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Glossary
A B C
D E F
G H I
J K L
M N O
P Q R
S T U
V W X
Y Z
This glossary is
for informational purposes only and should not be used without
legal counsel for the purpose of reading/understanding a
contract.
- Abandonment
- The voluntary relinquishment of rights of
ownership or another form of interest (an easement) by
failure to use the property over an extended period of
time.
- ABR
- The Accredited Buyer Representative
designation indicates a real estate agent specializing in
representating buyers in the real estate transaction.
- Abstract (Of Title)
- A summary of the public records relating
to the title to a particular piece of land. An attorney or
title insurance company reviews an abstract of title to
determine whether there are any title defects which must
be cleared before a buyer can purchase clear, marketable,
and insurable title.
- Acceleration Clause
- Condition in a mortgage that may require
the balance of the loan to become due immediately, if
regular mortgage payments are not made or for breach of
other conditions of the mortgage.
- Acre
- A measure of land, equal to 160 sq. rods
(43,560 sq.ft.). An acre is approximately 209' x 209'.
- Acknowledgment
- A formal declaration before an authorized
official (usually a notary public) by a person who has
executed a document, that he did in fact execute (sign)
the document
- Addendum
- Something added. A list or other items
added to a document, letter, contract, escrow
instructions, etc.
- Adverse Possession
- A method of acquiring title by open and
notorious possession usually vary with each state.
- Agent
- Acts of behalf of another, representing
that person's interests and serving as an intermediary.
- Agreement of Sale
- Known by various names, such as contract
of purchase, purchase agreement, or sales agreement
according to location or jurisdiction. A contract in which
a seller agrees to sell and a buyer agrees to buy, under
certain specific terms and conditions spelled out in
writing and signed by both parties.
- Alienation Clause
- A clause within a loan instrument calling
for a debt in its entirety upon the transfer of ownership
of the secured property. Also called a "due on
sale" clause.
- Amortization
- A payment plan which enables the borrower
to reduce his debt gradually through monthly payments of
principal.
- Appraisal
- An expert judgment or estimate of the
quality or value of real estate as of a given date.
- Assessed Value
- Value placed on property by the tax
assessor.
- Assignment
- A transfer or making over to another the
whole of any property, real or personal, or of any estate
or right therein. To assign is to transfer.
- Assumption of Mortgage
- An obligation undertaken by the purchaser
of property to be personally liable for payment of an
existing mortgage. In an assumption, the purchaser is
substituted for the original mortgagor in the mortgage
instrument and the original mortgagor is to be released
from further liability in the assumption, the mortgagee's
consent is usually required
- Attachment
- Seizure of property by court order,
usually done in pending law suit to make property
available in case of judgment.
- Balloon Payment
- The final installment paid at the end of
the term of a note; used only when preceding installments
were not sufficient to pay off the note in full.
- Bill of Sale
- An instrument used to transfer personal
property
- Binder or "Offer to
Purchase"
- A preliminary agreement, secured by the
payment of earnest money, between a buyer and seller as an
offer to purchase real estate. A binder secures the right
to purchase real estate upon agreed terms for a limited
period of time. If the buyer changes his mind or is unable
to purchase, the earnest money is forfeited unless the
binder expressly provides that it is to be refunded.
- Blanket Mortgage (Trust Deed)
- A single mortgage or trust deed which
covers more than one piece of real estate
- Bond
- An insurance agreement by which one party
is insured against loss or default by a third party. In
the construction business a performance bond ensures the
interested party that the contractor will complete the
project. A bond can also be a method of financing debt by
a government or corporation which is interest-bearing and
has priority over stock in terms of security.
- Breach
- Violation of an obligation in a contract
- Broker, Real Estate
- An agent licensed by the state to carry
on the business of operating in real estate. He usually
receives a commission for his services of bringing
together buyers and sellers, owners and tenants, in
exchange agreements.
- Building Code
- A set of stringent laws that control the
construction of buildings, design, materials and other
similar factors
- Building Line or Setback
- Distances from the ends and/or sides of
the lot beyond which construction may not extend. The
building line may be established by a filed plat of
subdivision, by restrictive covenants in deeds or leases,
by building codes, or by zoning ordinances.
- Built-Ins
- Items that are not movable, such a
stoves, ovens, microwave ovens, dishwashers.
- Buyers Market
- A market condition which occurs in real
estate where more homes are for sale than there are
interested buyers
- Capital Gains
- A term used for income tax purposes which
represents the gain realized from the sale of an asset
less the purchase price and deductible expense.
