Real Estate Definitions

Below are a number of real estate terms defined to help you bring clarity to the jargon of the business.

 

 

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Abstract of Title - A summary of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record which may impair the title to real property.
Acceleration
Clause -		 A clause in trust deed or mortgage giving the lender the right to call all sums owing him to be immediately due and payable upon the happening of a certain stated event.
Acceptance - A legal term referring to the acceptance of an offer. A buyer offers to buy and the seller accepts the offer.
Acknowledgment - A formal declaration before a duly authorized officer by a person who has executed an instrument that such execution is his act and deed.
Ad Valorem - "According to value." A method of imposing a tax on the ownership of real property.
Adverse
Possession -		 The open and notorious possession and occupancy under an evident claim or right, in denial or opposition to the title of another claimant.
Affidavit - A statement or declaration reduced to writing and sworn to or affirmed before some officer who has authority to administer an oath or affirmation.
Affirmation - A solemn declaration made under the penalties of perjury by a person who conscientiously declines taking an oath. This is equivalent to an oath.
Agency - The relationship between an agent and principal. One who represents another from whom he has derived authority.
Agreement of Sale - A written contract between seller and buyer in which they reach a meeting of minds on the terms and conditions of the sale.
Amortization - The liquidation of a financial obligation on an installment basis; also recovery, over a period, of cost or value.
Appraisal - An estimate of value of property resulting from an analysis of facts about the property. An opinion of value.
Appurtenance - Something belonging to the land and transferred with it, such as buildings, fixtures, rights
Assemblage - Putting together two or more lots to form a large parcel.
Assessed Value - A value placed upon property by the tax assessor.
Assessment - The valuation of property for the purpose of levying a tax, or the amount of the tax levied.
Assessor - One appointed to assess property for taxation.
Assignment - A transfer or making over to another of the whole of any property, real or personal, or of any estate or right therein. To assign - to transfer or make over to another.
Assumption of Mortgage - When a grantee takes a title to real property and the deed
contains an assumption agreement, or grantee executes a separate assumption agreement, the grantee becomes the principal guarantor for unpaid portions of the note and is primarily liable for the amount of any deficiency judgment.
Attachment - Seizure of property by court order, usually done to have it available in event a judgment is obtained in a pending suit.
Attorney-in-Fact - One who is authorized to perform certain acts for another under a Power of Attorney; may be limited to a specific act or acts, or be general.

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Balloon Payment - Where the final installment payment on a note is greater than the
preceding installment payments and it pays the note in full, such final installment is termed a balloon payment.
Beneficiary - (1) One entitled to the benefit of a trust; (2) One who receives profit from an estate, the title of which is vested in a trustee; (3) The lender on the security of a note and deed of trust.
Blanket
Encumbrance -		 A single mortgage or trust deed which covers more than one piece of real estate.
Bona Fide - In good faith, without fraud or deceit; authentic; sincere.
Breach - Violation of an obligation in a contract.

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Capitalization - In appraising it is a method of determining the value of property by interpreting the property's net income with a percentage which represents a reasonable return on invested capital.
Capitalization Rate - The rate of interest which is considered a reasonable return on the investment. It is used in the process of determining value based upon net income.
Cash Flow - Income generated by a property which is determined by subtracting vacancy allowances and collection costs, operating expenses and debt-servicing costs from the property's scheduled gross income.
Caveat Emptor - "Let the buyer beware." The buyer must examine the goods or property and buy at his own risk.
Chain of Title - A history of conveyances and encumbrances affecting the title from the time it passed from government ownership, or as far back as records are available.
Closing Statement - The written statement provided by the escrow company to each of the parties to the loan transaction showing the amounts received and the amounts paid out for various items.
Cloud on Title - Any conditions revealed by a title search which affect the title to property; usually relatively unimportant items but which cannot be removed without a quitclaim deed or court action.
Codes - A systematic collection of laws in writing.
Collateral Security - A separate obligation attached to another contract to guarantee
performance of the contract.
Collusion - An illegal agreement between two or more persons to defraud another of his rights by the forms of law, or to obtain an object forbidden by law.
Color of Title - That which appears to be good title but which is not title in fact
Commingling - The broker's unauthorized and improper mixing of office funds, which are personal or business monies, with trust funds, which are client customer monies.
Commission - A payment for the performance of specific duties in real estate; a percentage of the selling price of property, percentage of rentals, etc.
Compound Interest - Interest paid on the original principal and on interest accrued from time it became due.
Condemnation - The act of taking private property for public use by the sovereign powers; a declaration that a structure is unfit for use.
Conventional Loan - A loan that's neither guaranteed nor insured by Federal
Housing Administration (FHA) or Veterans' Administration (VA).
Conveyance - The transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.
Convenants - Agreements written into deeds and other instruments promising performance or non-performance of certain acts or stipulating certain uses or non-uses of the property.

