GLOSSARY of REAL ESTATE TERMS

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A

Abstract of judgment, law
Summary of a court judgment that creates a lien against a property when filed with the county recorder.

Accelerated cost recovery system
Tax calculation that provides greater depreciation in the early years of ownership of real estate or personal property.

Acceleration clause
Provision that gives a lender the right to collect the balance of a loan if a borrower misses a payment

Accelerated depreciation
Bookkeeping method that depreciates property faster in the early years of ownership

Acceptance
Seller's written approval of a buyer's offer

Acre
Measurement of land equal to 43,560 square feet

Addendum
Addition or change to a contract

Adjustable-rate mortgage (ARM)
Loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index

Adjustment period
Amount of time between interest rate adjustments in an adjustable-rate mortgage

Adverse possession
Acquisition of title to property through possession without the owner's consent for a certain period of time

Adverse use
Access and use of property without the owner's consent

Agency
Relationship of trust that exists between sellers and buyers and their agents. The agency is formed through a written contract

Agent
Person licensed by the state to conduct real estate transactions

Alienation clause
Provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.

Allowances
Budgets offered by builders of new homes for the purchase of carpeting and fixtures

Americans with Disabilities Act
Law passed in 1990 that outlaws discrimination against a person with a disability in housing, public accommodations, employment, government services, transportation and telecommunications

Amortization
Process of paying the principal and interest on a loan through regularly scheduled installments

Annual Percentage Rate (APR)
Cost of the loan expressed as a yearly rate on the balance of the loan

Annuity
Payment of a fixed sum to an investor at regular intervals.

Anticipatory breach
Communication that informs a party that the obligations of the original contract will not be fulfilled

Appraisal
Opinion of the value of a property at a given point in time

Appreciation
Increase in the value of a home or other property

As-is condition
Purchase or sale of a property in its existing condition

Asking price
Seller's initial price for a property

Assessed value
Tax assessor's determination of the value of a home in order to calculate a tax base

Assessment
Estimated value of a piece of real estate or a levy placed on property in addition to taxes

Assumable mortgage
Mortgage that can be transferred to another borrower.

Assumption clause
Provision that allows a buyer to take responsibility for the mortgage from a seller.

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B

Backup offer
Secondary bid for a property that the seller will accept if the first offer fails

Balloon loan
Mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal

Balloon payment
Final lump sum payment due at the end of a balloon mortgage

Basis Point
Basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points

Bequest
Personal property given to a person through a will

Blanket insurance policy
Policy that covers more than one person or piece of property

Blanket mortgage
Mortgage that covers more than one property owned by the same borrower

Book value
Value of a property as a capital asset based on its cost plus any additions, minus depreciation

Breach of contract
Failure to perform provisions of a contract without a legal excuse

Breach of covenant
Failure to obey a legal agreement

Breach of warranty
Seller's inability to pass clear title to a buyer

Bridge loan
Short-term loan for borrowers who need more time to find permanent financing

Brokerage
Act of bringing together two or more parties in exchange for a fee or commission

Broker
Person licensed by the state to deal in real estate

Building code
Comprehensive set of laws that controls the construction or remodeling of a home or other structure

Building permit
Permit issued by a local government agency that allows the construction of home or renovation of a house.

Buyer's market
Slow real estate market in which buyers have the advantage

Bylaws
Rules and regulations that a homeowners association or corporation adopts to govern activities

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C

Call option
Clause in a loan agreement that allows a lender to ask for the balance at any time

Cancellation clause
Clause that details the conditions under which each party may terminate the agreement

Cape Cod style
Wood-frame or shingled house with a steep roof and several windows projecting from the second floor

Capital gains
Profits an investor makes from the sale of real estate or investments

Capital improvement
Any improvement that extends the life or increases the value of a piece of property

Capitalization
Mathematical formula that investors use to compute the value of a property based on net income

Capitalization rate
Percentage rate of return estimated from the net income of a piece of property

Cash flow
Amount of cash a rental property investor receives after deducting operating expenses and loan payments from gross income

Cash-out refinance
Refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the extra funds in any manner

Caveat
Formal notice, that asks a court to suspend action until the party which filed the challenge can be heard

Certificate of occupancy
Document which states that a home or other building has met all building codes and is suitable for habitation

Chain of title
Official record that details the ownership history of a piece of property

Chattel
Personal property such as furniture, clothing or a car

Clear title
Property that does not have liens, defects or other legal encumbrances

Closing
Final procedure in which documents are signed and recorded, and the property is transferred.

