This reaction is usually requested by the Listing Agent and shared with the Seller to help them make adjustments in the property’s pricing or condition.

Fee Simple Absolute: (also called “Fee Simple” or “Fee”). This inheritable estate in land is the highest possible ownership recognized by law, providing the greatest interest of any form of title and the maximum benefits of ownership.

Fee Simple Defeasible: (also called “Qualified Fee” or “Defensible Fee”). In each of two categories of “Fee Defeasible” estates, the “Fee Simple” title is subject to being terminated upon the occurrence of a specified condition: (1) “Fee Simple Determinable”, which is known by the words, “As long as”. (2) “Fee Simple Subject to a Condition Subsequent”, which is recognized by the words, “But if”.

Felony: A serious crime punishable by fines and imprisonment.

Feudal System: A type of land ownership in medieval Europe, whereby only the King had absolute title to real property, even in cases where people were allowed to occupy and cultivate the land.

FHA -Insured Loan: A mortgage loan in which payments to Lenders are insured against default by the Federal Housing Administration, in order to induce Lenders to make more affordable loans.

FHA Loan Guarantee: A guarantee by the Federal Housing Administration that a certain percentage of a loan will be underwritten by a mortgage company or banker.

Fiduciary: A person who acts as a Trustee for another and protects their interests. In real estate, this describes the faithful relationship an Agent owes to his Principal (Client).

Final Settlement: (see “Closing”). The consummation of a contract to buy and sell real property, in which the parties perform according to their agreement.

Finance Charges: All costs, (direct or indirect), paid by the Borrower in a mortgage loan, which must be accurately disclosed in compliance with Federal Truth-In-Lending laws, in addition to the Annual Percentage Rate, (APR). Such charges may include: Origination Fee, Service Charges, Discount points, Interest, Credit Report Fee and Finders’ Fees.

Financial Statement: An accounting statement showing Assets and Liabilities of a person or a company. Used generally for large loans or other instances when a Credit Report, (history of debt payments), by itself is not sufficient.

Finder’s Fee: A fee paid to someone who finds a Buyer or Property, etc. for a Broker. The term is sometimes used to attempt to pay a commission to an unlicensed person. Generally, a Finder’s Fee is considered a Commission and may only be paid to someone who holds a real estate license.

Fire Insurance Policy: See Homeowner’s Insurance Policy.

First Lien: (also called “Senior Lien”). The claim with the highest priority against a real property, which is usually superior to later-recorded liens.

First Mortgage: The mortgage with the highest priority against a real property, which is superior to later-recorded mortgages.

First Right of Refusal: (also called “Right of First Refusal”). A clause frequently used in Leases, Condominiums or Cooperatives, which allows a party the first opportunity to purchase the property at market value, before it is offered for sale to the general public.

First User: A tax term signifying the one who builds or buys property and is the first one to put the Building to use. Certain tax (Depreciation) advantages are given to a first user. The term concerns only depreciable property, (Improvements), and prior use of the land as a farm would not apply.

Fixed Lease: (also called “Flat Lease” or “Straight Lease” or “Gross Lease”). A lease in which the rental amount remains the same for the entire lease terms.

Fixed-Rate Mortgage: A mortgage in which the interest rate does not change for the entire term.

Fixity of Location: A major characteristic of Land, because it cannot be moved and is therefore subject to the influences and impact of its surrounding area. This is a major reason why many people consider Location to be the single most important criteria in the Valuation of real property.

Fixture: (also called “Chattel Real”). Personal property that has become Real Property by having been attached to real property.

Flat: Another name for an apartment.

Flat Fee: A fixed, predetermined amount of compensation received or paid for a specific service in a real estate transaction.

Flat Lease: See “Fixed Lease”.

Floor Duty or Time: A policy in some real estate broker offices in which Sales Associates, according to a schedule, share the responsibility for answering telephones, property inquiries, etc.

FNMA: Federal National Mortgage Association. See “Fannie Mae”.

Foreclosure: The legal procedure of enforcing payment of a debt secured by a mortgage or any other lien. The process may vary according to state law.

Foreclosure Sale: (also called “Sheriff’s Sale” or “Lien Foreclosure Sale”). The sale of property without consent of the Owner, as ordered by a court or authorized by state law, in order to satisfy a Lien against the property.

Forfeiture: Loss of rights or property as a result of non-performance of an obligation in a contract.

Formal Assumption: Written permission from a Lender for a Buyer to assume an existing mortgage, usually at an interest rate prevailing at the time of “Assumption”.

For Sale By Owner (FSBO): A property which is offered for sale directly by its owner.

Franchise: A combination of individual ownership and central control. One may own a fast food restaurant, hotel, hardware store, etc., yet use the name and identity of a national company. Each individual owner pays for the name use, advertising, and may be required to make certain purchases, (napkins, buns, etc.) from the national company. The real estate brokerage business now has many companies operating in this manner.

Fraud: An intentional false statement of a material fact.

Freddie Mac: See Federal Home Loan Mortgage Corporation (FHLMC).

Freehold Estate: An estate in real property which continues for an indefinite period of time.

Free Market: An economic environment in which Buyer and Seller have ample opportunity to negotiate what each considers a fair exchange without undue pressure or urgency.

Friendly Foreclosure: (also called “Deed In Lieu of Foreclosure”). An absolute conveyance of title by a Borrower in default to the Lender, in an effort to avoid a record of foreclosure.

Front Foot: A linear foot of property frontage on a street or highway.

Full-Amenity Building: One that offers a variety of services to occupants: Ex: doorman, delivery/shipping room, dry cleaner, pool, tennis court, store, exercise facilities, and so on.

Fully-Amortized Mortgage: The repayment of a loan in equal fixed payments that results in the balance being reduced to Zero at the end of the loan term.

Full Disclosure: In real estate, revealing all known facts which may affect the decision of a buyer or Tenant. A Broker, (and his Agents), must disclose known defects in the Property for Sale or Lease.

A Builder must give a potential Buyer the facts of his new development, (are there adequate schools, sewer facilities? Is there an Airport or Dump nearby?, etc.) A Broker cannot charge a commission to both Buyer and Seller unless both know, (Disclosure), and agree.

Functional Obsolescence: Loss in a building’s value due to being perceived as being “out of date” with the expectations of a similar building in the current market.

Future Acquired Property: Property acquired after a loan or sale. EXAMPLE: A loan agreement may state that the loan is a Lien on all property presently owned or which the Borrower may acquire in the future.

Future Interest: A right to a property interest which will become effective at a future date.

G

Gain Realized: The excess of the amount realized over the Adjusted Basis.

Gap Financing: (also called “Bridge Loan”). Temporary financing until a permanent loan is issued.

Garden Apartment: A dwelling unit partially below grade.

Garnishment: A legal proceeding, usually by Judgment of a Court, under which a person’s income, (such as a salary), is taken for payment of a debt. The amount which may be taken is set by statute, (usually as a percentage).

General Agent: An agent having full authority over one property of the Principal, such as the Property Manager.

General Contractor: A person or firm, such as a Builder, who is party to a “Contract” and hires others, (“Sub-Contractors”), to perform one or more tasks in order to fulfill the terms of the Contract.

General Lien: A creditor’s lien that attaches to all the property of a debtor.

General Plan: A plan that sets forth the development of a subdivision.

General Warranty Deed: A deed denoting an unlimited guarantee of title from Grantor to Grantee. Essentially promises that Grantor, at his expense, will defend the Grantee’s interest against any claim.

Gerrymander: To divide an area into districts against the obvious natural divisions, for an unlawful purpose. EXAMPLE: To divide a school district to keep out persons of any race or religion, or to divide a political voting district so as to favor a political party.

GI Loan: See “VA Mortgage”.

GIM: See “Gross Income Multiplier”.

Gift Deed: A deed used to convey property with only “Good Consideration” in return, such as Love and Affection.

Gift Letter: A letter to a Lender stating that a gift of cash has been made to the Buyer(s) and that the person who is making the gift to the Buyer is not expecting the gift to be repaid. The exact wording of the Gift Letter should be requested of the Lender, and most Lenders have a form for this.

Ginnie Mae: (also known as “GNMA” and Government National Mortgage Association). A U.S. government agency which is part of HUD that purchases FHA and VA mortgages.

Good Consideration: Founded on natural duty and affection.

Good Faith: Bona fide. Based on honest and fair intentions upon which others can rely. For example, when making an Offer to purchase a property, the Buyer’s ‘Good Faith” deposit is made to assure the Seller that the Buyer truly intends to fulfill the terms of the Agreement.

Good Faith Deposit: See “Earnest Money Deposit”.

Good Faith Estimate (GFE): Lender’s honest estimate of Borrower’s settlement costs, which are required under the Real Estate Settlement Procedures Act, (RESPA), to be furnished to Borrowers at the time of loan application.

Good Title: A title that is free from encumbrances, such as liens, lawsuits and other defects and is marketable in its present form.

Good Will: The reputation a business has established with the general public or with consumers, which adds an intangible value to the business.

Government National Mortgage Association (GNMA). See “Ginnie Mae”.

Government Survey System: see “Rectangular Survey System”.

Grace Period: An agreed-upon “extension” of the time in which an obligation may be performed without being considered in default.

Graduated Lease: A lease that provides for scheduled future rent increases.

Graduated Payment Mortgage (GPM): A mortgage in which the payments are lower in the early years and increase on a scheduled basis.

Graduated Payment Adjustable Mortgage. A combination of the “Graduated Payment Mortgage” and the “Variable Rate Mortgage”.

Grandfather Clause: An exemption from compliance with current laws due to previously existing circumstances. For example, a building may be exempt from having to meet new building codes if it met the codes when it was built and if alterations would be considered an unfair burden to the owner.

Grant: A transfer of title to real property by Deed.

Grant Deed: A statutory, limited form of deed in which the Grantor’s responsibility to the Grantee covers only the time period that Grantor actually possessed the property.

Grantee: One who receives title to real property from the Grantor by Deed.

Grantor: One who conveys the title or interest in real property to the Grantee by Deed.

Granting Clause: The statement in a Deed which contains words of conveyance.

GRI: (stands for “Graduate Realtors Institute”). A professional designation earned by qualifying Realtors from their state Association or the National Association of Realtors.

GRM: See “Gross Rent Multiplier” or “Gross Income Multiplier”.

Gross Closed Commission Income: The total amount of commission income a real estate sales agent or broker receives from closed transactions.

Gross Income: Total Income received before subtracting expenses.

Gross Income Multiplier: (also called “Gross Rent Multiplier” or “GRM”): A factor that is used in calculating the estimated value of Income property. This factor is derived by finding similar income properties and dividing the sale price of each one by its annual, (or monthly), gross income, to arrive at an “average multiplier” that can be used for the subject property.

Gross Lease: (also called “Flat or Fixed Lease”). A type of Lease in which the Lessee, (tenant), pays a fixed rent amount and the Lessor pays all other costs associated with ownership, (Taxes, Utilities, Insurance, Maintenance, Repairs).

Gross Potential Income: The amount of rental income that would be realized if all units were rented 100 percent of the time and there were no credit losses.

Gross Rent Multiplier (GRM): See “Gross Income Multiplier”.

Gross Sale Price: The sale price before any concessions.

Ground Lease: A lease of unimproved land. All improvements made revert to Lessor at expiration.

Ground Rent: Lessee’s payment under a “Ground Lease”.

Grout: (1) Thin mortar used in masonry work to fill joints between bricks, blocks, tiles, etc.
(2) A variety of plaster used to finish ceilings of superior quality.

Growing Equity Mortgage (GEM): A type of Mortgage loan in which the monthly payments increase annually, with the increased amount applied directly to the loan’s principal balance, thus shortening the term of the loan and saving the Borrower money.

Guaranteed Loan Program: A private loan that is insured by the Rural Housing Service, which will pay the private financier in the event a covered Borrower defaults.

Guaranteed Offer: Used in Employee Relocation programs as an incentive, this is a “guaranteed” amount that may be offered for a property by an Employer to the Employee being transferred. Fees and conditions usually apply. Other “Guaranteed Sale” programs also exist in the real estate industry, which provide conditions under which a company will “guarantee” to buy a property.

Guaranty: A pledge or security made to assure the performance of a contractual obligation.

Guardian: A person, usually appointed by a court, to care for another person legally.

H

Habendum Clause: The statement in a Deed beginning with the words, “To have and to hold”, which defines the extent of the ownership being granted.

Habitable: Fit to live in or suitable for the type of occupancy intended.

Handicap: A mental or physical disability that impairs any of a person’s life functions.

Hard Money Mortgage: A mortgage given in return for cash, rather than to secure a portion of the purchase price, as with a Purchase Money Mortgage.

Hazard Insurance: Insurance covering losses to real estate from damages that might affect its value.

Heirs: Persons legally eligible to receive the property of a deceased person.

Heterogeneity: A variety of different or dissimilar uses of property. Opposite of “Homogeneous”.

Hereditament: Every type of inheritable property, including real and personal.

Highest and Best Use: The use a property can be put to which will result in the highest return.

High Rise: A term that generally refers to buildings of 10 stories or higher.

