Welcome to our comprehensive guide to real estate terminology. Whether you’re a first-time homebuyer, seasoned investor, or just curious about real estate terms, this glossary will help you navigate the complex world of real estate transactions. Use the alphabet navigation below to jump to specific sections.
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Abstract of Title: A summary of all recorded instruments and proceedings that affect the title to a property, arranged in chronological order.
Acceleration Clause: A provision that allows a lender to demand immediate full repayment of a loan if specific conditions are not met.
Accretion: The gradual increase of land through natural processes, such as water or wind deposits.
Acknowledgment: A formal declaration before a duly authorized officer by a person who has executed an instrument that such execution is their act and deed.
Acquisition: An act or process by which a person procures property.
Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that changes periodically based on market conditions.
Adjacent: Lying near to but not necessarily in actual contact with.
Adjoining: Contiguous; touching or sharing a common boundary.
Administrator: A person appointed by court to administer the estate of a deceased person who left no will.
Ad Valorem: According to valuation.
Adverse Possession: A means of acquiring title where an occupant has been in actual, open, notorious, exclusive, and continuous occupancy of property under a claim of right for the required statutory period.
Affidavit: A written statement sworn to under oath.
Affordability: The amount of house you can reasonably afford based on your income, typically calculated as spending no more than 30% of monthly income on housing costs.
Agency: The relationship between principal and agent arising from a contract where the agent is employed to represent the principal in dealings with third parties.
Agent: A licensed professional who represents buyers or sellers in real estate transactions.
Agreement of Sale: A written agreement between seller and purchaser in which the purchaser agrees to buy under certain terms.
Air Rights: Rights to use and develop the space above property.
Alienation: The transfer of property ownership from one party to another.
Amortization: The gradual repayment of a mortgage through regular monthly payments of principal and interest over the loan term.
Annual Percentage Rate (APR): The total cost of borrowing money, expressed as a yearly rate, including interest and fees.
Appraisal: A professional estimation of a property’s market value based on recent sales of comparable properties and other factors.
Appreciation: An increase in a property’s value over time.
Appurtenance: Something outside the property itself but belongs to the land and adds to its enjoyment, such as a right-of-way.
As-Is: The sale of a property in its current condition, without repairs or improvements.
Assessment: The value assigned to a property by local government for tax purposes.
Assignment: The transfer of rights or property from one party to another.
Assumption of Mortgage: Taking title to property and assuming responsibility for an existing mortgage on that property.
Avulsion: A sudden and perceptible loss or addition to land by the action of water, or a sudden change in the bed or course of a stream.
B
Back-End Ratio: The percentage of monthly income that goes toward paying all monthly debt payments.
Balloon Mortgage: A mortgage with small monthly payments but a large final payment.
Beneficiary: The person who receives or is to receive benefits resulting from certain acts.
Bequeath: To give or hand down by will.
Bill of Sale: A written instrument given to pass title of personal property.
Binder: An agreement covering down payment for purchase of real estate as evidence of good faith.
Biweekly Mortgage: A mortgage paid every two weeks instead of monthly, resulting in 13 monthly payments per year.
Blockbusting: The illegal practice of inducing homeowners to sell based on claims about neighborhood demographic changes.
Bona Fide: In good faith, without fraud.
Bridge Loan: A short-term loan used to “bridge” the gap between buying a new home and selling an existing one.
Broker: A licensed real estate professional who can manage their own real estate business and supervise other agents.
Building Code: Local regulations governing building construction standards.
Building Line: A line fixed at a certain distance from property lines beyond which structures cannot project.
Building Permit: Written governmental permission for construction or renovation.
Buydown: A financing technique where the buyer or seller pays extra points up front to reduce interest rates during the early years of a mortgage.
C
Capital Appreciation: The increase in value accruing to real estate improvements.
Capital Asset: Any asset of a permanent nature used for income production.
Capital Gain: Profit from the sale of a capital asset, often taxed at a lower rate than ordinary income.
Capital Improvement: Any structure or addition that increases property value or extends useful life.
Capital Loss: A loss from the sale of a capital asset.
Caveat Emptor: Latin for “let the buyer beware.” This principle states that the buyer is responsible for examining property and buying at their own risk.
Cease and Desist List: A list of homeowners who have filed statements expressing their wish not to be solicited by real estate brokers or salespersons.
Certificate of Occupancy: A document issued by a local government certifying a building is safe and suitable for occupancy.
Chain of Title: The history of all documents affecting ownership of a property.
Chattel: Personal property.
Clean Title: A title that is free of liens, encumbrances, or title defects.
Client: The person who has established an agency relationship with a real estate broker or agent.
Closing: The final step in a real estate transaction where property ownership is transferred from seller to buyer.
Closing Costs: Fees associated with completing a real estate transaction, typically 2-5% of the purchase price.
Cloud on Title: Any condition that affects the clear title to real property.
Collateral: Property pledged as security for a debt.
Color of Title: That which appears to be good title but is not title in fact.
Commingling: The unethical or illegal act of mixing client funds with an agent’s personal or business funds.