Closing costs
Expenses incidental to the sale of real estate, including loan, title and appraisal fees

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Closing statement
Document which details the final financial settlement between a buyer and seller and the costs paid by each party

Cloud on title
Invalid encumbrance on real property

Cluster development
Method of squeezing more homes into less space

Commission
Negotiable percentage of the sales price of a home that is paid to the agents of the buyer and seller

Common area
Area inside a housing development that is owned by all residents

Common law
Body of laws based on custom, usage and rulings by courts in various jurisdictions

Condemnation
Process the government uses to take private property for public use without the consent of the owner

Condominium
Individual units in a building or development in which owners hold title to the interior space while common areas such as parking lots, community rooms and recreational areas are owned by all the residents

Condominium conversion
Change in title from a single owner of an entire project or building to multiple owners of individual units

Consent judgment
Binding written agreement between two parties to have a judgment entered and recorded.

Consideration
Anything that is legal, has value and induces a person to enter into a contract

Contingency
Condition specified in a purchase contract, such as a satisfactory home inspection

Contingency listing
Property listing with a special condition attached

Contingent fee
Fee that must be paid if a certain event occurs

Conventional loan
Long-term loan a lender makes for the purchase of a home

Convertible adjustable-rate mortgage
Mortgage which starts as an adjustable-rate loan, but allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time

Conveyance
Transfer of title of property

Cooperating broker
Real estate broker who finds a buyer for a property that another broker has listed.

Covenant
Legal assurance or promise in a deed or other document, or implied by the law

Covenants, conditions and restrictions (CC&Rs)
Rules and regulations for a development, such as acceptable landscaping or improvements that can be made to individual units

Creative financing
Innovative home-financing arrangements that help sell a property

Custom home
Structure designed by an architect hired by the owner

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D

Days on the market
Period of time a property is listed for sale until it is sold or taken off the market

Deed
Legal document that transfers ownership of a piece of property

Deed of trust
Document that gives a lender the right to foreclose on a piece of property if the borrower defaults on the loan

Default
Failure to fulfill a duty or promise or discharge an obligation, such as making monthly mortgage payments

Deferred maintenance
Any repair or maintenance of a piece of property that has been postponed, resulting in a decline in property value

Delinquent mortgage
Mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings

Deposit
Money given by the buyer with an offer to purchase property. Also called earnest money

Depreciation
Decline in value of a piece of property

Disclosure
Statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint

Discount points
Fees that a borrower pays at the time the lender makes the loan. A point equals 1 percent of the total loan amount

Distressed property
Property that is in poor physical or financial condition

Dual agency
A relationship in which a real estate agent or broker represents both parties in a transaction

Due-on-sale clause
Standard language in a mortgage which states that the loan must be paid when a house is sold

Duplex
Structure that consists of two separate family units

Dutch colonial style
Design that features barn-like gambrel roof, a ground-level front porch, and dormers

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E

Early occupancy
Condition in which buyers can occupy the property before the sale is completed

Earnest money
Money a buyer gives with an offer to purchase a property. Also called a deposit

Easement
Right given to a third party to use a portion of the property for certain purposes, such as power lines or water mains

Effective age
Age of a structure estimated by its condition rather than its actual age

Eminent domain
Government's right to condemn private land for public use, such as the routing of a public highway

Encroachment
Fences or other structures that extend into the property of another owner

Encumbrance
Claim or lien on a property which complicates the title process

End loan
Conversion from a construction loan to permanent financing a condominium buyer secures after all units in a project have been completed

English Tudor style
Architectural design that features stone or brick exterior walls and exposed beams

Environmental impact statement
Government-mandated evaluation of all aspects and effects a development will have on the environment of a proposed site

Equal Credit Opportunity Act
Federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant's sex, marital status, race, religion, national origin or age. The law also prohibits a creditor from refusing to grant credit because the applicant receives public assistance

Escrow
Neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met.. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance

Escrow account
Account that a lender establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.

