AAbatement - Avulsion
Abatement: A legal action to stop a nuisance. Also can be a reduction of a property tax assessment.

Abstract: A history of every recorded document dealing with a property. It is examined to determine whether there is marketable title.

Accelerated Depreciation: Any method of depreciation for tax purposes that gives greater initial appreciation than the straight-line method.

Acceleration Clause: A provision in a note making all payments due upon the happening of a certain event (such as missing a payment or selling the property).

Accession: Obtaining title as a result of attaching or joining property to other property.

Accretion: Gradual buildup of soil by action of water or wind.

Accrued Depreciation: Depreciation to date; measured by the difference between the replacement cost new and the present value.

Acre: A measure of land equal to 43,560 square feet.

Adjustable-Rate Mortgage (ARM): A mortgage bearing a rate of interest subject to change (based on a particular index such as the T-bill rate) during the term of the loan. ARMs generally have a maximum interest swing.

Adjusted Basis: Acquisition cost less depreciation plus cost of improvements. The adjusted basis is deducted from the sales price to determine gain or loss.

Adjusted Market Price: The adjustment of a comparable property's sales price to account for difference in features and amenities of a property under appraisal (using the market comparison approach).

Ad Valorem: A tax according to value; real property taxes are considered to be ad valorem taxes.

Advance Commitment: A lender agreement to provide permanent financing upon completion of a construction project.

Affidavit: A statement sworn to under oath or by affirmation before a notary.

Affirmation: A formal declaration as to the truthfulness of a statement; made by a person whose religious beliefs prohibit swearing under oath.

Age-Life Tables: Appraisal tables that indicate the economic life for various types of structures.

Agent: A person representing another, acting in his or her behalf.

Air Rights: The right of a property owner to the reasonable use of the airspace over his or her property. Air rights are considered to real property and can be separately leased or conveyed.

Alienation: A transfer of property or property rights.

Alluvion: Soil added gradually to land by action of water. The soil belongs to the land it is added to by this accretion process.

ALTA: American Land Title Association; also a type of title insurance policy providing extended coverage to the lender. The same extended coverage also may be available for the buyer.

Amenities: Features of a property that enhance the satisfaction and use of the property, for example, extra bath, flower garden, mature shade trees.

Amortized Loan: A loan that is liquidated by equal payments.

Annual Percentage Rate (APR): Interest rate expressed in simple interest considering all finance charges.

Appraisal: An estimate of market value.

Appurtenance: Rights, benefits and attachments that transfer with real property. Examples: buildings, easement rights, water rights and the like.

As Is: A phrase intended to mean that seller does not warrant a property's condition. Such phrase, however, does not protect the seller in cases of concealment or fraud. Some courts hold that it applies only to readily observable defects, not to known but undisclosed latent defects.

Assessed Value: Value placed by tax assessor.

Assets: Property owned by or owed to a business or person.

Assignment of Rents: A mortgage clause that allows the mortgagee to collect the rents during foreclosure period. Could also be a transfer of rents to a third party.

Assumption: The act of taking over the responsibilities for an obligation and agreeing to be liable personally for the obligation. A deficiency judgment might be possible against the assuming party.

Attractive Nuisance: Doctrine holding owner of land liable for injury to children due to unsafe condition of property where property is likely to attract children as trespassers.

Avulsion: The sudden tearing away or loss of real property by action of water, such as a river changing course.

BBailment - Buyer's Market

Bailment: Giving possession of personal property to another but retaining title. Examples: storing goods in a warehouse, renting a trailer, giving existing mortgages to a lender as security for a loan.

Balloon Payment: A final installment of an unamortized loan that exceeds the previous payments.

Band of Investment Method: A procedure to determine the capitalization rate to be used for a particular property under the income approach.

Banker's Interest: Interest based on a 30-day month and a 360-day year.

Bargain-and-Sale Deed: A deed for consideration that uses the terms bargain and sale. It contains no warranties other than an implied interest by the grantor.

Basis (Cost Basis): Cost plus improvements less depreciation. Used to determine profit for tax purposes upon sale.

Bearer Paper: A negotiable instrument made out to cash or bearer that can be transferred without endorsement.

Benchmarks: A marker placed by a government surveyor showing elevation above sea level and used by surveyors as a reference point.

Beneficiary: The person receiving payments under a deed of trust; similar to a mortgageee.

Betterments: Actual improvements (not repairs) to real estate.

Bilateral Contract: A mutual exchange of promises whereby each promise is consideration for the promise of the other.

Bill of Sale: Written agreement transferring title to personal property.

Binder: Insurance coverage given by an agent prior to the issuance of a policy or payment of premium.

Blanket Mortgage: A mortgage covering more than one property.

Blended Mortgage Rate: A refinance rate that is less than the current market rate but more than the old rate.

Book Value: Cost plus improvements less depreciation taken. The value assigned an asset for bookkeeping purposes.

Bracketing: Process of selecting a value that lies between selling prices of comparable properties having more and fewer amenities; used in the market comparison method of appraisal.

Breach: The breaking of a law or contract.

Broker: An agent employed by a principal for real estate transactions. Only a broker can employ a salesperson.

Broker's Net Income: An income figure that does not consider a vacancy factor, collection costs or management expenses.

British Thermal Unit (BTU): The unit of heat needed to raise one pound of water one degree Fahrenheit. The BTU is used to rate the capacity of heating and air-conditioning units.

Budget Mortgage: A loan by which borrower pays 1/12 of estimated property tax and insurance payment with each monthly payment.