Holdback: Portion of a loan held back by a Lender until a contingency is met. EXAMPLE: In the sale of a home secured by FHA or VA, funds may be held back to make necessary improvements to bring the property up to FHA or VA standards. The money to make such repairs may not be available until closing. One and one-half to double the estimated repair amount is held back. If repairs are not made in the time allowed, these funds are used to make the repairs. (2) In construction financing, funds may be held back, for example, until a certain percentage of a subdivision has been sold, or a certain portion of a building has been constructed.

Holding Over: When a tenant, (Lessee), possesses the property after the term of a lease expires.

Holding Period: The length of time that a property is owned.

Holographic Will: A Will that is handwritten by the Testator.

Home Buyer’s Guide: A booklet required by RESPA, explaining the aspects of Loan Settlement.

Homeowner’s Association: (also known as “Property Owner’s Association”). Usually a non-profit organization, (no shareholders), which has the responsibility and authority to manage the common elements of a Subdivision, Condominium, or PUD.

Homeowner’s Policy: Insurance that covers personal liability and theft in addition to hazards, typically for a person’s principal residence.

Home Rule: Limited local self-government which is given by higher government to a municipality.

Homestead: The dwelling, (home and contiguous land), of the head of a family. Some states grant statutory exemptions, protecting Homestead Property against the rights of Creditors up to certain set amounts. Also, Property Tax Exemptions for all or part of the Tax may be available in some states. Legal requirements to establish a Homestead may include a formal declaration to be recorded, usually stating that the applicant Owns and Occupies the Homestead Property as a Principal Residence, and has complied with all filing requirements.

Home Warranty: Protection plans which insure a home Buyer against certain covered defects, usually for a period of one year after the Buyer owns the home. The covered defects usually do not include structural items, (Roof, Foundation, Walls, etc.), but include specified Mechanical Systems, (Plumbing, Heating, Electrical, etc.), up to stated limits and subject to payment of a Deductible.

Homogeneity: Neighborhoods made up of similar and compatible properties.

Horizontal Real property Act: The name of state legislation allowing the creation of condominiums.

Housing and Urban Development (HUD): U.S. Department of Housing and Urban Development is a federal agency concerned with housing programs and laws.

Housing Starts: Number of houses on which construction has begun. The figures are used to project and determine the availability of housing, the need for real estate loans, the need for materials and labor, economic activity, etc.

HUD / RESPA Settlement Statement (Housing and Urban Development / Real Estate Settlement Procedures Act): A document and statement that details all of the monies paid out and received at a real estate property closing.

Hybrid Adjustable Rate: Mortgage with a fixed rate for a set number of years, which then adjusts periodically for the next set number of years.

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

I

IDX (Internet Data Exchange): Allows real estate Brokers to advertise each other’s listings on their websites by importing them from listing databases such as the Multiple Listing Service, (MLS).

Illusory Offer: An offer that does not bind the Offeror to any real obligation.

Immobility: Fixed in location. An important physical characteristic of land which affects its value.

Implied Agency: An agency relationship that exists as a result of actions of the parties.

Implied Contract: An agreement created by deduction from the conduct of the parties rather than from direct words. Opposite of an express contract.

Implied Warranty: A warranty presumed by law to exist in a Deed, even though not expressly stated.

Impound Account: Another term for Escrow Account.

Improved Land: Land which has been improved by the addition of roads or buildings. May also refer to land which has access to utilities such as water, sewage, gas and electricity.

Improvements: Changes or additions made to a property which increase its value.

Inchoate: Incomplete; contingent upon a future event (such as the death of a husband in Dower).

Inchoate Interest: A person’s possible future interest in a property.

Inclusions: Fixtures or personal property that are included in a contract or offer to purchase.

Income Approach: Also called “Appraisal by Capitalization”. The primary method for estimating the value of income-producing property.

Income Averaging: A method of figuring Income Tax by paying tax on the “average income per year” for the past five years. EXAMPLE: A real estate salesperson earns $10,000 taxable income for four years, but $100,000 taxable income in the fifth year. With Income averaging, he could take the total taxable income for the five years, ($140,000), divide by 5 and arrive at an “average taxable income” of $28,000 for each of the five years.

Income Property: Real property that generates income and / or tax benefits for the owner.

Incompetent: A person who is not able to legally perform or enter into a legal contract.

Increasing and Diminishing Returns: An economic theory that an increase in Capital or Manpower will not increase Production proportionately. (EXAMPLE: Five workers may do less than five times the work of one worker, and two workers may do more than twice the work of one worker). Thus, When the increase in Production is proportionately Greater than the increased investment in Capital or Manpower, there is an Increasing Return. When the increase in Production is proportionately Less than the increased investment in Capital or Manpower, there is a Diminishing Return.

Incurable Depreciation: Deterioration or loss in value of a property which is not physically correctable or not economically practical to correct.

Indemnify: To reimburse someone for a loss.

Independent Contractor: A person who contracts with another for end results and is under self direction to achieve the results. In real estate, a salesperson who conducts real estate business through a written agreement with a Broker. This agent does not receive salary or benefits from the Broker and is not an employee for tax purposes.

Indestructibility: A physical characteristic of land describing that land as a permanent commodity that cannot be destroyed.

Index Lease: A lease in which the rental amount changes based on changes in a price index.

Infant: Another term for describing a “Minor”.

Ingress: The right to enter a parcel of land; Usually used as “Ingress and Egress” to signify the rights of persons to enter and leave a landlocked parcel of land through an Easement.

Inhabit: To occupy or live in.

Inheritance Basis: Market value of a property at the time of a decedent’s death, for tax purposes.

Inheritance Tax: A tax imposed on the estate of a deceased person.

Injunction: A court order to discontinue a specified activity.

Innocent Misrepresentation: When the Seller’s broker makes a false statement to the Buyer about the Property and the Broker does not know whether the statement is true or false.

In Personam: A legal proceeding against “a person”.

Inputting: In real estate, the process of entering new property listings or changes to a current listing in the Multiple Listing Services or other databases.

In Rem: A legal proceeding against an object, such as Real Property.

Inspection Contingency: (also known as Due-Diligence Clause or Inspection Clause). A major contingency in a real estate Purchase Agreement, (or an attachment to it), which provides the Buyer with certain rights to have the property inspected within a specified number of days. The clause usually states what types of property inspections or research may be done, who will pay for them and what procedures will be followed by the parties in the event of Buyer’s dissatisfaction with any results.

Installment Land Contract: (see “Land Contract”). A contract in which the buyer takes possession of the property while the seller retains the title to the property until the loan is paid.

Installment Sale: An income tax method of reporting the gain from the sale of real property when the Seller receives payment in installments paid over two or more years.

Institutional Lenders: Savings & Loan Associations, Commercial Banks and Mutual Savings Banks.

Instrument: A formal legal document, such as a contract, note or mortgage.

Insurable Interest: The degree of interest qualifying for insurance. A person’s legal relationship to the person or object to be insured. For example, this is the principle which prevents one from buying life insurance on an elderly person with whom they have no connection.

Insurance: Indemnification against a loss from an unplanned future event.

Insurance Rate: The ratio of an insurance premium to the amount of coverage.

Insured Loan: A loan in which all or part of the payment is insured, to protect the Lender.

Intangible Property: Personal property rights such as contracts, trademarks or legal claims.

Interest: (a) Money paid for the use of money; (b) An ownership or right.

Interest Rate: The charge or cost for the use of money, expressed in a percentage amount over a specified period of time.

Interest Rate Float: When a Borrower applies for a Loan, they are usually advised that the Interest Rate they are quoted may change between the time of Application and the time they receive funds. With certain conditions, the Borrower may be allowed to Lock the Rate to avoid a Rate increase, or to Float the Rate in the hope Interest Rates will go lower by the funding date.

Interest Rate Lock: (also see “Interest Rate Float”). When the Borrower and Lender agree to Lock the Rate on a loan, usually for a limited time, for a fee, and subject to certain terms and conditions.

Interim Financing: A short-term or temporary loan, such as one made during the construction period of a building.

Internal Rate of Return: (IRR) (also called “Discounted Cash Flow”). A rate of discount at which the present rate of future benefits is equal to the present worth of the investment.

Interpleader: A legal procedure wherein a “Third Party” determines the rights which exist between others involved.

Interstate Land Sales Full Disclosure Act: A federal law enacted in 1968 which regulates the sale of land across state lines and requires full and accurate disclosure and filing with HUD.

Intestate: To die without a valid will.

Intrinsic Value: The actual underlying worth of something.

Invalid: Not legally enforceable.

Inventory: Personal property of a business.

Investment: The outlay of money or something of value with the expectation of future reward such as income or profit.

Investment Syndicate: A joint venture, typically controlled by one or two persons, with the hope of return to all investors in the group.

Involuntary Alienation: Transfer of Title to Real Property as a result of one or more events:
(a) Foreclosure Sale, (b) Bankruptcy, (c) Adverse Possession, (d) Condemnation under the government’s power of Eminent Domain, or (e) Transfer of title to the state upon the death of the title holder, if there are no Heirs.

Involuntary Lien: An encumbrance placed upon real property against an Owner’s will.

Involuntary Conversion: Destruction, theft, seizure, requisition or condemnation of a property.

IRA (Individual Retirement Account): Savings programs available to individuals which allow them to deposit up to a certain amount each year, and that money is not subject to income tax, in that year or in following years, as long as it’s not withdrawn, (except as explicitly provided). The money is taxed when Withdrawn at retirement, usually when the depositor is in a lower tax bracket. During the life of the account, the money may be put into various interest-bearing investments. Securities Dealers as well as banks now offer IRA’s.

Irrevocable: That which cannot be changed, cancelled or revoked.

J

Jetty: (1) A pier or other structure, (usually of stones), built out into a body of water to hinder the currents and to protect a harbor. (2) A part of a building which projects out beyond the exterior walls, such as an overhanging second story or balcony, etc.

Joint Tenancy: A single, undivided estate, (Interest), in real property that is taken by two or more Joint Tenants with rights of survivorship. The interests (1) must be Equal, (2) must have accrued under the same conveyance, (3) must begin at the same time. Tenants have rights of survivorship. Upon death of a Joint Tenant, the interest of the deceased passes to the surviving Joint Tenants, rather than to the heirs of the deceased.

Journal: A record of a real estate Broker’s trust account showing all receipts and disbursements made on a daily basis.

Judgment: A court’s determination of the rights and obligations of parties to an action or lawsuit.

Judgment Lien: A general Lien against the real or personal property that belongs to a debtor.

Judgment Proof: One against whom a judgment creditor cannot collect (no assets). EXAMPLE: If one can show he was defrauded by a “Judgment Proof” real estate licensee, he may recover from the state fund in states having such a fund.

Judicial Foreclosure: A court proceeding which requires that a property be sold to satisfy a Lien.

Junior Lien: A Lien, such as a second mortgage, which is second in priority to an existing Lien.

Junior Mortgage: (see “Junior Lien” or “Second Mortgage”).

Jurisdiction: The extent of authority or power to act, such as the authority of a court.

Just Compensation: The amount of compensation paid to a property owner as the result of Condemnation proceedings.

K

Keene’s Cement: An unusually tough and durable gypsum plaster to which Aluminum has been added. Used primarily for walls of commercial buildings.

Keogh Plan: A retirement plan whereby a self-employed person may set aside a certain portion of Income, (tax deferred), into a retirement account. The money in this account is taxable upon withdrawal at retirement, when the person’s tax bracket is often lower.

Keyman Insurance: Insurance against loss, (from death or disability), of a “Key” (important) person in a company. The insured is typically covered for the estimated cost of the loss, in loss of business and also for replacement of the individual. Some Lenders require this insurance before lending to small companies which rely on one or a very few “Key” persons.

Knock Down: Any part of a building which can be easily assembled, installed or removed, such as certain types of window frames, partitions, etc.

Knot: (1) The hard, irregular-shaped defects in wood boards, caused by cutting at the point where the branch of the tree meets the trunk. (2) A measure of speed, equal to one nautical mile, (approx. 6,076 Ft. per hour).

L

Laches: Loss of legal rights because of failure to assert them on a timely basis. An unreasonable delay by a party making a claim or bringing an action, so that the rights of said party are waived. Laches are usually not controlled by a statute of limitations.

Lake Front: A dwelling unit that has front footage on a lake.

Lake View: A dwelling unit that has visual exposure to a lake.

Land: The surface of the earth down to the earth’s center and upward to the sky.

Land Capacity: The degree to which land can sustain improvements created to make the land more productive.

Land Contract: (also called “Installment Land Contract” or “Contract for Deed”). A method of owner financing wherein the Buyer, (Vendee), obtains “equitable title” (the right of possession), while the Seller, (Vendor), retains the actual title, (Deed), as security until the balance of the purchase price is paid in full through the agreed installment payments.

Land Grant: A gift of land by the government.

Land Lease: A long-term lease of bare land. Title remains with the Lessor.

Landlocked: Real property which has no access to a public road or Ingress and Egress.

Landmark: An object that is fixed in place and used as a marker for property boundaries.

Land Owner’s Royalty: In oil and gas leases, the portion of the value of each barrel of oil which goes to the property owner.

Late Charge: A penalty for failure to pay an installment payment on time. Usually not allowed as interest for tax deductions. May or may not be included as usury. If not, the amount of “Late Charge” is either set by statute or must be “reasonable”.

