Real Estate Glossary
Definitions A-G
Definitions H-N
Definitions O-Z
Other Definitions
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- acceleration clause
A provision in your mortgage that states that after one loan payment is late, the loan is considered to be in default, thereby making all outstanding payments due and payable at once or on the request of the lender
- adjustable-rate mortgage (ARM)
A loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a pre-selected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan.
- adjustment date
The date the interest rate changes on an adjustable-rate mortgage
- amortization
Refers to the regular recognition of an expense (or payment) over a period of its economic usefulness or, in the case of a loan to buy real estate, in which the real estate itself serves as collateral to provide for repayment in case of default, amortization is over a pre-agreed term of the loan.
The loan repayment consists of a portion which will be applied to pay the accruing interest, with the remainder being applied to
reduce the principal sum.
- amortization schedule [top]
A table which shows how much of each payment will be applied toward principal and how much
toward interest over the life of the loan. It also shows the gradual decrease of the loan
balance until it reaches zero.
- annual percentage rate (APR)
The APR is a measure of the cost of credit expressed as a yearly interest rate. Usually, the lower the APR, the better for you. Be sure to check the fine print to see if your offer has a time limit. Your APR could be much higher after the initial limited offer
- application
The form used to apply for a mortgage loan, containing information about a borrower's
income, savings, assets, debts etc.
- appraisal
An estimate of the market value of a piece of property by a qualified appraiser
- appraised value
The value placed on the property by an appraiser, recognized for experience in the real estate field. The appraisal is based primarily on knowledge of the area and recent
comparable sales, and the most recent sale is the one on the property in question, the
appraisal usually comes out at the purchase price.
- appraiser
An individual qualified by education, training, and experience to estimate the value of
real etate. Although some appraisers work directly for mortgage
lenders, most are independent.
- appreciation
The increase in the value of a property due to changes in market conditions, inflation, or
other causes.
- assessed value [top]
The value that a taxing authority places on real or personal property for the purpose of calculating taxes
- assessment
The determination of the value of real property upon which taxes will be imposed
- assessor
A public official who evaluates property for the purpose of determining the taxable value of property.
- asset
Anything an individual or corporation owns is considered an asset. Assets that can be quickly converted into cash are
considered "liquid assets." These include bank accounts, stocks, bonds, mutual
funds, and so on. Other assets include real estate, personal property, and debts owed to
an individual by others.
- assignment
The legal transfer of an owners rights or property to another person or corporation
- assumable mortgage
A mortgage contract that gives the mortgagor the option of transferring primary liability for payment of the mortgage to a buyer if the property is re-sold with interest rates and other terms of the original mortgage remaining in effect.
- assumption
The term applied when a buyer assumes the seller’s mortgage.
- balloon mortgage
A mortgage that does not fully amortize by the end of the loan term. Periodic payments may be for principal and interest, or for interest only. At maturity, the unpaid principal is due in a lump sum
- balloon payment [top]
The final lump sum payment that is due at the termination of a balloon mortgage.
- bankruptcy
The legal process in which a person or firm declares inability to pay debts. Any available assets are liquidated and the proceeds are distributed to creditors. A person or firm may be declared bankrupt under one of several chapters of the federal bankruptcy code: Chapter 7, which covers liquidation of the doubter's assets; Chapter 11, which covers reorganization of bankrupt businesses; or Chapter 13, which covers work-outs of debts by individuals. Upon a court declaration of bankruptcy, a person or firm surrenders assets to a court-appointed trustee, and is relieved from the payment of previous debts
- bill of sale
A written document that transfers title to personal property from the seller to the buyer.
- biweekly mortgage
A mortgage in which you make a "half-monthly payment" every two weeks instead of a "once-monthly payment" once a month. The result is that instead of making twelve monthly payments during the year, you make
thirteen. The extra payment reduces the principal, substantially reducing the time it
takes to pay off the mortgage.
- bond market
The daily buying and selling of thirty year treasury bonds. Lenders
follow this market closely because as the yields of bonds go up and down, fixed rate
mortgages do approximately the same thing. The same factors that affect the Treasury Bond
market also affect mortgage rates. That is why rates change daily and, in
a volatile market, change during the day as well.