Commission: Payment to a real estate agent for services rendered.
Community Property: In certain states, property acquired during marriage that is owned equally by both spouses.
Comparables (Comps): Similar properties used to determine the market value of a subject property.
Completion Bond: A bond guaranteeing completion of promised improvements.
Condemnation: Taking private property for public use through eminent domain.
Contingency: A condition that must be met for a real estate contract to become binding.
Contract: A legally enforceable agreement between competent parties.
Conventional Mortgage: A loan not guaranteed by the federal government that meets Fannie Mae and Freddie Mac requirements.
Conversion: Change from one character or use to another.
Covenants: Agreements in deeds restricting property use.
D
Damages: Monetary compensation for injury to person, property, or rights.
Debt Capital: Money borrowed for a particular business purpose.
Debt Service: Annual amount to be paid by a debtor on an obligation to repay borrowed money.
Deed: A legal document that transfers property ownership from one party to another.
Deed Restriction: A limitation in a deed controlling property use.
Default: Failure to meet legal obligations in a contract, particularly failure to make mortgage payments.
Defeasance Clause: The clause in a mortgage that permits the mortgagor to redeem their property upon payment of obligations.
Deficiency Judgment: A court judgment against a borrower for the difference between the foreclosure sale price and the mortgage balance.
Delivery: The transfer of possession of a thing from one person to another.
Depreciation: A decline in property value due to wear and tear or obsolescence.
Dispossess Proceedings: Summary process by a landlord to oust a tenant and regain possession of premises.
Documentary Evidence: Evidence in the form of written or printed papers.
Down Payment: The initial payment made when purchasing a property, typically expressed as a percentage of the purchase price.
Dual Agency: Representing both principals (seller and buyer) to a transaction.
Due Diligence: The investigation or audit of a potential investment to confirm facts and details.
Duress: Unlawful constraint exercised upon a person whereby the person is forced to do some act against their will.
E
Earnest Money: A deposit made by a buyer to show good faith in a real estate transaction.
Easement: A right to use another person’s land for a specific purpose.
Economic Life: The period over which a property will yield a return on investment.
Economic Obsolescence: Lessened desirability or useful life arising from economic forces.
Ejectment: A form of action to regain possession of real property, with damages for unlawful retention.
Eminent Domain: The right of government to take private property for public use with compensation.
Encroachment: When a structure or other property improvement intrudes onto another’s property.
Encumbrance: Any right to or interest in land that affects its value.
Equity: The difference between a property’s market value and the amount owed on the mortgage.
Equity of Redemption: The right to reclaim property before foreclosure sale by paying all debts.
Erosion: The wearing away of land through processes of nature.
Escheat: Property reverting to the state when an owner dies without a will or heirs.
Escrow: A third party that holds funds or documents until contractual conditions are met.
Estate: The degree, quantity, nature, and extent of interest in real property.
Estoppel Certificate: A document stating the current status of a lease and verifying certain facts.
Eviction: The legal process of removing a tenant from rental property.
F
Fair Credit Reporting Act: Federal law regulating the collection and use of consumer credit information.
Fair Housing Act: Federal law prohibiting discrimination in real estate transactions.
Fair Market Value: The price a property would sell for on the open market between a willing buyer and seller.
Fannie Mae: A government-sponsored enterprise that purchases conventional mortgages.
Fee Simple: Absolute ownership of real property; the highest form of property ownership.
FHA Loan: A government-backed mortgage insured by the Federal Housing Administration.
Fiduciary: A person who acts for another’s benefit while subordinating their own personal interests.
Fixed-Rate Mortgage: A mortgage with an interest rate that remains the same for the entire term.
Fixtures: Personal property that becomes permanently attached to real property.
Foreclosure: The legal process where a lender takes possession of a property due to default.
Freddie Mac: Government-sponsored enterprise buying mortgages on the secondary market.
G
Good Faith Estimate: A written estimate of all closing costs and fees associated with a mortgage loan.
Graduated Lease: A lease providing for periodic changes in rent.
Grantee: The person receiving title to a property.
Grantor: The person transferring title to a property.
Gross Income: Total income from property before expense deduction.
Ground Rent: Rent paid for the use of land.
H
Habendum Clause: The “to have and to hold” clause in a deed.
HELOC (Home Equity Line of Credit): A revolving line of credit using home equity as collateral.
Holdover Tenant: A tenant who remains in possession of leased property after the expiration of the lease term.
Home Inspection: A thorough examination of a property’s condition by a qualified professional.
Homeowners Association (HOA): An organization that makes and enforces rules for properties within its jurisdiction.
Homeowners Insurance: Insurance that protects against property damage and liability claims.
I
IDX Website: A real estate website featuring Internet Data Exchange capability, allowing display of MLS listings.
In Rem: A legal proceeding against the property directly rather than against a person.
Interest Rate: The percentage charged by a lender for borrowing money.
Intestate: Dying without having made a valid will.
Investment Property: Real estate purchased to generate rental income or profit through resale.
Involuntary Lien: A lien imposed against property without consent of the owner.
