Real Estate Terms

Abstract of Title- A history of the ownership of a parcel of land which lists transfers of title, rights, and liabilities.

Acceleration Clause- States that upon default, all of the principal installments come due immediately.

Acre-A piece of land equal to 43,560 square feet.

Action to Quiet Title- A lawsuit filed by a person to remove or clear the claims of others against property they own.

Adverse Possession - Acquiring title to property by open, notorious and hostile possession for a statutory period of time; also referred to as prescription.

Agency - A relationship in which the principal authorizes another party -the real estate agent or broker- to act as the principal's representative in dealing with third parties.

Agent -One who acts for and in place of a principal for the purpose of buying or selling real estate.

Amortization - The repayment of a financial obligation over a period of time in a series of periodic installments. In a mortgage, this is the portion of the payment that reduces the principal.

Appraisal - An opinion or estimate of value.

Appreciation - An increase in value.

Appurtenance - Any right or privilege which belongs to and passes with land.

Arrears -Not on time; late in making payments or completing work. Interest is paid in arrears. Taxes are paid at the end of the year, i.e., in arrears.

As is- A phrase which disclaims any promises or warranties. Seller cannot hide latent defects.

Assessed Value - The value placed on property, by the tax assessor, for the purpose of determining the property tax.

Balloon Payment - The remaining balance, at maturity, on a loan that has not been completely repaid through periodic payments. Once paid, the outstanding balance is zero.

Bill of Sale - A document used to transfer ownership of personal property.

Blanket Mortgage - A mortgage which covers more than one piece of real estate, used by developers in the financing of undeveloped lots. Contains a partial release clause.

Bundle of Rights - The rights of an owner to possess, control, enjoy, sell, lease, mortgage, and dispose of the property.

Capital Gains - The tax profit realized from the sale of property.

Certificate of Eligibility Certificate - Given to veterans indicating their qualification for a VA mortgage loan.

Chain of Title - A history of the ownership affecting title to a parcel of land.

Closing Costs - The expenses incurred and paid at the time of settlement in the transferring of property.

Cloud on Title - Any claim affecting title to property.

Co-Insurance -Coinsurance is a common clause in home owners insurance policies. You agree to insure your property in an amount equal to at least 80% of the replacement cost. It the property is not insured to that amount and a loss is incurred the insurance company will make the insured share in the loss on a pro-rata basis.

Collateral - Property which has been pledged as security for a loan.

Comparative Analysis- A method of appraising property in which the selling prices of comparable properties are used as the basis for determining value of property.

Counteroffer -A rejection of the original offer by proposing new offer.

Covenant - Included in a deed; a guarantee.

Covenant Against Encumbrances -The assurance that no encumbrances other than those specified in the deed exist.

Covenant of Further Assurance - A promise that the grantor will perform further acts reasonably necessary to correct any defects in the title or in the deed instrument.

Covenant of Quiet Enjoyment -A promise that no one has superior title to that of the grantor; assures the grantee of peaceful possession without fear of being ousted by a person with a superior claim to the property.

Covenant of Seisin - Gives the assurance that the grantor has the exact estate in the quantity and quality which is being conveyed. "I own and I have the right to sell it."

Deed of Trust -A deed to real property, which serves the same purpose as a mortgage, involving three parties instead of two.

Defect in Title - Any lien, claim or encumbrance, on a particular piece of real estate, that has been properly recorded in the public records. Recorded defects impair clear title and may result in the title being unmarketable.

Depreciation - A decrease in value due to physical deterioration, functional or economic obsolescence.

Discount Points - A fee charged by the lender at settlement that results in increasing the lender's effective yield on the money borrowed. One discount point equals one percent of the loan amount.

Down Payment - The amount paid by the purchaser, which when added to the mortgage amount, equals the total sales price.

Due-on-Sale Clause - A clause, included in many mortgages, permitting the lender to require the borrower to repay the outstanding balance when the property is sold. Prevents loan assumption.

Earnest Money - A sum of money given to bind an offer or agreement.

Easement - A right to limited use or enjoyment by one or more persons in the land of another.

Easement Appurtenant -An easement created to benefit adjacent land.

Easement by Implication - Occurs because of necessity, such as the conveyance of a land-locked property.

Easement in Gross - A personal right to use the land of another.

Eminent Domain -The right of government to acquire property, for a public purpose, after paying just compensation.

Encroachment -The extension of some improvement or object across the boundary of an adjoining property.