Escrow agent
Neutral third party who ensures that all conditions of a real estate transaction are met

Escrow closing
Escrow closes when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer

Estate
Total assets of a person, including real property, at the time of death

Eviction
Legal procedure to remove a tenant for reasons including failure to pay rent

Examination of title
Inspection by a title company of public records and other documents to determine the chain of ownership of a property

Exclusive Right to Sell Listing
Contract that gives an agent the exclusive right to market a property for a specific period of time

Executor
Person appointed to carry out the instructions in a will. If there is no will, a probate court will appoint an executor

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F

Fair Credit Reporting Act
Federal law passed in 1971 that regulates the activity of credit bureaus. It is designed to prevent inaccurate or obsolete information from staying in a consumer's credit file and requires credit bureaus to have reasonable procedures for gathering, maintaining and disseminating credit information. The act also requires credit bureaus to show a consumer their credit file if the consumer presents proper identification, although the bureau reserves the right to charge a fee for doing so

Fair Housing Act
Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability

Fannie Mae
Official name of the Federal National Mortgage Association, it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market

Fee simple
Type of ownership is the maximum interest a person can have in a piece of real estate. It entitles the owner to use the property in any manner they see fit, in accordance with state and local laws

Federal style
All-American home architecture style that evolved after the Revolutionary War. Details include bigger windows and a front doorway surrounded by glass and topped with an arched window

FHA loans
Mortgages that are insured by the Federal Housing Administration. The FHA's 203(b) loan program provides low-rate mortgages to buyers who make a down payment as small as 3 percent. The agency also operates loan plans for investors and purchasers of rural property.

Fiduciary duty
Relationship of trust that buyers and sellers expect from a real estate agent. The term also applies to legal and business relationships

Finder's fee
A fee in any amount that is paid to someone

First mortgage
Primary mortgage on a property that has priority over all other voluntary liens

Fixed-rate mortgage
Home loan with an interest rate that will remain at a specific rate for the term of the loan. About 75 percent of all home mortgages have fixed rates

Flat fee
A set fee charged by a broker instead of a commission

Foreclosure
Legal process reserved by a lender to terminate the borrower's interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned to the borrower

Forfeiture
Relinquishing of property rights by a delinquent borrower

Foyer
Entrance hall to a home or building

Framing
Construction of the skeletal framework of a house.

Freddie Mac
Common name for the Federal Home Loan Mortgage Corporation, a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market

French doors
Two adjoining doors inlaid with glass that open from the middle

Frontage
Portion of property that borders a roadway or body of water

Fully amortized adjustable-rate mortgage
Mortgage that amortizes, or pays down, the balance of a loan

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G

Gable
Triangular wall enclosed by the sloping ends of a ridged roof or a triangular decorative feature

Gable roof
A ridged roof that forms a triangle at each end

Georgian style
Popular throughout the 18th century, this type of architecture is distinguished by a symmetrical facade, prominent front entrance and quoins-decorative blocks of masonry or wood set in the corners of the house

Good-faith estimate
An estimate from an institutional lender that shows the costs a borrower will incur, including loan-processing charges and inspection fees

Grace period
A specified amount of time to make a loan payment after its due date without penalty

Graduated-payment mortgage (GPM)
Mortgage that requires a borrower to make larger monthly payments over the term of the loan. The payment is unusually low for the first few years but gradually rises until year three or five, then remains fixed

Grantee
A person conveyed an interest in a piece of property

Grantor
Person who conveys an interest in a piece of property to another person

Greek Revival style
Style introduced in the U.S. at the end of the 18th century. Its most prominent feature is a pillar-anchored pediment forming a portico in the front of the house

