A

A

Ad Valorem

A Latin phrase that means "according to value," used to refer to taxes that are based on value of property.

Adverse Possession

Acquiring title to real property that belongs to someone else by taking possession of it without permission, in the manner and for the length of time prescribed by statute.

Affidavit

A sworn statement made before a notary public (or other official authorized to administer an oath) that has been written down and acknowledged.

Agency

A sworn statement made before a notary public (or other official authorized to administer an oath) that has been written down and acknowledged.

Agency, Dual

When an agent represents both parties to a transaction, as when a broker represents both the buyer and the seller.

Agent

A licensed individual who represents buyers or sellers in real estate transactions.

Alienation

The transfer of ownership or an interest in property from one person to another, by any means.

Amenity

Any positive aspect of a home or property. These positive characteristics can be natural amenities, like scenic views and attractive landscapes, or they can be man-made amenities such as swimming pools, hot tubs, or sun porches.

Amortization

Gradual repayment of a debt with installment payments that include both principal and interest, over a period of time.

Annexation

Attaching personal property to real property, so that it becomes part of the real property (a fixture) in the eyes of the law.

Annual Percentage Rate (APR)

A loan’s yearly percentage rate. The APR can include the cost of obtaining the loan.

Apportionment

A division of property (as among tenants in common when the property is sold or partitioned) or liability (as when responsibility for closing costs is allocated between the buyer and seller) into proportionate, but not necessarily equal, parts.

Appraisal

An estimate made by a qualified professional that determines the market value of a property.

Appraised Value

An estimate of a property’s fair market value, based on an appraiser’s knowledge and experience.

Appreciation

An increase in value; the opposite of depreciation.

Appurtenance

Anything that is incident to, attached to, or pertains to the land, but is not necessarily a part of it. An appurtenance is ordinarily transferred with the land, but some appurtenances may be transferred separately.

Assessment

A value assessment of property made by the county assessors office for the purpose of taxes.

Assessor

An official who determines the value of property for taxation.

Asset

Anything of value that a person owns.

Assets, Liquid

Cash and other assets that can be readily turned into cash (liquidated), such as stock.

Assume

To take on legal responsibility for a debt or other obligation that was formerly the responsibility of another.

Assumption

When a property buyer takes on personal liability

Assumption

When a property buyer takes on personal liability for paying off the seller's existing mortgage.

Assumption Fee

A fee paid to the lender, usually by the buyer, when a mortgage is assumed.

Auditing

Verification and examination of records, particularly the financial accounts of a business or other organization.

B

Backup contract

A contract to buy real estate that becomes effective if a prior contract fails to be consummated.

Balloon Payment

The final payment on a loan, when that payment is greater than the preceding installment payments and pays the loan in full.

Band of Investment

An income property appraisal technique where the overall interest rate is derived from weighing mortgage and equity rates.

Beneficiary

The person who receives or is to receive the benefits resulting from certain acts.

Betterment

An improvement to real estate.

Biannual

Occuring twice a year.

Biennial

Occuring every 2 years.

Bilateral Contract

A contract under which each party promises performance.

Bill of Sale

A written instrument given to pass title or personal property from a seller to a buyer. Used when furniture and portable appliances are sold.

Blanket Mortgage

A single mortgage that covers more than one parcel of real estate.

Blended Rate

An interest rate, applied to a refinanced loan, that is higher than the rate on the old loan but lower than the rate offered on new loans.

Bond

A certificate that serves as evidence of a debt and of the terms under which it is undertaken.

Book Value

The carrying amount of an asset, as shown on the books of a company.

Breach of Contract

A violation of the terms of a legal agreement.

Broker

A licensed real estate professional who represents one or more individuals in a real estate transaction. This individual helps determine market values, lists properties, advertises properties for clients, shows properties to prospective buyers, prepares offers, and acts on behalf of his/her clients. A broker also ensures the compliance to all laws governing the transfer of property.

Budget Mortgage

A mortgage that requires monthly payments for taxes and insurance in addition to interest and principal.

Building Codes

Regulations established by local governments describing the minimum structural requirements for buildings.

Buy-Back Agreement

A provision in a contract under which the seller agrees to repurchase the property at a stated price upon the occurance of a specified event within a certain period of time.

Buy Down

The action to pay additional discount points to a lender in exchange for a reduced rate of interest on a loan.

Buyer’s Broker

A licensed real estate professional who acts on behalf of the buyer in real estate transactions.

C

Capital Asset

An asset defined in Section 1211 of the Internal Revenue Code that can receive favorable tax treatment upon sale.

Capital Expenditure

An improvement (as distinguished from a repair) that will have a life of more then one year.

Capital Gain

Gain on the sale of a capital asset. If long-term, (generally over one year), capital gains are favorably taxed.

Capital Loss

Loss from the sale of a capital asset.

Caveat Emptor

"Let the buyer beware." The buyer must examine the goods or property and buy at his own risk.

Certificate of Eligibility

Issured by the Veterans Administration to those who qualify for a VA loan.

Certificate of Insurance

A document issued by an insurance company to verify the coverage.

Certificate of Occupancy

A document issued by a local government to a developer permitting the structure to be occupied by members of the public.

Certificate of Reasonable Value

A document issued by the Veteran's Administration, based on an approved appraisal.

Certificate of Title

An opinion rendered by an attorney as to the status of title to a property, according to public records.

Chattel

Personal Property.

Closing

1. The act of transferring ownership of a property from seller to buyer in accordance with a sales contract. 2. The time when a closing takes place.