- Capitalization
- An appraising term used in determining
value by considering net operating income and a percentage
of reasonable return on investment.
- Cash Flow
- The owner's spendable income after
operating expenses and debt service is deducted
- Certificate of Title
- A certificate issued by a title company
or a written opinion rendered by an attorney that the
seller has good marketable and insurable title to the
property which he is offering for sale. A certificate of
title offers no protection against any hidden defects in
the title which an examination of the records could not
reveal. The issuer of a certificate of title is liable
only for damages due to negligence. The protection offered
a homeowner under a certificate of title is not as great
as that offered in a title insurance policy.
- Chain Of Title
- A history of conveyances and encumbrances
affecting the title as far back as records are available
- Client
- One who employs another's services, as in
an attorney, real estate agent, insurance agent, etc.
- Closing
- In the sale of real estate it is the
final moment when all documents are executed and recorded
and the sale is complete. Also a general selling term
where a sales person is attempting to sell something and
the buyer agrees to purchase
- Closing Costs
- The numerous expenses which buyers and
sellers normally incur to complete a transaction in the
transfer of ownership of real estate. These costs are in
addition to price of the property and are items prepaid at
the closing day.
- Closing Statement
- A list of the final accounting of all
Moines of both buyer and seller prepared by an escrow
agent which notes all costs each must pay at the
completion of a real estate transaction.
- Cloud (On Title)
- An outstanding claim or encumbrance which
adversely affects the marketability of title.
- Commission
- Money paid to a real estate agent or
broker by the seller as compensation for finding a buyer
and completing the sale. Usually it is a percentage of the
sale price- - 6 to 7 percent on houses, 10 percent on
land.
- Common Area
- That area owned in common by owners of
condominiums and planned sight development homes within a
subdivision.
- Community Property
- Both real and personal property
accumulated by a husband and wife after marriage through
joint efforts of both living together.
- Condemnation
- A declaration by governing powers that a
structure is unfit for use.
- Conditional Sales Contract
- A contract for the sale of property where
the buyer has possession and use, but the seller retains
title until the conditions of the contract have been
fulfilled. Also known as a land contract.
- Condominium
- Individual ownership of a dwelling unit
and an individual interest in the common areas and
facilities which serve the multi- unit project.
- Consideration
- Anything of value given to induce someone
into entering into a contract.
- Construction Loan
- The short-term financing of improvements
on real estate. Once the improvements are completed a
'take out' loan for a longer term is usually issued.
- Contingency
- A condition upon which a valid contract
is dependent. For example; the sale of a house is
contingent upon the buyer obtaining adequate financing.
- Contract
- An agreement between tow or more parties,
written or oral, to do or not to do certain things.
- Contractor
- In the construction industry, a
contractor is one who contracts to erect buildings or
portions of them. There are also contractors for each
phase of construction: heating, electrical, plumbing, air
conditioning, road building, bridge and dam erection, and
others.
- Conventional Mortgage
- A mortgage loan not insured by HUD or
guaranteed by the Veterans' Administration. It is subject
to conditions established by the lending institution and
State statutes. The mortgage rates may vary with different
institutions and between States. (States have various
interest limits.)
- Conveyance
- The transfer of the title to land from
one to another.
- Counter Offer
- An offer in response to an offer. 'A'
offers to by 'B's' house for $20,000 which is listed for
$22,000. 'B' counter offers 'A's' offer by stating that he
will sell the house to 'A" for $21,000. The $21,000
is the counter offer.
- Covenants
- Agreements written into deeds and other
instruments stating performance or non-performance of
certain acts or noting certain uses or non-uses of
property.
- Deed
- A formal written instrument by which
title to real property is transferred from one owner to
another. The deed should contain an accurate description
of the property being conveyed, should be signed and
witnessed according to the laws of the State where the
property is located, and should be delivered to the
purchaser at closing day. There are two parties to a deed:
the grantor and the grantee. (See also deed of trust,
general warranty deed, quitclaim deed, and special
warranty deed.)
- Default
- Failure to make mortgage payments as
agreed to in a commitment based on the terms and at the
designated time set forth in the mortgage or deed of
trust. It is the mortgagor's responsibility to remember
the due date and send the payment prior to the due date,
not after. Generally, thirty days after the due date if
payment is not received, the mortgage is in default. In
the event of default, the mortgage may give the lender the
right to accelerate payments, take possession and receive
rents, and start foreclosure. Defaults may also come about
by the failure to observe other conditions in the mortgage
or deed of trust.
- Depreciation
- Decline in value of a house due to wear
and tear, adverse changes in the neighborhood, or any
other reason.
