Definitions - Real Estate Homes Information

Important real estate definitions to help you with real estate terminology:

Acceptance - Act indicating that the terms and provisions of a proposed contract are satisfactory and are agreed to; usually preceded by an offer by one contracting party, which is accepted by the other party.

Acknowledgement - A form for authenticating instruments conveying property or otherwise conferring rights. A declaration before a notary republic or other official by the party executing an instrument that it is his or her act and deed. many instruments must be acknowledged before they are entitled to e recorded.

Acre - 43,560 Square Feet.

Agency - The relationship between principal and agent, whereby the agent represents the principal in dealings with a third party.

Appraisal - An opinion or estimate as to the fair market value of property; may be made for various reasons, such as a sales, condemnation, assessment, taxation, etc.

Annual Percentage Rate - APR The actual cost of credit as determined under the Federal Truth in Lending Act.

ARM - Adjustable Rate Mortgage.

As Is - A phrase intended to mean that the 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.

Bearing Wall - A wall or partition which supports a part of a building, usually a roof or floor above.

Bid - An offer.

Broker - One who buys and sells for another for a commission; one who acts as an intermediary between parties to a transaction. A real estate broker is a properly licensed person who, for a valuable consideration, serves as an agent to others to facilitate the sale or lease of real property. See also REAL ESTATE BROKER.

BTU (British thermal unit) - 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. There are 3,413 BTUs in one KWH.

Building Code - Standards for building, planning and construction established by state law and ordinance; an ordinance specifying minimum standards of construction of buildings for the protection of public safety and health.

Building Permit - A written permission granted by the County Building Department and required prior to beginning the construction of a new building or other improvement (including fences, fence walls, retaining walls and swimming pools).

Buyer's Market - The conditions which exist when a buyer is in a more commanding position as t the price and terms of sale, primarily because the real property offered for sale is in plentiful supply.

CC&R's - Covenants, conditions, and restrictions.

Chain of Title - The history of the conveyances and encumbrances affecting the present owner's title to property, as far back as records are available; the succession of conveyances from some accepted starting point whereby the present holder of real property derives his or her title. The chain of title reports the history of a property showing all conveyances from the original government conveyance (called the patent).

Closing - The completion of a real estate transaction, at which point required documents are transmitted and funds are transferred; the final stage of consummating a real estate transaction when the seller delivers title to the buyer, in exchange for the purchase price.

Closing Costs - Expenses of the sale which must be paid in addition to the purchase price (in the case of the buyer's expenses), or be deducted from the proceeds of the sale (in the case of the seller's expenses).

Closing Statement - A detailed cash accounting of a real estate transaction prepared by an escrow officer or other person designated to process the mechanics of the sale, showing all cash that was received, all charges and credits which were made, and all cash that was paid out in the transaction; also called a settlement statement.

Commission - The compensation paid to a real estate broker (usually by the seller) for services rendered in connection with the sale or exchange of real property; in real estate practice, typically a percentage of the selling price of property, rentals or other property value.

Community Property - A system of property ownership based on the theory that each spouse has an equal interest in property acquired by the efforts of either spouse during marriage. Presently, community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Comparables (Comps) - The properties listed in an appraisal report that are substantially equivalent to the subject property; recently sold properties which are similar to a particular property being evaluated, and which are used to indicate a reasonable fair market value for the subject property.

Comparative Market Analysis (CMA) - An appraisal prepared by an agent using recent comparable sales to indicate the likely sales price of a property.

Condominium - The absolute ownership of an apartment or a unit, generally in a multi-unit building, based on a legal description of the airspace which the unit actually occupies, plus an undivided interest in the ownership of the common elements which are owned jointly with the other condominium unit owners. The entire tract of real estate included in a condominium development is called a parcel, or development parcel. One apartment or space in a condominium building or a part of a property intended for independent use and having lawful access to a public way is called a unit. Ownership of one unit also includes a definite undivided interest in the common elements.

Conforming Loan - A loan that meets the purchase requirements of Fannie Mae or Freddie Mac.

Contingency - A provision in a contract that requires completion or that a certain event occur before the contract becomes binding.

Contract - A legal written or oral agreement entered into by two or more legally competent parties by the terms of which one or more of the parties, for a consideration, undertakes to do or to refrain from doing some legal act or acts. A contract may be either unilateral, where only one party is bound to act, or bilateral, where all parties to the instrument are legally bound to act as prescribed. There may be an express agreement of the parties or a contract may be implied by their conduct. A unilateral contract imposes an obligation on only one of the parties, whereas both parties to a bilateral contract have an obligation to perform. A contract is executory when a contract obligation is to be performed in the future, and executed when all obligations have been performed and the contract transaction has been completed. A real estate contract must be a signed writing made by competent parties, for valuable consideration, with an offer by one party that is accepted by the other.

Conventional Loan - A loan that is not insured or guaranteed by a government agency; a loan secured by a mortgage or trust deed that is made without governmental underwriting (FHA-insured or VA-guaranteed).