Closing Date

The date on which the seller delivers the deed and the buyer pays for the property.

Comparative Marketing Analysis (CMA)

In the initial stages of the home selling process, a comparative market analysis (CMA) is conducted by an agent to determine what today’s buyers are willing to pay for a home. The CMA compares the market activity of similar homes in similar neighborhoods.

Contingency

A condition in a contract that must be met in order for the contract to be carried out.

Contract

An agreement between competent parties to do or not to do certain things for a consideration. Example: to have a valid contract for the sale of real estate, there must be: 1. an offer 2. written documentation 3. description of property 4. signatures by principals or their attorney-in-fact

Contractor

One who contracts to supply specific goods or services, generally in connection with development of a property.

Conventional Loan

A mortgage loan other than one guaranteed by the Veterans Administration or insured by the Federal Housing Administration.

Conversion

Changing property to a different use or form of ownership, such as when apartments are transformed to condominiums.

Convey

To deed or transfer title to another.

Conveyance

The transfer of the title of real estate from one to another; the means or medium by which title of real estate is transferred.

Cooperative

A type of corporate ownership of real property whereby stockholders of the corporation are entitled to use a certain dwelling unit or other units of space.

Cost Approach

A method of appraising property based on the depreciated reproduction or replacement cost (new) of improvements, plus the market value of the site.

Counteroffer

Rejection of an offer to buy or sell, with a simultaneous substitute offer.

Covenants

Promises written into deeds and other instruments agreeing to performance or nonperformance of certain acts, or requiring or preventing certain uses of the property.

Creative Financing

Any financing arrangement other than a traditional mortgage from a third-party lending institution.

Credit

In finance, the availability of money.

Credit Rating (Report)

An evaluation of a person's capacity (or history) of debt repayment.

Creditor

One who is owed money.

Curable Depreciation

Depreciation or deterioration that can be corrected at a cost less than the value that will be added.

D

Damages

The amount recoverable by a person who has been injured in any manner, including physical harm, property damage, or violated rights, through the act or default of another.

Debenture

An unsecured note or bond.

Debit

In a closing statement (settlement), an item that is charged to a party.

Debt

An obligation to pay.

Deed

A legal document that shows the legal owner of a property.

Deed in Lieu of Foreclosure

The act of giving property back to a lender without foreclosure.

Deed of Trust

An instrument used in many states in lieu of a mortgage. Legal title to the property is vested in one or more trustees to secure the repayment of the loan.

Deed Restriction

A clause in a deed that limits the use of land.

Defect in Title

Any recorded instrument that would prevent a grantor from giving a clear title.

Deferred Maintenance

In appraisal, a type of physical depreciation owing to lack of normal upkeep.

Deferred Payment Method, Other (Tax)

A method to report the gain on a sale when promissory notes taken by the seller are worth less than their face value.

Deferred Payments

Payments to be made at some future date.

Density

The intensity of a land use.

Deposit

Money paid in good faith to assure performance of a contract.

Depreciation (Accounting)

Allocating the cost of an asset over its estimated useful life.

Depreciation (Appraisal)

A charge against the reproduction cost (new) of an asset for the estimated wear and and obsolescence.

Detached Housing

Residential buildings in which each dwelling unit is surrounded by freestanding walls and is generally sited on a separate lot.

Developer

One who transforms raw land to improved property by use of labor, capital, and entrepreneur efforts.

Disclaimer

A statement whereby responsibility is rejected.

Disclosure

Information presented to the buyer from the seller (or an agent) in a real estate transaction about the conditions affecting a property. A seller must disclose any known material facts about the property to the perspective buyer.

Discount

The difference between the face amount of an obligation and the amount advanced or received.

Discount Points

Amounts paid to the lender (usually by the seller) at the time of origination of a loan, to acount for the difference between the market interest rate and the lower face rate of the note.

Discrimination

Applying special treatment (generally unfavorable) to an individual solely on the basis of the person's race, religion, or sex.

Documentary Evidence

Evidence in the form of written or printed papers.

Dormer

1. A window projectiong through a sloping roof (single dormer); 2. The roofed structure containing such a window (shed dormer).

Down Payment

The amount one pays for property in addition to the debt incurred.

Dual Contract

The illegal or unethical practice of providing 2 different contracts for the same transaction.

Due-On-Sale Clause

A provision in a mortgage that states the loan is due upon the sale of the property.

Duress

Compulsion to do something because of a threat.

Dwelling

A place of residence.

E

Earnest Money

A deposit made by a purchaser of real estate to evidence good faith.

Easement

The right, privilege, or interest that one party has in the land of another.

Economic Depreciation

Loss of value from all causes outside the property itself.

Effective Rate

The true rate of return considering all relevant financing expenses.

Egress

Access from a land parcel to a public road or other means of exit.

Eminent Domain

The right of the government or a public utility to acquire property for necessary public use by condemnation; the owner must be fairly compensated.

Encroachment

A building, a part of a building, or an obstruction that physically intrudes upon, overlaps, or trespasses upon the property of another.

Encumbrance

Any right to or intrerest in land that affects it value.

Endorsement

The act of signing one's name, as the payee, on the back of a check or note, with or without further qualification; the signature itself.

Energy Tax Credits

A reduction in income tax, generally based on the cost of installing insulation and other energy-saving devices.

Entity

The legal form under which property is owned.

Environmental Protection Agency (EPA)

An agency of the U.S. government established to enforce federal pollution abatement laws and to implement various pollution prevention programs.