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Damages - The indemnity recoverable by a person who has sustained an injury either in his person, property or relative rights, through the act or default of another.
Deed - A written instrument which, when properly executed and delivered, conveys title to real property.
Deed in Lieu of Foreclosure - A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.
Default - Failure to fulfill a duty or promise or to discharge an obligation, or to perform any act in an instrument in writing, that has been agreed upon.
Deferred
Maintenance -		 Existing but unfulfilled requirements for repairs and rehabilitation.
Deficiency
Judgment -		 A judgment given when the security pledged for a loan does not
satisfy the debt upon its default.
Depreciation - Loss of value in real property brought about by age, physical deterioration or functional or economic obsolescence.
Deterioration - Reflecting the loss in value brought about by wear and tear, disintegration, use in service, and the actions of the elements.
Discount Fee - Sometimes referred to as "points," a fee charged by the lender in order to obtain a higher earning than the interest stated in the mortgage note.
Documentary Transfer Tax - A state enabling act allows cities and counties to adopt a
documentary transfer tax to apply on all transfers of real property located within their jurisdictions.
Duress - Unlawful constraint exercised upon a person whereby he is forced to do some act against his will.

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Easement - Created by grant or agreement for a specific purpose, an easement is the right privilege or interest which one party has in the land of another. (Example: right of way.)
Economic Life - The period over which a property will yield a return on the investment, over and above the economic or ground rent due the land.
Eminent Domain - The right of the government to acquire private property for public use by condemnation. The owner must be compensated fully.
Encroachment - Trespass; the building of a structure or construction of any improvements partly or wholly on the property of another.
Encumbrance - Anything which affects or limits the fee simple title to property, such as mortgages, trust deeds, easements or restrictions of any kind which do not prevent alienation of the fee title by the owner. Liens are special encumbrances which make the property security for the debt.
Enforceable - That which can be made to effective; to cause to take effect. An agreement or contract between persons in which one or other party can legally compel the performance of another or other parties.
Equity - The interest or value which an owner has in real estate over and above the liens against it.
Escheat - The reverting of property to the state in the absence of heirs or other claimants.
Escrow - The deposit of instruments and funds with instructions to a third party to carry out the provisions of an agreement or contract; when everything is deposited to enable carrying out the instructions, it is called a complete or perfect escrow.
Estate - The degree, quantity, nature and extent of interest which a person owns in real property.
Estoppel - A legal theory under which a person is barred from asserting or denying a fact because of the person's previous acts or words.
Exchange - A means of trading equities in two or more real properties, treated as a single transaction through a single escrow or as a deferred exchange through two or more escrows.
Exclusive Agency Listing - A written instrument giving one agent the right for a specified
time to sell a property, but reserving the right of the owner to sell the property himself without payment of a commission to the agent.
Exclusive Right to
Sell Listing -		 A written agreement between an owner and an agent
giving the agent the right to collect a commission if the property is sold by anyone during the term of his agreement.
Execute - To complete, to make, to perform, to do, to follow out. To execute a deed is to make a deed, including especially the signing, sealing, and delivery; to execute a contract is
o perform the contract, to follow it out to the end, to complete it.
Executed Contract - A contract that is fully performed.
Execution of
Contract - 		To sign a contract.
Executory Contract - A contract not yet fully performed.
Executor - A person named in a will to carry out its provisions as to the disposition of the
estate of a deceased person.
Executor's Deed - A legal deed to real property given by an executor of an estate.

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Fee Simple - The terms "fee" and "fee simple" are substantially
synonymous. The term "fee" is of old English derivation. "Fee simple absolute" is an estate in real property by which the owner has the greatest power over the title which it is
possible to have, being an absolute estate. In modern use, it expressly established the title of real property in the owner, without limitation or end. They may dispose of it by sale, or
trade or will, as he chooses.
FHA Loan - A loan that is underwritten to the standards of the Federal Housing Administration, which grants approval of the loan and insures the lender against financial loss.
Fiduciary - A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under rules of agency.
Fixtures - Appurtenances affixed to buildings or land, usually in such a way that they cannot be moved without damage to themselves or the property; plumbing, electrical fixtures, fences, trees, shrubbery, etc. Fixtures are real property.
FNMA (Fannie Mae) - A private corporation dealing in the purchase of first or second mortgages, at discounts.
Foreclosure - procedure whereby property pledged as security for a debt is sold to pay the
debt in event of default in payments or terms.
Forfeiture - Loss of money or anything of value due to failure to perform, such as a deposit given to insure performance.
Fraud - The intentional and successful employment of cunning, deception, collusion; or artifice used to cheat or deceive another person whereby that person acts upon it to the loss
of his property and to his legal injury.