Cooperative (Coop) - A residential multiunit building whose title is held by a trust or corporation that is owned by and operated for the benefit of persons living within the building. These persons are the beneficial owners of the trust or the stockholders of the corporation, each having a proprietary lease.

Counteroffer - A new offer made as a reply to an offer received, having the effect of reigning the original offer, which cannot be accepted thereafter unless revived by the offeror's repeating it.

Cul-de-sac - A dead-end street having a rounded end that widens sufficiently to permit an automobile to make a U-turn. It is desirable for housing because there is no through traffic.

Trust Deed - A legal document in which title to property is transferred to a third party trustee as security for an obligation owed by the trustor (borrower) to the beneficiary(lender). An instrument used to create a mortgage lien by which the mortgagor conveys his or her title to a trustee, who holds it as security for the benefit of the note holder (the lender).

Dual Agency - An agency relationship in which the agent represents two principals in their dealings with each other; an agency created when an agent acts for the buyer as well as the seller in a transaction. Both parties are clients.

Duplex - A structure that provides housing accommodations for two families by having separate entrances, kitchens, bedrooms, lanais, living rooms and bathrooms. A two-family dwelling.

Deposit - An amount of money deposited by a buyer under the terms of a contract; a good-faith deposit made by an offeror with an offer.

Easement - The right to a specific use of or the right to travel over the land of another. The land being used or traveled over is the servient tenement; the land that is benefited by the use is the dominant tenement. An easement appurtenant is a property interest that belongs to the owner of the dominant tenement and is transferred with the land; an easement in gross is a personal right that usually is not transferable by its owner.

Encumbrance - Any lien such as a mortgage, tax or judgment lien, an easement, or any restriction on the use of the land or an outstanding dower right, that may diminish the value of the property; anything that affects or limits the fee simple title to or affects the condition or use of real estate.

Escrow - The process by which money and/or documents are held by a disinterested third person (a "stakeholder") until the satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow). The closing of the transaction is handled through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered on the performance of certain conditions in the escrow agreement.

Exclusive Listing - A written listing of real property in which the seller agrees to appoint only one broker to sell the property for a specified period of time. The two types of exclusive listings are the exclusive agency and the exclusive right to sell.

Executed Contract - A contract where all performance has been completed; a contract in which all parties have fulfilled their promises and thus performed the contract.

Fee Simple - The highest ownership possible; has no time limit and can be transferred or inherited. (The word "fee" means an inheritable estate.) Also known as fee simple absolute. A fee simple estate is the least limited interest and the most complete and absolute ownership in land. It is of indefinite duration, freely transferable and inheritable.

First Mortgage - The highest ownership possible; has no time limit and can be transferred or inherited. (The word "fee" means an inheritable estate.) Also known as fee simple absolute. A fee simple estate is the least limited interest and the most complete and absolute ownership in land. It is of indefinite duration, freely transferable and inheritable.

Fixture - An article which was once personal property but has been so affixed to the real estate that it has become real property (e.g. stoves, bookcases, plumbing, etc.). If determined to be a fixture, then the article passes with the property even though it is not mentioned in the deed.

Flag Lot - A land parcel having the configuration of an extended flag and pole. The pole represents access to the site which is usually located to the rear of another lot fronting a main street.

Footing - The concrete poured in the ground on which the foundation rests. The footing distributes the building load to the soil.

Foreclosure - A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.

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

Grant Deed - A type of deed that includes three basic warranties: (1) the owner warrants that he or she has the right to convey the property; (2) the owner warrants that the property is not encumbered other than with those encumbrances listed in the deed; and (3) the owner promises to convey any after-acquired title to the property. Grant deeds are popular in states that rely heavily on title insurance.

Ground Lease – A lease of land only, on which the tenant usually owns a building or is required to build his or her own building (improvements) as specified in the lease. Such leases are usually long-term net leases; a tenant's rights and obligations continue until the lease expires or is terminated through default.

Homeowner’s Association - A non-profit association of homeowners organized pursuant to a declaration of restrictions or protective covenants for a subdivision, a PUD, or a condominium.

Homeowner’s Insurance – A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability and other common risks.

Homeowners Warranty Program - An insurance program offered to buyers by some brokerages, warranting the property against certain defects for a specified period of time.

Impound Account - A trust account established to set aside funds for future needs; a reserve for taxes and insurance kept by the lender to which the borrower pays, along with regular principal and interest payments; also called an escrow account.

Improvement - (1) Improvements on land-any structure, usually privately owned, erected on a site to enhance the value of the property; for example, buildings, fences, and driveways. (2) Improvements to land-usually a publicly owned structure, such as a streets, sidewalk, or utilities. Improvements are valuable additions made to property, amounting to more than repairs, costing labor and capital, and intended to enhance the value of the property.

Inspection - A visit to and review of the premises. A prudent purchaser of property always inspects the premises before closing.

Insurable Title - A title to land that a title company will insure.

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 with equal rights of possession. Upon the death of a joint tenant, his or her interest passes to the surviving joint tenant or tenants by the right of survivorship. The joint tenants have one and the same interest, arising by one and the same conveyance, commencing atone and the same time and held by one and the same possession (the concept of "four unities").