Building Line: The setback from the lot line.

Build-Up Method: A process for arriving at a capitalization rate by rating a risk-free, management-free investment and adding for risk and management problems.

Business Opportunity: A business including stock, fixtures and goodwill.

Buydown: A financing technique in which a seller makes a property more attractive by paying a lender points to lower the effective interest rate on a mortgage.

Buyers' Market: Market condition characterized by more sellers than buyers, so buyers have a more commanding position.

CCap - Cul De Sac

Cap: A limit, usually on interest rate or rate increases on an adjustable-rate mortgage (ARM).

Capital Assets: Physical assets such as land, buildings and equipment, usually for a business or trade. Capital assets other than land may be depreciated.

Capital Gain: Profit from the sale of business or investment property. Prior to the Tax Reform Act of 1986, capital gains held for a prescribed period of time were treated favorably for income tax purposes.

Capitalization Method: An appraisal approach whereby the net income of an investment property is capitalized to determine its value (the net income is divided by a capitalization rate).

Capitalization Rate: A desired rate of return for an investment that is divided into the net income to determine a property's value.

Capital Loss: Loss from a sale of a capital asset or other real property. (For tax purposes there is no loss from the sale of a residence, although a gain is taxable.)

Cash Flow: The net spendable cash remaining after all cash outlays are subtracted from the gross income.

Caveat Emptor: "Let the buyer beware." The warning that the buyer buys at his or her own risk.

Certificate of Eligibility: Obtained by the veteran to be eligible for a VA loan. Veteran must submit discharge information.

Certificate of Occupancy: Frequently required before a new structure can be occupied; usually provided by the building inspector.

Certificate of Reasonable Value (CRV): Appraisal required for all VA loans.

Certificate of Title: Evidence of title issued by registrar under the Torrens title system.

Chain of Title: History of a property showing all conveyances from the original government conveyance (patent).

Chattel: An item of personal property.

Civil Rights Act of 1866: Law that provided that every citizen shall have the same and equal rights as to housing.

Civil Rights Act of 1968: Title VIII of this act is known as the federal Fair Housing Act prohibiting discrimination.

Closing Statement: The final accounting showing all debits and credits in the sale of real property or a business. Also known as a settlement statement.

Cloud on Title: A claim, document or discrepancy that casts doubt on the marketability of title.

Coinsurance: A requirement that a property carry a minimum coverage (usually 80 percent of replacement cost) in order to collect 100 percent of the loss. If a person carries only a percentage of the amount required, then that person only gets that percentage of the loss suffered.

Collateral: Property that secures a loan.

Collaterally Secured: A loan secured by other loans.

Color of Title: Because of a defect, having only the appearance of title instead of true title; for example, a title under a forged deed.

Commercial Acre: The amount left from an acre after deducting land for streets and walks, for instance; less than 43,560 square feet.

Commission: An agent's fee or percentage for successfully completing a sale or lease.

Community Property: Property acquired during marriage that is considered equally owned by both spouses. Presently, community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

Comparative Unit Method: An appraisal method to determine replacement cost. In general the method is based on current price per square foot or cubic foot of similar construction.

Compensating Balance: Requirement of lender that borrower keep a specified balance on deposit with the lender.

Competitive Market Analysis: An appraisal prepared by an agent using recent comparable sales to indicate the likely sales price of a property.

Compound Interest: Interest that compounds upon interest as well as principal. Because interest is paid monthly on standard real estate loans, it is simple, not compound, interest.

Concurrent Estates: More than one estate in the same real property at the same time (one person could have a fee simple interest and another a leasehold estate.)

Condemnation: (1) Legal action to take property for public use by eminent domain. (2) The process of declaring property unfit for use.

Conditional Loan Commitment: A promise to make a loan on a property to a buyer yet unknown, so long as the buyer otherwise qualifies for the loan.

Conditional Sales Contract: Security sale agreement for sale of personal property where title remains with vendor (vendee has possession). Title is transferred only when goods are paid for (has generally been replaced by financing statements).

Consideration: Something of value given or promised in exchange for a promise, act or property of another. A promise made without consideration is deemed void and unenforceable. Love and affection, although deemed "good consideration," are not regarded as valuable consideration to support a promise or an act of another.

Contract: An agreement, enforceable by law, between two or more competent parties for consideration to perform or not perform a legal act.

Conventional Loan: A loan made by a conventional lender without government guarantee or insurance.

Corner Influence: An increase in value of commercial property because of the additional traffic and exposure of being located on two streets.

Correlation: Interpreting value by combining the three methods of appraisal. Also known as reconciliation.

Cost Approach: A method of appraisal whereby the cost to replace the structure is calculated. Accrued depreciation is determined and deducted from the replacement cost; the land value is then added to determine property value.

Covenant: A promise that runs with the land.

CPI (Consumer Price Index): An index that reflects by its changes the changes in the purchasing power of the dollar; widely used as a measurement of inflation.

Crawl Space: The space between the ground and the floor on houses not built on a slab or with a basement.

CRB (Certified Residential Broker): A National Association of Realtors® designation.

CRE (Counselor of Real Estate): Member of American Society of Real Estate Counselors.

Creditor: One to whom something is owed.

Cul-De-Sac: A dead-end street having a rounded end. It is desirable for housing because there is no through traffic.

DDealer - Duress

Dealer: A person who makes a regular part of his or her income by buying and selling property.

Debtor: One who owes money to a creditor.

Declaration of Homestead: A formal procedure of recording a homestead declaration. It protects the homestead from unsecured creditors up to a statutory amount.