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Gift Deed - A deed for which the consideration is love and affection and where there is no material consideration.
GI Loan - Analyzed by - and approval granted by - Veterans' Administration. Also called VA loan. Only eligible veterans may apply. Veterans' Administration guarantees a portion
of the loan to the lender against loss.
Graduated Lease - A type of long-term lease agreement which provides for a fixed rental fee during the initial period of the lease with increases and/or decreases in rental amount at
stated times during the balance of the contract term.
Grant Deed - A technical legal term in a deed of conveyance bestowing an interest in real property on another. The words "convey" and "transfer" have the same effect.
Grantee - The purchaser; the person to whom a grant is made.
Grantor - Seller of property; one who signs a deed.
Gross Income - Total income from property before any expenses are deducted.
Guarantee of Title - The opinion of a title company backed by its assets as to the true condition of the title to a certain piece of land at a particular time, as shown by the public records in the recording office.

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Homestead - A home upon which the owner or owners have recorded a Declaration of Homestead, as provided by California statutes; protects home against judgments up to specified amounts.
Hypothecate - To give a thing as security without the necessity of giving up possession of it. To mortgage real property.

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Implied - Not expressed in writing; presumed or inferred.
Income Property - Property which produces income from residential or commercial rentals and profits attributable to real estate other than rent.
Incompetent - One who is mentally incompetent, incapable; any person who, though not insane, is, by reason of old age, disease, weakness of mind, or any other cause, unable unassisted to properly manage and take care of himself or his property.
Injunction - A writ or order issued under the seal of a court to restrain one or more parties to a suit or proceeding from doing an act which is deemed to be inequitable or unjust in regard to the rights of some other party or parties to the suit.
Installment Note - A note which provides that payments of a certain sum or amount be paid on the dates specified in the instrument.
Instrument - A legal document in writing to create, alter, modify or terminate a right.
Interest Rate - The percentage of a sum of money charged for its use.
Investment - Money put in property or other ventures with the expectation of making a profit, with sufficient security to return and protect the capital; not speculation.
Involuntary Conveyance - Sheriff's deed; tax deed; an instrument against the will of the
owner.
Involuntary Lien - A lien imposed against property without consent of owner. Examples: taxes, assessments, federal income tax liens, judgments, etc.

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Joint Tenancy - Joint ownership by two or more persons with right of survivorship.
Judgment - Final decision, determination, decree or sentence of a court of law.

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Land Contract - An agreement for the purchase or sale of real property. (See agreement of sale, conditional sales contract.)
Lease - A contract between the owner of real property, called the lessor, and another person, called the lessee, covering conditions under which the lessee may occupy and use
the property.
Legal Description - A written description by which property can be located definitely by reference to government surveys or approved recorded maps.
Leverage - The use of a small amount of cash to control a large amount of property values.
Lien - A charge or encumbrance upon property for the payment or discharge of a debt.
Life Estate - An interest in real property, which is held for the duration of the life of some
certain person. It may be limited by the life of the person holding it or by the life of some
other person.
Liquidate - Disposal of property or settlement of debts.
Liquidity - The ability of property to be exchanged for cash.
Lis Pendens - A notice recorded for the purpose of warning all persons that the title or right of possession of certain real property is in litigation. Gives constructive notice of such litigation.
Listing - An employment contract between owner and broker authorizing broker to perform services involving the principal's property.
Loan Costs - The actual expense for services rendered in obtaining a loan. Includes appraisal fees, attorney fees, survey fees, loan commissions. Usually itemized for the benefit of the borrower.

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M.A.I. - Designates a person who is a member of the American Institute of Real Estate Appraisers
Marketable Title - Merchantable title; one free and clear of objectionable liens or encumbrances.
Market Price - The price the property brings in a given market.
Market Value - The price a willing buyer would pay and a willing seller would accept, both being fully informed and the property being exposed for sale for a reasonable time period.
Mechanic's Lien - A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.
Moratorium - Temporary suspension, usually by statute, of the enforcement of liability for an obligation.
Mortgage - An instrument by which property is hypothecated to secure the payment of a debt.
Mortgage Broker - One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.
Mortgagor - One who borrows money on his property and gives a mortgage as security.

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Negotiable - Capable of being negotiated; assignable or transferable in the ordinary course of business.
Net Listing - A listing which provides that the agent may retain, as compensation for his services all sums received over and above a net price to the owner.
Net Worth - Value remaining after subtracting the liabilities from the assets of a company or an individual.
Nonconforming Use - A use that was lawfully established and maintained, but no longer conforms to the use regulations of the zone in which it is located because of a subsequent change in a zoning ordinance.
Notary Public - An official authorized by law to witness or attest to an acknowledgment by a person who has executed an instrument.
Note - A signed written instrument acknowledging a debt and promising payment.
Notice of Default - A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on the payments).
Notice of Non-Responsibility - A notice provided by law designed to relieve a property owner from responsibility for the cost of improvements
ordered by another person
Notice of Rescission - A recorded notice to rescind a notice of default of a mortgage or deed of trust.