Equal Credit Opportunity Act

A federal law, enacted in 1974, to discourage discrimination by lenders on the basis of sex or marital status. Amended in 1976 to prohibit discrimination on the basis of age, race, color, religion, national origin, or receipt of public assistance.

Equitable Conversion

A legal doctrine in some states in which, under a contract of sale, buyers and sellers are treated as though the closing had taken place in that the seller in possession has an obligation to take care of the property.

Equity

The interest or value that the owner has in real estate over and above the liens against it.

Escrow

A process involving a neutral third party who acts as a facilitator for the buyer and seller. The escrow company handles all the paperwork, distributes funds, and prepares the deed.

Estate

The degree, nature, and extent of interest that a person has in real property.

Estate Tax

A tax based on the value of property left by the deceased.

Evidence of Title

Documents, such as deeds, that demonstrate ownership.

Exclusive Agency Listing

Employment contract giving only one broker, for a specified time, the right to sell the property and also allowing the owner alone to sell the property without paying a commission.

Exclusive Right to Sell Listing

Employment contract giving the broker the right to collect commission if the property is sold by anyone, including the owner, during the term of the agreement.

Executor

A person named in a will to carry out its provisions for the disposition of the estate.

F

Facade

The outside front wall of a building.

Face Value

The dollar amount, shown by words and/or numbers, on a document.

Fair Market Value

A term, generally used in property tax and condemnation legislation, meaning the market value of a property.

Fannie Mae

Nickname for Federal National Mortgage Association.

Farmer's Home Administration (FmHA)

An agency, within the U.S. Department of Agriculture, that administers assistance programs for purchasers of homes and farms in small towns and rural areas.

Federal Deposit Insurance Corporation (FDIC)

A public corporation established in 1933; insures up to $100,000 for each depositor in most commercial banks. Has own reserves and can borrow from the U.S. Treasury.

Federal Fair Housing Law

A federal law that forbids discrimination on the basis of race, color, sex, religion, or national origin in the selling or renting of homes or apartments.

Federal Housing Administration (FHA)

An agency, within the U.S. Department of Housing and Urban Development, that administers many loan programs, loan guarantee programs, and loan insurance programs designed to make more housing available.

Federal Trade Commission

A federal agency, headquarters in Washington D.C., that regulates advertising and other promotion and sales practices of firms engaged in interstate commerce.

Fee Simple Absolute

Absolute ownership of real property; owner is entitled to the entire property with unconditional power of disposition during the owner's life, and upon his death the property descends to the owner's designated heirs.

Fee Simple Defeasible

A type of property ownership in which the grant of title or duration of ownership is dependent on a specified condition.

FHA Mortgage Loan

A mortgage loan insured by the FHA.

Fiduciary

One who acts, in a financial role, in the best interests of others.

Finance Charge

Interest or certain other fees charged to a credit customer.

Financial Statement

One that shows income and expenses for an accounting period, or assets, liabilities and equity as of a point in time.

First Mortgage

A mortgage that has priority as a lien over all other mortgages.

Fiscal Year

A 12-month time interval used for financial reporting; the period starts on any date after January 1 and ends one year later.

Flexible Payment Mortgage (FPM)

A home-purchase loan plan that allows the borrower to pay interest-only for the first several years of the term.

Floor-Area Ratio

The arithmetic relationship of the total square feet of a building to the square footage of the land area.

Foreclosure

Foreclosure is the process a bank uses to repossess a home.

Forfeiture

Loss of money or anything else of value because of failure to perform under contract.

Franchise

A license for a person or group to operate a business under someone else's company name.

Fraud

The intentional use of deception to cause another person to suffer loss.

Freddie Mac

Nickname for Federal Home Loan Mortgage Corporation.

Freehold

An interest in real estate without a predetermined time span.

Full Disclosure

A requirement to reveal all information pertinent to a transaction.

G

General Contractor

One who constructs a building or other improvement for the owner or developer.

General Lien

A lien that includes all of the property owned by the debtor, rather than a specific property.

General Warranty Deed

A deed in which the grantor agrees to protect the grantee against any other claim.to title fo the property and provides other promises.

Gift Tax

Federal tax upon a monetary gift to a relative or friend.

Ginnie Mae

Nickname for Government National Mortgage Association.

Good Faith

An act done honestly.

Goodwill

A business asset of intangible value created by customer and supplier relations.

Government National Mortgage Association (GNMA)

A government organization to assist in housing finance.

Gradient

The slope, or rate of increase or decrease in the elevation of a surface; usually expressed as a percentage.

Graduated Payment Mortgage (GPM)

A mortgage requiring lower payments in early years than in later years.

Grant

A technical term used in deeds of conveyance of property to indicate a transfer.

Grantee

The party to whom the title to real property is conveyed; the buyer.

Grantor

Anyone who gives a deed.

Gross Area

The total floor area of a building, usually measured from its outside walls.

Gross Income

Total income from property before any expenses are deducted.

Growing Equity Mortgage

A mortgage loan in which the payment is increased by a specific amount each year, with the additional payment amount applied to principal retirement.

Guarantee (A Loan)

To agree to indemnify the holder of a loan all or a portion of the unpaid principal balance in case of default by the borrower.

Guaranty (A Loan)

An assurance provided by one party that another party will perform under a contract.

H

Habendum Clause

The "to have and to hold" clause that defines or limits the quantity of the estate granted in the deed.

Hazard Insurance

A form of insurance that protects against certain risks, such as from fires or storms.

Heir

One who inherits property.

Highest and Best Use

An appraisal term meaning the legally and physically possible use that, at the time of appraisal, is most likely to produce the greatest net return to the land and/or buildings over a given period.