Latent Defects: Hidden defects in a property that would not be discovered by an ordinary inspection.

Lateral Support: The right of a Landowner to the natural support of his land by the adjoining land. The adjoining Landowner has a duty not to change his land, (such as lowering it), so as to cause the Lateral Support to be weakened or removed.

Lawful: Lawful; not prohibited by law.

Law of Nuisance: The principle that the Owner of a property may not use his property in any way that interferes with the reasonable use of a neighbor’s property.

Lawsuit: A legal process in court to enforce a legal claim.

Lease: A contract wherein a Landlord the rights of use and possession of a property for a limited period of time in return for rent.

Leased Fee: The Lessor’s, (Landlord’s), interest in leased property.

Leasehold: The Lessee’s (Tenant’s), interest in real property created by a Lease.

Leasehold Estate: (see “Leasehold”)

Lease Option: (also called “Lease With Option To Buy”). A clause in a Lease that gives Tenant the right to purchase the property under certain conditions. Typically, the Price and Terms of the Sale must be set forth in order for the Option to be valid. The Option may run for the entire length of the Lease term or only for a limited portion of the Lease term.

Ledger: A detailed, per-transaction record of a Broker’s trust account activity, which shows all receipts and disbursements to a particular transaction.

Legacy: A bequest of money or personal property through a will.

Legal Age or Capacity: The age at which a person is legally recognized as being capable to enter into binding contracts.

Legal Description: A written description of land recognized by law and used by Surveyors.

Legal Entity: A person or organization having legal capacity.

Legal Life Estate: An estate created by the right of Dower, Curtesy, or a statutory substitute.

Legal Name: The recognized full name that a person uses in all legal documents.

Legal Rate of Interest: The maximum interest rate that may be legally charged.

Less Than Freehold Estate: (see “Nonfreehold Estate”).

Lessee: A tenant under a Lease.

Lessor: A landlord under a Lease.

Leverage: The use of borrowed money to finance a purchase.

Levy: (a) the assessment or collection of a property tax, (b) selling property to satisfy a lien.

Liber: Latin term for “Book”. In real estate, the Book of Records in the County’s Register of Deeds office, which is often referred to in a property’s Legal description.

License: (a) permission to practice a job or profession, (b) a personal privilege to do a particular act or series of acts.

Licensee: A person who has a valid license.

Lien: A legally-recognized claim which a person, (Lien-holder), has upon the property of another. Usually this Lien is for some debt or charge a, entitling the Lien-holder to have the claim satisfied from the property of the Debtor.

Lien Foreclosure Sale: (also called “Foreclosure Sale” or “Sherriff’s Sale”). The sale of property without consent of the Owner, as ordered by a court or authorized by state law, in order to satisfy a Lien against the property.

Lienee: One whose property is subject to a lean.

Lienor: One who holds a lien against the property of another.

Lien Waiver: (also called “Waiver of Liens”). (1) A waiver of Mechanics Lien Rights, signed by all subcontractors so that the owner or general Contractor can receive a draw on a Construction Loan.

(2) A waiver of Mechanics Lien Rights, signed by all Contractors and subcontractors, that is usually required at closing of a sale, in order to obtain title insurance for a newly-constructed building.

Life Estate: A non-inheritable interest which lasts only for the life of one or more named persons.

Life Estate in Remainder: A form of Life Estate in which certain persons, (called Remaindermen), are designated to receive the title upon termination of a life tenancy.

Life Estate in Reversion: A form of life estate that goes back to the creator of the Life Estate in fee simple upon termination.

Life Estate Pur Autre Vie: An estate in which the duration is measured by the life of someone other than the life of the life Tenant.

Life Tenant: The one who is the holder of a Life Estate.

Like-Kind Property: Property purchased which is of the same nature and character as the property sold, for purposes of effecting Section 1031 Exchanges.

Limited Common Elements: Areas of a condominium used only by some of the unit owners.

Limited Partnership: A legal entity having a General Partner who is responsible for the total venture and limited partners, (passive), having lesser roles.

Line of Credit: An established amount of money that a Borrower is approved for by a Lender.

Liquidated Damages: Money to be paid and received as compensation for a breach of contract.

Liquidity: The ability to convert an asset into cash.

Lis Pendens: Latin for “A suit is pending”. The giving of constructive notice that a lien or lawsuit is pending against a property.

Listing: A Brokers written agreement to represent a seller and their property. Agents refer to their inventory of Listing Agreements with sellers as “Listings”.

Listing Agent: The real estate sales agent that is representing the sellers and their property, through a listing contract or agreement.

Listing Contract: A written employment contract between an owner, (Principal), and Broker, (Agent), setting forth the terms and conditions upon which Broker will market owner’s property.

Listing Exclusion: A clause included in the Listing Agreement when a Seller lists his or her property with a Broker, permitting the Seller to exclude certain specified items from the Listing Agreement.

Litigation: A lawsuit.

Littoral Rights: Rights belonging to the owner of Land that border a lake, ocean or sea.

Livery in Deed: The delivery of title to a property through a written instrument called a “Deed”.

Loan: An amount of money that is lent to a Borrower who agrees to repay the amount plus interest.

Loan Application: A document that buyers who request a loan fill out and submit to their lender. The Loan Application typically contains information about the property Buyer wants to buy, as well as personal and financial information about the prospective Borrower. The Loan Application is used by the Lender to determine if they are willing to lend, how much they will lend, and under what terms.

Loan Closing: (also called “Loan Settlement”). The disbursement of funds and recording of the Mortgage and Note.

Loan Closing Costs: (also known as “Mortgage Closing Costs”). The costs a Lender charges to close a Borrower’s loan. These costs vary from Lender to Lender and from market to market.

Loan Commitment: (also known as “Mortgage Commitment”). A written document telling the borrowers that the mortgage company has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time. The loan commitment may also contain conditions upon which the Loan Commitment is based.

Loan Correspondent: A person who negotiates Loans and services them for other Lenders.

Loan Modification: A change in the interest rate or in other factors of a loan.

Loan Originator: (see “Mortgage Broker”).

Loan Origination Fee: A financing charge required by a Lender.

Loan Package: The group of mortgage documents that the Lender sends to the closing or escrow.

Loan Policy: (also called “Lender Title Insurance” or “Mortgage Title Insurance”). A title insurance policy insuring a Mortgagee, (Lender), or a beneficiary under a Deed of Trust, against Loss cause by invalid title in the Borrower, or loss of priority of the mortgage or deed of trust.

Loan Processor: An administrative individual who is assigned to check, verify, and assemble all of the documents and the Buyer’s funds to prepare the Borrower’s loan for closing.

Loan-To-Value Ratio: The relationship between the amount of the mortgage loan and the Lender’s opinion of the value of the property pledged to secure payment of the loan.

Loan Underwriter: One who underwrites a loan for another. Some lenders have investors underwrite a buyer’s loan.

Location: An economic characteristic of land having the greatest effect on value in comparison to any other characteristic.

Location Obsolescence: (see “Economic Obsolescence”)

Lockbox: A tool that allows secure storage of property keys on the premises for agent use. A combo uses a rotating dial to gain access with a combination; a Supra® (electronic lockbox or ELB) features a keypad.

Long-Term Capital Gain: Gain on the sale of a Capital Asset which has been held for a specified time or longer, and which may be taxed at a special rate, instead of as ordinary income.

Lot: A parcel of Land.

Love and Affection: A type of consideration referred to as “Good Consideration” (a gift).

M

Made-Land: Artificially formed land, either by filling or dredging.

Magic Mtg.: A nickname for the “Mortgage Guaranty Insurance Corporation” (see MGIC).

Maintenance Fee: A charge levied against a condominium owner for upkeep expenses.

Management Agreement: (see “Property Management Agreement”).

Management Company: A professional real estate management company that manages the physical operation of a building.

Management Plan: (see “Property Management Plan”).

Management Proposal: (see “Property Management Proposal”).

Management Report: (see “Property Management Report”).

Managing Broker: A person licensed by the state as a Broker who is also the broker of record for a real estate sales office. This person manages the daily operations of a real estate sales office and supervises the activities of Salespersons.

Manufactured Home: All or part of a dwelling unit that is constructed in one location and placed in another location.

Margin: Measure of profit.

Marginal Land: Land which is considered to be of little value because of physical characteristics or conditions, such as being too steep, too rocky, etc.

Marketable Title: A title that can be insured because it is free from reasonable doubt or objections.

Market Data Method: (also called “Comparative Market Analysis” or “CMA” or “Market Value Approach”). The primary approach used for estimating the value of vacant land and single-family, owner-occupied dwellings. This method compares similar sold properties in a geographic area over a given time period.

Market Value: The highest price paid for a property, agreed upon by a willing Buyer and Seller, when neither is under any undue pressure, and each is knowledgeable of market conditions at the time.

Master Deed: (also called “Condominium Declaration”). The instrument that legally establishes a condominium.

Master Plan: A program developed to provide a long-term guideline of community development.

Material Fact: Important information that may affect a person’s judgment or decisions.

Materialman: The supplier of materials used in construction of an improvement to a property.

Materialman’s Lien: (see “Mechanic’s Lien”)

Maturity: The time when a Note or negotiable instrument is declared due and payable.

Mechanic’s Lien: A statutory lien available to persons who have not been paid after supplying labor (Mechanics), or material (Materialmen), to a construction project.

Meeting of the Minds: A condition that must exist for the creation of a contract.

Menace: The threat of duress.

Merchantable Title: (see “Marketable Title”).

Merger: When a contract is drafted that merges all previous contracts between the parties for the subject property into the latest version, and renders the previous contracts invalid.

Meridians: An imaginary set of lines running North and South, in the Rectangular Survey method.

Metes and Bounds: A common system of land description which identifies a property by using distances, directions and angles. It always begins and ends at the Point of Beginning, (POB).

MGIC: (see Mortgage Guaranty Insurance Corporation”).

Michigan Civil Rights Commission: State agency which investigates alleged discrimination and helps to secure equal protection of civil rights.

Michigan Condominium Act: Details the rights of condominium Buyers in Michigan.

Michigan Construction Lien Act: Protects and enforces, by Lien, the rights of persons performing labor or supplying materials or equipment for construction and real estate improvements.

Michigan Consumer Protection Act: Prohibits certain practices in trade or commerce and provides for certain remedies.

Michigan Due-On-Sale Clause Act: (applies to Michigan state-chartered Lenders only). Provides that if the Lender amends the Loan and blends the rate for the Buyers who are assuming the Loan, the Seller of the property, (original Borrower), still retains liability on the Note and Mortgage.

Michigan Mortgage Brokers, Lenders and Servicers licensing Act: Regulates the licensing and registration of persons who make, broker or service one-to-four family residential first mortgage loans secured by Michigan property.

Michigan Persons With Disabilities Civil Rights Act: Requires that any person who engages in a real estate transaction, (such as an Owner, real estate Broker or Salesperson), shall not engage in a number of discriminatory practices on the basis of a disability that is unrelated to the individual’s ability to acquire, rent or maintain property, nor discriminate against those using adaptive devices or aids.

Michigan Security Deposits Act: A series of Michigan statutes that closely regulate how a Landlord may handle security deposits received from Tenants.

Michigan State Housing Development Authority (MSHDA): Makes loans at below-market interest rates to developers of rental housing, to low-and-moderate-income Buyers of single-family homes, and to low-and-moderate-income Borrowers for home improvement.

Michigan Truth-In-Renting Act: Regulates rental agreements for residential properties.

Michigan Uniform Securities Act: Prohibits real estate licensees from engaging in transactions that could be viewed as Securities, without having the appropriate Securities license.

Michigan Uniform State Antitrust Act: Prohibits certain types of practices and trade restraints that are injurious to competition.

Michigan Usury Laws: Provides a maximum allowable interest rate of 11 percent in transactions between private parties or unregulated Lenders.

Michigan Environmental Protection Act: Defines state environmental standards and provides penalties for violators.

Michigan Land Division Act: Regulates the division and sub-division of land within the state.

Michigan Land Sales Act: Regulates the advertising, sale or lease of certain land parcels that fall within the scope of the Act and are marketed in Michigan.

Michigan Out-of-State Land Sales: Requirements by the state of Michigan regarding the sale of property located in another state.

Michigan Right-to-Farm Act: Protects farmers from litigation if they follow established guidelines.

Michigan Seller Disclosure Act: Mandates that Owners who sell a one-to-four family residential dwelling complete a Property Disclosure form regarding the condition of the property.

Michigan Underground Storage Tank Regulatory Act: Mandates that all petroleum products stored underground must be registered.

Michigan Wetland Protection Act: Defines and regulates the use of Michigan’s wetlands.

Mid-Rise: A multiple-floor building that has three to nine floors.

Mile: A lineal measurement of distance. Equal to 1,700 yards or 5,280 feet or 1.609 kilometers.

Mill: One tenth of one cent; One dollar per each $1,000 of assessed value; (.001 in decimals).

Mineral Deed: A deed used to convey mineral rights in a property.

Mineral Lease: A leasehold estate in the area below the surface of the land.

Mineral Rights: A land owner’s legal ability to take minerals from the earth or to sell or lease this right to others.