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H

Half-bath
Also called a powder room, a half-bath contains a toilet and a sink but no bathtub or shower stall

Hazard insurance
Provision of homeowners insurance covers damage by fire, wind or other disaster. It is required by all lenders before a loan is approved

Heat pump
Electric cooling and heating system

Hectare
Equivalent of 2.471 acres

High-rise
Any building higher than six stories

Historic preservation
Physical rehabilitation of a historic home or building, and the movement of the same name begun in the 1960s in the U.S. to preserve and protect landmarks and urban neighborhoods

Home equity loan
Loan that allows owners to borrow against the equity in their homes

Home inspection
Examination of a home's construction, condition and internal systems by an inspector or contractor prior to purchase

Homeowners' association
A group that governs a modern subdivision or planned community. An association collects monthly fees from all owners to pay for maintenance of common areas, handle legal and safety issues, and enforce the covenants, conditions and restrictions set by the developer

Homesteading
Document that to protects some of a home's equity from lawsuits

Home warranty
Type of insurance that covers repairs to certain parts of a house and some fixtures

Housing discrimination
Illegal practice of denying an individual or group the right to buy or rent a home based on race, color, religion, national origin, sex, disability or family status

Housing expense ratio
Percentage of gross monthly income devoted to housing costs

HUD-1 Uniform Settlement Statement
Closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing

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I

Impact fees
Fees collected from developers of new homes to pay for schools, parks and other facilities

Income property
Property that is not occupied by the owner but is used to generate income

Incurable defect
Defect in a property that cannot be fixed, such as an adjacent hazardous waste site, or that would cost too much to repair relative to the value of the property

Index
Financial tables used by lenders to calculate interest rates on adjustable mortgages and on Treasury bills

Initial interest rate
Original interest rate on an adjustable mortgage

Inspection report
Examination of a home's exterior, foundation, framing, plumbing, electrical system, heating, air conditioning, fireplace, kitchen, bathroom, roofing and interior

Insurable title
Title to property that a company agrees to insure against defects and disputes

Insurance binder
Temporary insurance arrangement usually put in force until a permanent policy can be obtained

Interest
Fee borrowers pay to obtain a loan. It is calculated based on a percentage of the total loan.

Interest accrual rate
Rate at which interest accrues on a mortgage

Interest-only loan
Paying only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment

Interest rate
The sum, expressed as a percentage, charged for a loan. Interest payments on most home loans are tax- deductible

Interest rate caps
Limit on the amount that can be charged to the monthly payment of an adjustable-rate mortgage during an adjustment period

Interest rate ceiling
Highest interest a lender can charge for an adjustable-rate mortgage

Investment property
Real estate that generates income, such as an apartment building or a rental house

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J

Joint tenancy
Ownership by two or more people that gives equal shares of a piece of property. Rights pass to the surviving owner or owners

Judgment
Decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person's property

Jumbo mortgage
Loans that exceed limits set by Fannie Mae and Freddie Mac.

Junior mortgage
Loan that subordinate to the primary loan

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K

Kit home
Structure that contains prefabricated components and is put together by a contractor

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L

Landscape
A home's surroundings. Major component of curb appeal

Late charge
Fee a lender imposes on a borrower when the borrower does not make a payment on time

Late payment
Payment a lender receives after the due date has passed

Latent defect
Invisible problem in a piece of property such as bad wiring, termite damage or lead paint

Lead
Metallic chemical element present in older dwellings, primarily in the form of lead-based paint and lead plumbing. Exposure to lead has been found to be a health risk

Lease
Binding agreement that contains the terms and conditions of a renter's occupancy

Leasehold estate
Arrangement in which the borrower does not own a specific piece of property but possesses a long-term lease

Lender
A bank, savings institution or mortgage company that offers home loans

Letter of intent
Formal statement that the buyer intends to purchase the property for a certain price on a certain date

