Real Estate Glossary

A summary of the public records relating to the ownership of a particular piece of land. It represents a short legal history of an individual piece of property and traces the ownership of that property from the time of the first recorded transfer to present.

Acceptance

Consent to an offer to enter into contract.

Adjustable Rate Mortgage

A mortgage that allows the interest rate to be changed periodically; referred to as ARM.

Agency

A legal relationship in which an owner-principal engages a broker-agent in the sale of property or a buyer-principal engages a broker-agent in the purchase of property.

American Society of Home Inspectors (ASHI)

A professional trade association providing training and education in home inspections. Members meet qualification requirements to join.

Amortization

The gradual repayment of a mortgage by periodic installments.

Annual Percentage Rate (APR)

The total finance charge (interest, loan fees, and points) expressed as a percentage of the mortgage amount.

Appraisal

An evaluation of a piece of property used to determine its value.

Appreciation

Increase in value due to any cause.

Asbestos

A mineral fiber used in some building materials, such as flooring, siding, insulation, and roofing. It is presently banned for most uses in real property.

Assessed Value

The valuation placed on property by a public tax assessor as the basis of property taxes.

Assumption of Mortgage

An agreement whereby the buyer assumes responsibility for a mortgage owed by the seller; the seller remains liable to the lender unless lender
agrees to release the seller from the liability.

Comparables

Properties similar in size and character to the one being bought or sold.

Condominium

Ownership of a unit only, rather than of the entire building with the land.

Consideration

Anything of value to induce another to enter into a contract (i.e. money, services, a promise, etc.).

Contingency

A condition that must be satisfied before a contract is binding.

Contract

An agreement to do or not to do a certain thing.

Conventional Mortgage

A fixed rate, fixed-term mortgage not insured by the federal government.

Deed

A legal document conveying title to a property.

Deed (quit claim)

A deed that transfers only that title or right to a property that the holder of that title has at the time of the transfer. It does not warrant or guarantee a clear title.

Department of Housing and Urban Development

A U.S. government agency established to implement certain federal housing and community development programs.

Disclosure Laws

State and federal regulations which require sellers to disclose such conditions as whether a house is located in a flood plain or whether there are known defects in or affecting the property.

Earnest Money

A portion of a down payment given to the seller by a potential buyer indicating the buyer’s intent to complete the purchase of the property.

Easement

A right to use the land of another.

Encroachment

A condition that limits the interest in a title to property, such as a mortgage, deed restrictions, easements, unpaid taxes, etc.

Equity Mortgage

A mortgage based on the borrower’s equity in their home rather than on their credit worthiness.

Escrow

Documents, real estate, money, or securities deposited with a neutral third party (the escrow agent) for safekeeping to be delivered upon fulfillment of certain conditions, as established in a written agreement.

Fannie Mae

Nickname for Federal National Mortgage Corp. (FNMA), a tax paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.

Federal Housing Administration (FHA)

An agency within the Department of Housing and Urban Development (HUD) that administers loan guarantee programs and loan insurance programs to make more housing available.

Fixed Rate Mortgage

A loan that fixes the interest rate at a prescribed rate for the duration of the loan.

Foreclosure

Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default. See Real Estate Owned (REO’s)

Freddie Mac

Nickname for Federal Home Loan Mortgage Corp. (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.

Graduated-Payment Mortgage

A mortgage that starts with low monthly payments and increases at a predetermined rate.

Growing-Equity Mortgage

A mortgage loan in which the monthly payments increase by a specific amount each year, with the “overpayments” applied to the principal.

Installment Debts

Long-term debts that usually extend for more than one month.

Investor

The holder of a mortgage or the permanent lender for whom the mortgage maker services the loan. Any person or institution that invests in mortgages.

Lease Purchase Agreement

Buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.

Lien

A legal claim against a property that must be paid when the property is sold.

Loan-to-Value Ratio

The relationship between the amount of a home mortgage and the total value of the property. Lenders may limit their maximum mortgage to 80-95 percent of value.

Lock-in Ratio

A commitment made by lenders on a mortgage loan to “lock-in” a civilian rate pending mortgage approval. Lock-in periods vary.

Market Value

The highest price a buyer will pay for property and the lowest price the seller will accept.

Mortgage

One type of document used to make property the security for the payment of a loan.

Mortgage Broker

An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private sources to lend the money; may also handle collections and disbursements.

Mortgagee

The lender of money or the receiver of the mortgage.

Mortgagor

The borrower of money or the giver of the mortgage document.

Negative Amortization

An increase in the outstanding balance of a mortgage resulting from the failure of periodic debt service payment to cover required interest charges on the loan.

Note

A written promise to pay a certain amount of money.

Origination Fee

A fee or charge for work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

Prepayment Penalty

A fee paid to the mortgagee for paying the mortgage before it becomes due. Also know as prepayment fee or reinvestment fee.

Promissory Note

A written contract containing a promise to pay a definite amount of money at a definite future time.

Radon

A colorless, odorless gas formed by the breakdown of uranium in subsoils. It can enter a house through cracks in the foundation or in water and is considered to be a health hazard.

Real Estate Owned (REO’s)

Real estate owned or REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

REALTOR and REALTOR-Associate

Registered collective membership marks that identify real estate professionals who are members of the National Association of REALTORS and who subscribe to its strict Code of Ethics.

Rent with Option

A contract which gives one the right to lease property at a certain sum with the option to purchase at a future date.

Savings and Loan Association (S&Ls)

Depository institutions that specialize in originating, servicing, and holding mortgage loans, primarily on owner-occupied residential property.

Savings Bank

A financial institution organized to hold individual depositors’ funds in interest-bearing accounts and to make long-term investments, such as
home mortgage loans.

Second Mortgage/Second Deed of Trust/Junior Mortgage or Lien

An additional loan imposed on a property with a first mortgage; generally a higher interest rate and shorter term than a “first” mortgage.

Severalty Ownership

Ownership by one person only; sole ownership.

Shared-Equity Mortgage

A home loan in which an investor is granted a share of the equity, thereby allowing the investor to participate in the proceeds from resale.

Short Sales

Any sale of real estate in which the proceeds from selling the property are less than the amount owed on the property and will fall short of the balance of debts secured by liens against the property. A real estate short sale occurs when the lender or lien holders and borrower decide that selling the property and accepting less than the amount owed on the debt is preferable to having the borrower default on the loan. It is therefore an alternative to foreclosure.

Survey

The process by which a parcel of land is measured and its area ascertained.

Tenancy in Common

Ownership by two or more persons who hold an undivided interest without right of survivorship (in the event of the death of one owner, his/her share will pass to the heirs).

Title

A document that is evidence of ownership.

Title Defect

An outstanding claim or encumbrance on property that affects marketability.

Title Insurance

Protection for lenders and homeowners against financial loss resulting from legal defects in the title.

Veterans Administration (VA)

A government agency that provides services for eligible veterans of the armed forces. It guarantees mortgage loans made by private lenders to veterans.

Variance

A special suspension of zoning laws to allow the use of property in a manner not in accord with existing laws.

Zoning Restrictions