GLOSSARY OF REAL ESTATE TERMS
Affidavit: A written statement or declaration sworn to or affirmed before an authorized person.
Agreement of Sale: A written agreement in which the purchaser agrees to buy and the seller agrees to sell. Terms and conditions are included in the agreement.
Alienation Clause: Also known as a "due-on-sale" clause. This is a provision that allows a lender to demand payment of the balance of a loan in full if the collateral is sold.
Amortization Mortgage: A debt for which the periodic repayments are used to reduce the principal outstanding as well as to payoff the current interest charges.
Apportionment: The adjustment of the income, expenses, or carrying charges of real estate that is usually computed to the date of closing of title so that the seller pays all expenses to that date. The buyer assumes all expenses from the date on which the deed is conveyed to the buyer.
Appraisal: An estimate of a property's value made by an appraiser who is usually presumed to be an expert in this work.
Appraisal by Comparison: An estimate of value made by comparing the sale prices of other similar properties.
Assignment: The method or manner by which a right or contract is transferred from one person (the assignor) to another (the assignee).
Assumption of Mortgage: This occurs when a person takes title to property and assumes the payment of an existing note or deed of trust.
Balloon Payment: A final installment payment, larger than previous installments, that pays off a debt.
Beneficiary: The person who receives or is to receive the benefits of a certain act.
Bird Dog/Bird Dogger: A person who looks for houses that potentially fit the guidelines of the properties that you prefer to purchase. Bird doggers will bring the information that you require and you will reimburse them for their efforts on whatever basis you have agreed upon.
Bona Fide: In good faith; without fraud.
Capital Gain or Loss: The difference between the basis price (cost plus purchase expenses) of a capital asset and its sales prIce.
Caveat Emptor: Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk.
Chain of Title: A history of the conveyances and encumbrances affecting a title from the time the original patent was granted or as far back as records are available.
Client: The principal: the one who employs a broker and who compensates a broker.
Closing Date: The date on which the buyer takes over the property.
Cloud on the Title: An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title.
Codicil: An addition to or amendment of a will.
Collateral: Additional security pledged for the payment of a debt.
Commission: A fee charged for brokerage services.
Commitment: A pledge; a promise; an affirmation agreement.
Complaint: 1. In civil law, the initial statement of the facts on which a complaint is based. 2. In criminal law, the preliminary charge made against the accused.
Comps: See Appraisal by Comparison.
Condemnation: The acquisition of private property for public use with fair compensation to the owner. See also Eminent Domain.
Conditional Sales Contract: A contract for the sale of property stating that although delivery is to be made to the buyer, the title is to remain vested in the seller until the conditions of the contract have been fulfilled.
Consideration: Anything given as an inducement to enter into a contract, such as money or personal services. Any contract, lease, obligation, or mortgage may subsequently be modified without consideration provided that the change is made in writing and signed.
Contract: A legally enforceable agreement.
Covenants: Agreements written into deeds and other instruments promising performance or non-performance of certain facts or stipulating certain uses or restrictions on the property.
Debt Service: Annual amount to be paid by a debtor for money borrowed.
Deed: An instrument in writing, duly executed and delivered, that conveys title to real property.
Deed Restriction: A restriction imposed in a deed to limit the use of the land. A deed might include clauses preventing the sale of liquor or defining the size, type, value, or placement of improvements.
Default: Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform an act. In property foreclosure, usually the failure to pay loan installment repayments when they become due.
Defeasance Clause: The clause in a mortgage that permits the mortgagor to redeem his or her property upon payment of the obligations to the mortgagee.
Defendant: The party sued or called to answer in any lawsuit, civil or criminal.
Deficiency Judgment: When the security for a loan is sold for less than the amount of the loan, the unpaid amount (the deficiency) is held by law (the judgment) to be the liability of the borrower unless the new owner has assumed the debt.
Due-on-Sale: See Alienation Clause.
Earnest Money: Down payment made by a purchaser of real estate as evidence of good faith.
Easement: A right that may be exercised by the public or individuals on, over, or through the property of others.
Eminent Domain: A right of the government to acquire property for public use. The owner must be fairly compensated.
Encroachment: A building, part of a building, or obstruction that intrudes on the property of another.
Encumbrance: Any right to or interest in property interfering with its use or transfer or subjecting it to an obligation. In connection with foreclosure property, the most likely encumbrances are mortgages and claims for unpaid taxes.
Equity: In real estate, the difference between the value of a property and the amount owed on it. Also called the owner's interest.
Equity Loan: Junior (subordinate) loan based on a percentage of the equity.
Escrow:A written agreement between two or more parties providing that certain instruments or property be entrusted to a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.
Estate: The degree, quantity, nature and extent of interest (ownership) that a person has in real property.
Estoppel Certificate: An instrument executed by the mortgagor setting forth the status of and the balance due on the mortgage as of the date of the execution of the certificate.