Leverage
Use of a small amount of cash--a 5 percent or 10 percent down payment--to buy a piece of property

Lien
Claim laid by one person or company on the property of another as security for money owed

Listing
Piece of property placed on the market by a listing agent

Loan -to-value ratio
Technical measure used by lenders to assess the relationship of the loan amount to the value of the property

Lock-in
When interest rates are volatile, many borrowers want to "lock in" an interest rate and many lenders will oblige, setting a limit on the amount of time the lock-in is in effect

Loft
Living space not partitioned into rooms or a small space built above a larger room

Log cabin
Homes constructed of rough-hewn timbers and a standard housing form in the early European settlement of the U.S

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M

Maintenance fee
Monthly assessment members of a homeowners' association pay for the repair and maintenance of common areas

Market conditions
Factors affecting the sale and purchase of homes at a particular point in time

Market value
Price that a piece of property sells for at a particular point in time

Maximum financing
A loan amount within 5 percent of the highest loan-to-value ratio allowed for a property

Median price
Price of the house that falls in the middle of the total number of homes for sale in that area

Merged credit report
Report that draws information from the Big Three credit-reporting companies: Equifax, Experian and Trans Union Corp

Metes and bounds
A time-honored land surveying method of describing land in terms of shape and boundary dimensions

Mint condition
Mint condition, or blue-ribbon condition, refers to a house that looks as close to new as possible

Mixed-income housing
Neighborhood that contains houses of widely varying prices

Mortgage
Legal document specifying a certain amount of money to purchase a home at a certain interest rate, and using the property as collateral

Mortgagee
Bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor

Mortgagor
Person who borrows money to purchase a house. The lender is called the mortgagee

Mortgage acceleration clause
Clause which allows a lender to demand that the entire balance of the loan be repaid in a lump sum under certain circumstances. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment

Mortgage insurance
Required by lenders in some loans to protect them from a possible default . All conventional loans with less than a 20 percent down payments require private mortgage insurance, or PMI

Mortgage-interest deduction
Tax write-off that the Internal Revenue Service allows most owners to claim for the annual interest payments they make on their real estate loans

Mortgage life insurance
Special type of insurance that will pay off a mortgage if the borrower dies before the debt is retired

Motivated buyer
Any buyer with a strong incentive to make a purchase

Motivated seller
Any seller with a strong incentive to make a deal

Move-in condition
House that is ready for a new occupant

Multi-dwelling property
Property that contains individual units for several households but carries only one mortgage

Multifamily mortgage
Mortgage on a multifamily dwelling with more than four families, typically an apartment building.

Multiple listing service (MLS)
The service combines the listings for all available homes in an area, except For-Sale-By-Owner (FSBO) properties, in one directory or database

Multiple offers
Multiple purchase offers occur in hot markets or hot neighborhoods

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N

Negative amortization
The situation occurs when a borrower's monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller. Most fixed-rate loans are not subject to negative amortization, but many adjustable-rate mortgages are susceptible

No cash-out refinance
The amount of the new mortgage covers the remaining balance of the first loan, closing costs, any liens and cash no more than 1 percent of the principal on the new loan

No-documentation loan
Loan application that does not require verification of income but typically is granted in cases of large down payments

Non-assumption clause
Loan provision that prohibits the transfer of a mortgage to another borrower without lender approval

Non-recurring closing costs
Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a home inspection

Note
Legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time

Note rate
The interest rate specified in a mortgage note.

