Glossary of Real Estate Terms

Glossary of TermsAt Renewal Zone, our goal is to make real estate continuing education classes and resources available at your finger tips. Our glossary of terms is always accessible for reference while you are taking an online real estate renewal class or anytime you need to look up commonly-used terms.

AAA: American Arbitration Association. A national organization of arbitrators from which individuals are selected or assigned to arbitrate disputes. The Association has its own rules and code of ethics that provide direction and guidelines for the arbitration process.
Abatement:: A decrease or reduction in whole or in part of a continuing charge, such as rent.
Absentee owner: Property owner who does not occupy the property and who sometimes employs a property manager to oversee the property.
Abstract of title: History of the ownership of specific real property consisting of a "chain of title" taken from documents pertaining to the subject property.
Acceleration clause: Provision in a mortgage, deed of trust, note or other loan document, which provides the lender the opportunity to call the balance due. Such terms operate when there has been a default such as nonpayment of installments in a timely manner, failure to maintain insurance coverage on the property, etc.
Access: The right of a property owner to egress and regress (a way to enter and leave) the property.
Acknowledgement:: Declaration before an authorized official, such as a notary public, by the person who executed the instrument.
Actual notice: Actually receiving information by reading it, seeing it or hearing about it.
Adjustable rate Mortgage (ARM): Financing instrument in which the mortgage rate can be adjusted by the lender according to a set index.
Ad valorem: According to the value.
Accrued taxes: Taxes which are owed for a given accounting period, but not yet payable. Taxes are paid in arrears.
Acre: A piece of land containing 43,560 square feet in any shape.
Acre foot:: A volume of water equal to water one foot deep over an entire acre of land.
Ad hoc: For this special purpose. For example, a guardian ad hoc is one appointed for a specific need or event.
Adverse possession: A method of acquiring the title to real property by possessing the property in an open and hostile manner for a specific period of time as defined by State statutes.
Agency: Fiduciary relationship in which one person acts on behalf of another.
Agent:: Representative or one who is authorized to act on behalf or in the best interest of another. An agent has fiduciary duties to their client.
Agreement:: A meeting of the minds or the document which is evidence of a meeting of the minds.
Amortization: Payment of a loan in equal installments over a set period of time. The payments are applied first to interest due and secondly to the principle balance.
Annexation: The adding of one thing to another refers to the acquisition of additional land by a municipality, county, state or nation.
Annual Percentage Rate (APR): The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).  This is the rate used to compare rates from lender to lender.
Arbitration: Conflict resolution achieved by presenting the dispute before a neutral third party arbitrator. The arbitrator reaches a decision which is binding upon all parties.
Arrears: Being behind in payments that are due or payment that is structured such that the monies are submitted after the period for which the amounts are owed.
Appraisal: The process of establishing an opinion of value for property. There are generally three methods used: cost valuation, income valuation and market comparable valuation.
Appraiser: The person appointed to provide an opinion of value for property.
Assemblage: Combining two or more adjacent properties to form one parcel, usually to improve the usability of the property and thus increase the value.
Assessed value: Value established for real property by the county assessor for property tax purposes.
Articles of Incorporation: The document filed with the appropriate government agency (e.g. Secretary of State) when a business is incorporated, also referred to as "certificate of incorporation."
Assessment base: The total assessed value of all property within an assessment area (usually a county).
Assignee: Person or entity to which an assignment is made by the party having the right to make the assignment. An assignment can be for property, for interest in property, for option to purchase property, for position in a contract, for rights under a contract, etc. as long as the Assignor has the right and authority to do so.
Balloon mortgage: A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
Balloon payment:: A single, large payment due at the end or at specified times during the time period for repayment of a loan.
Back ratio: Used in mortgage qualification; a calculation of the borrower's total living expenses, including housing costs, divided by the borrower's income.
Baseline: Imaginary horizontal line used by surveyors to establish township lines.
Bilateral contract: Contract requiring agreement by both parties wherein both parties have legal obligations to each other.
Building code: Rules and standards established for construction of buildings within a municipality or other jurisdiction.
Call option: A provision in a mortgage that gives the mortgagee the right to call the mortgage due and payable at the end of a specified period for whatever reason.
Cash reserves: Money put aside in case of a financial emergency.
Cash-out Refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay existing first mortgage, closing costs, points and the amount required to satisfy any outstanding subordinate mortgage liens.  In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose.
Caveat emptor: Let the buyer beware.
Chain of title: Listing of all previous owners of a specific property, named in succession to form a "chain" of ownership.
Comparative Market Analysis (CMA): Estimate of a property's market value based on other comparable properties that have recently sold or are currently on the market.
Constructive notice: Information that has been recorded in the public records, usually at a county recorder's office. The records are maintained and can be viewed by the general public.