Declaration of Restrictions: A declaration of the restrictive covenants recorded by the subdivider. In each deed the subdivider usually incorporates the restrictions by referencing the recording of the document.

Deed: Document that conveys title to real property from a grantor to a grantee.

Deed In Lieu of Foreclosure: Deed from owner to lienholder. Unlike foreclosure, it may not wipe out junior encumbrances.

Default: The breach of a promise or agreement.

Default Clause: A mortgage provision that allows a junior lienholder to cure any default of a prior lien (and then foreclose on his or her own lien).

Defeasance Clause: A mortgage provision that defeats (or cancels) the mortgage upon the full payment as agreed or provides for forfeiture should the conditions not be fulfilled.

Defeasible Estate: An estate that can be lost should a certain event take place.

Delivery: The actual transfer of an interest; requires the intent to make an irrevocable transfer.

Demise: The transfer of a leasehold interest.

Deposit Receipt: An offer by a buyer that becomes a binding contract when accepted by the seller. Also known as a purchase contract or offer to purchase.

Depreciation: A loss in property value from any cause.

Dereliction: Land that is created by the recession of water. It belongs to the adjacent landowners. Also called reliction.

Descent: Hereditary succession by act of law when property does not pass by a will.

Devise: The passing of real property by will.

Direct Endorsement: A lender authorized to make FHA loans without FHA approval.

Discounting a Loan: Selling a loan for less than its face value (common with second mortgages or loans bearing low interest rates).

Discount Loan: A loan whose interest is deducted in advance, resulting in a higher effective rate of interest because the total sum borrowed actually is not received.

Double Escrow: The use of one escrow to purchase and resell a property.

Downzoning: A change in zoning resulting in a lower-density use or lower use.

Dragnet Clause: A provision extending a mortgage to cover future obligations that may arise between the parties; used in an open-ended mortgage.

Dual Agency: An agency created when an agent acts for buyer as well as seller.

Due-On-Sale Clause: A type of acceleration clause in a note that makes all future payments due when a property is sold. Prevents an assumption of the loan. Also called alienation clause.

Duress: Use of force or threat to make a person act; makes a contract voidable.

EEarnest Money - Extension of Lease

Earnest Money: A good-faith deposit made by an offeror with an offer.

Easement: The right of a person to use another's land.

Easement By Estoppel: An easement created when one person's words or actions lead another to believe in the existence of an easement, causing the second person to act to his or her own detriment. The person who made the assertion will be estopped by court action from denying the existence of the easement.

Economic Life: That period for which improvements give a return attributable to the improvements alone.

Economic Rent: The rental value of a property in the marketplace.

Effective Age: An age placed on property for appraisal purposes based on the condition of the property. Effective age may be more or less than the chronological age.

Elevations: Views of a structure from various directions on a builder's plans. (A separate definition is height above sea level.)

Emblements: Cultivated annual crops. Considered to be personal property.

Eminent Domain: Government right to take private property (title or easement) for public use. It is not under the police power, for the owner is paid for the property taken.

Encroachment: A trespass by placing an improvement on or over the land of another.

Encumbrance: Anything that affects title or limits use, such as liens, easements or restrictions.

Entitlement: That portion of the loan the VA guarantees.

Equal Credit Opportunity Act (ECOA): Federal act that prohibits credit discrimination based on age, sex, race or marital status.

Equity: (1) The difference between the value of a property and the liens against it. (2) That which is right or just.

Equity of Redemption: The right of a mortgagor to redeem during and after foreclosure; governed by state statute.

Escalator Clause: A contract or lease provision allowing for payments to rise or fall.

Escape Clause: Lets a party out of contract responsibilities in the event of stated situations.

Escrow: A neutral depository that handles real estate closings as agent for the buyer and the seller.

Estoppel: A doctrine whereby a party is barred from raising a defense when that person's acts or words induced another party to act to his or her detriment.

Exception in a Deed: An exclusion in the deed. Deeding only part of the property.

Excess Land: Land that does not contribute economically to use and/or value.

Exclusive Agency Listing: A listing whereby the broker is the exclusive agent of the owner and is entitled to a commission if the broker or any other agent sells the property. If the owner sells the property without an agent, then the broker is not entitled to a commission.

Exclusive Right-to-Sell Listing: A listing whereby the agent is entitled to a commission if the property is sold during the listing tern by anyone, including the owner.

Exculpatory Clause: A contract provision excusing a party for injuries to another; frequently used by lessors in leases. Exculpatory clauses do not affect the rights of third parties who may be injured on the premises.

Execute: To sign a document.

Express Contract: A contract that is stated verbally or in writing, as opposed to an implied contract, which is understood but not stated.

Extended Coverage Policy: Extends basic fire policy (fire, lightning and smoke) to cover additional perils such as windstorm, hail, riot and such.

Extension of a Lease: Continued occupancy under the terms of an existing lease. (A lease renewal is a new lease.)

FFair Credit Reporting Act - Funding Fee

Fair Credit Reporting Act: Allows a person to know what is in his or her credit file and to have explanations inserted and information investigated and removed if wrong.

FDIC (Federal Deposit Insurance Corporation): Insures bank and savings and loan deposits. The maximum federal insurance is $100,000 for an account.

Federal Land Bank: A farm credit administrative agency that provides financing for farm purchases.

Federal Reserve System: A federal agency that regulates the money supply, interest rates and reserve requirements of member banks.

Fee Simple Determinable: A grant that automatically ends should a property no longer be used for a designated purpose.