Notice of default
Lender's initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed

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O

Online real estate listings
Properties listed for sale on the Internet

Open house
Marketing tool in which a listing agent opens a house for view

Open listing
Property given to a number of brokers to market at the same time

Open space
Undeveloped land or common areas in a planned community reserved for parks, walking paths or other natural uses

Option
A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy

Origination fee
Fee charged by most lenders--also called points--for processing a loan. A point is 1 percent of the total loan amount

Owner financing
Transaction in which the seller of a property agrees to finance all or part of the purchase

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P

Parcel
An officially described piece of land

Partition
Any kind of structure dividing one room or space from another

Payment cap
Legal limit on the amount a monthly payment can increase on an adjustable-rate mortgage

Per-diem interest
Interest charged or accrued daily

Parking strip
The strip of grass between the sidewalk and the street in front of a house

Pest-control inspection
A common pest-control inspection is a termite inspection, which is required in some states

P.I.T.I (Principal, Interest, Taxes, Insurance)
When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower's actual monthly mortgage-related expenses

Planned communities
The concept began in the 19th century and describes any town or neighborhood built with certain guidelines and goals

Planned-unit development
Residents own the home and the land, and share the use and financial responsibility for common areas

Point
Fees charged by lenders at the time a loan is originated. A point is equal to 1 percent of the total loan amount

Portfolio lender
A lender who makes loans with its own funds and keeps the loans on the company's books--in other words, inside the institution's "portfolio"--rather than selling the loan on the secondary market

Possession
When a buyer signs the papers and receives the keys to the house, the buyer officially takes possession

Power of attorney
Document that authorizes an individual to act on behalf of someone else

Pre-approval letter
A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain

Prepaid expenses
Costs for taxes, insurance and assessments paid before the due date

Prepaid interest
Interest paid before it is due. For example, at the close of a real estate transaction borrowers usually pay for the interest on their loan that falls between the closing period and the first monthly payment

Prepayment penalty
Lenders can impose a penalty on a borrower who pays a loan off before its expected end date

Pre-qualification
Many lenders will pre-qualify a borrower who is shopping for a loan by completing a preliminary assessment of the buyer's ability to pay for a home

Pre-sold home
Homes that are sold before they are built

Price range
The range of how much a buyer is willing to pay for a home

Principal
Amount of money that the borrower owes on a mortgage

Principle of conformity
The idea that a house will more likely appreciate in value if its size, age, condition and style are similar to, or conform to, other houses in the neighborhood

Principle of progression
An appraisal term which states that real estate of lower value is enhanced by the proximity of higher-end properties

Principle of regression
An appraisal term which states that the value of higher-end real estate can be brought down by the proximity of too many lower-end properties

Private mortgage insurance (PMI)
Special type of loan insurance that many lenders require borrowers to purchase if the borrower's down payment is less than 20 percent of the home's purchase price

Probate sale
A real estate sale triggered by the death of the owner, with proceeds to be divided among heirs or creditors

Property line
Official dividing line between properties

Property value
Value of a piece of property is based on the price a buyer will pay at a certain time

Proration
Agreed-upon percentages of certain expenses associated with a piece of property that must be paid by the buyer or the seller at the time of closing

Punch list
Buyers compile a punch list during the final walk-through detailing items to be fixed before closing

Purchase & Sales agreement
Document which details the purchase price and conditions of the transaction

Purchase-money mortgage
Mortgage that a borrower obtains to acquire a property

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Q

Qualifying ratios
Lenders compute qualifying ratios to determine how much a potential buyer can borrow

Queen Anne style
A Victorian-era style that originated in San Francisco

Quit-claim deed
Document that releases a party from any interest in a piece of real estate

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R

R-value
Construction term that refers to the resistance of to heat loss. The higher the R-value, the slower the rate of heat loss

Radon
Ground-generated radioactive gas that seeps into some homes through sump pumps, cracks in the foundation and other inlets. A leading cause of lung cancer , radon is found in mostly the northern half of the country

Ranch style
Modern ranch-style homes, popularized in the 1950s, were championed by such architectural giants as Frank Lloyd Wright

Rate-improvement mortgage
Loan with a clause that entitles a borrower to a one-time cut in the interest rate without going through refinancing

Rate lock
When interest rates are volatile, many borrowers want to "lock in" an interest rate and many lenders will oblige, setting a limit on the amount of time the guaranteed interest rate is in effect

Real estate
Land and anything permanently affixed to it, including buildings, fences and other items attached to the structure

Real estate agent
A real estate agent has a state license to represent a buyer or a seller in a real estate transaction in exchange for a commission. Most agents work for real estate brokers