Holdback

Money not paid until certain events have occured, such as a floor loan of a loan commitment or retainage on a construction contract.

Holding Company

One that owns or controls another company(ies).

Holding Period

The time span of ownership, often for investment real estate.

Home Warranty Plan

An insurance policy that covers electrical, plumbing, heating, and appliance-related failures in a home.

Homeowner's Association

An organization of the homeowners in a particular subdivision, planned unit development, or condominium; generally for the purpose of enforcing deed restrictions or managing the common elements of the development.

Homeowner's Policy

An insurance policy designed especially for homeowners. Usually protects the owner from losses caused by most common disasters, theft, and liability.

Homeowner's Warranty Program (HOW)

A private insurance program that protects purchasers of newly constructed homes, when the builder participates in the progrram, against structural and mechanical faults.

Homeownership

The state of living in a structure that one owns.

Homestead

Status provided to a homowner's principal residence by some state statutes; protects home against judgments up to specified amounts.

Housing and Urban Development (HUD) Department

A U.S. government agency established to implement certain federal housing and community development programs.

I

Implied Contract

Created by actions but not necessarily written or spoken.

Implied Warranty

One that is not written but exists under the law.

Income

The money or other benefit coming from the use of property, skill, or business.

Incorporate

To form a corporation under regulations provided by the Secretary of State.

Incurable Depreciation

A defect that cannot be cured or that is not financially practical to cure; a defect in the "bone structure" of a building.

Indemnify

To protect another person against loss or damage.

Indenture

A written agreement made between 2 or more persons having different interests.

Independent Contractor

A contractor that is self employed. Most Real Estate Agents fall in this classification

Individual Retirement Account (IRA)

A special account available to all employees throught private financial organizations (banks, savings and loans, credit unions, insurance companies, and securities firms) for the purpose of retirement savings.

Inheritance Tax

A tax, based on property value, imposed in some states on those who acquire property form a decedent.

Injunction

An order issued under the seal of a court to restrain one or more parties to a legal proceeding, from performing an act deemed inequitable to another party or parties in the proceeding.

Inspection

A physical scrutinizing review of property or of documents.

Institute of Real Estate Management (IREM)

A professional organization of property managers.

Institutional Lender

Financial intermediiaries who invest in loans and other securities on behalf of their depositors or customers; lending and investment activities are regulated by laws to limit risk.

Instrument

A written legal document, created to establish the rights and liabilities of the parties to it.

Insurable Interest

An interest in a person or property that would cause one a loss if that person or property were injured.

Insurable Title

A title that can be insured by a title insurance company.

Insurance Coverage

Total amount and type of insurance carried.

Interest

Cost of the use of money.

Interest Rate

The percentage of a sum of money charged for its use.

Internal Revenue Code

The law, passed by Congress, that specifies how and what income is to be taxed, and what may be deducted from taxable income.

Internal Revenue Service (IRS)

An agency of the federal government that is responsible for the administration and collection of federal income taxes.

Intestate

1. (adj.) Having made no valid will. 2.(noun) A person who dies leaving no will or leaving one that is defective.

Involuntary Conversion

Condemnation or sudden destructionn by nature.

Involuntary Lien

A lien imposed against property without consent of the owner (unpaid taxes, special assessments. etc.).

Irrevocable

Incapable of being recalled or revoked; unchangeable.

J

Joint Tenacy

Ownership of realty by 2 or more persons, each of whom has an undivided interest with the right of survivorship.

Judgment

A decree of a court stating that one individual is indebted to another and fixing the amount of the indebtedness. The decree can be attached to real property and cause a cloud on title.

Judicial Foreclosure

Having a defaulted debtor's property sold where the court ratifies the price paid.

Just Compensation

The amount paid to the owner of a property when it is acquired under eminent domain.

L

Land Banking

The activity of purchasing land that is not presently needed for use.

Land Contract

A real estate installment selling arrangement whereby the buyer may use, occupy, and enjoy land, but no deed is given by the seller (so no title passes) until all or a specified part of the sale price has been paid.

Land Lease

Only the ground is covered by the lease.

Lease

A contract in which, for a payment called rent, the one entitled to the possession of real property (lessor) transfers those rights to another (lesse) for a specified period of time.

Leasehold

The interest or estate on which a lessee (tenant) or real estate has a lease.

Legal Description

Legally acceptable identification of real estate by one of the following: the government rectangular survey; metes and bounds; or recorded plat (lot and block number).

Lessee

A person to whom property is rented under a lease.

Lessor

One who rents property to another under a lease.

Letter of Credit

An arrangement, with specified conditions, whereby a bank agrees to substitute its credit for a customer's.

Letter of Intent

The expression of a desire to enter into a contract without actually doing so.

Leverage

Use of borrowed funds to increase purchasing power and, ideally, to increase the profitability of an investment.

Levy

To legally impose or collect that which is due.

Liability

A debt or financial obligation.

Liability Insurance

Protection for a property owner from claims arising from injuries or damage to other people or property.

Liable

Responsible or obligated.

License

1. Permission. 2. A right granted by a state to an individual to operate as a real estate broker or salesperson.

License Laws

Laws that govern the activities of real estate salespersons.

Licensee

One who holds real estate license; a licensed salesperson or broker.

Lien

A charge against property making it security for the payment of a debt, judgment, mortgage, or taxes; it is a type of encumbrance.

Life Estate

A freehold interest (in real property) that expires upon the death of the owner or some other specified person (pur autre vie).

