Real Estate Definitions

A B C D E F G H I L M N O P Q R S T U V W Z

Terms	Definition
1031 Exchange	The Internal Revenue Code Section 1031 refers to the exchange of like-kind properties usually to defer capital gains. The replacement property must be located within the United States if the exchanged property is United States property.

Acre (AC)	A measure of land area equal to 43,560 square feet.
Addendum	Material that is additional to the contract that is attached and made a part of the document. Usually referred to within the agreement.
Adjustable Rate Mortgage (ARM)	A broad term for a loan (mortgage or deed of trust) in which the rates and terms that can change.
Agency	A relationship created when a person delegates to another, the agent, the right to act on his or her behalf in business transactions and to exercise some degree of discretion while so acting. The creation of the agency relationship may be implied for the acts of the parties and does not depend on the existence of a written contract.
Agent	Someone authorized to represent and to act on behalf of another person, the principal, owing them certain fiduciary responsibilities.
Amendment	A document that makes a change to the ratified contract
Amortization	The process of repaying of a loan through regular payments of the principlal and/or interest over a set period so that the end of the set period results in a zero balance.
Apartment Building	A building containing separate units for tenants who rent or lease them. The owner of the building provides common facilities and maintains common entrances and hallways.
Appraiser	A licensed professional who estimates the value of a property for a fee. Fees typically based on time and expenses, not a percentage of the appraised value.
Asbestos	A mineral finber found in rocks used in a wide variety of household products which if presence is known by the real estate agent must be disclosed to prospective buyers.
As-Is	Words in a contract intended to signify that the seller offers the property in its present condition without any improvements or modifications. This is usually intended as a disclaimer of warranties or representations.

Backup Offer	Also known as a secondary offer, it is an offer to purchase which is submitted to a seller with the understanding that the seller has already accepted a prior offer.
Balloon Mortgage	A type of mortgage in which the final payment is substantially higher than the previous payments and pays the debt in full. Usually used in second mortgages to keep the initial payments low while paying the primary mortgage.
Breach of Contract	The violation of the terms of the contract without legal excuse.
Broker	A licensed professional who acts as an intermediary between parties of a transaction. A real estate broker is a state licensed party who, for promise of consideration, serves as a special agent to others to facilitate the sale or lease of real property. A real estate broker is an independent businessperson who sets the office policies, hires employees and supervises them, and is free to accept or reject angency relationships with principals.
Buydown	Reducing the monthly payment for the mortgagee during the initial years, typically by payments made to the lender (called points) that effectively lower the interest rate paid by the purchaser.
Bylaws	The rules adopted by a condominium owner’s association for the management and operation. Usually established by the builder, then subject to amendments when the owner’s association takes over.

Cape Cod	This style originated from early New England colonists and is almost always single-storied, sometimes with a dormer, and double-hung windows, a small overhang on the roof with a chimney.
Cntg/Ko	Property that is still available but has a contract with at least one pending contingency that includes a kick out clause. Sellers can accept contracts on these properties if the buyer meets the criteria to “kick out” the existing contract.
Cntg/NoKo	Property is that is still available, but has a contract with at least one pending contingency, which do not contain a kick out clause.
Colonial	Houses built in this style are symmetrical and functional in nature. They usually have at least two floors, with bedrooms upstairs and the living space on the main floor.
Commission	The salary paid to a real estate broker for services rendered in connection with the sale or exchange of real property.
Condo Docs	Condominium documents are legal papers of the condominium provided to the purchaser. They typically include the condominium declaration, bylaws,the plat and plans, financial statements, condo budget, Reserve Study, and other misc legal documents.
Condominium	A property that contains structures with individual interests in each unit, an undivided common interest in common areas such as land, elevators, stairwells etc. Each unit is exclusively owned, taxed and assessed separately however the owners must comply with the rules of the bylaws and regulations set forth in the condo docs.
Contingency	A clause in a contract that requires that certain provisions be met or certain acts performed before the contract is considered fully binding. Common contingencies include but are not limited to financing, appraisal, sale of another property, home inspection and HOA.
Contract	A legally binding agreement in the form of a document made between two competent parties that requires specific performance for consideration. Typically, real estate contracts must be in writing and signed by both parties to be enforceable.
Co-op	Also called a cooperative ownership, it is a type of ownership of a unit in which the owner has purchased shares in the corporation that holds title to the entire building.
Counter Offer	A response made in the form of an offer to an offer received. Once made, the original offer is essentially rejected and cannot then be accepted unless re-offered.