- Documentary Stamps
- A State tax, in the forms of stamps,
required on deeds and mortgages when real estate title
passes from one owner to another. The amount of stamps
required varies with each State.
- Down Payment
- The amount of money to be paid by the
purchaser to the seller upon the signing of the agreement
of sale.
- Earnest Money
- The deposit money given to the seller or his agent by
the potential buyer upon the signing of the agreement of
sale to show that he is serious about buying the house. If
the sale goes through, the earnest money is applied
against the downpayment. If the sale does not go through,
the earnest money will be forfeited or lost unless the
binder or offer to purchase expressly provides that it is
refundable.
- Easement Rights
- A right- of- way granted to a person or company
authorizing access to or over the owner's land. An
electric company obtaining a right- of- way across private
property is a common example.
- Economic Obsolescence
- Loss of useful life and desirability of a property
through economic forces, such as change in zoning, changes
in traffic flow, etc., rather than deterioration.
- Encroachment
- An obstruction, building, or part of a building that
intrudes beyond a legal boundary onto neighboring private
or public land, or a building extending beyond the
building line.
- Encumbrance
- A legal right or interest in land that affects a good or
clear title, and diminishes the land's value. It can take
numerous forms, such as zoning ordinances, easement
rights, claims, mortgages, liens, charges, a pending legal
action, unpaid taxes, or restrictive covenants. An
encumbrance does not legally prevent transfer of the
property to another. A title search is all that is usually
done to reveal the existence of such encumbrances, and it
is up to the buyer to determine whether he wants to
purchase with the encumbrance, or what can be done to
remove it.
- Equity
- The value of a homeowner's unencumbered interest in real
estate. Equity is computed by subtracting from the
property's fair market value the total of the unpaid
mortgage balance and any outstanding liens or other debts
against the property. A homeowner's equity increases as he
pays off his mortgage or as the property appreciates in
value. When the mortgage and all other debts against the
property are paid in full the homeowner has 100% equity in
his property.
- Escalation Clause
- A clause in a lease providing for an increased rent at a
future time due to increased costs to lessor, as in cost
of living index, tax increases, etc.
- Escheat
- The reverting of property to the state in the absence of
heirs.
- Escrow
- Funds paid by one party to another (the escrow agent) to
hold until the occurrence of a specified event, after
which the funds are released to a designated individual.
In FHA mortgage transactions an escrow account usually
refers to the funds a mortgagor pays the lender at the
time of the periodic mortgage payments. The money is held
in a trust fund, provided by the lender for the buyer.
Such funds should be adequate to cover yearly anticipated
expenditures for mortgage insurance premiums, taxes,
hazard insurance premiums, and special assessments.
- Estate
- The ownership interest of a person in real property. Is
also used to refer to a deceased person's property. And
often used to describe a large home with spacious grounds
- Fair Market Value
- That price a property will bring given that both buyer
and seller are fully aware of market conditions and
comparable properties.
- Fee Simple
- Ownership of title to property without any limitation,
which can be sold, left at will, or inherited.
- Fixtures
- Items affixed to buildings or land usually in such a way
that they cannot be moved without damage to themselves or
the property, such as plumbing, electrical fixtures,
trees, etc.
- Foreclosure
- A legal term applied to any of the various methods of
enforcing payment of the debt secured by a mortgage, or
deed of trust, by taking and selling the mortgaged
property, and depriving the mortgagor of possession.
- Front Footage
- The linear measurement along the front of a parcel. That
portion of the parcel which fronts the street or walkway.
- Functional Obsolescence
- Loss in value due to out-of-date or poorly designed
equipment while newer equipment and structures have been
invented since it's construction.
- General Warranty Deed
- A deed which conveys not only all the grantor's
interests in and title to the property to the grantee, but
also warrants that if the title is defective or has a
"cloud" on it (such as mortgage claims, tax
liens, title claims, judgments, or mechanic's liens
against it) the grantee may hold the grantor liable.
- Grantee
- That party in the deed who is the buyer or recipient.
- Grantor
- That party in the deed who is the seller or giver.
- Ground Lease
- A lease of vacant land
- Hazard Insurance
- Protects against damages caused to property by fire,
windstorms, and other common hazards.
- Home Owners Association
- An association of homeowners within a community formed
to improve and maintain the quality of the community. An
association formed by the developer of condominiums or
planned developments.
- HUD
- U.S. Department of Housing and Urban Development. Office
of Housing/Federal Housing Administration within HUD
insures home mortgage loans made by lenders and sets
minimum standards for such homes.