Minor: A person who has not attained the statutory age of majority and cannot enter into binding agreements.

Misrepresentation: (a) a false statement or omission of material fact, (b) in real estate, making an unintentionally false statement.

Mobile Home: A dwelling unit that is constructed with attached wheels and can be moved from one location to another.

Mobile Home Mortgage: A security loan for financing a mobile home.

Model Home / Condo: A dwelling unit that the builder/developer finishes as a sales sample for the public to view.

Money Market Mutual Funds: Funds which invest in the “Money Market”, a variety of interest-bearing securities such as Treasury Bills and bank Certificates of Deposit (CD’s). None is invested directly into real estate or real property securities.

Month-to-Month Tenancy: (also called “Period-to-Period Tenancy”). A periodic tenancy in which a Tenant rents for one period at a time. It is renewable by agreement of both parties and termination usually requires a 30-day notice.

Monument: In surveys, this is a visible marker of a Point of Beginning, (POB).

Mortgage: A written instrument used to pledge a Title to real property in order to secure payment of a promissory Note.

Mortgage Assumption: The transfer of mortgage obligations to a Buyer of a mortgaged property.

Mortgage Banker: A licensed financial middleman that brings the Borrower and Lender together, makes the Loan, packages the Loan, and sells it to private and secondary investors. Unlike a Mortgage Broker, a Mortgage Bankers lends their own funds, although these funds are generally borrowed and the financing is either short term, or if long-term, the mortgages are sold to investors within a short time.

Mortgage Bonds: Bonds issued by corporations in order to raise money, which offer first mortgages on real property owned by the corporation as security for payment of the bonds.

Mortgage Broker: (also called “Loan Broker”). A licensed business that arranges a mortgage Loan between a Borrower and Lender and processes mortgage applications for a fee.

Mortgage Company: (also called “Mortgage Servicer”). A company authorized to service real estate loans for a fee.

Mortgage Discount: (see “Discount Points”).

Mortgage Guaranty Insurance Corporation (MGIC): This independent insurance company insures the top 5 to 20 percent of the Loan Principal made by qualified Lenders, allowing Buyers to qualify for a mortgage Loan with less than 20% of their own funds.

Mortgage Insurance Premium (MIP): A payment required of certain Borrowers, (typically those with Down Payment of less than 20%), to protect the Lender and/or Insurer against loss if default occurs.

Mortgage Lien: (see “Lien”).

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 under the policy is the Mortgagee, (Lender). In the event of death, (some policies also cover disability), of the Insured Borrower, the mortgage is paid in full.

Mortgage Loan Servicing Company: (also called “Mortgage Servicer”). A company that collects monthly mortgage payments from Borrowers and keeps loan records.

Mortgage Loan Value: The value deemed sufficient to secure payment of a mortgage loan.

Mortgage Modification: (see Loan Modification).

Mortgage Principal: The total amount of money that is borrowed and on which interest is either paid or received.

Mortgage Satisfaction: Full payment of a mortgage loan according to terms agreed.

Mortgagee: The Lender in a mortgage Loan, who receives a “Mortgage” from the Borrower, (Mortgagor), to secure the debt.

Mortgage Servicing: Controlling the necessary duties of a Mortgagee (Lender), such as collecting payments, releasing the loan upon payment in full, foreclosing if in default, and making certain that taxes are paid, insurance is in force, etc. Servicing may be done directly be the Lender, or a company acting for the Lender for a fee.

Mortgaging Clause: The statement in a Mortgage or Deed of Trust that states the Mortgagor’s intention to mortgage the property to the Mortgagee.

Mortgagor: The Borrower who pledges the real property through an instrument called a “Mortgage” in order to secure the debt.

Motel: A building and business that provides overnight accommodations for a charge.

Multiple Exchange: When more than two properties are exchanged as part of a single transaction.

Multiple Listing Service (MLS): A real estate industry listing service that compiles a database of properties for sale or lease by member Brokers, and shares the information with other members. The MLS system benefits all involved: (a) Sellers benefit by listing their property with one Broker who then markets the home to all member Brokers and their Buyers. (b) Buyers benefit by being able to have access to a large database of properties through one single Broker, and (c) Real Estate Brokers and Salespersons benefit by having an indispensable resource of properties they can sell to generate pre-determined commission income.

Multiple Offers: When a Listing Broker receives more than one offer on a property and the offers are competing against each other.

Mutual Assent: (also called “Meeting of the Minds”). The voluntary agreement of all parties to a contract, as evidenced by an Offer and Acceptance.

Mutual Release: (also called “Mutual Rescission”). A document wherein the parties to a contract mutually agree to release one another of contract obligations.

Mutual Savings Bank: Banks that are mutually owned by their investors, (Depositors) and which are a substantial source of funding for the housing market, unlike Commercial Banks, which concentrate more on short-term loans.

N

National Association of REALTORS® (NAR): The largest national trade association comprised of real estate professionals.

National Environmental Protection Act: A law passed in 1969 to protect the environment.

National Fair Housing Alliance (NFHA): A Coalition of private, nonprofit fair housing groups that has joined with federal and state government agencies to improve fair housing enforcement.

Natural Flow: Allows a property owner to use water that flows through their property, but not to stop the natural flow of the water.

Negative Amortization: When a loan payment is not enough to cover the interest due, the shortage is added to the Principal, causing the Principal to grow larger, even after payment is made.

Negative Covenant: (see “restrictive Covenant”).

Negative Easement: A right in the land of another, (Easement), which restricts the use of that other person’s land.

Negligence: A Legal term describing the failure to use the level of care that a reasonable person would use in like circumstances.

Negotiable Instrument: A written instrument signed by a Maker, containing an unconditional promise to pay to the Bearer a certain sum of money upon demand or at a definite time.

Neighborhood: Homes, land and buildings, usually sharing some common characteristics, within a close geographic area.

Net Income: (also called “Net Operating Income” or “NOI”): Gross income less operating expenses.

Net Lease: (also called a “NNN Lease” or “Triple Net Lease”). A lease in which the Lessee, (Tenant), pays a fixed amount for the rent plus a share of the operating costs of the property, (Taxes, Insurance, Maintenance).

Net Listing: A method of establishing the Listing Broker’s commission as being all amounts received for the property above a specified net amount to the Seller.

Net Sales Price: Gross sales price, less closing costs.

Net Salvage Value: (see “Salvage Value”).

Net Worth: The difference between Total Assets and Total Liabilities of an individual or company.

Niche: A special area or interest.

Non-Bearing Wall: A wall used only to separate areas and not to provide support to the structure.

Nonconforming Use: A use of land that does not conform to the uses permitted by the zoning ordinance for the area. Sometimes this is allowed because the use was pre-existing before the restrictions were imposed and the nonconforming use is said to be “Grandfathered” in. Variance
may also be granted to Owners who apply and show good cause.

Non-Exclusive Listing: (also called “Exclusive Agency Listing”). A listing under which the real estate Broker has an exclusive listing as opposed to other agents, but the Owner retains the right to sell the property without using an agent, and in such case would not be liable to pay a commission.

Non-freehold Estate: Estates with a length determined by agreement or statute, (such as Leaseholds), which only establish possession of land as opposed to ownership in fee.

Non-judicial Foreclosure: (also called “Foreclosure Under Power of Sale”). A type of foreclosure that does not require court action to conduct a foreclosure sale.

Non-Recourse Loan: A loan not allowing for a deficiency judgment. The Lender’s only recourse in the event of default is the security, (Property), and the Borrower is not personally liable.

Notary Public: A person authorized by the state to formally acknowledge documents and certify signatures to them.

Note: The primary evidence of a debt and a personal obligation on the Borrower, (Obligator).

Notice of Cessation: A notice stating that work has stopped on a construction project. Usually done to accelerate the period for filing a Mechanic’s Lien, but may also occur when a Building Inspector has found violations that must be corrected before work on the construction may continue.

Notice of Lis Pendens: A statement on the public record warning all persons, (Giving Constructive Notice), that a title to real property is the subject of a lawsuit, and that any liens resulting from the suit will attach to the title held by a purchaser of the property.

Notorious Possession: See “Adverse Possession”.

Novation: A release of liability; Substitution of a new contract for a prior contract.

Nuisance: A use of property which interferes with another person’s reasonable use and enjoyment.

Null and Void: Invalid; without legal force or effect.

Nuncupative Will: An oral will, usually in a deathbed situation, before witnesses who later testify to its authenticity.

O

Oath: A promise to tell the “Truth” by a person, which binds him or her legally and morally. An “Oath” usually attests to the “Truth” of something, such as an Affidavit or the validity of a signature. Also, an “Oath” may be a promise to carry out a duty with high morality, (Oath of Office). An Oath usually has religious connotations, may require one to place their hand on a Bible, and may include use of the word “Swear”, and the phrase, ‘So help me God”.

Obligee: One to whom a duty or obligation is owed, (such as the Lender or Mortgagee).

Obligor: The person who owes the duty or obligation, (such as the Borrower or Mortgagor).

Obsolescence: Loss in property value, (depreciation), caused by functional or economic factors.

Occupancy: The physical possession of real property.

Offer: A promise by one party to act or perform in a specified manner in return for specified consideration from another.

Offer and Acceptance: (also “Mutual Assent”). Necessary elements for the creation of a contract.

Offeree: One to whom an offer is made.

Offerror: One making an offer.

Office Tour / Caravan: A walking or driving tour by a real estate sales office of listings represented by agents in the office. Usually held on a set day and time.

Official Map: The control of land use by a municipality.

Off- Market: A property listing that has been removed from the sale inventory in a market.

Offset Statement: (1) A statement given to a Buyer of rental property by a Tenant, setting forth the amount of the rent and terms of the rental agreement. (2) A statement by an Owner or Lien-Holder to a Buyer, setting forth the balance due on existing Liens against the property being purchased.

Once-In-A-Lifetime Tax Exclusion: A forgiveness of a portion of the tax due on the sale of a residence by a senior citizen. The “Exclusion” can be taken only once in a lifetime.

“One, Two, Three” Financing: A method of creative financing by which the Buyer: (1) assumes an existing loan, (2) secures a second loan from a third-party Lender, and (3) takes a third loan from the Seller.

On-Site Management: The management of a building operating from an office within the building.

Open House: When a listing that is on the market is available to the public for viewings.

Open Listing: A property listing given to one or more Brokers, (non-exclusive), wherein the Broker procuring the sale is entitled to the commission, but the owner is not liable to pay a commission if the property is sold to a party who was not procured by one of the listing Brokers.

Open Mortgage: A mortgage that has no prepayment penalty.

Open-End Mortgage: A mortgage that may be refinanced without rewriting the mortgage.

Operating Budget: A periodic budget prepared by a property Management company to show income and expenses for a specific property.

Operation of Law: The assignment of rights and liabilities to parties by the application of law, without requiring the cooperation of the parties.

Opinion of Title: (see “Attorney’s Opinion of Title”).

Opportunity Cost: The cost related to missed opportunities when Investors have their money tied up and cannot take advantage of alternative investments.

Option: (also called “Option to Buy”). A contract whereby a property Owner, (Optionor), sells a right to purchase his or her property to a prospective Buyer, (Optionee), sometime in the future.

Optionee: The person who holds the Option, (the prospective Buyer).

Optionor: The person who gives the Option, (the prospective Buyer).

Option to Renew: A provision which explains the method and terms for renewing a Lease.

Ordinance: A law enacted by a local government.

Origination Fee: A service charge by Lending institutions for making a mortgage loan.

Ostensible Authority: The authority that a person can assume another has based on their actions.

Over-Improvement: Making improvements to a real property that exceed the possible resale value.

Override: A rental amount paid according to the sales of the Tenant. EXAMPLE: A Lease for a service station may contain a provision for a certain amount of “additional rent” to be paid to the Landlord for every gallon of gasoline over a certain amount sold each month. The amount “Over” is the “Override”, such as, two cents per gallon for each gallon over fifty thousand sold each month.

Ownership: The right to hold, control, use, possess and dispose of real property.

Ownership in Severalty: Title to real property held in the name of one person only.

Owner’s Title Policy: A policy of title insurance covering an owner’s estate against defects in title.

P

Package Mortgage: A type of mortgage wherein both Real and Personal property is pledged to the Lender as security.

Package Policy: Insurance that combines coverage for a number of risks under a single policy.

Parcel identification Number (PIN): A taxing authority’s tracking number for a property.

Parking:
• Deeded:…………A parking space that is owned as a piece of real estate.
• Leased:………….A parking space that is leased by the building occupant.
• Underground:…A parking space located beneath grade of the building.
• Assigned:……….A parking space appointed by the association or management company.
• Valet:…………….The car is parked and returned by a parking attendant for the occupant of the space.

Parol Evidence Rule: A concept allowing that oral explanations can support the written words of a contract, but cannot contradict them.

Partial Release Clause: Allows certain parcels of property to be removed from a mortgage lien if the loan balance is reduced to a specified amount. This is useful in “Blanket Mortgages” because it allows land Developers and Builders to transfer ownership one parcel at a time.

Partial Eviction: A Landlord’s interference with some part of the Tenant’s right of possession.

Partially Amortizing Mortgage: (see “Balloon Mortgage).