Deed	A written document in which an owner aslo known in this situation as the grantor conveys and transfers the ownership interest in real property to the purchaser or “grantee”. This does not refer to leasehold property.
Default	Usually a breach of contract which results from not performing to the terms of the contract and the non defaulting party can seek legal remedies to recover any loss.
Designated Agent	The agent for either buyer or seller to the exclusion of all other agents in the brokerage used as the solution to potential conflict of interests.
Disclosure	To make known to purchasers any facts or information pertaining to the transaction or the condition of the property.
Down Payment	The amount the purchaser will pay at settlement apart from the loan.
Dual Agent	Is the situation in which an agent or agency acts as the intermediary for both the seller and the purchaser and must be disclosed and agreed upon by both parties.

Earnest Money Deposit (EMD)	The deposit in form of money offered by a purchaser as a sign of good faith when entering into the contract and secures the buyers performance.
Easement	Written documents that entitles the holder a limited use or enjoyment of another’s land. Most easements address right-of-way issues or restrictions within a neighborhood.
Escrow	When a neutral third party holds money or documents until satisfaction of the terms and conditions of the contract are met. An escrow agent does not review or prepare legal documents; they merely follow the terms set forth by the contract.
Exclusive Agency	A written listing agreement in which the seller agrees to appoint only one broker to sell the property for a specific amount of time.

Federal Housing Administration (FHA)	Established in 1934 under the Nation Housing Act, is a federal agency which neither builds homes nor lends money directly. Instead it insures loans made by approved lending institutions. They have a standardized appraisal process, fully amortized loans, and approval to buyers with less than perfect credit.
FICO Score	A score developed by the Fair Isaac Company used by lenders to evaluate creditworthiness and risk. The higher the score, the lower the risk.
Foreclosure	The legal procedure in which the property used as security for debt is sold to satisfy the debt in the case of default of payments or other terms of the mortgage.
Fully finished basement	When the basement has been designed and completed to function as a fully habitable addition to the house.

Grantee	A person, natural or otherwise, who receives real property and not only exists at time of conveyance but who is also capable of taking title.
Grantor	The legal competent person, natural or otherwise, identified in the deed who is transferring title or interest in real property to a grantee.
Gross Income	The total income accrued before any adjustments for expenses, depreciation, or taxes.

Homeowner’s Association (HOA)	A nonprofit organization of homeowners within a subdivision containing a declaration of restrictions and protective covenants.
HUD-1 Form	Used at settlement to tabulate all loans, fees, and monies within the transaction.
HVAC	An acronym for the heating, ventilation, and air-conditioning systems in a structure.

Insurable Title	A title that is eligible to receive a policy of insurance from a title insurance company.
Interest	The amount of money charged extra to the loan in return for the use of the money. Usually stated in terms of rates and is usually regulated by state laws.
Interest Rate	The rate at which interest may be charged on a mortgage. Typically quoted for one year and divided by 12 to find the interest due for one month.

Lease	The agreement between landlord and tenant for possession of certain property a defined period of time.
Lien	A claim made on the title of real property for payment of debt using the real property as security.
List Price	Also known as the asking price, it is the price at which the property is offered to the public.
Listing Agreement	The written agreement of a service contract between a property owner and a real estate broker authorizing the broker to find a buyer or tenant for their real property. It is an employment contract strictly between the seller and broker.
Loan to Value (LTV) ratio	The ratio of the mortgage loan to the property’s appraised value or its sales price, whichever is lower.

Market Value	The price a property should bring in a open market under conditions set by federal lending institutions.
Mortgage	The written legal document used to secure the obligation of a mortgagee to repay the mortgage loan debt.
Mortgagee	The borrower on a mortgage loan.
Mortgagor	The lender, typically a financial institution, for a mortgage loan.
Multiple Listing Service (MLS)	A membership made up of brokers who combine their listings in one location and offer cooperation and consideration to other brokers.

Net Proceed

The cash received after paying all expenses including liens.

Open House

The practice used by real estate agents to make properties available to the viewing public for a set amount of time in hopes of attracting potential buyers.