Encumbrance -Any interest in or claim on, the land of another, which in some manner burdens or diminishes the value of the property.

Equity -value of real estate less any liens against it.

Exclusive Agency Listing - The owner employs only one broker but retains the right to personally sell the property, and thereby not pay a commission. However, if any other real estate company sells the property, the listing broker is still entitled to the commission stipulated.

Exclusive Right to Sell Listing - Under this listing arrangement, the broker is entitled to a commission no matter who sells the property during the listing period. (Even the Seller)

Executor -A person appointed in the will to carry out the instructions of the testator, pay the debts of the estate, and dispose of the property as instructed.

FHA - Federal Housing Administration- A federal agency established to increase home ownership by providing an insurance program to safeguard the lender against the risk of nonpayment. Currently part of HUD.

Fiduciary - A fiduciary must carry out the duties in a manner which best serves the interest of the party for whom the fiduciary relationship is established. A real estate agent has a fiduciary duty to his/her client. (Seller, landlord, buyer or tenant)

Foreclosure - A legal procedure on pledged property used to secure a debt under a mortgage or other lien.

Land Contract -The seller accepts a down payment on a parcel of land but title to the property does not pass until the last principal payment has been received.Also referred to as an installment sales contract or a contract for a deed.

Lease Purchase Agreement - An arrangement whereby part of the rent payment is applied to the purchase price, and when the prearranged total amount has been paid, title is transferred.

Legal Description - A written description of a parcel of land which locates it precisely and will hold up in court. (Does not include address.)

Loan-to-Value Ratio or LTV - The relationship between the amount borrowed and the appraised value of the property.

Market Value - The price at which a buyer and a seller will agree upon, when neither is under any undue pressure, and both are negotiating with complete knowledge of the market.

Mortgage - A legal document, in which the borrower or mortgagor agrees to pledge property to secure the debt represented by the promissory note.

Mortgage Banker - A financial middleman who makes loans, packages them, and sells the packages to both primary and secondary investors. Also services loans.

Mortgage Broker - A person who brings together the borrower and the lender. For this service, a finder's fee is usually paid by the borrower.

Multiple Listing - Marketing service in which many brokers pool all of their listings and establish procedures for sharing commissions.

Offer and Acceptance -For example, an agreement of one party to buy and another party to sell.

Option - A right which is given for consideration to a party (optionee) by a property owner (optionor) to purchase or lease property within a specified time, at a specified price and terms.

Percolation or Perc test- Ability of soil to absorb water; used for septic systems.

PITI - "Principal, Interest, Taxes and Insurance." In residential financing, it is common for the monthly mortgage to include these four payments.

Plat - A map showing the division of land into lots and blocks.

Prepayment Penalty - The charge levied by the lender for paying off a mortgage prior to its maturity date.

Prime Rate - The interest rate charged to a lender's AAA customer. Find current Prime Rate.

Promissory Note - A contract in which the borrower promises to pay back a sum of money borrowed.

Purchase Money Mortgage - A mortgage given by the seller to the buyer to cover all or part of the sale price.In other words, seller financing.

Quitclaim Deed - Only conveys whatever interest a person may have in a particular property , and makes no representations or warranties of title. The weakest deed.

Real Estate - Land and all man-made improvements both on and to the land, plus all tangible interest in the real property. Surface, subsurface and air rights.

RESPA- Real Estate Settlement Procedures Act - A law which covers most mortgage loans made for one to four-unit residential property. It requires the lender to provide the loan applicant with pertinent information so that the borrower can make informed decisions as to which lender will be used to finance the purchase.

Second Mortgage - A subordinate mortgage to a first mortgage; also referred to as a junior mortgage.

Time Is of the Essence - A phrase included in contracts to require punctual performance of all obligation.

Title -The legally recognized evidence of a person's right to possess property.

Title Insurance -An insurance policy that protects the insured against loss or damage due to defects in title.

Township -A 6-by-6 mile area containing 36 sections each 1 mile square. A division of land in the rectangular survey method of land description.

VA Mortgage or GI Mortgage - Mortgage guaranteed by Veterans Administration, for qualified Veterans. More info

Variance - A legal safety valve to allow a property owner, who is unfairly burdened by zoning restrictions, to find relief.

Will - A legal document in which a person disposes of property to take effect upon his or her death.

Wrap Around Mortgage - A junior mortgage which provides an owner additional capital without refinancing the first mortgage.