Deed: Legal instrument used to convey title to real property.
Deed restriction: Restrictive covenants that are recorded against a specific property or subdivision.
Default:: Failure to fulfil the terms of a contractual agreement or mortgage.
Earnest money: A deposit made with an offer to purchase to demonstrate good faith and "earnest" intent to complete the transaction. Earnest money may be forfeited upon cancellation or termination of the contract, depending on the terms of the agreement. In the event the transaction is completed, earnest money is usually applied to the down payment at close of escrow.
Disclosure: Bringing into view by uncovering, revealing knowledge, making known, freeing from secrecy or ignorance.
Easement:: A right to access or pass over property owned by another party.
Eminent domain: Right of the government to take ownership of private property for public use with just compensation to the property owner.
Encroachment:: A building or fixture that illegally (without authorization) intrudes into or invades the adjoining property.
Escrow agent:: An escrow agent oversees escrow, the process that some states use to complete a sale of real property.  The buyer and seller sign an agreement that gives the escrow agent a detailed list of instructions on how escrow should be carried out, which includes how much money to collect, what documents to prepare and when to order a title search.  The escrow agent is a neutral party who fairly serves both the seller and buyer.  The escrow agent can be a lender, title company or real estate attorney.
Escrow account:: Moneys deposited into a neutral third party's account, usually a bank, title company or trust company, to be used in the settlement of a transaction.
Fair Credit Reporting Act:: A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fiduciary: Duties within an agency relationship owed by the agent to the agent's client, including loyalty, accountability, disclosure, confidentiality, obedience, advocacy, and reasonable care.
Freehold estate: An estate for life or in fee. The right of title to land for an uncertain duration can be for the lifetime of the tenant or can be inherited by heirs.
Grantor: Party who "grants" property on a Deed; the Seller.
Highest and best Use: The specific use (current or potential) of a property that will optimize the value of that property.
Homestead Exemption: Property tax exemption (for all or a portion of the tax) in some states for the dwelling house and adjoining land where the family dwells. A homestead may also be exempt from liquidation for payment of taxes or for payment of debts under bankruptcy protection.
Involuntary lien: A claim attached to real property without the consent of the owner (e.g. tax lien).
Joint tenancy: A joint ownership in real property by two or more individuals, each having equal rights to possession.
Legal description: A detailed written description denoting the exact boundaries of a parcel of land.
Life estate: A tenancy for real property which has duration for the life of some specific person (not necessarily the life of the resident of the property).
Masonry: Stone, brick, concrete block or other similar building units or materials, or a combination of the same, bonded together with mortar to form a wall, pier (foundation) or decoration.
Merchantability: Fit for the general purpose for which the item or property has been sold.
Merchantable title: Good and marketable title, free from liens or litigation, conveyed fee simple.
Metes and bounds: A land description using based on established survey stakes and exact measurements of the boundaries of the property using directional compass points. A metes and bounds description starts at a Point of Beginning (POB) and describes the entire boundary of the property to arrive back at the same POB.
Misrepresentation: False or misleading information regarding materials facts related to a property or to a transaction.
Nonconforming use: Land use that is not in compliance with current zoning of the property.
Option: The right to purchase or lease property at a pre-determined price during a specified time frame.
Planned Unit Development (PUD): A development planned and approved with mixed land uses, including various commercial and mixed density residential.
Prepayment Penalty: Fee charged under the terms of a mortgage for payments made in advance of when the payments are due.
Prorate: Division of charges and credits, proportionate to each party's period of ownership, of the costs related to a real estate transaction.
R-Value: Rating used for insulation of structures. An R-value indicates the insulation's resistance to heat flow; the higher the R-value, the greater the effectiveness of the insulating materials.
Regulation Z: Regulations implemented by the Federal Reserve board which, in turn, provided for the Federal Truth-in-Lending Act, which established rules for advertisements, promotions and disclosure requirements related to mortgage programs, interest rates, etc.
Subdivision plat Map: An engineered drawing of a subdivision showing the exact dimensions and location of each lot, common areas, streets and public utility easements, etc.
Subordination: The process, by which a party's rights are ranked below the rights of another party, generally used with the ranking of mortgages or other property liens.
Subrogation: Substitution of one party in place of another with reference to a claim, debt or other rights or interest in property.
Tenancy at Sufferance: Rights to property (estate) lawfully obtained for a temporary period of time, but retained after the period of lawful possession has expired, such as a tenant remaining after the expiration of the lease.
Tenancy at will: Lawful possession of property that may be terminated by either party at any time with proper notice.
Unilateral contract: An agreement wherein only one party is obligated to perform.
Voidable contract:: An agreement that does not have all of the elements of an enforceable contract. Enforceable real estate contracts must be in writing, between competent parties, have mutual agreement (meeting of the minds, be for a lawful purpose, include consideration, contain a legal description of the subject property and be signed by all parties.

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