Irrevocable: Unable to be changed or reversed.
J
Joint Tenancy: Property ownership where two or more people share equal rights, with right of survivorship.
Judgment: A court decree stating the rights of parties in a lawsuit.
Judicial Foreclosure: Foreclosure proceedings supervised by a court.
Jumbo Loan: A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac.
K
L
Laches: Delay or negligence in asserting one’s legal rights.
Landlord: One who rents property to another.
Lease: A contract for the use and occupancy of land, space, or structures.
Leasehold: A tenant’s right to occupy real estate for a fixed period.
Legal Description: A description of real property sufficient to identify it for legal purposes.
Lien: A legal claim against a property for an unpaid debt.
Life Estate: A property interest that lasts for the duration of a specified person’s life.
Listing: A contract between a real estate broker and property owner to sell the property.
Littoral Rights: The rights of owners of land bordering lakes and oceans.
Loan-to-Value Ratio (LTV): The relationship between the mortgage amount and the property’s value, expressed as a percentage.
M
Market Value: The most probable price a property would bring in an open market transaction.
Mechanic’s Lien: A lien against property filed by someone who provided labor or materials to improve the property.
Meeting of the Minds: When all parties to a contract agree to its substance and terms.
Metes and Bounds: A method of describing land using physical features and distances.
Mortgage: A loan secured by real estate as collateral.
Mortgage Broker: A professional who arranges mortgage loans between lenders and borrowers.
Multiple Listing Service (MLS): A database of property listings shared by real estate agents.
N
Net Listing: A listing where the broker receives all proceeds above a set price to the seller (often prohibited).
Notice of Default: A formal written notice to a borrower that a default has occurred and legal action may follow.
O
Offer: A promise to purchase property with specific terms and conditions.
Option: The right to purchase or lease property at a specified price within a specified time period.
P
Pay-at-Closing Leads: A lead generation model where agents only pay for leads after successfully closing a transaction.
Per Diem Fees: Daily charges that may apply in real estate transactions.
PITI: Principal, Interest, Taxes, and Insurance – the components of a monthly mortgage payment.
Plottage: The increase in value created by combining adjacent lots into one larger parcel.
Points: Fees paid to a lender at closing to reduce the interest rate.
Power of Attorney: Legal authorization for one person to act on behalf of another.
Pre-Approval: A lender’s preliminary commitment to loan a specific amount based on verified financial information.
Private Mortgage Insurance (PMI): Insurance required on conventional loans when the down payment is less than 20%.
Q
Quiet Enjoyment: The right of a tenant to use property without interference from the landlord.
Quiet Title: A legal action to establish clear ownership of real estate.
Quit Claim Deed: A deed transferring whatever interest the grantor has in a property without warranties.
R
Real Estate Agent: A licensed professional who helps people buy, sell, or rent properties.
Real Estate Owned (REO): Property owned by a lender after an unsuccessful foreclosure auction.
Recording: Filing documents with the county recorder to make them part of the public record.
Red-Lining: The illegal practice of discriminating against certain neighborhoods in lending or insurance practices.
Refinancing: The process of replacing an existing mortgage with a new one.
Rem: See “In Rem”.
Restrictive Covenant: A limitation on how a property may be used.
Right of First Refusal: The right to match any offer to buy a property.
Right of Ingress or Egress: The right to enter and leave a property.
Riparian Rights: The rights of land owners whose property borders flowing water (streams, rivers).
S
Sale-Leaseback: A transaction where the buyer allows the seller to remain as a tenant after the sale.
Second Mortgage: A loan that is subordinate to a first mortgage.
Short Sale: A sale where the proceeds fall short of what the owner still owes on the mortgage.
Special Assessment: A tax or levy imposed against a property to pay for public improvements that benefit the property.
Specific Performance: A legal action requiring a party to perform their duties under a contract.
Survey: A drawing showing a property’s boundaries and features.
T
Tax Lien: A lien placed on property for unpaid taxes.
Tenancy in Common: Property ownership by two or more people with no right of survivorship.
Title: A legal document establishing property ownership.
Title Insurance: Insurance that protects against losses from title defects.
Title Search: An examination of public records to determine ownership of property and potential claims against it.
Transfer Tax: A tax charged when property changes ownership.
U
Under Contract: A property that has an accepted offer but hasn’t closed yet.
Underwriting: The process of evaluating a loan application to determine risk and approval.
Usury: Charging interest above the legal maximum rate.
V
VA Loan: A mortgage loan guaranteed by the Department of Veterans Affairs.
Variance: Permission to use property in a way that varies from zoning requirements.
Void: Having no legal force or effect.
W
Walkthrough: A final inspection of a property before closing.
Warranty Deed: A deed in which the grantor guarantees the title to be good and clear.
Water Rights: The right to use water on or adjacent to property.
X
Y
Z
Zoning: Local laws that specify how property in specific locations can be used.
This glossary is intended as a general reference guide. Real estate terms and their applications may vary by location and specific circumstances. Always consult with qualified real estate and legal professionals for advice on your specific situation.
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