Participation Certificates: Mortgage Securities, rather than Mortgages. The advantage of the Certificate is that it is readily marketable or pledge-able.

Participation Mortgage: One or more of the following conditions may exist: (a) Two or more Lenders share in making the Loan, or (b) A Lender shares in the profit produced by an income property that was pledged to secure the Loan, in addition to receiving interest and principal payments. (c) A Lender shares in the profits from the sale of the secured property at closing.

Partition: (1) A legal proceeding that divides the property of co-owners, resulting in Individual Ownership of the interests of each. (2) A wall used to divide a room or building, often movable and not load-bearing.

Party Wall: A common wall used by two adjoining structures.

Passive Income: Income from passive activities.

Patent Defects: Property defects that could be discovered by exercising ordinary care and reasonable inspection.

Payment Cap: In Adjustable Rate Mortgages, this is the maximum amount for a payment, regardless of the periodic increase in the Interest Rate. If the payment is Less than the Interest alone, Negative Amortization is created.

Payoff Letter: A written document from a seller’s mortgage company stating the amount of money needed to pay the loan in full on a given date. This is usually needed to prepare closing documents.

Pending: (also called “Under Contract”). This refers to the status of a real estate property when a sales contract has been accepted but the transaction has not closed.

Penthouse: A dwelling unit of the uppermost occupied floor of a building.

Percent Owner-Occupied: The number of units in a condo or co-op that are owner-occupied.

Percentage Lease: When the Lessor, (Landlord), receives both a set rent and a percentage of the Tenant’s gross sales.

Perch: A surveyor’s measure (16.5 feet in length).

Percolation Test: (also called “Perc Test”). A test used to determine the soil’s ability to retain or absorb water and if it’s porous enough to allow installation of a septic tank.

Perfecting Title: Clearing title clouds and defects.

Periodic Tenancy: (see “Month-to-Month Tenancy”).

Permanent Mortgage: Long term mortgage loan.

Permissive Waste: Allowing a property to deteriorate beyond normal wear and tear.

Personal Assistant: A real estate Broker or Salesperson’s administrative assistant.

Personal Property: (also called “Chattel”). All property that is not land and is not permanently attached to land. Everything that is readily movable.

Personal Property Loan: A loan which is secured by both Real and Personal property. The minimum ratio of Personal to Real property is set by law. The Borrower’s credit is a major consideration in making the loan.

Personal Representative: In Michigan, a person who is an Administrator or Executor appointed by a court to distribute the property of a person dying without a valid Will (intestate).

Physical Deterioration: Loss in property value caused by wear and tear and inadequate maintenance or repairs.

PITI: Acronym denoting that a mortgage payment includes Principal, Interest, Taxes and Insurance.

Placed In Service: The date when an asset is ready for a particular use.

Plaintiff: The party bringing a civil action against a Defendant.

Planned Unit Development (PUD): A newer, high-density, mixed-use development that sets aside areas for residential use, commercial use, and public areas such as schools, parks, and so on.

Planning: A program designed by the “Planning Commission” for the orderly growth and development of a city or county.

Planning Commission: Government agency in charge of land use and controls.

Plat: A recorded property map showing property divided into lots and blocks.

Plat Book: Book filed in the public records identifying subdivided land, (lot and block).

Platted Land: Property that is recorded as an official subdivision.

Pledge: To offer property as security for a debt or for the performance of a promise.

Plottage: Combining two or more parcels of land into one tract to increase total value.

PMI: Private Mortgage Insurance. (see “Mortgage Insurance Premium”).

Point Of Beginning (POB): (also called “Monument”). The point at which a Metes & Bounds legal description begins and ends.

Points: (see “Discount Points”).

Police Power: The power of government, at various levels, to regulate the use of real property for the benefit of the public. This includes the passing and enforcement of laws & ordinances.

Policy: (a) a set position or procedure one follows, such as in the operation of a business; (b) an agreement between an insurance company and an insured.

Population Density: The number of people within a given land area, such as a square mile. This is part of the Demographic Information that may be useful to Buyers of income-producing property.

Possession: The actual or constructive possession or control of real property. A Leasehold estate.

Possibility of Reverter: This term shows no estate, (interest), in property, but only the chance that an estate will exist at a future time. EXAMPLE: If a property was sold on the condition that it be used for a Park, and, if not used for a Park, would revert back to the Seller, then the Seller would have the possibility of Reverter.

Potential Income: (see “Gross Potential Income”).

Power of Attorney (POA): A written instrument authorizing a person to act on behalf of another.

Preapproval: A higher level of Buyer/Borrower Prequalification required by a mortgage Lender. This is usually based on review of credit history and verified documentation. Some preapprovals have conditions the borrower must meet.

Premises Clause: The introductory information on a Deed.

Premium: The amount an insured pays to the insurance company for the insurance policy.

Prepaid Expenses: Expenses that are paid before they are due. In real estate transactions, these may include property Taxes and Association Dues which were paid by the Seller but not fully used up, requiring the Buyer to reimburse the Seller at closing on a pro-rated basis for the unused portion.

Prepaid Interest: Funds paid by a Borrower at closing based on the number of days left in the month of closing. This is to pay Lender interest for the partial month before regular payments begin.

Prepaid Items: (also called “Pre-paids”. See “Escrow Account Lender”). Funds a Buyer pays at closing to start an Escrow Account with the Lender, as may be required in certain mortgage loans.

Prepayment Penalty Clause: A provision in a mortgage loan which imposes a fine on the borrower by the lender when the loan is paid off before it comes due, (maturity date).

Prepayment Privilege Clause: A provision in a mortgage or Land Contract giving the Borrower the right to pay off all or part of the Loan before it matures, without penalty.

Prequalification: When a mortgage company tells a Buyer how much money the Buyer can afford to borrow, in advance of the formal mortgage application. This is usually based on unverified figures, so it is not considered as accurate or strong as a “Preapproval”. Some pre-qualifications have conditions that the borrower must meet.

Prescription: A method of acquiring an easement on someone’s real property by continuous and uninterrupted use without permission.

Prescriptive Easement: An easement acquired through a court procedure by adverse use.

Prescriptive Title: (see “Adverse Possession”).

Preview Appointment: When a real estate licensee views a property alone to see if it meets his or her Buyer’s needs.

Preventive Maintenance: A program of regularly-scheduled maintenance checks on equipment to assure proper operation and functioning.

Prima Facie: Latin meaning, “On the face of it”; a fact presumed to be true unless disproved by contrary evidence.

Prima Facie Case: A suit that is sufficiently strong that it can be defeated only by contrary evidence.

Primary Financing: The loan having the highest priority.

Primary Mortgage Market: The activity of Lenders making mortgage loans to individual Borrowers.

Prime Contractor: Any Contractor, (such as a Builder), hired directly by the Owner. The contractors hired by the Prime Contractor are called “Sub-Contractors”.

Prime Rate: The interest rate a Lender charges to it’s most credit-worthy customers.

Principal: (a) The amount of money borrowed. (b) In the law of agency, one who appoints an agent to represent him or her. For example, when a Homeowner lists their home with a real estate Broker, the Homeowner is the Principal and the Broker is the Agent.

Principal, Interest, Taxes, and Insurance (PITI): The four parts that make up a borrower’s monthly mortgage payment.

Principal Meridian: In the rectangular method of property description, this is the North-South line.

Principal Residence: A home someone occupies most of the time.

Principle: An ethical position or fundamental belief upon which others may be based.

Prior Appropriation System: A system of appropriating water rights used in many western states which gives priority to water rights based on the date that the water was first put to beneficial use.

Priority Liens: Special Liens that receive preferential treatment.

Private Land Use Controls: A general term for land use regulations imposed by individuals and non-government organizations, such as Deed restrictions and Restrictive Covenants.

Private Mortgage Insurance (PMI): A special insurance paid by borrowers in monthly installments to protect Lenders against loss, typically on loans of more than 80 percent of the value of the property.

Private Property: Property which is not owned by government. Opposite of “Public Property”.

Probate: A judicial procedure for proving the validity of a will.

Procuring Cause: The efforts of a Broker which are credited with causing a sale.

Profit a Prendre: The right to share in profits from another’s land, such as from minerals or crops.

Professional Designation: Additional real estate education completed by a real estate professional.

Professional Regulation: A state licensing authority that oversees and disciplines licensees.

Promissory Note: A written promise to pay a debt as set forth in the writing.

Promulgate: To put in effect by public announcement.

Property: Something which belongs to a person. Property may be divided into two general types: (a) Real Property, which is Land and all that is permanently attached to it, and (b) Personal Property, which is all other types of property.

Property Description: An accurate legal description of land.

Property Disclosure Form: A comprehensive checklist pertaining to the condition of the property, including its structure and known environmental hazards.

Property Management: A service offered by some real estate Brokers to property Owners which often includes rent collection, leasing and maintaining the property. Property Management may also cover many other aspects. The details of each party’s responsibilities are set forth in a “Property Management Agreement”.

Property Management Agreement: A contract through which a property Owner employs a property Manager.

Property Management Plan: A long-range program prepared by a property Manager indicating to the Owner how they will manage the property.

Property Management Proposal: A proposed program for operating a property, submitted to the Owner by a Property Manager.

Property Management Report: A periodic financial and operations report prepared for the Owner by a Property Manager.

Property Manager: One who manages property for an Owner, as the Owner’s agent.

Property Report: Disclosure required under the “Interstate Land Sales Disclosure Act”.

Property Tax: A charge levied by a government unit against Real or Personal property.

Proprietary Lease: A written Lease in a Cooperative (Co-Op) apartment, giving the Tenant the right to occupy a particular unit.

Proration: The division of certain settlement costs between Seller and Buyer.

Protection Period: See “Safety Clause”.

Public Land Use Controls: A general term for regulation of land use imposed by government bodies in the form of zoning laws, building codes, subdivision ordinances and environmental protection laws.

Public Offering Statement: A disclosure statement required of property sellers in some states.

Public Property: That which is owned by the government. Opposite of “Private Property”.

Public Records: Giving Constructive Notice for all to see by recording documents with government offices. In the event of conflicting claims, the date of placement in the Public Records may determine the order of priority.

Public Sale: A sale to which the public is invited to submit bids.

Public Utility Easement: The taking of land for the purpose of installing pipes, wires, cables, etc. to benefit the public.

PUD: Abbreviation for “Planned Unit Development”.

Puffing: An exaggeration of a property’s benefits, usually based on opinion and usually not grounds for a misrepresentation.

Punitive Damages: (also called “Exemplary Damages”, which are intended to “make an example of the offender”). Court-awarded damages intended as punishment for extremely bad behavior. This is mostly done when the wrong is deliberate or grossly negligent and Compensatory Damages do not appear to be sufficient.

Pur Autre Vie: A life estate based on the life of another.

Purchase and Leaseback: When a property is sold and leased back to the Seller.

Purchase Money Mortgage: When Seller gives Buyer a mortgage to cover part or all of the purchase price.

Q

Quadrant: (1) A quarter section of a circle. (2) One of the Quarters created by two intersecting roads or streets.

Quadrominium: Four attached condominiums.

Qualified Fee: (see “Fee Simple Defeasible”).

Quantity Survey Method: (also called “Price Take-Off Method”). A process of arriving at an estimate of new construction costs by a detailed estimate of the quantities of necessary building materials plus labor costs.

Quarter Section: One fourth of a section of land, containing 160 acres.

Quiet Enjoyment: The right of an Owner or Tenant to undisturbed use of the premises.

Quiet Title: A legal action in court to remove a cloud from a title and to perfect a claim.

Quit Claim Deed: A Deed which makes no guarantees or warranties of title and only conveys whatever interest the Grantor has at the time Grantor signs it. Quit Claim Deeds are often used to relinquish or release a claim to real property, so as to remove a cloud from the title.

R

Radon: An odorless, tasteless and invisible gas produced by the decay of naturally-occurring Uranium in soil and water. Radon is released into the air and into homes and buildings in various concentrations. For most people, the greatest exposure to Radon is in their homes, especially in rooms that are below grade or close to the ground. Radon is a form of ionizing radiation and is a proven carcinogen. EPA estimates that about 20,000 lung cancer deaths each year in the U.S. are Radon-related. The EPA currently recommends that all homes be tested and that homes be fixed if the Radon level is 4 pCi/L (picocuries per liter) or more. Because there is no known “safe level” for Radon, the EPA further recommends that Americans should consider fixing their homes even when the Radon Level is one-half that amount. Check the EPA website for more information.

Radius: Part of a property’s metes and bounds legal description, the Radius is the distance from the center of a circle to the perimeter.

Range: An area of land defined by the rectangular survey system, (Government Survey System), which is a land strip six miles wide running in a North-South direction.

Rate of Return: (also called “Return On Investment” and “ROI”). The relationship between the Investment in a business and the annual net income.

Ratify: To reaffirm a previous action.

Ready, Willing and Able: Describes a Buyer who is ready to buy, willing to buy and financially able to pay the price.

Real Estate: (also called “Real Property”). Land and everything permanently attached to land. This includes air, surface and subsurface (mineral) rights.

Real Estate Agent: An individual who is licensed by the state and who acts on behalf of his or her client, the Buyer or Seller. The real estate Salesperson who does not have a Broker’s license must work for a licensed real estate Broker.