Eviction: A legal proceeding by a landlord to recover possession of real property.
Exclusive Agency: An agreement to employ one broker only. If the sale is made by any other broker, both are entitled to commissions.
Exclusive Right to Sell: An agreement to give a broker the exclusive right to sell for a specified period. If a sale during the term of the agreement is made by the owner or by any other broker, the broker holding the exclusive right is, nevertheless, entitled to compensation.
Executor: A person or a corporate entity or any other type of organization named in a will to carry out its provisions.
Fee (fee simple, fee absolute): The absolute ownership of real property. This type of estate gives the owner and his or her heirs unconditional power of disposition.
FHA: Federal Housing Administration. See FHA Mortgage Loan.
FHA Mortgage Loan: Mortgage loan insured by the Federal Housing Administration.
Fiduciary: A person who transacts business or handles money or property on behalf of another. The relationship implies great confidence and trust.
First Mortgage: Mortgage that has priority as a lien over all other mortgages. In cases of foreclosure, the first mortgage will be satisfied before other mortgages are paid off.
Foreclosure: A procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default in payments or terms.
Grace Period: Additional time allowed to perform an act or make a payment before a default occurs.
Grantee: The party to whom the title to real property is conveyed; the buyer
Grantor: The person who conveys real estate by deed; the seller.
Habendum Clause: The "to have and to hold" clause that defines or limits the quantity of the estate granted in the deed.
HUD: Department of Housing and Urban Development. This agency has a broad mission in the entire housing industry. The specific area of interest to you, as an investor, is its involvement in subsidizing rents for low-income housing and the marketing of repossessed houses. Many of the HUD repos provide EXCELLENT investment opportunities.
Hypothecate: To use something as security without giving up possession of it.
Installments: Parts of the same debt, payable at successive periods as agreed; payments made to reduce a mortgage.
Intestate: A person who dies before making a will, or whose will is defective in form.
Irrevocable: Incapable of being recalled or revoked; unchangeable; unalterable.
Joint Tenancy: Ownership of property by two or more persons, each of whom has an undivided interest with or without the right of survivorship.
Judgment: Decree of a court declaring that one individual is indebted to another, and fixing the amount of such indebtedness.
Junior Mortgage: A mortgage second in lien (subordinate) to a previous mortgage.
Landlord: One who rents property to another.
Land Contract: In reality, a land contract is a promise to pay. In other words, if you buy a house under a land contract, you promise to pay an agreed-upon amount on or before a specific date. Once the terms have been fulfilled, the seller will then deed the property to you.
Land Trust: A means of taking control of a property anonymously. The only name that will appear on public records will be the name of the trust and, usually, the name of the trustee. The land trust provides some asset protection in that it requires a good deal of digging via legal channels to discover if a person is the beneficiary of a trust.
Lease: A contract whereby, for a consideration, usually termed rent, one who is entitled to the possession of real property transfers such rights to another for life, for a term of years, or at will.
Leasehold: The interest given to a lessee of real estate by a lease.
Lessee: A person to whom property is rented under a lease.
Lessor: One who rents property to another under a lease.
Lien: A legal right or claim on a specific property that attaches to the property until a debt is satisfied.
Life Estate: The conveyance of title to property for the duration of the life of the grantee.
Lis Pendens: A legal document filed in the office of the county clerk giving notice that an action or proceeding, affecting the title to a property, is pending in the courts.
LTV (Loan-to-Value Ratio): Refers to the amount of money loaned on a property relative to its actual value. For example, a loan of $20,000 on a $40,000 house would be a 50% LTVratio.
Marketable Title: A title that the court considers to be so free from defect that it will enforce its acceptance by a purchaser.
Mechanic's Lien: A claim made to secure the price of labor done upon and materials furnished for uncompensated improvement.
Moratorium: An emergency act by a legislative body to suspend the legal enforcement of contractual obligations.
Mortgage: An instrument in writing, duly executed and delivered, that creates a lien on real estate as security for the payment of a specified debt, which is usually in the form of a bond.
Mortgage Broker: One who is paid to match borrowers with lenders.
Mortgagee: The party who lends money and takes a mortgage to secure their payment.
Mortgagor: A person who borrows money and gives a mortgage on his or her property as security for the payment of the debt.
Multiple Listing: An arrangement among members of the Board of REALTORS® whereby brokers bring their listings to the attention of the other members. If a sale results, the commission is divided between the broker providing the listing and the broker making the sale.
Non-Qualifying Assumption: A mortgage or deed of trust that does not contain a due-on-sale clause, thereby allowing transfer of title freely without permission from the lender.
Obsolescence: Loss in value due to reduced desirability and usefulness of a structure because its design and construction has become obsolete.
Open Listing: A listing given to any number of brokers with commissions payable only to the broker who secures the sale.
Open Mortgage: A mortgage that has matured or is overdue and, therefore, is "open" to foreclosure at any time.