FHA (Federal Housing Administration): A federal agency that insures mortgage loans.

FHLB (Federal Home Loan Bank): Provides a credit system for savings and loan associations to borrow from.

Fictitious Mortgage: A mortgage recorded solely to provide terms for other mortgages that will incorporate them by reference. The purpose is to reduce the number of recorded pages.

Filtering Down: Process in which housing passes down to lower economic groups.

Financing Statement: An instrument filed by a lender on a personal property loan to give public notice that the goods are security for the loan (under Uniform Commercial Code).

Fire Block: A horizontal block between studs to prevent a fire from rising through a wall.

Firm Commitment: A loan commitment made for a particular borrower and property.

First Right of Refusal: A right to meet any bona fide offer to purchase or lease that an owner wishes to accept. Generally given to tenants.

Fixture: A former item of personal property that has become so connected to the realty that it has become part of the real property.

Floor Space: Interior square footage measured from the inside walls.

FNMA (Federal National Mortgage Association or Fannie Mae): A private corporation that sets the market in FHA and VA and conventional loans by buying and selling loans.

Footing: Concrete poured in the ground upon which the foundation rests. The footing distributes the building load over the soil.

Foreclosure: Legal procedure whereby the lender forces the sale of property to pay indebtedness in the event of default.

Foundation: The masonry substructure upon which the building rests. The foundation rests on the footing.

Fraud: An intentional act or omission to deceive another to the detriment of the other party.

Front-Foot: A linear measurement of land based on the number of feet fronting on a road (could also refer to water frontage).

Functional Obsolescence: Obsolescence that is built in by design or by construction.

Funding Fee: Fee paid by a veteran for a VA loan.

GGap Loan - Gross Income

Gap Loan: A temporary loan, usually at a higher interest rate, where the borrower intends to obtain better financing. Also known as bridge loan or swing loan.

Garnishment: Legal seizure of funds deposited by or due to debtor.

GEM (Growing Equity Mortgage): A mortgage with increasing payments, causing the principal to be rapidly decreased.

General Agent: An agent having all necessary authority to conduct a business or trade.

General Lien: A lien against all property of a debtor (for example, judgment liens and federal tax liens).

General Warranty Deed: A deed where the grantor warrants title as to the claims of all others.

GNMA (Government National Mortgage Association or Ginnie Mae): A federal corporation that provides assistance for federally aided housing projects by purchasing mortgages that are at below-market interest rates. Funds are raised through the sale of government-backed securities.

GNP (Gross National Product): The sum of all goods and services produced nationwide during a particular period of time.

Government Survey: The survey system used for most of the nation whereby land is measured from principal base lines and meridians and laid out in townships and sections.

Grace Period: A period allowed for late payments without penalty.

Graduated Lease: A step lease with payments that increase as of agreed dates.

Graduated Payment Mortgage (GPM): A loan where early payments are lower and increase during the term of the loan - making it easier for young people to purchase property.

Grant: A transfer of title.

Grant Deed: A deed used in some states in conjunction with title insurance whereby the seller warrants that title has not been conveyed previously and that there is nothing against the property that the seller knows of that has not been disclosed to the buyer.

Grantee: The person who receives the grant from the grantor.

Granting Clause: A deed provision indicating that title is passing.

Grantor: The person who makes the grant to the grantee.

Grantor/Grantee Index: A recorder's index system by grantor/grantee names that makes it easy to research a title.

GRI (Graduate Realtors® Institute): Professional designation that requires seminar attendance and courses of study.

Gross Income: The total income before any expenses or deductions.

HHabendum - Hypothecate

Habendum: "To Have and To Hold" clause in a deed, indicating the extent of ownership being transferred (such as fee simple or life estate).

Habitability: Reasonably fit for human habitation.

Hard-Money Loan: A cash loan, rather than seller financing.

Header: A beam over a window or door.

Head Lease: A master lease under which the lessee subleases portions of the premises.

Hereditaments: Any item capable of being inherited.

Highest and Best Use: That use resulting in the greatest net attributable to the land and/or building.

Hip Roof: A roof where all four sides slope to ridge line.

Holder in Due Course: A person who, in the course of commerce, takes a negotiable instrument good on its face for value prior to due date, without notice of any defense of the maker.

Hold-Harmless Clause: One party agrees to indemnify the other for any loss suffered because of the contract or lease.

Holdover Clause: A lease condition that provides for a very high rent should the tenant fail to vacate at the end of a lease, discouraging a holdover situation.

Holdover Tenant: Tenant retaining possession after expiration of lease.

Homeowners Policy: A comprehensive insurance policy covering fire, vandalism, theft, liability and other hazards.

Homestead: A home on which a declaration of homestead has been filed to protect the home from unsecured creditors up to a statutory amount.

HUD: Federal Department of Housing and Urban Development.

Hypothecate: To give something as security without giving up possession.

JAdjustable Rate Mortgage

Illegal: In violation of an existing law.

Illiquidity: An asset that is not readily convertible to cash. Real estate is considered to be illiquid.

Illusory contract: An agreement that appears to be binding but in which one party actually is not bound; not enforceable.

Implied Agent: An agent not expressly appointed but implied by actions of the parties.

Implied Contract: An agreement not expressly stated but implied by actions of the parties.

Implied Easement: An easement implied when the grantor conveys property that is landlocked by other property of the grantor or where the grantor created the use, then sold the parcels separately.

Impound Account: A reserve for taxes and insurance kept by the lender to which the borrower pays along with regular principal and interest payments. Also called escrow account.