Real Estate Board: A real estate industry association composed of Brokers and Salespersons.

Real Estate Broker: A licensed person or organization who negotiates real estate sales, exchanges or rentals for others for compensation. The Broker may employ real estate Salespersons as Agents of the Broker, to assist Broker in carrying out these objectives.

Real Estate Commission: (a) a fee paid to a Broker for their services, (b) a department of the state charged with enforcing real estate laws.

Real Estate Contract: A binding agreement between a Buyer and Seller of real estate. It consists of an offer and an acceptance as well as consideration (i.e., money).

Real Estate Investment Trust (REIT): A group of investors who purchase real estate through a Trust by the use of certificates, and profits are distributed free of corporate tax, provided that the Trust distributes at least 90 percent of Taxable Income to Shareholders.

Real Estate Market: A local activity in which real estate is purchased, sold and leased at prices set by competing forces.

Real Estate Salesperson: A licensed person who is employed by a real estate Broker to carry out the Broker’s objectives as an Agent of the Broker, including negotiation of real estate sales, exchanges or rentals for others for compensation.

Real Estate Settlement Procedures Act (RESPA): A federal law regulating activities of lending institutions in making mortgage loans for housing.

Realized Gain: The actual profit that results from a sale.

Real Property: (also called “Real Estate”). Land and everything permanently attached to land. This includes air, surface and subsurface (mineral) rights.

REALTOR®: A registered trademark of the NATIONAL ASSOCIATION OF REALTORS that can be used only by its members.

Realty: (see “Real Estate” or “Real Property”).

Reappraisal Lease: A lease in which the rental amount is adjusted according to periodic reappraisals of the property’s value.

Rebate: A discount or reduction in price of a product or interest. Many states regulate gifts and educational aids given to real estate Brokers by supporting companies, such as title agencies, calling these in effect a “price discount”.

Recapture Clause: In a Percentage Lease, this clause allows the Landlord to regain possession of the property and cancel the Lease if the rent income falls below a set minimum.

Receipt: A written acknowledgment of having received money or something of value.

Receiver: A court-appointed person who is temporarily charged with managing a property.

Receiver Clause: A clause in a mortgage designating a Receiver upon mortgage default.

Reciprocity: Mutual agreement by states to extend licensing privileges to each other’s licensees.

Recognized Gain: The amount of profit that is taxable.

Recordation: The act of entering a document into the public record, giving “Constructive Notice”.

Recorded Plat: (see “Plat”).

Recovery Fund: Provides a means of recovery if all debts are not paid by the contractor.

Rectangular Survey System: (also called “Government Survey”). A type of land description which divides land by imaginary lines of Longitude (Meridians) and Latitude (Base Line) into six-mile squares called Townships, containing 36 square miles called Sections.

Redemption: A mortgage Borrower’s right to redeem their title and rights to a property after default and foreclosure, by paying the debt in full, along with accrued interest and Lender costs.

Redemption Period: The time period that a Borrower has in which to pay off a mortgage default and recover their right to the property, usually after judicial Foreclosure. The Foreclosure process and the time allowed for Redemption may vary as they are governed by state laws.

Redlining: A discriminatory practice involving some Lenders who refuse to make loans for purchase, construction or repair when the dwelling is located in an integrated area or has a minority population.

Reduction of Mortgage Certificate: A document showing the exact unpaid balance of a mortgage or Land Contract.

Reentry: An owner’s right to regain possession of property.

Referral: When a real estate licensee sends or receives business from another Broker or Agent. Usually, this is done because the sending Agent cannot service the customer properly due to distance.

Referral Fee: An agreed percentage of a Broker’s commission paid to another Broker as a fee for sending them a Buyer or Seller.

Refinancing: Obtaining a new mortgage loan to pay and replace an existing mortgage.

Regulation A: Provides a special exemption from the SEC standard registration of a security issue.

Regulation B: (see “the Equal Credit Opportunity Act”).

Regulation Q: Allows different interest rates for Savings & Loans and Commercial Banks.

Regulation T: Regulates the extension of credit by securities brokers.

Regulation Z: (see “Truth-In-Lending Law”)

Reinstatement: Payment of a Note, Mortgage, etc., to bring it from Default to good standing.

Reinsurance: The transferring of a portion of the Liability of an insurance policy to other Insurers.

REIT: See: Real Estate Investment Trust.

Reject: To refuse to accept an offer.

Release Clause: A provision in a “Blanket Mortgage” which specifies the terms by which specific individual parcels that were pledged as security for a loan are released from the mortgage lien.

Release Deed: A written document stating that a seller or buyer has satisfied his or her obligation on a debt. This document is usually recorded.

Release of Liability: (see “Novation”)

Reliction: An increase in a Riparian property owner’s land resulting from the lowering of water.

Relist: Property that was listed with another broker but relisted with a current broker.

Remainder: A future interest in a Life Estate.

Remainderman: One having a future interest in a life estate.

Remise: To release or give up.

Renegotiable Rate Mortgage: A type of mortgage loan with a fixed maturity, such as 15 or 30 years, but with an interest rate that is renegotiated periodically, which changes the monthly payment.

Rent: A charge paid or received for the use of real estate.

Rental: Property for which an Occupant / Tenant periodically pays the Landlord / Owner a sum of money to use and occupy.

Rent Concession: A discount from the rent normally charged or advertised.

Rent Control: Government regulations, (state or local), restricting the amount of rent that Tenants can be charged in certain areas.

Renunciation: Renouncing or giving up some right or interest in a contract.

Replacement Cost: The amount of money required to replace a structure with another structure of comparable utility but built with modern materials.

Repossession: Regaining possession of property as a result of a default of contract by another.

Reproduction Cost: The amount of money required to build an exact duplicate of a structure, using the same style and materials.

Rescission: Cancellation of a contract, either mutually or by one of the parties when the other party is in default.

Reservation: (1) A right created and retained by a Grantor. The reservation may be temporary, (such as a Life Estate), or permanent, (such as an Easement running with the land). (2) Public land that is reserved for a special purpose, such as an Indian Reservation.

Residence: A person or a family’s home.

Resident Manager: A person employed to manage a building who usually lives on the premises.

Residual Value: A building’s value after it’s economic life is reached.

Resource Conservation and Recovery Act: An act that establishes a comprehensive regulatory plan for hazardous waste management.

Restriction: A limitation on the use of real estate.

Restrictive Covenant: A limitation placed, such as a Deed Restriction, placed on the use of private property by an individual or non-governmental entity.

Revenue Stamps: (see “Documentary Stamps” or “Transfer Tax”).

Reverse Annuity Mortgage (RAM): A type of mortgage which allows elderly homeowners to borrow against the equity in their home without paying back the Lender, except through a settlement with the estate after death.

Reversion: The return of title to the holder of a future interest, such as return of title to the Grantor in a Life Estate not in Remainder.

Reversionary Interest: The future interest a person has in real property, such as when possession of the property will revert back to the Owner in the future, at the end of a Lease.

Revocation: To terminate, cancel or withdraw, such as the revocation of an Offer to Purchase.

Rider: (see “Addendum”).

Right of Assignment: Allows a Lender to sell a mortgage before the completion of the loan term.

Right of First Refusal: A right to have the first opportunity to buy or lease a property.

Right of Inheritance: An Heir’s right to inherit property.

Right of Redemption: An owner’s right to redeem a property after a foreclosure sale, as provided by state law.

Right of Survivorship: In a “Joint Tenancy” or “Tenancy By The Entirety”, the right of an Owner to receive title to the share in the property of a deceased Co-Owner.

Right Of Way: (1) An easement to pass over another’s property. (2) A strip of land which is used a roadbed for a street or railway. The land is set aside as an Easement or in Fee, either by agreement or by condemnation.

Right to Emblements: The right of former Owners or former Tenants to reenter a property to cultivate and harvest annual crops they planted.

Riparian Rights: A property Owner’s legal right to use water adjoining his land.

Risk Management: Controlling and limiting risk, such as in property ownership.

Rollover Rule: A provision in the tax law allowing the tax on gains from the sale of a principal residence to be postponed when all conditions are met.

Row Houses: Attached homes with common side wall(s).

Running With The Land: Rights, covenants or restrictions which are transferred with the title.

Rural housing Service (RHS) Direct Loan Program: Provides loans for rural Americans who qualify by having incomes that are below 80% of the median income in their community.

S

S Corporation: A form of corporation whereby corporate income and expenses flow through to shareholders as if in a “Partnership”.

Safety Clause: (also called “Carryover Clause” or “Extender Clause” or “Protection Period”). A clause in a Listing Agreement which protects the Broker from having Buyer and Seller avoid the payment of Broker’s Commission by waiting until the listing Expires to make a deal. The clause typically states that if the listed Property is sold during a specified period after the Expiration of the listing, (or any extensions thereof), to a Buyer provided during the listing period by the Broker, the commission shall be paid. To avoid having Sellers be liable for paying commissions to multiple Brokers, many such clauses make an exception in the event the property is listed by another Broker, who later sells to a buyer who saw the home previously.

Salaried Agent: A real estate sales agent or broker who receives all or part of their compensation in real estate sales in the form of a salary. More common in the new construction industry.

Sale and Leaseback: A transaction whereby an Owner sells their property to another party, and then leases it back from that party, as agreed in the sales contract.

Sales Contract: An agreement between Buyer and Seller to certain specified terms and conditions.

Salesperson: A person licensed under state law to act on behalf of a licensed Broker.

Salvage Value: The estimated worth of an asset, or property, at the end of its useful economic life.

Sale Price: The price paid for a listing or property.

Sales Meetings: A meeting conducted by the managing broker of a real estate sales office.

Sales Volume: The total amount of all sales prices for all transactions completed by a real estate agent, broker, or real estate sales office.

Satisfaction of Mortgage: A certificate issued by the Mortgagee stating the mortgage is discharged.

Satisfaction Piece: A certificate which states that a Lien has been discharged.

Savings and Loan Association: Originally an association chartered to hold savings and make real estate loans. Federally insured and regulated. Active mostly in long-term financing rather than construction loans. Recent changes in federal controls have enabled these associations to offer Checking Accounts, Consumer Loans and other services traditionally offered by Banks.

Savings Banks: A primary source of funds for residential real estate financing.

Scarcity: An economic characteristic of real property. When a given market has a limited supply of real estate in relation to demand, this “shortage” increases the value of real estate in that market.

Scenic Easement: A negative easement which prevents a property owner from erecting a building on their property when such building impairs the view of others, such as in waterfront areas.

Secondary Financing: A junior mortgage of real property.

Secondary Mortgage Market: (also called “Sub Market”). An institutional investment market that purchases mortgages from mortgage Lenders, thus providing Lenders with more cash to lend.

Second Mortgage: (see “Junior Mortgage”). A mortgage which is subordinated to a first mortgage.

Section: In the “Rectangular Survey System”, a section is one square mile and contains 640 acres.

Security: Certificates which provide evidence of an obligation to pay money or to participate in earnings, such as with stocks and bonds.

Security Deposit: A sum of money held to assure the performance of a contract. In the Leasing of real estate, Landlord typically holds a “Security Deposit” from Tenant, to protect Landlord in the event that Tenant damages the property or violates the terms of the Lease. If Landlord suffers no damages, “Security Deposits” are usually returned. Many states have laws regulating “Security Deposits”.

Seisin (or “Seizin”): Possession of a freehold estate in land.

Self-Managed: Buildings and dwelling units overseen by unit owners or unit shareholders.

Seller (Owner): The owner of a property who is selling, or offering to sell, one or more property rights.

Seller Agency: Allows the employed Broker to market the Seller’s property and represent the Seller under the terms and conditions of a Listing Agreement.

Seller’s Disclosure Statement: A form completed and signed by the Seller regarding the condition of the property. Many states have laws governing property disclosures at time of sale.

Separate Ownership: Ownership in severalty by one’s spouse.

Separate Property: Any property acquired by one spouse during marriage to which that spouse may legally have separate ownership.

Senior Mortgage: (opposite of “Junior Mortgage”). A first mortgage that has priority over all second mortgages.

Sequestration, Writ of: Taking custody of one’s property, (real or personal), to force compliance with a court order.

Servient Estate (also called “Servient Tenement”). A parcel of land encumbered by an easement.

Setback: A zoning requirement regarding the minimum distance buildings must be from lot lines.

Settlement: (see “Closing”).

Settlement Costs: (see “Closing Costs”).

Severalty Ownership: The sole ownership of property by one person only.

Shared Appreciation: The gaining or retaining of Equity in a property by someone other than the Buyer. EXAMPLE: The Seller retains a 25% interest in a property, thus making the Buyer responsible for only 75% of the Purchase Price, and reducing the needed financing by 25%. This obviously makes the property more affordable. By agreement, expenses are shared as well as any increase in value when the property is sold.

Shared Appreciation Mortgage (SAM): A type of mortgage in which the Lender shares in the appreciation of the property’s value in return for giving the Borrower a better rate or better terms than would otherwise be available at the time.

Sheriff’s Deed: A deed given by a court to the Buyer of a foreclosed property. The Grantor transfers only whatever interest the Grantor may have, and makes no warranties.