- Interest
- A charge paid for borrowing money. (See mortgage note)
- Involuntary Lien
- A lien which attaches to property without the consent of
the owner such as tax liens as opposed to voluntary liens
(mortgages).
- Joint Tenancy
- Joint ownership by two or more persons with right of
survivorship. Upon the death of a joint tenant, his/her
interest does not go to his/her heirs, but to the
remaining joint tenants.
- Lease
- A contract between the owner of real property, called
the lessor, and another person referred to as the lessee,
covering all conditions by which the lessee may occupy and
use the property.
- Lease With Option To Purchase
- A lease where the lessee has the option to purchase the
leased property. The terms of the purchase option must be
set forth in the lease.
- Legal Description
- The geographical identification of a parcel of land
- Lessee
- One who contracts to rent property under a specified
lease>
- Lessor
- An owner who contracts into a lease with a tenant
(lessee).
- Lien
- A claim by one person on the property of another as
security for money owed. Such claims may include
obligations not met or satisfied, judgments, unpaid taxes,
materials, or labor. (See also special lien.)
- Life Estate
- A estate in real property for the life of a person
- Listing
- A contract between owner and broker to sell the owner's
property
- Marketable Title
- A title that is free and clear of objectionable liens,
clouds, or other title defects. A title which enables an
owner to sell his property freely to others and which
others will accept without objection.
- Mechanic's Lien
- A lien created by statute on a specific property for
labor or materials contributed to an improvement on that
property.
- Mortgage
- A lien or claim against real property given by the buyer
to the lender as security for money borrowed. Under
government- insured or loan- guarantee provisions, the
payments may include escrow amounts covering taxes, hazard
insurance, water charges, and special assessments.
Mortgages generally run from 10 to 30 years, during which
the loan is to be paid off.
- Mortgage Commitment
- A written notice from the bank or other lending
institution saying it will advance mortgage funds in a
specified amount to enable a buyer to purchase a house.
- Mortgage Insurance Premium
- The payment made by a borrower to the lender for
transmittal to HUD to help defray the cost of the FHA
mortgage insurance program and to provide a reserve fund
to protect lenders against loss in insured mortgage
transactions. In FHA insured mortgages this represents an
annual rate of one- half of one percent paid by the
mortgagor on a monthly basis.
- Mortgage Note
- A written agreement to repay a loan. The agreement is
secured by a mortgage, serves as proof of an indebtedness,
and states the manner in which it shall be paid. The note
states the actual amount of the debt that the mortgage
secures and renders the mortgagor personally responsible
for repayment.
- Mortgage (Open- End)
- A mortgage with a provision that permits borrowing
additional money in the future without refinancing the
loan or paying additional financing charges. Open- end
provisions often limit such borrowing to no more than
would raise the balance to the original loan figure.
- Mortgagee
- The lender in a mortgage agreement.
- Mortgagor
- The borrower in a mortgage agreement.
- Multiple Listing
- A listing taken by a member of an organization of
brokers, whereby all members have an opportunity to find a
buyer.
- Negative Amortization
- When monthly payments are not enough to cover interests
costs, they are added to the principal balance, and you
may end up owing more than when you started. This is most
likely to occur with ARMs that
have payment caps.
- Notary Public
- One who is authorized by federal or local government to
attest authentic signatures and administer oaths.
- Note
- A written instrument acknowledging a debt and promising
payment
- Offer
- A presentation to form a contract or agreement.
- Option
- A right given, for consideration, to purchase or lease
property upon stipulated terms within a specific period of
time
- Origination Fee
- Application fee(s) for processing a proposed mortgage.
- Plat
- A map or chart of a lot, subdivision or community drawn
by a surveyor showing boundary lines, buildings,
improvements on the land, and easements.
- P.M.I. (Private Mortgage Insurance)
- Insurance which covers a portion of the first mortgage
allowing the lender to offer more lenient terms to a
borrower.
- Points
- Sometimes called "discount points." A point is
one percent of the amount of the mortgage loan. For
example, if a loan is for $25,000, one point is $250.
Points are charged by a lender to raise the yield on his
loan at a time when money is tight, interest rates are
high, and there is a legal limit to the interest rate that
can be charged on a mortgage. Buyers are prohibited from
paying points on HUD or Veterans' Administration
guaranteed loans (sellers can pay, however). On a
conventional mortgage, points may be paid by either buyer
or seller or split between them.