Life Tenant

One who is allowed to use property for life or the lifetime of another designated person.

Listing Agreement

An agreement made between a real estate broker (agent) and a homeowner. The homeowner agrees to employ only this broker to find a buyer for the property.

Loan Contingency

A condition in a purchase contract that allows a buyer to terminate the contract if the buyer is unable to secure a loan. The buyer must also agree to remove the contingency within a specified amount of time, or withdraw from the purchase contract.

Lock Box

A small, locked box that holds the front door key of a property. The secure lock box is placed on the property for easy access by real estate agents. Only licensed agents in the area will have a combination or key to this lock.

M

Maintenance

Activities required to compensate for wear and tear on a property.

Management Agreement

A contract between the owner of property and someone who agrees to manage it.

Marginal Property

Property that is barely profitable to use.

Market Comparison Approach

One of 3 appraisal approaches. Value is estimated by analyzing sales prices of similar properties (comparables) recently sold.

Market Price

The actual price paid in a market transaction.

Market Value

The theoretical highest price a buyer, willing but not compelled to buy, would pay, and the lowest price a seller, willing but not compelled to sell, would accept.

Marketable Title

A title so free from defect that a court will enforce the title's acceptance by a purchaser.

Maturity

The due date of a loan.

Mechanic's Lien

A lien given by law upon a building or other improvement upon land, and upon the land itself, as security for the payment for labor done and materials furnished for improvement.

Merger

The fusion of 2 or more interests, such as businesses or investments.

Metes and Bounds

A land description method that details all the boundary lines of land, together with their terminal points and angles.

Mineral Rights

The privilege of gaining income from the sale of oil, gas, and other valuable resources found on land.

Minimum Lot Area

The smallest building or lot area allowed in a subdivision, generally specified by a zoning ordinance.

Minor

A person under the age of majority specified by law (18 or 21, depending on the state).

Misrepresentation

An untrue statement, whether unintentional or deliberate. It may be a form of nondisclosure where there is a duty to disclose or the planned creation of a false appearance. Where there is misrepresentation of material fact, the person injured may sue for damages or rescind the contract.

Model Unit

A representative home, apartment, or office space used as part of a sales campaign to demonstrate the design, structure, and appearance of units in a development.

Modular Housing

Dwelling units constructed from components prefabricated in a factory and erected on the site.

Moisture Barrier

A layer of foil, plastic, or paper used in the construction of exterior walls, ceilings, and foundations to prevent moisture penetration into wooden members or insulation.

Money Market Certificate (MMC)

A type of certificate of deposit offered by banks and savings and loan associations. A fixed interest rate is determined, for certificates issued that week, by rates offered by U.S. treasury bills.

Mortgage

A written instrument that creates a lien upon real estate as security for the payment of a specified debt.

Mortgage Bonds

Tax-exempt securities sold by municipal and state authorities for the purpose of providing low-interest rate mortgage loans to qualified individuals.

Mortgage Broker

One who, for a fee, places loans with investors, but does not service such loans.

Mortgage Discount

Amount of principal that lenders deduct at the beginning of the loan.

Mortgage Insurance

1. A policy that guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the mortgager. 2. Protection for the lender in the event of default, usually covering the top 25% of the amount borrowed.

Mortgage Lien

An emcumbrance on property used to secure a loan.

Mortgagee

One who holds a lien on a property or title to property, as security for a debt.

Mortgagor

One who pledges property as security for a loan.

Multiple Listing

An arrangement among a group of real estate brokers; they agree in advance to provide information about some or all of their listings to the others and also agree that commissions on sales of such listings will be split between listing and selling brokers.

Multiple Listing Service (MLS)

A database (available only to realtors) that details information on homes for sale that are listed by realtors. Between 70-80% of homes are sold through the MLS.

N

National Association of Realtors (NAR)

An organization of Realtors, devoted to encouraging professionalism in real estate activities.

Negative Amortization

An increase in the outstanding balance of a loan resulting from the failure of periodic debt service payments to cover required interest charged on the loan.

Negotiable Instrument

A promise to pay money, transferable from one person to another.

Negotiation

The process of bargaining that precedes an agreement. Successful negotiation generally results in a contract between two partiesl.

Neighborhood

A district or locality characterized by similar or compatible land uses.

Net Income

In accounting, the amount remaining after all expenses have been met.

Net Leasable Area

In a building or project, floor space that may be rented to tenants.

Net Lease

A lease whereby, in addition to the rent stipulated, the lessee (tenant) pays such expenses as taxes, insurance, and maintenance.

Net Listing

A listing in which the brokers commission is the excess of the sales price over an agreed upon (net) price to the seller; this is illegal in some states.

Net Operating Income (NOI)

Income from property or business after operating expenses have been deducted, but before deducting income taxes and financing expenses (interest and principal payments).

Net Present Value

A method of determining whether expected performance of a proposed investment promises to be adequate.

Net Worth

The excess of assets over liabilities.

Nominee

One who, in a limited sense, acts for or represents another.

Nonconforming Use

A use that violates zoning regulations or codes but is allowed to continue because it began before the zoning restriction was enacted.

Nondisturbance Clause

1. An agreement in mortgage contracts on income-producing property that provides for the continuation of leases in the event of loan foreclosure.

Notary Public

An officer who is authorized to take acknowledgements to certain types of documents, such as deeds, contracts, and mortgages, and before whom affidavits may be sworn.

Notice of Default

A letter sent to a defaulting party as a reminder of the default. May state a grace period and the penalties for failing to cure the default.