- bridge loan
A bridge loan is a type of short-term loan in the financial industry. Bridge loans are typically taken out for a period of 2 weeks to 3 years in order to finance other projects. Uses for bridge loans include real estate purchases, retrieving real estate from foreclosure and business loans for operating capital.
- broker [top]
A firm or individual who brings the borrower and lender together, receiving a commission if a sale results
- buydown
The practice of a seller, builder or other party advancing money to a mortgage lender resulting in lower monthly mortgage payments by a third party, the homebuyer. As the result of a buydown, monthly mortgage payments may be reduced for the entire life of the mortgage, or for just an initial period of one or more years. Frequently, the amount of the buydown is added to the selling price of the property
- call option
Similar to the acceleration clause.
- cap
The maximum allowable interest rate increase for adjustable rate mortgages. Caps embedded in mortgage agreements may limit the amount of upward change in the rate of interest at each adjustment period and provide a fixed maximum over which the rate cannot rise during the life of the loan
- cash-out refinance
When a borrower refinances his mortgage at a higher amount than the current loan balance
with the intention of pulling out money for personal use, it is referred to as a
"cash out refinance."
- certificate of deposit
An interest earning savings instrument issued by a bank or thrift in which funds must remain on deposit for a specified amount of time; withdrawals prior to maturity incur interest penalties. CDs usually offer a higher rate of return than most comparable investments. Also called a time deposit
- certificate of deposit index
One of the indexes used for determining interest rate changes on some adjustable rate
mortgages. It is the average of what banks are paying on certificates of deposit.
- Certificate of Eligibility [top]
A document issued by the Veterans Administration that certifies a veteran’s
eligibility for a VA loan.
- Certificate of Reasonable Value (CRV)
Once the appraisal has been performed on a property being bought with a VA loan, the
Veterans Administration issues a CRV.
- chain of title
An analysis and history of the transfers of title to a piece of property over the years.
- clear title
A title that is free of liens or legal questions as to ownership of the property.
- closing
The closing date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. On the closing date, the parties consummate the purchase contract, and ownership of the property is officially transferred to the buyer.
Several things happen during closing:
(1) The buyer (or their bank) delivers the check for the purchase price.
(2) The seller signs the deed over to the buyer, and gives them the keys.
(3) The lawyer registers the new deed with the local land registry office.
(4) The seller receives a check for the proceeds of the sale, less closing costs and mortgage payouts.
Closing typically happens in escrow, which means that a lawyer or other trusted party gets the money and the signed deed, and arranges for the transfer. This is primarily so that the seller can give up ownership of the property, and the buyer can hand over the payment, without both parties having to be there at the same time. Escrow ensures an orderly transaction, or if something goes wrong, an orderly termination of the agreement.
In some countries, this is also known as "completion"
- closing costs [top]
Expenses paid by a buyer and/or seller for the cost of processing the sale or financing of real property. Such costs include loan fees, title fees,
escrow fees and appraisal fees
- closing statement
See Settlement Statement.
- cloud on title
Any conditions revealed by a title search that adversely affect the title to real estate.
Usually clouds on title cannot be removed except by deed, release, or court action.
- co-borrower
IAn additional individual who is both obligated on the loan and is on title to the
property.
- collateral
In a home loan, the property is the collateral. The borrower risks losing the property if
the loan is not repaid according to the terms of the mortgage or deed of trust. Also one of the Five "Cs" used in determining a loan applicant's credit worthiness
- collection
The process of resolving a delinquent, or past due, mortgage loan including, when necessary, proceeding with foreclosure
- commission
The fee paid to a broker for executing a trade, including Realtors, loan officers, title
representatives, attorneys, escrow representative, and representatives for pest companies,
home warranty companies, home inspection companies, insurance agents, and more. The
commissions are paid out of the charges paid by the seller or buyer in the purchase
transaction. Realtors generally earn the largest commissions, followed by lenders, then
the others.
- common area assessments [top]
In some areas they are called Homeowners Association Fees. They are charges paid to the
Homeowners Association by the owners of the individual units in a condominium or planned
unit development (PUD) and are generally used to maintain the property and common areas.