Liquidated Damages - An amount predetermined by the parties to a contract as the total compensation the aggrieved party will receive should the other party breach the contract. If so unreasonable that the court considers them a penalty, they will not be enforced.

Listing - An agency agreement between owner and broker wherein the owner authorizes the broker to attempt to find a buyer and agrees to pay a certain commission should the broker succeed.

Listing Agreement - A contract between a landowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed as agent to sell real estate on the owner's terms within a given time, for which service the landowner agrees to pay a commission. A listing agreement may be used to employ a real estate broker to act as agent for a person seeking property to buy, lease, or rent.

Listing Broker - The broker in a multiple listing situation from whose office a listing agreement is initiated, as opposed to the selling broker, from whose office negotiations leading to a sale are initiated. The listing broker and the selling broker may, of course, be the same person. See also MULTIPLE LISTING.

Loan Commitment - A commitment by a lender of the amount he will loan to a qualified borrower on a particular piece of real estate for a specified amount of time under specific terms.

Loan-to-Value Ratio - The ratio that the amount of the loan bears to the appraised value of the property or the sales price, whichever is lower. It is usually expressed as a percentage.

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 interest.

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

Mortgage - A legal instrument by which property is pledged by a borrower, the mortgagor, as security for the payment of a debt or an obligation owed to a lender, the mortgagee. In effect, the mortgage states that the lender can look to the property in the event the borrower defaults in payment of the note. The mortgagor retains title and gives the mortgagee a lien.

Mortgage Broker - A mortgage broker is a firm or person who brings borrowers and lenders together, and the finders' fee is normally paid by the borrower. For compensation or gain, a mortgage broker negotiates, sells or arranges loans and sometimes continues to service the loans.

Multiple Listing Service - An organization of real estate agents providing for a pooling of listings and the sharing of commissions on transactions involving more than one agent.

Note - A document signed by the borrower of a loan, stating the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note is the evidence of the debt. When secured by a mortgage, it is called a mortgage note. The mortgage or trust deed secures the note in real estate transactions.

Offer - A promise by one party to act or perform in a specified manner provided the other party will act or perform in the manner requested.

Personal Property - All things that are tangible and moveable; property that is not classified as real property; chattels that do not fit into the definition of real property.

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

PUD - A development with individual lot ownership and shared ownership of common areas such as recreational areas; also called a planned development project. PUDs produce a high density of dwellings and maximum utilization of open spaces. Individual lots are owned in fee with joint ownership of open areas; primarily residential but may include commercial and/or industrial uses.

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. See also DISCOUNT POINTS.

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

Probate - Court proceeding by which the property of a decedent is distributed according to the decedent's will or, if the decedent died intestate (without a will), according to the state law of intestate succession. The will is presented to the probate court, and creditors and interested parties are notified to present their claims or to show cause why the provisions of the will should not be enforced by the court.

Proration - Adjustment of interest, taxes, insurance and other costs of property ownership on a pro rata basis as of the closing or agreed-on date; usually apportions those costs based on seller's and buyer's respective periods of ownership. Closing statement prorations generally include taxes, rents, insurance, interest charges, and assessments.

Recording - The act of entering into the book of public records the written instruments affecting the title to real property, such as deeds, mortgages, contracts of sale, options, assignments, and the like. Proper recordation imparts constructive notice to all the world of the existence of the recorded document and its contents. Until recorded, a deed or mortgage generally is not effective against subsequent purchases or mortgage liens.

Seller’s Market - A market condition characterized by more buyers than sellers, so sellers have a more commanding position.

Septic Tank - A sewage settling tank in which part of the sewage is converted into gas and liquids before the remaining waste is discharged by gravity into a leaching bed underground.

Setback - Zoning restrictions on the amount of land required surrounding improvements; the amount of space required between the lot line and the building line.

Square Footage - The measurement arrived at by taking exterior dimensions, excluding the garage.

Sub Division - A tract of land divided by the owner, known as the subdivider, into blocks, building lots and streets according to a recorded subdivision plat that must comply with local ordinances and regulations; the division of real property into separate parcels or lots for the purpose of sale, lease or financing.

Tenancy in Common - A form of concurrent ownership of property between two or more persons, in which each has an undivided interest in the whole property; frequently found when the parties acquire title by descent or by will. Each individual owner has the right to partition. Unlike a joint tenancy, there is no right of survivorship between tenants in common.

Title Insurance - Insurance designed to indemnify the holder for loss sustained by reason of defects in a title, up to and including the policy limits; a comprehensive contract of indemnity under which the title company agrees to reimburse the insured for any loss if title is not as represented in the policy.

Townhouse - A type of dwelling unit normally having two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor; row housing having common walls with adjoining housing.

Waiver - The intentional or voluntary relinquishment of a known claim or right; accepting something less than contracted for. A waiver leaves the parties as they are. Rescission places them back as they were.

Zoning - The regulation of structures and uses of property within designated districts or zones. Zoning regulates and affects such things as use of the land, types of structure permitted, building heights, setbacks, and density (the ratio of land area to improvement area); considered to be an exercise of police power.