Notorious Possession

Generally acknowledged possession of real estate.

Novation

A 3-party agreement whereby one party is released from a contract and another party is substituted.

Null and Void

That which cannot be legally enforced, as with a contract provision that is not in conformance with the law.

O

Obsolescence

A loss in value due to reduced desirability and usefulness of a structure because its design and construction has become obsolete; loss due to a structure's becoming old-fashiononed, not in keeping with modern needs, with consequent loss of income.

Off-Site Costs

Expenditures related to construction that are spent away from the place of construction.

Off-Site Improvements

The portions of a subdivision or development that are not directly on the lots to be sold.

Open-End Mortgage

A mortgage under which the mortgager (borrower) may secure additional funds from the mortgagee (lender), usually stipulating a ceiling amount that can be borrowed.

Open House

A method of showing a home for sale whereby the home is left open for a specified period of time and available for viewing to potential buyers.

Open Listing

A listing given to any number of brokers without liability to compensate any except the one who first secures a buyer who is ready, willing, and able to meet the terms of the listing or secures the seller's acceptance of another offer. The sale of the property automatically terminates all open listings.

Open Mortgage

A mortgage that has matured or is overdue and is therefore open to foreclosure at any time.

Operating Expenses

Amounts paid to maintain property, such as property taxes, utilities, hazard insurance. Excludes financing expenses and depreciation.

Operating Lease

A lease between the lessee and the sublessee who actually occupies and uses the property.

Opinion of Title

A certificate, generally from an attorney, as to the validity of title to property being sold.

Option

The right to purchase or lease a property upon specified terms within a specified period.

Oral Contract

A verbal agreement. With few exceptions, verbal agreements for the sale or use of real estate are unenforceable.

Ordinances

Municipal rules governing the use of land.

Ordinary Annuity

A series of equal payments, each payment occuring at the end of each equally spaced period.

Ordinary Income

Defined by the Internal Revenue Code to include salaries, fees, commissions, interests, dividends, and many other items.

Ordinary Loss

For income tax purposes a loss that is deductible against ordinary income.

Orientation

The position of a structure on a site relative to sunlight angles and prevailing winds.

Origination Fees

Charges to a borrower to cover the costs of issuing the loan, such as credit checks, appraisal, and title expenses.

Outstanding Balance

The amount currently owed on a debt.

Overall Rate of Return (OAR)

The percentage relationship of net operating income divided by the purchase price of property.

Overimprovement

A land use considered too intense for the land.

Override

A fee paid to someone higher in the organization, or above a certain amount.

Override

A fee paid to someone higher in the organization, or above a certain amount.

P

Package Mortgage

A mortgage arrangement whereby the principal amount loaned is increased because personalty (e.g., appliances), as well as realty serve as collateral.

Parcel

A piece of property under one ownership; a lot in a subdivision.

Partial Release

A provision in a mortgage that allows some of the property pledged to be freed from serving as collateral.

Partial Taking

Acquisition by condemnation of only part of the property or some property rights.

Participation Mortgage

One that allows the lender to share in part of the income or resale proceeds.

Partition

The division of real property between those who own it with undivided interest.

Partnership

An agreement between 2 or more entities to go into business or invest. Either partner may bind the other, within the scope of the partnership. Each partner is liable for all the partnership's debts. A partnership normally pays no taxes, but merely income tax on their share of income.

Penalty

Money one will pay for breaking a law or violating part or all of the terms of a contract.

Performance Bond

Issued by an insurance company; posted by a party who is to perform certain work. If fhe work is not performed, the insurer promises to complete the work or pay damages up to the amount of the bond.

Permanent Mortgage

A mortgage for a long period of time (over 10 years).

Permit

A document, issued by a government regulatory authority, that allows the bearer to take some specific action.

Perpetuity

The condition of being never ending. Most states attempt to outlaw perpetuities because of potential problems. A perpetual income stream may cause bankruptcy.

Personal Holding Company

In taxation, a term that applies to certain corporations. A personal holding company is required to either pay a high tax in addition to the corporate income, or pay out most of the corporate earnings to share holders each year.

Personalty

Personal property, i.e., all property that is not realty.

Physical Depreciation or Deterioration

The loss of value from all causes of age and action of the elements.

Piggyback Loan

1. A combination of the construction loan with the permanent loan commitment. 2. One mortgage held by more than one lender, with one lender holding the rights of the others in subordination.

Plat

A plan or map of a specific land area.

Plat Book

A public record containing maps of land, showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels.

Plot Plan

A diagram showing the proposed or existing use of a specific parcel of land.

Points

Fees paid to induce lenders to make a mortgage loan.

Police Power

The right of any governmental body to enact and enforce regulations for the order, safety, health, morals, and general welfare of the public.

Possession

The holding, control, or custody of property for one's use, either as owner or person with another right.

Power of Attorney

An instrument authorizing a person to act as the agent of the person granting it.

Power of Sale

A clause sometimes inserted in mortgages or deeds of trust; grants the lender (or trustee) the right to sell the property upon certain default.

Pre-Approval

A loan commitment made by a lender to a borrower before the buyer has committed to the purchase of a property.

Pre-Qualification

An informal evaluation by a lender about a potential borrower’s borrowing ability

Preclosing

A rehearsal of the closing whereby instruments are prepared and signed by some or all parties to the contract.

Premises

Land and tenements; an estate; the subject matter of a conveyance.

Premium

The cost of an insurance policy.

Prepaid Expenses

Amounts that are paid prior to the period they cover.