Real estate attorney
Lawyer who specializes in real estate transactions

Real estate broker
Real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission. Most brokers also have agents working for them, and are entitled to a portion of their commissions

Real estate investment trusts (REITs)
The trusts are publicly traded companies that own, develop and operate commercial properties

Real Estate Settlement Procedures Act (RESPA)
Federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business

Real property
Land and any permanent fixtures on it, including buildings, trees and minerals

Realtors ®
Designation for an agent or broker who is a member of the National Association of Realtors

Recission
Cancellation of a contract by law or consent by the parties involved

Reconveyance
When a borrower completely pays off the mortgage, the property is reconveyed to them from the lender

Recording
The filing of a specific document to the appropriate government entity

Redlining
The practice by a bank or insurance company to deny credit or insurance to people based on ethnic background or neighborhood

Refinancing
The process of replacing an older loan with a new mortgage that has better terms

Regulation Z
The federal code issued under the Truth-in-Lending Act which requires that a borrower be advised in writing of all costs associated with the credit portion of a financial transaction

Rehabilitation mortgage
Mortgage that provides for the costs of repairing and improving a resale home or building

Replacement reserve fund
Money that is set aside from homeowners' assessments to replace common property, such as furniture in a planned development's community room

Repossession
When a house is repossessed, it is taken back by the lender holding the mortgage

Resale value
Future value of a piece of property that can be affected by many factors, including the surrounding neighborhood, school scores, and economic and housing market conditions

Restructured loan
Mortgage in which new terms are negotiated

Return on investment
Amount of profit a property generates

Reverse mortgage
Special type of loan available to equity-rich, older owners. Repayment is not necessary until the borrower sells the property or moves into a retirement community

Right of first refusal
Agreement by a property owner to give another person the right to buy or rent the property before it goes on the open market

Right to recission
Provision in the federal Truth-in-Lending Act that allows borrowers to cancel certain kinds of loans within three days of signing

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S

Sale-leaseback
Transaction in which the buyer leases back the property to the seller for a specified period of time

Sales contract
Contract signed by the buyer and seller that details the terms of a home purchase

Saltbox style
Design that dates to colonial times and takes its name from the shape of saltboxes

Second mortgage
Another loan placed upon a piece of property

Secondary mortgage market
A market of packaged home loans that are resold as securities to investors. Major players are Fannie Mae and Freddie Mac

Secured loan
Any loan backed by collateral

Security
Piece of property designated as collateral

Seller broker
A seller broker represents the interest of the seller

Seller carry-back
Agreement in which the seller provides financing for a home purchase

Seller's market
A hot real estate market in which sellers have the advantage and multiple offers are common

Setback
Minimum distance a house or buildings must be from the lot line

Settlement statement
Document that details who has paid what to whom

Shared-appreciation mortgage
A loan that allows a lender or other party to share in the borrower's profits when the home is sold

Shared-equity transaction
Transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner

Shingle style
Alternative style of Victorian homes that evolved in the late 19th century to simplify the complexity of the traditional Victorian house

Spanish Mission style
Design that is derived from the original missions established by the Spanish in the Southwest

Special assessment
When a homeowners' association needs or wants extra funds, it levies a special assessment upon the owners

Specifications
Written requirements for materials, equipment, construction systems and standards

Split-level style
A home that is a ranch-style house stacked to fit on a smaller lot and perhaps to accommodate a garage

Standard Metropolitan Statistical Area
Areas designated by the U.S. Office of Management and Budget that contain a city of 50,000 or more

Starter home
Homes that fall within the lower price range of a typical first-time buyer

Step-rate mortgage
Loan that allows a gradual increase in the interest rate during the first few years of the loan

Straight purchase
Transaction in which the buyer gives a new-home builder a deposit to begin building and the balance when the sale of the house closes

Subagent
When an agent brings a buyer to a property, they in effect act as a subagent to the listing agent

Subdivision
Process in which the owner of a large piece of property divides it into smaller parcels