- common areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit
development (PUD) or condominium project's homeowners' association (or a cooperative
project's cooperative corporation) that are used by all of the unit owners, who share in
the common expenses of their operation and maintenance. Common areas include swimming
pools, tennis courts, and other recreational facilities, as well as common corridors of
buildings, parking areas, means of ingress and egress, etc.
- common law
An unwritten law based on general custom in England and used to an extent in some
US states.
- community property
In some states, property acquired by a married couple during
their marriage is considered to be owned jointly, except under special circumstances. In the United States there are eight community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington. Wisconsin has adopted a marital property statute, which functions in many ways like community property but has unique applications. In addition, Puerto Rico is a community property jurisdiction. Married couples in Alaska can also adopt community property rules, at least for the purposes of that state's law, by signing an agreement to that effect. Most states that operate under community property regimes were first colonized by Spain or France, which have always been civil law jurisdictions
- comparable sales [top]
Recent sales of similar properties in nearby areas and used to help determine the market
value of a property. Also referred to as "comps."
- condominium
A condominium, or condo for short, is a form of housing tenure. It is the legal term used in the United States and in most provinces of Canada for a type of joint ownership of real property in which portions of the property are commonly owned and other portions are individually owned. In Australia and the Canadian province of British Columbia, the legal term for this is known as strata title. In Quebec, it is known as syndicates of co-ownership. Colloquially, the term "condo" is often used to refer to the apartment unit itself in place of the term "apartment". This clearly signifies ownership of the property. The closest equivalent in the United Kingdom is shared freehold.
- condominium conversion
Changing the ownership of an existing building (usually a rental project) to the
condominium form of ownership.
- condominium hotel
A condominium project that has rental or registration desks, short-term occupancy, food
and telephone services, and daily cleaning services and that is operated as a commercial
hotel even though the units are individually owned. These are often found in resort areas
like Hawaii.
- construction loan
A loan package to finance acquiring, developing and constructing real estate. The lender makes
payments to the builder at periodic intervals as the work progresses.
- contingency [top]
In colloquial English, a contingency is something that can happen, but that generally is not anticipated. Planning for contingencies often requires a more imaginative approach, because contingencies are inherently not obvious. However, in Real Estate transactions, a contingency is a condition that must be met before a contract is legally binding. For example, home
purchasers often include a contingency that specifies that the contract is not binding
until the purchaser obtains a satisfactory home inspection report from a qualified home
inspector.
- contract
An oral or written agreement to do or not to do a certain action.
- conventional mortgage
Refers to home loans other than government loans (VA and FHA).
- convertible ARM
IAn adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate
mortgage within a specific time.
- cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own
shares in the cooperative corporation that owns the property, giving each resident the
right to occupy a specific apartment or unit.
- cost of funds
index (COFI)
Cost of Funds is the interest paid or accrued on savings, advances from a Federal Home Loan Bank or interest on other funds borrowed by a thrift institution, expressed as a percent of its average total savings and borrowings during a given accounting period
Cost of Fuinds Index (COFI) is one of the indexes that is used to determine interest rate changes for certain
adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings,
and advances of the financial institutions such as banks and savings & loans, in the
11th District of the Federal Home Loan Bank.
- credit [top]
An agreement in which a borrower receives something of value in exchange for a promise to
repay the lender at a later date.
- credit history
Credit history is a record of an individual's or company's past borrowing and repaying. It will list personal credit currently in the person's or company's name, and risk factors like late payments and bankruptcy. Credit card companies and other lenders look at a credit history to determine if a person or company is likely to repay on time, if not then they can be denied credit. However if a person does have a negative credit history, then a lender may still decides to issue them credit, but at a higher APR (Annual percentage rate).
- creditor
A person to whom money is owed.
- credit report
Your credit payment history is recorded in a file or report. These files or reports are maintained and sold by consumer reporting agencies (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance or a job. Your credit record contains information about your income, debts and credit payment history. It also indicates whether you have been sued, arrested or have filed for bankruptcy
- credit repository
An organization that gathers, records, updates, and stores financial and public records
information about the payment records of individuals who are being considered for credit.