- Prepayment
- Payment of mortgage loan, or part of it, before due
date. Mortgage agreements often restrict the right of
prepayment either by limiting the amount that can be
prepaid in any one year or charging a penalty for
prepayment. The Federal Housing Administration does not
permit such restrictions in FHA insured mortgages.
- Prepayment Penalty
- A penalty within a note, mortgage, or deed of trust
imposing a penalty if the debt is paid in full before the
end of its terms.
- Principal
- The basic element of the loan as distinguished from
interest and mortgage insurance premium. In other words,
principal is the amount upon which interest is paid.
- Purchase Agreement
- An agreement between buyer and seller denoting price and
terms of the sale.
- Real Estate Agent
- a licensed person who works under the direction of a
broker selling and renting real estate.
- Real Estate Broker
- A middle man or agent who buys and sells real estate for
a company, firm, or individual on a commission basis. The
broker does not have title to the property, but generally
represents the owner.
- Realtor
- A real estate broker holding membership with the
National Association of Realtors.
- Refinancing
- The process of the same mortgagor paying off one loan
with the proceeds from another loan.
- Restrictive Covenants
- Private restrictions limiting the use of real property.
Restrictive covenants are created by deed and may
"run with the land," binding all subsequent
purchasers of the land, or may be "personal" and
binding only between the original seller and buyer. The
determination whether a covenant runs with the land or is
personal is governed by the language of the covenant, the
intent of the parties, and the law in the State where the
land is situated. Restrictive covenants that run with the
land are encumbrances and may affect the value and
marketability of title. Restrictive covenants may limit
the density of buildings per acre, regulate size, style or
price range of buildings to be erected, or prevent
particular businesses from operating or minority groups
from owning or occupying homes in a given area. (This
latter discriminatory covenant is unconstitutional and has
been declared unenforceable by the U.S. Supreme Court.)
- Seller's Market
- More buyers than sellers.
- Special Assessments
- A special tax imposed on property, individual lots or
all property in the immediate area, for road construction,
sidewalks, sewers, street lights, etc.
- Special Lien
- A lien that binds a specified piece of property, unlike
a general lien, which is levied against all one's assets.
It creates a right to retain something of value belonging
to another person as compensation for labor, material, or
money expended in that person's behalf. In some localities
it is called "particular" lien or
"specific" lien. (See lien.)
- Special Warranty Deed
- A deed in which the grantor conveys title to the grantee
and agrees to protect the grantee against title defects or
claims asserted by the grantor and those persons whose
right to assert a claim against the title arose during the
period the grantor held title to the property. In a
special warranty deed the grantor guarantees to the
grantee that he has done nothing during the time he held
title to the property which has, or which might in the
future, impair the grantee's title.
- Survey
- A map or plat made by a licensed surveyor showing the
results of measuring the land with its elevations,
improvements, boundaries, and its relationship to
surrounding tracts of land. A survey is often required by
the lender to assure him that a building is actually sited
on the land according to its legal description.
- Tax
- As applied to real estate, an enforced charge imposed on
persons, property or income, to be used to support the
State. The governing body in turn utilizes the funds in
the best interest of the general public.
- Title
- As generally used, the rights of ownership and
possession of particular property. In real estate usage,
title may refer to the instruments or documents by which a
right of ownership is established (title documents), or it
may refer to the ownership interest one has in the real
estate.
- Title Insurance
- Protects lenders or homeowners against loss of their
interest in property due to legal defects in title. Title
insurance may be issued to a "mortgagee's title
policy." Insurance benefits will be paid only to the
"named insured" in the title policy, so it is
important that an owner purchase an "owner's title
policy", if he desires the protection of title
insurance.
- Title Search or Examination
- A check of the title records, generally at the local
courthouse, to make sure the buyer is purchasing a house
from the legal owner and there are no liens, overdue
special assessments, or other claims or outstanding
restrictive covenants filed in the record, which would
adversely affect the marketability or value of title.
- Trustee
- A party who is given legal responsibility to hold
property in the best interest of or "for the benefit
of" another. The trustee is one placed in a position
of responsibility for another, a responsibility
enforceable in a court of law. (See deed of trust.)
- Variable Interest Rate
- A fluctuating interest rate which can go up or down
depending on the going market rate.
- Voluntary Lien
- A voluntary lien by the owner such as a mortgage, as
opposed to involuntary liens (taxes).
- Waive
- To relinquish, or abandon. To forego a right to enforce
or require anything.
- Wrap-Around Mortgage
- A second mortgage which is subordinate to but includes
the face value of the first mortgage.
- Zoning Ordinances
- The acts of an authorized local government establishing
building codes, and setting forth regulations for property
land usage.
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