Improvement: An addition to property, such as a room or air-conditioning. Improvements increase the cost basis by the cost of their improvements (repairs do not affect the cost basis of the property).

Incentive Zoning: Encourages particular improvements, for example, zoning that allows greater height if a public plaza is included.

Incorporeal Rights: Nonpossessor rights in real estate arising out of ownership, such as the right to rents.

Increment: Any increase in value.

Independent Contractor: A contractor employed to complete a task but who is not under the supervision or control of the employer.

Index Lease: A lease tied to an index such as the Consumer Price Index.

Index Method: A method of determining cost of replacement by taking the actual costs when built and applying the increases in the construction cost index since that date.

Informal Description: A description of property that is not a legal description, such as by street address or name of owner.

Injunction: A court action to cease and desist from a course of action.

Interest Rate: The percentage of a loan balance charged by the lender for the use of money.

Interim Loan: A short-term or gap loan.

Intermediate Theory (Mortgage): A mortgage where title remains with mortgagor but automatically transfers to mortgagee in the event of default.

Internal Rate of Return: A method of measuring returns on investment that considers tax consequences.

Interpleader Action: An action requested by a party to determine rights when two or more people claim to have an interest in property, such as an action brought by a broker where buyer and seller each demands the broker turn over trust funds to him or her.

Involuntary Lien: A lien imposed without the consent of the landowner, such as a tax lien. A mortgage is a voluntary lien.

JJoint and Several - Junior Lien

Joint and Several: Agreement to be liable together as well as separately.

Joint Liability: Each party agrees to be equally liable for an obligation.

Joint Tenancy: An undivided interest with the right of survivorship. Owners must take title at the same time, by the same instrument, with equal interests and equal rights of possession.

Joint Venture: A partnership for a particular undertaking only. It differs from a standard partnership in that a sole joint venture partner cannot obligate the other joint venture partners.

Joist: Horizontal boards that support a floor or ceiling.

Judgment: Final order of a court as to money owed. When recorded, the judgment becomes a general lien on the property of the debtor.

Junior Lien: A subordinate lien as determined by time of recording or nature of the lien.

KKey Lot

Key Lot: A lot having a number of other lots abutting a side line (undesirable for residential use).

LLaches - LTV

Laches: The doctrine that upholds loss of the right to enforce an agreement or restriction, because the delay in bringing action worked to the detriment of the other party.

Land Contract: The seller keeps title while the buyer gets possession. Title passes when the property has been fully paid for. Also known as a contract for sale.

Landlocked: Property that has no access because of surrounding property and the absence of any easement.

Land Residual Method: A means to determine land value by deducting the value of the income attributable to the improvements alone from the value of the income of the property.

Late Charge: A charge imposed by a lender for late payments. Late charges are regulated by state law.

Latent Defect: A defect not apparent from a reasonable visual inspection.

Lateral Support: The support a landowner has a duty to provide to the land of adjacent property owners.

Lease: A tenancy agreement between landlord (lessor) and tenant (lessee).

Leasehold: A lease estate in realty; a non-freehold interest.

Legal Description: A description of real property by government survey; metes and bounds; or reference to recorded lot, block and tract.

Lessee: A tenant under a lease.

Lessor: Landlord who has given a lease.

Leverage: Use of other people's money to make money. Purchasing real property with a minimum down payment is a use of leverage.

License: A revocable privilege to use the land of another.

Lien: An encumbrance that is secured by real estate.

Lien Theory: The theory in a majority of states that a mortgage is a lien and not a transfer of title. See title theory.

Life Estate: An estate in property for the life of a person that may not be inherited.

Like For Like: An exchange of similar property that qualifies for a tax-deferred exchange; for example, real property for real property.

Liquidated Damages: Advance agreement as to the amount of damages for nonperformance when exact damages may be difficult to ascertain. If so unreasonable that the court considers them a penalty, they will not be enforced.

Liquidity: Cash or assets readily convertible to cash.

Lis Pendens: A recorded notice of a pending lawsuit concerning a property. Though not a lien, lis pendens provides constructive notice that an action is pending against the property.

Listing: An agency agreement between owner and broker wherein the owner authorizes the broker to attempt to find a buyer and to pay an agreed commission should the broker succeed.

Littoral Property: Property located on shore of lake or ocean.

Littoral Rights: Right of a property owner to reasonable use of lake, pond or ocean water bordering the property.

Livable Floor Space: Space measured by the interior of each room, excluding interior walls and closets.

Lock-In Clause: A provision that allows prepayment provided full interest is paid as if the loan had gone to maturity; the borrower is "locked in" as to the interest.

LTV: The loan-to-value ratio is the percentage of the value (or ratio) that a lender is willing to lend against a property.

MMAI - Mutual Savings Banks

MAI: A professional membership designation of the Appraisal Institute.

Maker: Person who signs a negotiable instrument.

Margin of Security: Lender's security that is the difference between the mortgage amount and the value of the property.

Marketable Title: A title that is clear of objectionable liens and encumbrances. A merchantable title.

Market Comparison Approach: An appraisal method wherein value is based on sales of comparable properties.

Market Price: Price actually paid.

Market Value: Price a willing, informed buyer would pay to a willing, informed seller.

Markup: The percentage added to cost to determine selling price.

Master Lease: The original lease between lessor and lessee when the lessee later subleases.

Mediation: A nonjudicial process to resolve disputes where a third party acts as a facilitator to aid the parties in reaching an agreement.

Megalopolis: An urban sprawl.