Prepaid Interest

Interest paid in advance of the time it is earned.

Prepayment Clause

A clause in a mortgage that gives a mortgagor (borrower) the privilege of paying the mortgage indebtedness before it becomes due.

Prepayment Penalty

Fees paid by borrowers for the privilege of retiring a loan early.

Prime Rate

The lowest commercial interest rate charged by banks on short-term loans to their most credit-worthy customers.

Principal

The one who owns or will use property.

Private Mortgage Insurance

Default insurance on conventional loans, provided by private insurance companies.

Probate or Prove

To establish the validity of the will of a deceased person.

Promissory Note

A promise to pay a specified sum to a specified person under specified terms.

Property

1. The rights that one individual has in lands or goods to the exclusion of all others; rights gained from the ownership of wealth. 2. Real estate.

Property Tax

A government levy based on the market value of privately owned property. Sometimes referred to as ad valorem tax or real estate tax.

Prorate

To allocate between seller and buyer their proportionate share of an obligation paid or due; for example, to prorate real property taxes or insurance.

Public Record

Usually refers to land transaction records kept at the county courthouse.

Purchase Money Mortgage

A mortgage given by a grantee (buyer) to a grantor (seller) in part payment of the purchase price of real estate.

R

Real Estate

Land, and any buildings or trees on the land.

Real Estate Commission

State agency that enforces real estate license laws.

Real Property

The rights to use real estate.

Realtor

A professional in real estate who subscribes to a strict Code of Ethics as a member of the local and state boards and of the National Association of Realtors.

Reassessment

The process of revising or updating the value estimate of property for ad valorem tax purposes.

Rebate

A refund resulting form a purchase or tax.

Reciprocity

Mutual agreement to accept, such as a state's acceptance, as valid the real estate license one has earned in another state.

Recognized Gain

In a tax-free exchange, the portion of gain that is taxable.

Recording

The act of entering in a book of public records instruments affecting the title to real property.

Redlining

The illegal practice of refusing to originate mortgage loans in certain neighborhoods on the basis of race or ethnic compositon.

Referral

The act of suggesting the use of a certain broker.

Refinance

The substitution of an old loan(s) with a new loan(s).

Registrar

The person who is to maintain accurate official records, such as for deeds, mortgages, and other recorded documents.

Regulation D

A regulation of the Securities and Exchange Commission that sets forth conditions necessary for a private offering exemption.

Regulation Q

A federal law that specifies the maximum interest rates that banks and savings and loan associations can pay on various types of deposits.

Regulation Z

A federal regulation requiring creditors to provide full disclosure of the terms of a loan. Compliance is compulsory for anyone who arranges credit for more than 5 sales of residential real estate in a one year period. Terms of the loan must be disclosed.

Release

To free real estate from a mortgage.

Release Clause

In a mortgage, a clause that gives the owner of the property the priviledge of paying off a portion of the mortgage indebtedness, thus freeing a portion of the property from the mortgage.

Remainder

An estate that takes effect after the termination of a prior estate, such as a life estate.

Renegotiate

To legally revise the terms of a contract.

Repairs

Work performed to return property to a former condition without extending its useful life, as distinguished from capital improvements.

Replacement Cost

The cost of erecting a building to replace or serve the functions of a previous structure.

Reproduction Cost

The cost of exact duplication of a property as of a certain date. Reproduction differs from replacement in that replacement requires the same functional utility for a property, whereas reproduction is an exact duplication.

Rescind

To withdraw an offer or contract. Regulation Z allows a 3-day period in which to rescind certain credit transactions.

Rescission

The act of canceling or terminating a contract. Rescission is allowed when the contract was induced by fraud, duress, misrepresentation, or mistake.

Residential Property

1. In real estate brokerage terminology, owner-occupied housing. 2. In income taxation terminology, rental units used for dwelling purposes, not of a transient (hotel, motel) nature.

Residual

Value or income remaining after deducting an amount necessary to meet fixed obligations.

Restriction

A limitation placed upon the use of property, contained in the deed or other written instrument in the chain of title or in local ordinances pertaining to land use.

Retire (A Debt)

To pay off the principal on a loan, thereby fulfulling the obligation under the loan contract.

Reverse Annuity Mortgage

A type of mortgage, designed for elderly homewoners with substantial equity, by which a lender periodically (monthly, for example) pays an amount to the borrower.

Reversion

The right of a lessor to possess leased property upon the termination of a lease.

Revocation

An act of recalling a power of authority conferred, as a revocation of a power of attorney, a license, an agency, etc.

Rezoning

An action to change the designation of a subject parcel or group of parcels on the zoning map.

Right of First Refusal

The opportunity of a party to match the terms of a proposed contract before the contract is executed.

Right of Survivorship

The right of a surviving joint tenant to acquire the interest of a deceased joint owner; the distinguishing feature of both joint tenancy and tenancy by entirely.

Riparian Owner

One who owns land bounding upon a lake, river, or other body of water.

Rollover Loan

A type of mortgage loan, commonly used in Canada, in which the amortization of principal is based on a long term but the interest rate is established for a much shorter term.

Royalty

Money paid to a property owner for extraction of some value resource from the land.

Run With The Land

An expression indicating a right or restriction that affects all current and future owners of a property.

Rural

Pertaining to the area outside the larger and moderate-sized cities and surrounding population concentrations.

S

Sale-Leaseback

The simultaneous puchase of property and lease back to the seller.

Sales Contract

A contract by which the buyer and seller agree to the terms of sale.