Subordinate loan
A second or third mortgage

Survey
A precise measurement of a piece of property by a licensed surveyor

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T

Tax deduction
Tax break given by the government. Mortgage interest, loan points and property taxes can be deducted

Tax lien
Impediment placed against a property, such as back taxes

Tax shelter
Term often applied to real estate investment and refers to various tax advantages

Tenancy by the entirety
When a married couple owns a home, it is usually considered tenancy by the entirety If the property must be sold to pay the debts of one spouse, both must agree

Tenants in common
Two or more owners who share interest in a specific property

Third-party origination
In a third-party origination transaction, the lender has another institution originate all or part of a mortgage

Timeshare
Ownership that involves the acquisition of a specific period of time, or that percentage of interest, in a vacation home or resort

Title
Actual legal document conferring ownership of a piece of real estate

Title company
Firms that ensure that the title to a piece of property is clear and provide title insurance

Title insurance
Policy issued to lenders and buyers to protect any losses because of a dispute over the ownership of a piece of property

Title risk
Possible impediments to the transfer of a title from one owner to another

Title search
Check of public title records to ascertain that the seller is the legal owner and that there are no claims or liens against the property

Townhouse
An attached home that is not a condominium

Tract home
Term for a production home, a mass-produced house constructed by one builder in a project

Transfer of ownership
Any legal means by which a piece of real estate changes hands

Transfer tax
Assessment by state or local authorities at the time a piece of property changes hands

Trust account
Special accounts used by brokers and escrow agents to safeguard funds for a buyer or seller

Trustee
Legally empowered person who holds or controls a piece of property for another person

Truth-in-Lending Act
Federal law that protects consumers in a variety of ways. One of its key provisions allows a consumer to cancel a home-improvement loan, second mortgage or other loan if the home was pledged as security (except for a first mortgage or first trust deed) until midnight of the third business day after the contract was signed

Two-step mortgage
Adjustable mortgage with two interest rates, one for the first five or seven years of the loan, and the other for the remainder of the loan term

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U

Underwriting
Process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan

Unrecorded deed
Unrecorded deed transfers ownership from one party to another without being officially recorded

U.S. Department. of Housing and Urban Development (HUD)
Federal agency that oversees the Federal Housing Administration and a variety of housing and community development programs

Unsecured loan
Any loan that is not backed by collateral

Up-zoning
Process in which a property is zoned from a lower to a higher use

Urban sprawl
Unplanned expansion of development over a large area

Usury
Reference to illegally excessive interest charged on any loan

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V

Variable interest rate
Loan rate that moves up and down based on factors including changes in the rate paid on bank certificates of deposit or Treasury bills

Variable rate mortgage
Loan with an interest rate that hinges on factors such as the rate paid on bank certificates and Treasury bills

Variable rate
Interest rate that changes with fluctuations in such indexes as the U.S. Treasury bill index

Veterans Administration (VA)
The U.S. Department of Veterans Affairs operates a variety of programs to help veterans. One of the key plans it oversees is the VA loan program, which allows most veterans to purchase a house without a down payment

Victorian style
Architectural style that dates from the mid-19th century

Voluntary lien
Lien that a homeowner willingly gives to a lender

VA loans
Program that allows most veterans to purchase a house without a down payment

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W

Waiver
A voluntary relinquishing of certain rights or claims

Walk-through
Buyer's final inspection of the home to determine if conditions in the purchase agreement have been satisfied

Warranty
Legally binding promise to do something in the future

Wetlands
Watery areas such as swamps, marshes and floodplains

Wild deed
Improperly recorded deed

Will
The most basic legal document outlining the disposition of a person's estate in the event of death

Wraparound mortgage
Loan to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both loans are made to the lender who holds the wraparound loan

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Z

Zero-lot lines
Houses built without space between them and with little or no yard

Zoning
Regulations that control the use of land within a jurisdiction

Zoning variance
One-time modification of existing zoning law

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Glossary of Real Estate Leasing Terms

 

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