Merger: The joining of a lesser right with a superior right so as to extinguish the lesser one. For example, a tenant having an estate for years buys the property in fee simple; the lease is extinguished, because the owner and tenant now are one and the same.

MGIC (Mortgage Guaranty Insurance Corporation): A private mortgage insurance (PMI) carrier.

Mile: A linear measure of 5,280 feet.

Mineral, Oil and Gas Lease: Lease rights to extract minerals, oil and gas (a personal property interest).

Mineral, Oil and Gas Rights: The absolute right to extract minerals, oil and gas (a real property interest).

Misrepresentation: A false statement to induce another to act. It makes a contract voidable at the option of the injured party. Unlike fraud, misrepresentation does not require intent to deceive.

Mobile Home: A factory-built housing unit transported on its own chassis.

Mortgage: A security device for real estate. In lien theory states, the mortgagor retains title and gives the mortgagee a lien. In title-theory states, the mortgagor retains possession but gives the mortgagee title as security.

Mortgagee: One who receives the mortgage. A lender or a seller (under a purchase-money mortgage).

Mortgage Loan Correspondent: A firm that arranges the sale of existing loans in the secondary mortgage market.

Mortgage Note: The note that reflects the promise to pay the mortgage debt. The mortgage is security for the note.

Mortgage Warehousing: Interim financing under which a lender or correspondent borrows on the stock of mortgages until they can be sold.

Mortgagor: The owner or buyer of property who gives the mortgage.

Multiple Listing: A listing, usually an exclusive right-to-sell listing, which is given out to a group of cooperating brokers who are members of a multiple listing service.

Muniments of Title: Deeds.

Mutual Consent: The meeting of minds required for a binding contract.

Mutual Mistake: The mistake of both parties to an agreement. A mutual mistake as to fact allows a mistaken party to void the agreement.

Mutual Mortgage Insurance: FHA insurance that protects the lender against buyer default.

Mutual Savings Banks: Banks owned by depositors and paying dividends, not interest, to their depositors. Located in several northeastern states, they can make real estate loans anywhere in the nation.

NNaked Title - Nuisance

Naked Title: Legal title only without other right of ownership; for example, a trustee under a deed of trust.

NAR: National Association of Realtors®.

Narrative Report: An appraisal written in a narrative form, the most comprehensive form of an appraisal report.

National Flood Insurance Act: Legislation that makes flood insurance available in communities that have developed a flood-protection plan.

Negative Amortization: A loan whose monthly installments are not sufficient to pay the interest, so the principal is increasing.

Negative Covenant: A promise not to do something, for example, a restrictive covenant that prohibits detached garages.

Negative Easement: An easement right that prohibits an owner from a use.

Negotiable Instrument: Written unconditional promise or order to pay a certain sum in money now or at a definite time in the future.

Nonconforming Use: A use existing prior to zoning that is not in conformance with the zoning.

Noncumulative Zoning: Zoning that allows only a specified category of use (not less-restrictive uses).

Nondisturbance Clause: A mortgage condition by which the mortgagee agrees not to terminate leases (if the lessees are in compliance with lease terms) in the event of mortgage foreclosure.

Noninstitutional Lender: Lender other than banks, savings and loan associations, and insurance companies. Examples: pension funds and private individuals.

Nonrecourse Loan: A loan for which the borrower is not personally liable (no deficiency judgment is possible).

Note: A signed instrument that acknowledges a debt and agrees to pay it either on demand or at a set date in the future. The mortgage or trust deed secures the note in real estate transactions.

Notice of Default: A notice given under a trust deed that sets statutory period for trustor to pay up his or her obligation.

Notice of Nonresponsibility: A notice filed by owner to protect the property from liens for work authorized by another person, for example, a tenant.

Nuisance: A use of property that interferes with the quiet enjoyment by others of their properties. An abatement action can be taken to stop (abate) the nuisance.

OObjective Value - Overimprovement

Objective Value: Market value as opposed to subjective value, which is use value.

Obligatory Advances: Loan advances required by a lender under an agreement as construction progresses.

Observed Condition Method: The method of determining effective age of a property by its condition.

Obsolescence: Loss in value due to reduced desirability because of built-in design (functional obsolescence) or forces outside the property itself (economic obsolescence).

Offset Statement: Statement by lender as to the current status of a loan (balance due).

Open-End Mortgage: A mortgage that can be increased in the future up to an agreed-on maximum amount. See Dragnet Clause.

Open Listing: A nonexclusive agency whereby the owner agrees to a fee only if the broker is the first to procure a buyer under the exact terms of the listing or any other terms to which owner agrees.

Open Mortgage: (1) A loan that can be prepaid without penalty. (2) A mortgage in default prior to foreclosure sale.

Option: A noncancelable right given by an owner to another to buy or lease a property at an agreed-on price within a stated period of time. To be valid, consideration must have been given to keep the offer open.

Optionee: Party who purchased the option and has the right to exercise it.

Optionor: Owner who gives the option.

Order Paper: Note payable to a named person or order that allows it to be negotiated by endorsement.

Orientation: The way a structure is placed on a site.

Origination Fee: Points paid to obtain a loan.

"Or More" Clause: A provision that allows prepayment without penalty.

Ostensible Agency: An agency that is implied by actions of the parties.

Overimprovement: An improvement that cannot be recaptured by increased income or sale value.

PPackage Mortgage - Pyramiding

Package Mortgage: A mortgage that includes personal property as well as real property.

Partially Amortized Loan: A loan whose payments over the loan term leave a balance (a balloon payment).