Option: A right given for a consideration to purchase or lease a property upon specific terms within a specified time. If the right is not exercised, the option holder is not subject to liability for damages. If exercised, the grantor of option must perform.
Pay-off Letter: A letter from a lender stating the current balance due on an account; also referred to as an estoppel letter or certificate.
Performance Bond: A bond used to guarantee the specific completion of an endeavor in accordance with a contract.
Personal Property: Any property which is not real property.
Plat Book:A public record containing maps of land showing the division into streets, blocks, and lots and indicating the measurements of the individual parcels.
Points: Discount charges imposed by lenders to raise the yields on their loans. One (1) point equals one (1%) percent of the loan amount.
Prepayment Clause: A clause in a mortgage that gives a mortgagor the privilege of paying the mortgage indebtedness before it becomes due, either with or without prepayment penalty.
Proration: Allocation of closing costs and credits to buyers and sellers.
Purchase Money Mortgage: A mortgage given by a grantee or any other lender in partial payment of the purchase price of real estate.
Quiet Title Suit: A suit in court to ascertain the legal rights of an owner to a certain parcel of real property.
Quitclaim Deed: A deed that conveys simply the grantor's rights or interest, if any, in real estate; generally considered inadequate except when interests are being passed from one spouse to the other.
Real Estate Board: An organization whose members consist primarily of real estate brokers and salespersons.
REO (Real Estate Owned): Property acquired by a lender through foreclosure and held in inventory.
Real Estate Syndicate: A partnership formed for a real estate venture. Partners may be limited or unlimited in their liability.
Real Property: Land and generally whatever is erected upon or affixed thereto.
REALTOR®:A term used to identify active members of the National Association of REALTORS® (NAR®), This term is commonly used to refer to anyone licensed to sell real estate. However, the term "REALTOR®"only applies to those duespaying members of NAR.
Recording: The act of writing or entering, in a book of public record, instruments affecting the title to real property.
Recourse: The right to claim against an owner of a property or note.
Red Lining: The refusal to lend money within a specific area for various reasons. This practice is illegal because it discriminates against creditworthy people who happen to live there.
Release Clause: A clause found in a blanket mortgage which gives the owner of the property the privilege to payoff part of the debt, and thus free part of the property from the mortgage.
Repo:A shortened or slang version of repossession.
Repossession: Repossession occurs when a lender takes possession of the collateral which was security for a loan.
Right of Redemption: Right to recover property transferred by a mortgage or other lien by paying off the debt either before or after foreclosure; also called equity of redemption.
Right of Survivorship: Right of the surviving joint owner to succeed to the interests of the deceased joint owner. This right is a distinguishing feature of a joint tenancy or tenancy by the entirety.
RTC (Resolution Trust Corporation): An organization set up by the government to market houses from the inventory of federally insured, defunct banks and other lending institutions.
Sales Contract: A contract by which the buyer and seller agree to terms of sale.
Second Mortgage: A mortgage made by a home buyer in addition to an existing first mortgage. The order of recording determines the seniority of the lien.
Seller Financing: Refers to the owner of a property who agrees to carry a mortgage on the property that he or she is selling, so that the buyer doesn't have to obtain any or all of the financing from another source or lending institution.
Specific Performance: A remedy in a court of equity compelling a defendant to carry out the terms of an agreement or contract.
Split Funding: A technique whereby an investor offers a small amount of cash to close the deal with the balance due at a later date in a form other than extended monthly payments.
Statute of Frauds: Law requiring certain contracts to be made in writing or partially complied with in order to be legally enforceable.
Subdivision: A tract of land divided into lots or plots.
Subordination: See Subordination Clause.
Subordination Clause: A clause in a mortgage that gives priority to a mortgage taken out at a later date. The seller agrees to go into a second, third or fourth position allowing you to obtain new financing senior to their lien without paying them off from the proceeds.
Substitution of Collateral: Taking an existing mortgage on one property and transferring it to another.
Survey: The process by which a parcel of land is measured and its area ascertained; also the blueprint showing the measurements, boundaries, and area.
Tax Sale: Sale of real property after a period of non-payment of real estate taxes.
Tenancy in Common: An ownership of realty by two or more persons, each of whom has an undivided interest, without the right of survivorship.
Tenancy by the Entirety: An estate that exists only between husband and wife with equal right of possession and enjoyment during their joint lives and with the right of survivorship.
Tenancy at Will: A license to use or occupy lands and tenements at the will of the owner.
Testate: Condition when a person dies leaving a valid will.
TPA (Third Party Administrator): One who is approved to administer funds from a retirement program. You must use a TPA to access money from your retirement accounts for self-directed activities.
Title Company: A firm that examines title to real estate and/or issues title insurance.
Without Recourse: Words used in endorsing a note or bill to denote that the future holder is not to look to the endorser in case of nonpayment.
Wrap (Wraparound Loan): A new loan encompassing any existing loans.
