Common Terms Used In Real Estate
This glossery of terms and definitions is provided to help in understanding many common terms used in buying and selling real estate.
Abstract of title: The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.
Appraisal: An estimate of the quantity, or value of smoething. The process through which conclusions of property value are obtained; also refers to the report that sets forth the porcess of estimation and conclusion of value.
Appreciation: An increase in the owrth or value of a property due to economic or related clauses, which may prove to be either temporary or permanent; opposite of depreciation.
Assessment: The imposition of a tax, charge or levy, usually according to established rates.
Broker: One who acts as an intermediary on behalf of others for a fee or commission.
Brokerage: the bringing together of parties interested in making a real estate transaction.
Certificate of title: A statement of opinion on the status of the title to a parcel of real property based in an examination of specified public records.
Closing statement: A detailed cash accounting of a real estate transaction showing all cash received, allcharges and credits made and all cash paid out in the transaction.
Commission: Payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.
Competitive Market Analysis (CMA): A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities.
Contingency: A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.
Contract: A legally enforceable promise or set of promises that must be performed and fro which, if a breachof the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.
Counteroffer: A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.
Covenant: A written agreement between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases and contracts for deed.
Deed: A written instrument that, when executed and delivered, conveys title to or intrest in real estate.
Deed Restriction: Clauses in a deed limiting the future uses of the property. Deed restrictions may impose a vast variety of limitations and conditions - for example, they may limit the density of buildings, dictate the types of structures that can be erected or prevent buildings from being used for specific purposes or even from being used al all.
Dual agency: Representing both the parties to a transaction. This is unethical unless both parties agree to it, and it is illegal in many states.
Earnest money: A good faith deposit that upon acceptance of a buyer's Purchase Agreement by a seller, is held in a trust account until closing. At closing it used as part payment for the purchase of the property.
Equity: the interest or value that an owner has in the property over and above any indebtedness.
Escrow: The closing of a transaction through a thrid party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered upon the performance of certain conditions outlined in the escrow instructions.
Fair Housing Act: the federal law that progibits discrimination in housing based on race, color, religion, sex handicap, familial status and national origin.
Fiduciary: One in whom trust and confidence is placed; a reference to a broker employed under the terms of a listing contract or buyer agency agreement.
Foreclosure: A legal procedure whereby property used as security for a debt is sold to satisfy the debt in theevent of default in payment of the mortgage note or default of other terms in the mortgage document. The goreclosure 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 thrid party ehi may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.
General warranty deed: A deed in which the grantor fully warranty good clear title to the premises. Used in most real estate deed transfers, a general warrenty deed offer the greatest protection of any deed.
Homeowner's insurance policy: A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability and other common risks.
Homestead: Land that is owned and occupies as the family home. In many states a protion of the area or value of this land is protected or exempt from judgements for debts.
Joint tenancy: Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the deat of a joint tenant, the descendant's interest passes to surviving joint tenant or tenants by the right survivorship.
Lease option: A lease under which the tenant has the right to purchase the property either during the lease term or at its end.
Listing agreement: A contract between an owner (as principle) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission.
Market value: the most probable price property would bring in an arm's- length transaction under normal conditions on the open market.
Mechanic's lien: A statutory lien created in favor of contractors, laborers and material men who have performed work or furnished materials in the erection or repair of a building.
Mortgage: A condition transfer or pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien.
Multiple Listing Serivce (MLS): A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hopes of procuring a ready, willing and able buyers for their properites more quickly than they could on their own, Most multiple-listing services accept exclusive-right-to-sell or exclusive agency listings from their member brokers.
Power of attorney: a written instrument authorizing a person, the attorney-in-fact, to act as agent for another person tothe extent indicated in the instrument.
Pre-Approval: One step (or two) beyond the pre-qualification process, this is a powerful tool for any buyer to have when searching for property. It is a commitments, usually for a specific period of time and at a specific interest rate, for a loan amount a buyer will receive from that lender.
Private Mortgage Insurance (PMI): Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.
Prorations: Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing.
Quiet title: A court action to remove a cloud on the title.
Quitclaim deed: A conveyance by which the grantor transfers whatever interest he or she has in the real estate, without warranties or obligations.
Rate cap: the limit on the amount the interest rate can be increased at each adjustment period in an adjustablt-rate loan. The cap may also set the maximum interest rate that can be charged during the life of the loan.
REALTOR: A registered trademark term reserved for the sole use of active members of local REALTOR boards affiliated with the National Association of REALTORS.
Restrictive covenants: A clause in a deed that limits the way the real estate ownership may be used. Otherwise known as "Protective Covenants".
Setback: the amount of space local zoning regulation requires between a lot line and a building line.
Severance: Changing an item or real etstate tp personal property by betaching it from the land; for example, cutting down a tree.
Special assessment: A tax or levy customarily imposed against only those specific parcels of real estate that will bebefit from a proposed public improvement like a street of sewer.
Specific performance: A legal action to compel a party to carry out the terms of a contract.
Steering: the illegal practice of the channeling home seekers to particular areas, either to maintain the homogeneity of an area or to change the character of an area, which limits their choices of where they can live.
Survey: The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.
Tax lien: A charge against property, created by operation of law. Tax liens and assessments take priority over all other liens.
Title insurance: A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects and matters specifically excluded by the policy.
Title search: The examination of public records relating to real estate to determine the current state of the ownership.
Transfer tax:Tax stamps required to be affixed to a deed by state and/or local law.
Zoning ordinance: An exercise of police power bya municipality to regulate and control the character and use of property.