Sheriff’s Sale: (see “Foreclosure Sale”).

Shoreline: The line dividing private land and public beach on the Great Lakes or the Oceans.

Short Sale: The sale of a property wherein the Seller’s net proceeds are not enough to completely pay off the existing liens. The Seller either has to come to the closing with funds for the difference or with Agreement from the Lien-holders to accept a settlement. In some cases, Lien-holders may accept a settlement amount at closing but may still seek a “Deficiency Judgment” against the Seller for the amount of their loss.

Showing: When a listing is shown to prospective buyers or the buyer’s agent (preview).

Showing Appointments: Time periods during which an agent shows properties to clients.

Signature: A person’s name placed on paper or on an instrument in their own handwriting.

Sign Rider: An additional sign placed on a yard sign to provide more information; it may include the agent’s name or make an announcement, such as, “Open Sunday,” “Lakefront Home”, “Sold,” etc.

Single-Family Home: A dwelling unit that has no common walls with another dwelling unit and is designated for use by a single family.

Site: The parcel of land designated for a location or construction.

Site Condo: (also “Site Condominium”). A parcel of land designated for the construction of a condominium.

Site Engineer: The mechanical or operations professional for a building who is on-site at his or her place of employment. Some engineers live on the premises and are referred to as “the Super”, short for Superintendent.

Situs: Land location that allows a specific economic use.

Soil Test: An analysis of soil samples to determine the level of contamination with hazardous materials or with substances regulated by the Environmental Protection Agency, EPA.

Spec Home: A home built on speculation by a builder/developer.

Special Agent: A person authorized to perform a specific act or function by a Principal, such as the Broker in a Listing Agreement.

Special Assessment: A tax imposed by a local government on real property for part of the cost of making an improvement that benefits the property, such as street paving, installing sidewalks or adding water & sewer lines. These assessments should appear on the public record and are usually paid over time. When properties with “Special Assessments” are sold, the Purchase Agreement should specify who will be responsible for payment.

Special Warranty Deed: A deed containing a limited warranty of title in which the Grantor only warrants against defects which occurred during Grantor’s term of ownership, not against defects arising from previous owners.

Specific Lien: A lien which attaches to one particular property only.

Specific Performance: A court order requiring a party to fulfill the specific terms of a contract.

Spot Zoning: When a property is re-zoned differently from the surrounding land use.

Square Foot Method: A technique used to estimate the total cost of construction, in which the total number of proposed square feet is multiplied by a cost-per-square-foot amount.

Standard Fire Policy: A common insurance policy indemnifying the insured against loss by fire.

Starker Exchange /Starker Trust: (also called a “1031 Exchange”). A method for holding the proceeds of a real property sale in an approved Trust until the Seller can locate a like-kind property in which to invest the proceeds. The transaction may constitute a tax-free exchange.

State Association of REALTORS®: An association of Realtors® in a specific state.

Statute: A law passed at the federal level by Congress or at the state level by State Legislature.

Statute of Frauds: A law which requires that certain contracts be in writing to be valid and legally enforceable.

Statute of Limitations: State laws which establish time limit periods within which certain lawsuits can be commenced.

Statutory Foreclosure: A foreclosure proceeding that allows a certain time period after a “Foreclosure Sale” during which the Borrower may redeem the title, (Redemption Period).

Statutory Lien: A lien created by law, such as a Tax Lien, which sets specific requirements for enacting the Lien.

Statutory Period of Redemption: (also called “Redemption Period”). The legal time limit in which a property may be redeemed after foreclosure, usually set by state laws.

Steering: The practice of directing prospective real estate Buyers toward or away from certain neighborhoods in order to preserve the racial or ethnic mix of these areas.

Straight Line Depreciation: When a taxpayer deducts equal amounts of a depreciable asset’s cost each year.

Straight Term Mortgage: (see ‘Term Mortgage”).

Straw Man: A person who buys property for another to conceal the other’s identity. For example, a Builder may believe he can negotiate a better price for land if the Seller doesn’t know he is selling to someone with a lot of money and a strong desire for that particular parcel of land.

Strict Foreclosure: A proceeding in which a court gives the mortgagor in default a specified time period in which to satisfy the debt or lose title to the property.

Strip Center: Usually refers to a building divided into smaller sections for use by retail businesses.

Studio: A one-room dwelling unit.

Sub Agent: A person appointed or empowered by an “Agent” to assist in performing some or all of the tasks of the agency. For example, Broker “A” lists a property for sale and becomes the “Agent” for the homeowner. Broker “A” advertises the property in a “Multiple Listing Service”, (MLS), and offers compensation to any Broker who finds a Buyer. Then Broker “B” (or a Salesperson of Broker ”B”), acting as a “Seller’s Agent”, shows the property to a Buyer and the sale is consummated. Broker ‘B” is thus a “Sub Agent” who assisted Broker “A” (the “Agent”) in performing a major task of the agency.

Sub Contractor: A person or firm, (such as a Plumber), who is employed by a “General Contractor”, (such as a Builder), to perform one or more tasks the “General Contractor” has agreed to perform.

Subdivide: To partition or divide land into smaller parcels.

Subdivision: A large parcel of land that has been divided into smaller lots.

Subdivision Regulation (Ordinance): Public control of the development of residential subdivisions.

“Subject To” Clause: A clause in a Deed, stating that the Grantee takes title “Subject to” an existing Mortgage. In the event of Foreclosure of the Mortgage, the original Mortgagor is alone responsible for any deficiency, not the Grantee. (Differs from an “Assumption Clause”, where the Grantee “assumes” and agrees to pay the existing mortgage).

Sublease: When a Tenant leases space to another Tenant. Usually the original Tenant retains a Reversionary Interest. The ability of a Tenant to “Sublease” or “Assign” rights to another party is controlled by the original Tenant’s Lease Agreement with the Landlord.

Subordinate: To make lower in priority, such as a second mortgage Lien.

Subordination Clause: A clause which permits a second Lien holder to have priority over the first.

Subrogation: When one empowers a third person or firm to act as a substitute for them in a legal action. For example, the substitution of a title insurance company in the place of an insured for the purpose of filing a legal action.

Substitution: A real estate principle holding that the value of a property may be established by the cost to purchase or construct another property of equal utility and desirability, when that substitution can be made without unusual delay.

Sufficient Consideration: An amount agreed upon by the parties as being enough to bind a contract.

Suit: (see “Lawsuit”).

Supply and Demand: A fundamental principal of free-market economics which states that the greater the Supply of any commodity in relation to Demand for it, the lower is its value; conversely, the smaller the Supply and greater the Demand, the more its value increases.

Supra®: Brand name for an electronic lockbox (ELB) that holds keys to a property, in order to facilitate access to authorized persons. Users must have a Supra keypad to use the lockbox.

Surface Rights: The rights, (Easements), to use the surface of land, including the right to drill or mine through the surface if sub-surface rights are involved.

Surrender and Acceptance: When a Tenant vacates a property prior to the Lease Expiration and Landlord takes no action to enforce the Lease Term. When a Landlord does not approve of the premature vacancy, it is called “Abandonment”.

Survey: The measuring of Land and establishment of boundaries.

Survivorship Right: The right of a surviving Co-owner to automatically receive the title to a property held as Joint Tenants, immediately and without probate.

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 purchase.

Syndicate: An association of individuals formed for the purpose of carrying on some particular business venture in which the members are mutually interested, including real estate investment.

T

1031 exchange or Starker exchange: The delayed exchange of properties that qualifies for tax purposes as a tax-deferred exchange.

1099: The statement of income reported to the IRS for an independent contractor.

Tacking: Occurs when a Claimant in an Adverse Possession suit adds periods of time when the property was occupied by others to bolster his claim.

Take-Out Loan: When permanent financing is arranged to replace a short-term construction loan.

Taking Title “Subject to” a Mortgage: (see “Subject To Mortgage”).

Tangible Property: Physical objects or items.

Taxable Gain: (also called ‘Recognized Gain”). The amount of profit which is subject to taxation.

Taxation: The right of Federal, State and Local governments to impose and collect taxes.

Tax Base: The total amount of all assessed value in a given jurisdiction.

Tax Certificate: An instrument received by the Buyer of property at a Tax Sale Auction.

Tax Credit: An amount of money that may be deducted from a tax bill when calculating the amount of tax due. Government uses “Tax Credits” to assist lower-income tax filers and to incentivize certain behaviors, such as buying energy-efficient products, etc.

Tax Deductible Expense: An amount of money that may be deducted from Gross Income when calculating Taxable Income.

 

Tax Deed: (1) Deed from Tax Collector to governmental body after a period of non-payment of taxes according to statute. (2) An instrument received by the Buyer at a Tax Sale to satisfy delinquent taxes. The Purchaser receives only such title as the former owners had, and strict procedures must be followed to prevent attachment of prior Liens.

Tax-Free Exchange: Exchanging qualified properties to defer Capital Gains Taxes.

Tax Roll: Public Record which identifies all taxable property, assessed values, millage and tax amounts in a given jurisdiction.

Tax Sale: The sale of property at foreclosure to satisfy one or more tax Liens.

Tax Shelter: Using real estate to shelter income from tax liability.

Tenancy: The possession of real estate.Tenancy at Sufferance: When a Tenant wrongfully occupies the property after the Lease Expiration.

Tenancy at Will: A Tenancy with the Owner’s permission for an unspecified term, which can be terminated at any time by either party.

Tenancy By The Entirety: A form of Ownership limited only to husband and wife, with the right of survivorship.

Tenancy From Period to Period: (see “Month-To-Month Tenancy”)

Tenancy In Common: A form of concurrent ownership between two or more persons holding separate titles and an undivided interest in the same property. The interests held need not be equal. In the event of death of one of the Owners, no right of survivorship exists for the surviving Owners, meaning that the Heirs of the deceased inherit his interest and become Tenants in Common.

Tenancy In Partnership: A form of business in which two or more persons form a business to own real property and share in the profits and losses.

Tenant: A person who holds possession of real property.

Tenement: The land and all that is attached.

Term Mortgage: A mortgage that requires the mortgagor to pay interest only during the mortgage term, with the principal due at the end of the term.

Terra Cotta Lumber: Very porous earthen-ware which can hold a nail and be cut without breaking.

Testate: To have died leaving a valid will.

Testator: A man who has died and left a valid will.

Testatrix: A woman who had died and left a valid will.

Tester: One or more persons employed by a government agency or fair housing organization to pose as a Seller, Buyer or Renter of real estate, in order to determine if the Licensee, Owner or Landlord is acting in compliance with the law.

Testimonium Clause: The portion of a Deed that contains signatures of Grantors and witnesses, and the acknowledgement of a Notary Public.

Tier: Designates a row of townships running East and West in the “Rectangular Survey System”.

Time Is Of The Essence: A clause inserted in a contract requiring performance of certain obligations in the time periods provided.

Time-Sharing: A type of ownership in which the Buyer owns the property for a certain specified time interval, on a rotating basis with other owners. Popular with vacation homes & resort condominiums. EXAMPLE: Fifty two different Purchasers buy one condominium; each agrees to possession for one week per year, and possession may be fixed, rotated, by reservation, etc. Costs, (Taxes, Insurance, Maintenance, etc.) are shared equally. Some developers provide several resort projects in different parts of the world, so that a person who owns one week in a Hawaii resort could elect to spend that week in a connected project in France or some other place.

Title: Evidence of the right to own and possess property.

Title Agency: A firm that performs title examinations and issues title insurance policies underwritten by larger entities called title insurance companies. Title Agencies also frequently prepare Settlement / Closing Documents, attend closings, and act as an Escrow Agent.

Title Commitment: A document generated by a Title Agency’s search of the public records, which discloses the results of a Title Examination and details specific requirements that must be met in order for Title Insurance to be issued by the underwriter.

Title Company: A company that prepares Abstracts and sells or underwrites Title Insurance.

Title Examination: (also called “Title Search”). A search of the Public Records, (usually done at time of sale or refinancing), to discover recorded Liens, Encumbrances, Clouds or Defects and to determine the quality of a title to real property.

Title Insurance: An insurance policy protecting the insured, with conditions, from a financial loss caused by a covered defect in a title to real property.

Title Search: (see “Title Examination”).

Title Theory States: States that allow the mortgagee (Lender) to hold actual title until final payment.

Ton: (1) A measure of weight; two thousand pounds. (2) A measure of capacity of Air Conditioners. One ton equals twelve thousand British Thermal Units (B.T.U.’s).

Torrens System: A system of land registration required in some states in order to have valid title.

Tort: A civil wrong which may result in the payment of damages.

Townhouse: Originally, this was a house “in a city” as opposed to a country estate. More recently the term is applied to certain types of row houses and attached dwelling units with common wall(s).

Township: An area of land defined by the “Rectangular Survey System” as a 6 X 6 mile square, containing 36 Sections. (Each Section of land is 1 mile square and contains 640 Acres).

Toxic Substances Control Act (TSCA): Legislation enacted to regulate chemical substances that pose certain risks to health and the environment.

Tract: An area of land.

Trade Fixture: An item that is installed by a commercial Tenant and is removable upon termination of the Tenancy, except as otherwise provided in a Lease.

Transaction: The real estate sales process from offer to closing.