Participation Loan: Loan agreement under which the lender receives a share of the revenue or profits in addition to the interest. The lender takes an equity share as a limited partner or stockholder as partial consideration for the loan.

Partition: A legal action to break a joint ownership.

Partition In Kind: Splitting the property into separate parcels to dissolve a joint tenancy or tenancy in common.

Party Wall: A common wall on the property line maintained by both owners.

Passive Loss: A paper loss from depreciation.

Payback Period: The time it will take for the income generated by a property to return the investment (down payment).

Pitch: The slope of a roof. Usually expressed in inches per foot; a 5-12 pitch drops five inches in each horizontal foot. Generally, roofs with steeper pitch have longer lives than more gently sloped roofs.

PITI: Denotes that a payment includes principal, interest, taxes and insurance.

Planning Commission: A group of appointed officials responsible for planning and zoning.

Plat: A map or plan of a subdivision showing individual lots.

Pledge: Depositing of personal property as security for a debt with another while retaining title.

Plot Plan: Layout of a lot showing placement of the structure in relationship to lot lines.

PMI (Private Mortgage Insurance): Insures conventional loans.

Points: A fee charged by the lender that amounts to advance interest, making up for an interest rate the lender considers too low. Each point is 1 percent of the loan amount.

Preliminary Title Report: A report indicating the present condition of the title and indicating the conditions upon which title insurance will be issued.

Prepayment Penalty: A penalty for prepaying a loan prior to the payment schedule of the note.

Primary Financing: First mortgages and trust deeds.

Principal: (1) One who engages an agent to act in his or her behalf. (2) A party to a contract. (3) A sum of money.

Principle of Change: Real estate values do not remain constant.

Principle of Conformity: A property will have its maximum value when it is in an area of similar properties.

Privity: Relationship of parties to a contract.

Progression: The increase in value of a less expensive home resulting from more expensive homes being built around it.

Pyramiding: Refinancing or selling property that has increased in value to buy additional or larger property.

QQualified Endorsement - Quitclaim Deed

Qualified Endorsement: An endorsement (acceptance) of a negotiable instrument "without recourse" to the endorser.

Quantity Survey: A detailed method to determine replacement cost by pricing out all the elements or a structure in the same manner as a builder would estimate costs.

Quiet Enjoyment: Right of an owner or tenant to use the property without interference

Quiet Title: A court action to determine ownership rights.

Quitclaim Deed: A deed conveying whatever interest the grantor may have without making any claims as to ownership.

RR Factor - RRM

R Factor: Resistance factor used to measure insulation.

Rafter: The diagonal roof beams running from the eaves to the ridge of the roof.

RAM (Reverse Annuity Mortgage): A mortgage in which the mortgagee makes monthly payments to the mortgagor. The loan is paid back when the property is sold or the mortgagor dies.

Ratification: The approval of an act of the agent by the principal when the agent exceeded his or her authority. By taking the benefits of the act, the principal also accepts its obligations.

Real Estate Board: An organization of brokers and associates (salespeople).

Real Estate Settlement Procedures Act (RESPA): A federal disclosure act requiring borrower be given an estimate of settlement costs and an information booklet. RESPA is administered by HUD.

Real Property: Land and that which goes with the land (appurtenances).

Realtist: A real estate broker who is a member of the National Association of Real Estate Brokers.

REALTORS®: A broker-member of the National Association of Realtors® (NAR).

Reconciliation: Process whereby appraiser assigns various weights to value determined by different appraisal methods.

Reconveyance Deed: The deed from the trustee to the trustor when the trustor has satisfied the debt to the beneficiary.

Redemption Right: The right of the mortgagor to redeem the property after a foreclosure sale. (Prior to a sale it would generally be a reinstatement right.)

Regression: A loss in value because a home was placed in an area of less expensive homes.

Replacement Cost: Cost of replacing a structure of the same desirability and utility values using modern methods and materials.

Rescission of Contract: Setting aside the contract and placing the parties back in the condition they were in prior to the contract (as opposed to waiver, which leaves them as they are).

Restoration: Returning to an original condition.

Restrictive Covenants: Private beneficial restrictions whereby owners are limited as to the use of their property. Examples: minimum size, setbacks, height limitations. Also known as CC&Rs (covenants, conditions and restrictions).

Rezoning: Change of zoning as opposed to a variance, which is an exception to zoning.

Right of First Refusal: A right sometimes given to a tenant to meet the price and terms at which the owner is willing to sell or lease the property to another party. The owner first must offer it to the holder of the right before a sale or lease can be made to another. Unlike an option, the owner is required to sell or lease.

Right of Way: The right to pass over another's land, such as in an easement.

RRM (Renegotiable Rate Mortgage): A short-term mortgage where the lender will rewrite the loan, when due, at the current interest rate (rollover mortgage).

SSafety Clause - Sweat Equity

Safety Clause: A listing provision that grants the broker a commission for a sale made within a specified period of time after a listing expires, if the broker submits the name of the buyer to the owner within a stated period of time as a party with whom the broker had negotiated prior to expiration of the listing.

Satisfaction of Mortgage: Given by the mortgagee to the mortgagor when the mortgage has been satisfied. By recording the satisfaction, the lien is removed.

Section: A parcel of land one mile square containing 640 acres, formed by government survey.

Sellers' Market: Market condition characterized by more buyers than sellers, so sellers have a more commanding position.

Special Agent: An agency in which the agent is authorized to perform only designated acts (specific agency).

Special Assessment: A charge against a property for a specific improvement such as street or sewer; it usually is assessed on a front-foot basis.