Personal Property	Tangible and movable objects on a property that are not considered real property.
PITI	An acronym for principle, interest, taxes, and insurance which is usually included in the mortgage payment.
Point	Percentages of the principal loan amount where one point is equal to one percent of the loan amount.
Power of Attorney (POA)	A written document giving a person, the attorney-in-fact, the authority to act as the agent on behalf of another to the extent described within the instrument.
Pre approval	A loan that is pending and in which all the documents are in a file and there is a very strong probability that there will be no financial issues preventing the purchaser from closing.
Pre qualification letter	Given by the lender based on an interview with the purchaser and their credit report. Ensuring that if the borrowing is telling the truth about all financial statements and income, the purchaser should qualify to meet the loan requirements.
Prime Rate	The minimum interest rate charged by a commercial bank on short term loans to it’s strongest clients. Typically used as the base rate for other loans.
Private Mortgage Insurance (PMI)	A type of insurance that allows lenders to increase the LTV ratio.
Property Taxes	A state and local government levied tax against real or personal property.
Purchase Offer	A written contract drawn up by the purchaser for the purchase of real property.

Quitclaim Deed

A deed in which the grantors only convey whatever interest they have in the property without warranting the title or possession. Typically used for conveying minor interests in the property for the purpose of clearing title defects.

Radon	This is a colorless, odorless, naturally occurring gas produced from the decay of naturally radioactive minerals in the ground. It is a known carcinogen and must be disclosed if the presence of it is known.
Ratified	The purchase offer including any addenda signed by both parties acknowledging and agreeing to all terms of the contract. All changes to the contract must be initialed by both sides to be considered ratified.
REALTOR®	A member of the professional organization National Association of REALTORS® who adheres to a stricter code of ethics than demanded by the state or federal level.
Recording	The act of officially entering the title documents for real property into the book of public records.
Refinancing	Obtaining a new loan to pay off an existing loan usually to acquire better rates.
Rentback	To sell real property and subsequently rent it from the new owners for a specified amount of time.
Real Estate Owned (REO)	A term used to describe property that was purchased by lenders at a foreclosure auction.
RESPA	A federal law enacted in 1974 that ensures that the buyer and seller in a real estate transaction receive information of all settlement costs involved with the purchase of a single family residence when financed by a federally regulated mortgage.

Settlement	Also known as the closing, it is the act of concluding a real estate transaction typically held in an attorney’s office.
Short Sale	The sale of a property for fewer funds than what is owed to the lender and the lender releases the property to be sold free and clear to the new owner.
Single Family Home	A structure designed for use and occupancy of a single family unit, as in a private dwelling.
Split Foyer	A house in which the entrance opens directly to a split stairwell that leads the level(s) above and the downstairs level.
Split Level	A house in which two or more floors are usually located directly above each other and one or more adjacent floors are placed at a different level.
Square Feet (SF or sq ft)	A unit of measurement of area equal to one foot by one foot square, typically used in real estate to measure the interior spaces of a property.
Subdivision	A piece of land and all of the units and parcels within it that are referred to as a common title for the purpose of advertising and sales.
Subsidy	Funds and/or incentives gifted by an entity to reduce the cost of the purchase of property or persuade a buyer to purchase.

Tax Assessment	See property taxes.
Term	A word commonly used in the mortgage industry to describe the length of time in which the mortgage loan must be paid off.
Title	The right to or ownership of land and all the bundle of rights an owner possesses.
Title Insurance	The warranty a title insurance company makes to comprehensively cover a loss arising through the defects in title or any liens and encumbrances.
Title Search	The research and study of public records to determine if there are any defects in the chain of title to a specific real property.
Townhouse	A type of dwelling structure usually with at least two levels that typically have party walls and shared and common grounds. They are often part of a PUD or planned urban development.

Underwriting

The analysis of risk by the lender associated with a mortgage application and the ability of the potential mortgagee to repay the loan.

Veterans Administration (VA) loan	Also called the GI Loan, it is a government sponsored mortgage assistance program for eligible veterans or their un-remarried widowers. It is administered by the Department of Veteran Affairs.
Variable Rate	A type of financing in which the lender is permitted to alter the interest rate under the loan after given advanced notice based on an agreed rate index.
Virtual Home Tour	Any advertising method used to provide internet users with a graphical presentation of a home, including web pages, streaming video and panoramic images.
Void	Not enforceable, having no legal binding effect.

Walk Through	The final inspection of the property by the purchasers before going to settlement.
Warranty Deed	A deed in which the grantors fully warrants good clear title to the premises. Also known as a general warranty deed.