- debt
An amount owed.
- deed
A written legal document used to convey ownership of real estate.
- deed-in-lieu
A means of escaping an overly burdenome mortgage. If a homeowner can't make the mortgage payments and can't find a buyer for the house, many lenders will accept ownership of the property in place of the money owed on the mortgage. Even if the lender won't agree to accept the property, the homeowner can prepare a quitclaim deed that unilaterally transfers the homeowner's property rights to the lender
- deed of trust [top]
A deed of trust is a special kind of deed that is recorded in public records, where it tells everyone that there is a lien on your property. It is used in place of a mortgage.
A deed of trust involves three parties. You as the trustor, the lender as the beneficiary, and a neutral third party as the trustee, who you can think of as someone who holds temporary (but not full) title until the lien is paid.
The deed of trust is cancelled when the debt is paid. Until then, the trustee has the power to foreclose if the debt is not paid, without going through the court system, making it easier and quicker than foreclosing on a mortgage.
- default
Failure to make the mortgage payment within a specified period of time. For first
mortgages or first trust deeds, if a payment has still not been made within 30 days of the
due date, the loan is considered to be in default.
- delinquency
Failure to make mortgage payments when mortgage payments are due. For most mortgages,
payments are due on the first day of the month. Even though they may not charge a
"late fee" for a number of days, the payment is still considered to be late and
the loan delinquent. When a loan payment is more than 30 days late, most lenders report
the late payment to one or more credit bureaus.
- deposit
A sum of money given in advance of a larger amount being expected in the future.
- depreciation
A decline in the value of property; the opposite of appreciation. The periodic write-off of a capital asset (a building, vehicle, piece of equipment, etc.) over the asset’s useful life. This allows a business to claim a deduction for assets which would otherwise not be able to be deducted in just one year
- discount points
An amount paid by a borrower to a lender at the time the loan is made to increase the loan's effective yield. One point is equal to one percent of the loan amount
- down payment [top]
The part of the purchase price of a property that the buyer pays in cash and does not
finance with a mortgage.
- due-on-sale provision
A provision in a mortgage enabling the lender to demand full repayment if the borrower sells the mortgaged property
- earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying
the property.
- easement
A right or privilege that a person may have on another's land, as the right of a way or ingress or egress
- effective age
An appraiser's estimate of the physical condition of a building. The actual age of a
building may be shorter or longer than its effective age.
- eminent domain
The power of the federal or state government to take private property for a public purpose, even if the property owner objects. The Fifth Amendment to the United States Constitution allows the government to take private property if the taking is for a public use and the owner is "justly compensated" (usually, paid fair market value) for his or her loss. A public use is virtually anything that is sanctioned by a federal or state legislative body, but such uses may include roads, parks, reservoirs, schools, hospitals or other public buildings. Sometimes called condemnation, taking or expropriation.
Known in UK as Comulsory Purchase Order
- encroachment
An addition or improvement that intrudes illegally on another person's property.
- encumbrance [top]
Anything that affects or limits the fee simple title to a property, such as mortgages,
leases, easements, or restrictions.
- Equal Credit Opportunity Act (ECOA)
-
A federal law that requires lenders and other creditors to make credit equally available
without discrimination based on race, color, religion, national origin, age, sex, marital
status, or receipt of income from public assistance programs.
- equity
A homeowner's financial interest in a property. Equity is the difference between the actual market value of the property and the amount still owed on its mortgage and other liens.
- escrow
A written agreement under which documents, funds or other property being transferred from one party to another are placed with a third person or entity, usually a trust company, acting as custodian. The custodian completes the transfer to the second party only upon the fulfillment of certain specified conditions.
- escrow account
Funds placed in trust with a third party, by a borrower for a specific purpose and to be delivered to the borrower only upon the fulfillment of certain conditions.. In real estate, this often refers to a situation where the amount you pay each month is more than you would normally pay if you were only paying your principal and interest. The
extra money is held in your escrow account for the payment of items like
property taxes and homeowner's insurance when they come due. The lender pays them
with your money instead of you paying them yourself.