Square Footage: Measurement by taking exterior dimensions, excluding the garage.

SRA: Senior Residential Appraiser, a designation of the Society of Real Estate Appraisers.

SREA: Society of Real Estate Appraisers.

Statute of Frauds: Legislation requiring that certain contracts, including those dealing in real estate, be in writing.

Statute of Limitations: Sets forth the time limit within which certain legal action must be taken or rights will lapse.

Steering: Illegal practice of directing buyers to certain area, based on race.

Subdivision: Land division in accordance with state subdivision laws.

Subjective Value: The use value to the owner.

"Subject-To" Mortgage: An agreement that allows the buying of real estate without agreeing to pay an encumbrance. Buyer is not personally liable on the loan, so a deficiency judgment is not possible. Buyer must make payments, however, or lienholder will foreclose.

Survey: A location or verification of property lines by a surveyor.

Sweat Equity: Equity earned through owner's construction or improvements.

TTax Collector - Truth-In-Lending

Tax Collector: Collects property tax and conducts tax sales.

Tax Deed: The deed given at a tax sale.

Tax Shelter: A way of excluding income from taxes by such means as depreciation, which is a paper expense and can offset other income.

Tenancy: A mode of holding ownership or interest in property.

Tenements: Rights that transfer with the real property.

Time-Share: Interval ownership plan used for vacation property.

Title: Ownership. Title is passed by deed.

Title Insurance: Insurance policy that agrees to indemnify owner for defects in title caused by specified risks.

Title Theory: The theory that a mortgage is a transfer of title to secure a loan and not just a lien (minority of states).

Title I Loans: FHA home improvement loans.

Title II Loans: FHA home purchase loans for one to four residential units.

Town House: Row housing having common walls with adjoining housing.

Trading On Equity: Borrowing money on equity in property in order to invest it at a higher rate of return.

Trespass: A wrongful intrusion on the land of another.

Trust Deed: Transfer of title from the trustor (borrower) to a trustee (third party) as security for a note to a beneficiary (lender).

Trustee: The third party who holds the trust deed.

Trustor: The debtor who gives title to the trustee as security for the loan.

Truth-In-Lending: Part of Consumer Credit Protection Act, also known as Regulation Z. It is a disclosure act requiring lender to show the interest as an annual percentage rate.

UUltra Vires - Usury

Ultra Vires: An act outside the authority of the person acting. That person is responsible personally for his or her actions.

Unconscionable Contract: A contract that is so unfair or harsh that the court will refuse to enforce it.

Underimprovement: An improvement which, because of a deficiency in size or cost, fails to achieve the highest and best use for the property.

Undivided Interest: An unspecified interest in the whole rather than a separate interest in a particular portion of a property.

Undue Influence: Taking advantage of another because of a unique position of trust, such as a doctor-patient or attorney-client relationship.

Unearned Increment: An increase in value that is not due to any effort of the owner.

Uniform Commercial Code: Standardized commercial laws adopted throughout the nation.

Uniform Residential Appraisal Report (URAR): A form used for VA, FNMA, HUD, FHLMC and FmHA loans.

Uniform Residential Landlord and Tenant Act: An act adopted in whole or in part by a number of states and designed to provide uniformity as to rights and obligations of residential tenants and landlords.

Unilateral Contract: A promise in exchange for an act; accepted by the offeree's performance.

Unit In Place Method: An appraising method whereby cost is priced per unit, such as price per square foot.

Universal Agent: An agent appointed to perform all acts that the principal can delegate lawfully to another.

Unlawful Detainer: Legal eviction procedure.

Upset Price: Minimum bid at an auction.

Usury: An unlawful rate of interest.


Valid: Enforceable by either party.

Valid Escrow: Escrow in which an agreement has been reached and there has been conditional delivery of transfer agreements (deeds) to escrow. Delivery is conditioned upon escrow receiving all required funds and/or liens.

Valley: An internal angle in a roof. Metalwork often is used in a valley to prevent leaks.

VA Loan: A loan to a veteran where the Department of Veterans Affairs guarantees the lender up to agreed limits.

Variance: An exception to zoning.

Vendee: The buyer.

Vendor: The seller.

Verification: A sworn statement before an officer of the court as to the correctness of the contents of an instrument.

Vested: A present or sure interest that cannot be revoked.

Vested Remainder: A remainder interest that cannot be defeated, such as a remainder interest to a life estate. The remainder holder or heirs are bound to get the property.

Void: Having no legal effect.

Voidable: Capable of being voided by one party only. Valid until voided.

Voluntary Lien: A lien, such as a mortgage, placed by an owner.

WWainscoting - Wrap-Around Loan

Wainscoting: The treatment of the lower portion of a wall in a different manner than the rest of the wall; half paneling.

Waive: To give up or relinquish a right.

Waiver: Accepting something less than contracted for. A waiver leaves the parties as they are. Rescission places them back as they were.

Warehousing: Practice of mortgage companies of accumulating a stock of mortgages and borrowing on them until they can be sold.

Warranty Deed: A deed under which the grantor warrants the marketability of the title.

Waste: Destruction or damage to a property (usually by a tenant).

Wrap-Around Loan: A loan written for the amount of both junior and senior liens. The borrower makes the entire payment to the lienholder, who then makes the payment on the senior encumbrance. Also called all-inclusive mortgage.

ZZero Interest Loan - Zoning

Zero Interest Loan: A loan in which the seller buys down the interest rate to zero. Usually a short-term loan.

Zoning: City or county regulation on land use; considered to be an exercise of police power.