| - A -
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. 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. Acceptance
Refers to a legal term denoting acceptance of an offer. A buyer offers
to buy and the seller accepts the offer 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 which usually
varies by state. Alienation Clause
A clause within a loan instrument calling
for payment of a debt in its entirety
upon the transfer of ownership of
the secured property. Also called
a "due on sale" clause. Agent
Acts on 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. 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. Assessment
The valuation of property for the purpose of levying a tax, or the amount
of the tax levied. Assessor
One appointed to assess property for taxation. 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. Back to Top - B - 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 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 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. 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 Back to Top - C - 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 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 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. 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 monies 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- often 5 to 7 percent on houses, 10 percent on land. Common Area
That area owned in common by owners of condominiums and planned site
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. Co-Op Housing
An apartment building or a group of dwellings owned by a corporation,
the stockholders of which are the residents of the dwellings. It is
operated for their benefit by their elected board of directors. In
a cooperative, the corporation or association owns title to the real
estate. A resident purchases stock in the corporation which entitles
him to occupy a unit in the building or property owned by the cooperative.
While the resident does not own his unit, he has an absolute right
to occupy his unit for as long as he owns the stock. 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 two or more parties, written or oral, to do or not
to do certain things. Conveyance
The transfer of the title to land from one to another. 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.) Counter Offer
An offer in response to an offer. 'A'
offers to buy '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. Back to Top - D - 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
closing. The agreement of sale will refer to the down payment amount.
Downpayment is the difference between the sales price and maximum mortgage
amount. Back to Top - E - 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. 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. 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 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. 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. Back to Top - F - Fair Market Value
That price a property will bring given that both buyer and seller are
fully aware of market conditions and comparable properties. 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. Fee Simple
Ownership of title to property without any limitation, which can be sold,
left at will, or inherited. 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 its construction. 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. Back to Top - G - 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 Back to Top - H - 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. Back to Top - I - Interest
A charge paid for borrowing money. (See mortgage note) Intestate
A person who dies without making a will. Involuntary Lien
A lien which attaches to property without the consent of the owner such
as tax liens as opposed to voluntary liens (mortgages). Back to Top - J - Joint Tenancy
Joint ownership by two or more persons with right of survivorship. Upon
the death of a joint tenant, his interest does not go to his heirs,
but to the remaining joint tenants. Back to Top - K - - L - 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
An estate in real property for the life of a person Listing
A contract between owner and broker to sell the owner's property Back to Top - M - 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. Back to Top - N - 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 Back to Top - O - Offer
A presentation to form a contract or agreement. Origination Fee
Application fee(s) for processing a proposed mortgage. Option
A right given, for consideration, to purchase or lease property upon
stipulated terms within a specific period of time Back to Top - P - 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. Back to Top - Q - -- R - 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 in a real estate board affiliated
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.) Back to Top - S - Sales Agreement
See agreement of sale. 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. State Stamps
See documentary stamps 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. Back to Top - T - 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.) Back to Top - U - - V - 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). Back to Top - W - 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. Back to Top - X - - Y - Back to Top - Z - Zoning Ordinances
The acts of an authorized local government establishing building codes,
and setting forth regulations for property land usage. Back to Top |