- escrow analysis
A lender's periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower's monthly mortgage payment to pay for expenses such as property taxes and insurance.
- escrow disbursements [top]
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance,
and other property expenses as they become due.
- estate
The sum total of all the real
property and personal property owned by an individual at time of death.
- eviction
The lawful expulsion of an occupant from a property.
- examination of title
The report on the title of a property from the public records or an abstract of the title.
- exclusive listing
A written contract that gives a licensed real estate agent the exclusive right to sell a
property for a specified period of time.
- executor
A person named in a will to administer an estate. The court will appoint an administrator
if no executor is named. "Executrix" is the feminine form.
- Fair Credit Reporting Act
Federal law giving individuals the right to examine their own credit history. The provisions of this law enable consumers to approach credit reporting agencies to see what the agencies may be saying about them, find out if their credit information has been used any third parties, and approach an agency to dispute wrongful use or interpretation of their information.
- fair market value
What a qualified buyer will pay for goods, services, or property on an open and fair market.
- Fannie Mae (FNMA) [top]
FNMA or Fannie Mae. A congressionally chartered corporation which buys mortgages on the secondary market, pools them and sells them as mortgage-backed securities to investors on the open market. Monthly principal and interest payments are guaranteed by FNMA but not by the U..S. Government
- Fannie Mae's Community Home Buyer's Program
An income-based community lending model, under which mortgage insurers and Fannie Mae
offer flexible underwriting guidelines to increase a low- or moderate-income family's
buying power and to decrease the total amount of cash needed to purchase a home. Borrowers
who participate in this model are required to attend pre-purchase home-buyer education
sessions.
- Federal
Housing Administration (FHA)
FHA. A government agency whose primary purpose is to insure residential mortgage loans.
- fee simple
An estate in land of which the inheritor has unqualified ownership and power of disposition.
Private ownership of real estate in which the owner has the right to control, use, and transfer the property at will
- fee simple estate
Form of common law ownership of real property that permits disposition of property by its holder in any manner desired. Both the holder and the holder's heirs have use of property in perpetuity and have an insurable interest in the property.
- FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA
loans, an FHA loan is often referred to as a government loan.
- firm commitment
A lender's firm agreement to make a loan to a specific borrower on a specific property for a specific sum.
- first mortgage
The mortgage that is in first place among any loans recorded against a property. Usually
refers to the date in which loans are recorded, but there are exceptions.
- fixed-rate mortgage [top]
A mortgage in which the interest rate does not change during the entire term of the loan.
- fixture
A piece of equipment which has been attached to real estate in such a way as to be part of the premises and its removal would do harm to the building or land. Thus, a fixture is transformed from a movable asset to an integral part of the real property. Essentially a question of fact, it often arises when a tenant has installed a lighting fixture, a heater, window box, or other item which is bolted, nailed, screwed or wired into the wall, ceiling or floor.
- flood insurance
Insurance coverage for flood damage. Flood coverage is excluded under homeowners policies and must be purchased separately from the federal government (USA) through the National Flood Insurance Program
- foreclosure
The forced sale of real estate to pay off a loan on which the owner of the property has defaulted
- 401(k)/403(b)
An employer-sponsored investment plan that allows individuals to set aside tax-deferred
income for retirement or emergency purposes. 401(k) plans are provided by employers that
are private corporations. 403(b) plans are provided by employers that are not for profit
organizations.
- 401(k)/403(b) loan
Some administrators of 401(k)/403(b) plans allow for loans against the monies you have
accumulated in these plans. Loans against 401K plans are an acceptable source of down
payment for most types of loans.
- government loan (mortgage) [top]
A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by
the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that
are not government loans are classified as conventional loans.
- Government National Mortgage
Association (Ginnie Mae)
A government-owned corporation within the U.S. Department of Housing and Urban Development
(HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae
and Freddie Mac in providing funds to lenders for making home loans. The difference is
that Ginnie Mae provides funds for government loans (FHA and VA)
- grantee
The person to whom an interest in real property is conveyed.
- grantor [top]
The person conveying an interest in real property.
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