Transaction Coordinator: A licensee involved in a real estate transaction without having an “Agency” relationship with either party.

Transaction Fee: A fixed amount in addition to commission some Brokers may charge.

Transferability: The ability to convey legal rights in property from Seller to Buyer.

Transfer of Title: Conveyance of legal rights in property from one party to another.

Transfer Tax: (also called ‘Documentary Transfer Tax”). A tax imposed on the conveyance of title to real property by Deed. Typically based on the purchase price. Check statutes for each state.

Trapezoid: A four-sided area with two parallel sides and two non-parallel sides.

Treasury Bills: Interest-bearing U.S. government obligations, sold at a weekly sale. This is one way the U.S. government borrows to raises funds. The change in interest rates paid on these obligations is frequently used as the Rate Index of Adjustable Mortgage Loans.

Trespass: Wrongful entry upon another’s property.

Trust: A legal vehicle for holding and managing property for another to benefit them.

Trust Account: (also called ”Escrow Account”). An account maintained by a real estate Broker to hold Buyers’ funds, (Earnest Money Deposits), while awaiting closing. Monies in a Trust Account may not be commingled with the Broker’s own funds, and are to be disbursed only in accordance with state laws and as agreed by the parties to a Purchase Agreement.

Trust Deed: (see ‘Deed of Trust”).

Trustee: One who holds and manages property in a “Trust” created for the benefit of another, who is called the “Beneficiary”.

Trustee In Bankruptcy: A person appointed by a court to manage the assets in a bankruptcy case. The Trustee holds the property “In Trust” not for the bankrupt but rather for the Creditors.

Trustor: The person who creates the Trust and conveys title to a Trustee.

Truth-In-Lending Law: (also called “Regulation Z”). A federal law requiring Lenders to make accurate disclosures of the Annual Percentage Rate (A.P.R.) and all finance charges when offering credit to individual Borrowers.

U

Unavoidable Cause: A cause which reasonable prudence and care could not have prevented, such as illness, death, papers lost in the mail, etc.

Under Contract: (also called “Pending”). A property that has an accepted real estate contract between Seller and Buyer, but the transaction is not yet been closed.

Underground Storage Tanks: Containers in which petroleum products and other potentially-hazardous substances have been stored. Regulated by the Environmental Protection Agency, (EPA).

Under-Improvement: Land that does not generate income to its full potential because it’s being utilized for other than its highest and best use. For example, Residential land that is being used as a farm, (Agricultural).

Underlying Financing: A mortgage, deed of trust, etc. that is prior to, (underlying), a Land Contract or mortgage on the same property.

Underwriting: In the mortgage industry, this is the act of reviewing the loan Application, the property appraisal and other documentation to determine the proposed Borrower’s ability to repay the loan and whether the value of the property is sufficient to serve as collateral for the Loan.

Undisclosed Principal: A person whose identity cannot be disclosed by an Agent who represents them because such disclosure would violate the Agency Agreement.

Undivided Interest: A co-owner’s interest to the full, undivided use of the property.

Undue Influence: Improper or wrongful influence on someone that interferes with their free will.

Unencumbered Property: Real property that is free from any liens.

Unenforceable Contract: An agreement that is not legally enforceable in a court of law.

Uniform Commercial Code (“UCC”): A comprehensive, standardized set of laws regulating commercial transactions.

Uniform Laws: Laws approved by National Conference of Commissioners on Uniform State Laws. Among laws adopted by one or more states: (1) Uniform Commercial Code, (2) Uniform Negotiable Instruments Act, (3) Uniform Partnership Act, (4) Uniform Residential Landlord and Tenant Act.

Uniform Residential Landlord-Tenant Act: An Act adopted by many states attempting to standardize the regulation of rental property.

Unilateral Contract: An agreement wherein there is no separate consideration apart from a promise by one party in return for an action by the other party.

Uninsured Conventional Loan: A loan in which there is no mortgage insurance to protect a Lender from a Borrower’s default.

Unintentional Misrepresentation: A misstatement of a material fact that is not deliberate.

Unit: The part of a condominium reserved for the exclusive use and possession by its Owner.

Unities of Ownership: Concurrent ownerships require at least one of the following “Unities” between co-owners: a) time, b) title, c) interest and d) possession.

Unit-In-Place Method: Used in the “Cost Approach” to real estate appraisal to estimate values according to the stage of construction.

Unity of Person: Husband and wife exist in ownership as “One” person.

Unity of Possession: A Tenant’s right to possess the entire property.

Unity of Interest: Each Tenant must have the same fractional interest.

Unity of Time: Each Tenant must acquire the Title at the same time.

Unity of Title: The Joint Tenancy must be created in one single conveying instrument (Deed).

Universal Agent: An Agent who has complete authority over any activity of the Principal, such as with a General Power of Attorney.

Universal Exclusion: Married homeowners may exclude from taxation up to $500,000 of the gain from the sale of a principal residence; single homeowners may exclude up to half that amount.

Unlawful Detainer: When a person takes unlawful possession of a property.

Unlike-Kind Property: In an exchange, a property that is not similar in nature and character.

Unrecorded Instrument: A document that is not recorded in the public records, is not protected under recording statutes. Valid between the parties involved, but not against innocent third parties.

Unsecured Loan: A loan given without collateral as security.

Useful Life: (1) Generally, the period of time that a property is expected to be economically useful.
(2) In Appraisal for sale purposes, the economic value of a building in years of use to the owner.
(3) For tax purposes, the life set for Depreciation; at any time during that period, a new life could begin for a new Owner.

Usury: Charging a rate of interest that is higher than the maximum allowed by law.

Utility: a) Capability to serve a useful purpose; b) consumer services such as gas and electric.

V

VA Mortgage: A mortgage loan in which payment is guaranteed by the Veterans Administration.

Vacancy Factor: The estimated percentage of vacancies in a rental project. May be based on past records of the property, or a professional guess if a new project. Similar buildings in the surrounding area may be used for comparison.

Vacancy Rate: The percentage of a building’s total rentable space which is not rented. Potential Income minus Vacancy Rate equals Gross Income.

Vacate: To surrender possession.

Vacation or Resort or Second Home: A residence owned as a non-primary residence.

Valid Contract: An agreement that is legally binding and enforceable in a court of law.

Valuable Consideration: Anything of value agreed upon by parties to a contract. A “promise” may also be deemed to be good and sufficient consideration.

Valuation: Establishing an opinion of property value using an objective approach based on facts such as Location, Age, Size, Replacement Cost, etc.

Value In Exchange: The amount of money or other consideration a property may command for its exchange. Similar to “Market Value”.

Value in Use: The present worth of future benefits of ownership, such as based on future income. Not the same as ‘market Value”.

Variable Interest Rate Mortgage: (also called “Variable Rate Mortgage” or “VRM” or “Flexible Interest Rate Mortgage” or “Adjustable Rate Mortgage”). A mortgage in which the interest rate charged by the Lender varies periodically according to an index that’s not controlled by the Lender. There are usually maximums, (“Caps”), that control the frequency and amount of fluctuation

Variance: A permitted deviation from the specific requirements of a zoning ordinance which may be granted to property owners who demonstrate a special hardship resulting from the ordinance.

Vendee: Purchaser.

Vendor: Seller.

Vendor’s Affidavit: Document signed under oath by Vendor stating that Vendor has not encumbered title to the real estate except as fully disclosed to the Vendee.

Veneered Construction: The placing of a “facing” material over the external surface of a structure.

Venue: (1) The country, state or other geographic location in which a legal action or prosecution is brought for trial and which will furnish a panel of jurors. (2) The location in which an acknowledgment, (Notarization), is made.

Vested Interest: A fixed or fully-determined interest in property.

Vested Right: When a known owner has a present right to future possession.

Veteran’s Administration (VA): A federal agency created to administer Veterans affairs, including the VA-insured mortgage, which helps qualified Veterans to purchase real estate with little or no down payment by providing a loan guaranty program to protect Lenders from default.

Virtual Tour: An Internet web / cd-rom – based video presentation of a property.

Vital Statistics: Data regarding Births, Deaths, Marriages, Health records, etc., usually kept by a Federal government bureau, the Bureau of Vital Statistics.

Voice Mail: A telephone message system where voice messages can be left and be retrieved directly or from a remote location.

Void Contract: An agreement that has no legal force or effect.

Voidable Contract: An agreement that may be voided by one or more of the parties without legal consequences.

Volt: A term in Electronics, being the force necessary to cause one Ampere to flow through a Conductor with a resistance of one Ohm. Common household current is 110 Volts, with a 220 Volt circuit used for some heavy appliances. Industrial uses typically require higher Voltage.

Voluntary Alienation: The transfer of title freely by Deed.

Voluntary Lien: A Lien placed against real property by the voluntary act of the Owner, such as with a mortgage or deed of trust.

Voluntary Waste: Deliberate impairment of the rights of a person owning a future interest, such as when a Tenant destroys property improvements in which the Owner has a future interest.

VOWs: (Virtual Office Web Site): Internet based real estate brokerage business model that is intended to work with real estate consumers in same way as a brick and mortar real estate brokerage.

W

W-2: The Internal Revenue form issued by employer to employee to reflect compensation and deductions to compensation.

W-9: The Internal Revenue form requesting taxpayer identification number and certification.

Waive: To knowingly abandon, relinquish, renounce or surrender a right, benefit or claim.

Walk-Through: A showing before closing or escrow that permits the buyers one final tour of the property they are purchasing.

Walk-Up: A building with no elevator.

Wall-Bearing Construction: When the weight of roofs and floors is supported entirely by the exterior walls, without load-bearing partitions. Posts and pillars are used at points where the span is too wide for support by the exterior walls.

Warranty: In a Deed, this is an assurance that defects do not exist in the title. Warranties as to real property have taken on a lesser role with the increased use of Title Insurance.

Warranty Deed: The Deed which conveys the greatest assurance from the Grantor to the Grantee regarding the quality of title. Until the widespread use of Title Insurance, the Warranties by the Grantor were very important to the Grantee. When Title Insurance is purchased, the Warranties become less important as a practical means of recovery by the Grantee for defective title.

Waste: A Tenant’s impairment of a property.

Wasting Assets: (also called “Diminishing Assets” or “Wasting Property”). Assets which, by use or lapse of time, are consumed or reduced in their “Book Value”, irrespective of market fluctuation. Such assets may include, Oil, Minerals, Patent Rights, etc.

Water Rights: An Owner’s rights to water passing through or adjoining their land.

Watt-Hour: The basis used to determine the consumption of electricity and electric bills. EXAMPLE: A 100 Watt light bulb means that if that bulb burns for One Hour, it will use 100 Watts of electricity.

Wear and Tear: The depreciation of an asset resulting from ordinary and normal use.

Weep Holes: Small holes in a retaining wall or other wall, where it may be necessary to drain off excess water to avoid pressure build-up.

Well and Septic Report: A report usually required at time of sale in some regions where property is serviced by a Well or Septic System. Usually, the well and Septic System are inspected by the area Health Department, to determine the potability of water, the extent of any contamination, and the condition of both the Well and the Septic System.

Wild Interest: A recorded Interest in real property which cannot be traced in the chain of title. This frequently occurs when an incorrect Legal Description appears on a document. An “apparent” wild interest may occur if a woman changes her name through marriage after acquiring property, and later sells the property using her married name only.

Will: A legal declaration by a person with instructions for how their property is to be disposed of in the event of their death.

Without Recourse: A finance term which refers to a Lender being limited to look only to the security, (Property), for repayment in the event of default, and not personally to the Borrower.

Words of Conveyance: Wording in a Deed which demonstrates the Grantor’s definite intention to convey a specific title to real property to a named Grantee.

Working Drawing: Drawing used by workmen during construction, which usually shows all details such as electric, plumbing, partitions, etc.

Wrap-Around Mortgage: A junior mortgage in an amount exceeding the first mortgage.

Writ of Attachment: A court order preventing any transfer of the attached property during litigation.

Written Release: A document wherein one party to a contract agrees to discharge one or more obligations of the other party.

Wrought Iron: An easily molded form of Iron used for decorative railings, gates, furniture, etc. The term is loosely used to describe steel or aluminum used in the same manner.

Y

Yacht Basin: A system of docks and channels used for the keeping of Yachts and similar boats.

Yard: (1) A measure equal to three feet or 36 inches. (2) The area between the building and the property line of a residential property, (Front Yard, Back Yard, Side Yard). (3) An enclosure in or out of a building that’s used for a business purpose, (Lumber Yard, etc.).
Yard Lumber: Lumber generally found in a Lumber Yard and graded for general building purposes.

Yield: The return on an investment.

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 the sidewalk.

Zero Side Yard: The building of a subdivision with each house built on a side boundary line. This allows for more usable yard space on narrow lots. An Easement for maintenance is normally given over a portion of the lot adjoining each house.

Zone: (1) An area of a city or county in which the use of the land is restricted by law, (Zoning Ordinance). (2) An area designated by a number, (Zip Codes), to assist the delivery of mail.

Zoning: A public law regulating land use.

Zoning Map: A map that shows the zoning districts as they have been divided in a given area.

Zoning Ordinance: A law passed by local government which sets forth the type of use permitted under each zoning classification and the specific requirements for compliance.