Salesperson

One who is licensed to deal in real estate or perform any other act enumerated by state real estate license laws, while under the supervision of a broker licensed by the state.

Salvage Value

The estimated value that an asset will have at the end of its useful life.

Savings and Loan Associations (S&Ls)

Depository institutions that specialize in originating, servicing, and holding mortgage loans.

Scale

The proportional relationship between the dimensions of a drawing, plan, or model to the dimensions of the physical object it represents.

Scenic Easement

An encumbrance on the title to a property to preserve it in a more-or-less natural or undeveloped state.

Seasoned Loan

A loan on which several payments have been collected.

Second Mortgage

A subordinated lien, created by a mortgage loan, over the amount of a first mortgage.

Section (Of Land)

One square mile in the government rectangular survey. There are 36 sections in a 6-mile square township.

Security

Property that serves as collateral for a debt.

Security Deposit

A cash payment required by a landlord, to be held during the term of a lease to offset damages incurred due to actions of the tenant.

Seisen

The possession of a realty by one who claims to own a fee simple estate or a life estate or other salable interest.

Self-Amortizing Mortgage

One that will retire itself through regular principal interest payments.

Setback

The distance from the curb or other established line within which no buildings may be erected.

Severalty

The ownership of real property by an individual as an individual.

Shared Appreciation Mortgage

A residential loan with a fixed interest rate set below market rates, with the lender entitled to a specified share of appreciation in property value over a specified time interval.

Short-Term Capital Gain

Gain on the sale of a capital asset that was held, generally, for less than one year.

Simple Interest

A method of calculating the future value of a sum assuming that interest paid is not compounded.

Single-Family Housing

A type of residential structure designed to include one dwelling.

Site

A plot of land prepared for or underlying a structure or development.

Spec House

A single-family dwelling constructed in anticipation of finding a buyer.

Special Agent

One who is engaged to act for another, with limited authority.

Special Assessment

An assessment made against a property to pay for a public improvement by which the assessed property is supposed to be especially benefited.

Special Warranty Deed

A deed in which the grantor limits the title warranty given to the grantee to anyone claiming by, from, through, or under him, the grantor.

Specific Performance

A legal action in which the court requires a party to a contract to perform the terms of the contract when one has refued to fulfill thier obligation. Used in real estate to execute purchase contracts.

Square Footage

The area, measured in square feet, of a piece of real estate. Generally measured from outside the exterior walls in the case of structures.

Statute

A law established by an act of legislature.

Statute Of Frauds

A state law that provides that certain contracts must be in writing in order to be enforceable.

Statute of Limitations

A specified statutory period after which a claimant is barred from enforcing his claim by suit.

Steering

An illegal practice of limiting the housing shown to a certain ethnic group.

Structure

Any constructed improvement to a site.

Subcontractor

One who performs services under a contract to a general contractor.

Subdivider

One who partitions a tract of land into smaller tracts.

Subdivision

A tract of land divided into lots suitable for home-building purposes.

Subordination

Moving to a lower priority, as a lien would if it changes from a first

Subordination Clause

A clause or document that permits a mortgage recorded at a later date to take priority over an existing mortgage.

Survey

The process by which a parcel of land is measured and its area ascertained.

Surveyor

One who prepares surveys.

T

Tax-Exempt Property

Real property that is not subject, in whole or in part, to ad valorem property taxes.

Tax Deed

The type of instrument given to a grantee by a government that had claimed the property for unpaid taxes.

Tax Lien

A debt attached against property for failing to pay taxes.

Tax Rate

The ratio of a tax assessment to the amount being taxed.

Tax Shelter

An investment that produces after-tax income that is greater than before-tax income.

Tenements

Possessions that are permanent and fixed; structures attached to land.

Tenure

The nature of an occupant's ownership rights; an indication of whether one is an owner or a tenant.

Term

The period of time during which something is in effect.

Termite Inspection

A property inspection that searches for damage caused by any kind of organism (mold, termites, beetles, etc).

Termites

Insects that bore into wood and destroy it.

Terms

Conditions and arrangements specified in a contract.

Term, Amortization

For a loan, the period of time during which principal and interest payments must be made; generally the time needed to amortize the loan fully.

Testate

Having made a valid will.

Time-Sharing

A form of property ownership under which a property is held by a number of people, each with the right of possession for a specified time interval.

Title

Evidence that the owner of land is in lawful possession thereof; evidence of ownership.

Title Company

One in the business of examining title to real estate and/or issuing title insurance.

Title Insurance

A type of insurance that protects the insured individual against loss in a property ownership dispute involving the insured title.

Title Report

A document indicating the current state of the title, such as easements, covenants, liens, and any defects.

Title Search

An examination of the public records to determine the ownership and encumbrances affecting real property.

Torrens System

A title registration system used in some states; the condition of the title can easily be discovered without resorting to a title search.

Transaction Costs

The costs associated with buying and selling real estate.

Trust

An arrangement whereby property is transferred to a trusted third party (trustee) by a grantor (trustor). The trustee holds the property for the benefit of another (beneficiary).

Trust Account

A separate bank account segregated from a broker's own funds, in which the broker is required by state law to deposit all monies collected for clients.

Trust Deed

A conveyance of real estate to a third party to be held for the benefit of another.

Trustee

One who holds property in trust for another to secure performance of an obligation; the neutral party in a trust deed transaction.

W

Witness

The act of witnessing the execution of an instrument, such as a deed or will.

XYZ

Zoning

A city or county’s practice of restricting the way a property is used in specific areas. Some areas are restricted/zoned for residential use only, while other areas are set aside for commercial development.