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Obsolescence - Loss in value due to reduced desirability and usefulness of a structure because it has become old fashioned and not in keeping with modern needs or because of adverse social or economic influences.
Offer and
Acceptance - 		A contract used in the sale of real property; a deposit receipt or exchange agreement.
Offer to Buy - An agreement between owner and purchaser as to the price, terms, conditions and date of occupancy. Usually prepared by a Realtor or attorney.
Open-End Mortgage - One which provides that the outstanding balance can be increased in order to advance additional loan funds to the borrower, up to the original sum of the note.
Open Listing - An authorization given by a property owner to a real estate agent wherein said agent is given the non-exclusive right to secure a purchaser; open listings may be given to any number of agents without liability to compensate any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer.
Option - A right given for a consideration to purchase or lease a property upon specified terms within a specified time.
Oral Contract - A verbal agreement; one which is not reduced to writing.

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Percolation - The seepage of water through soil; the soil's ability to absorb to water or other liquid.
Personal Property - Any property which is not real property.
Planned
Development -		 Five or more individually owned lots where one or more other
parcels are owned in common or there are reciprocal rights in one or more other parcels. A subdivision.
Plat - A map or plan of a certain parcel of land.
Plat Book - A book showing the lots and legal subdivisions of an area.
Pocket Listing - A trade term. An open listing that a real estate salesperson "pockets" or keeps hidden from his/her associates.
Possessory
Interest -		 Right to possess.
Power of Attorney - An instrument authorizing a person to act as the agent of the person granting it.
Preliminary Title Report - A report showing the condition of title before a sale or loan
transaction. After completion of the transaction, a title insurance policy is issued.
Prepayment
Penalty -		 The percentage a lender may require to be paid in addition to the unpaid principal balance when a loan is paid off ahead of schedule.
Prescription - Obtaining title to property by adverse possession by occupying it for the period determined by law to bar action for recovery.
Prima Facie - Presumptive on its face; true, valid, or sufficient at first impression.
Principal - The employer of an agent.
Promissory Note - The document signed by the borrower promising repayment of the loan showing the amount of monthly payments, interest rate, first payment date, last payment date, and the late charge and prepayment provisions.
Proration of Taxes - To divide or prorate the taxes equally or proportionately to time of use.
Puffing - The sometimes exaggerated buildup a salesperson or the seller may give to property. It is recognized in law as an opinion and not necessarily representing the facts
Purchase Money Encumbrance - (1) A trust deed or mortgage given by the buyer to the
seller as part or all of the purchase price of the property. (2) A trust deed or mortgage given to a third party as security for the borrowing of money used to purchase less than five residential units, one of which is to be occupied by the purchaser.

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Quiet Title - A court action brought to establish title; to remove a cloud on title.
Quitclaim Deed - A deed used to remove clouds on title by relinquishing any right, title or interest that the grantor may have.

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Ratification - The adoption or approval of an act performed on behalf of a person without previous authorization.
Real Estate Investment Trust - A special arrangement under Federal and State law whereby
investors may pool funds for investments in real estate and mortgages and yet escape corporation taxes; requires one hundred persons or more.
Realtor - A real estate broker holding active membership in a real estate board affiliated with the National Association of Realtors.
Reconveyance - The transfer of the title of land from one person to the immediately preceding owner. This instrument is commonly used in California when the performance or debt is satisfied under a deed of trust and the trustee conveys the title he has held back to the owner.
Redemption - The buying back of one's property after it has been lost through foreclosure.   Payment of delinquent taxes after sale to the State.
Rescission of
Contract -		 The annulling, revocation or repealing of a contract by mutual
consent of the parties to the contract or for cause by either party to the contract.
Restriction - The term, as used in relation to real property, means that the owner of real property is restricted or prohibited from doing certain things relating to the property or using the property for certain purposes.
Reversion - The right to future possession or enjoyment by the person or his heirs, creating the preceding estate.
Reversionary
Interest -		 A type of interest a person may have in lands or other property upon the termination of the preceding estate.
Right of
Survivorship -		 Right to acquire the interest of a deceased joint owner. Distinguishing characteristic of a Joint Tenancy Deed.
Right-of-Way - A privilege operating as an easement upon land, whereby the owner does, by grant or by agreement, give to another the right to pass over his land.

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Sales Contract - A contract by which buyer and seller agree to terms of a sale.
Sandwich Lease - A leasehold interest which lies between the primary lease and the operating lease. It is created when the lessee enters into a sublease.
Satisfaction - In real estate practice, an instrument to be recorded on the county recorder's books when a mortgage has been paid in full. it is signed by the mortgagee and recites that the debt has been satisfied.
Separate Property - Property owned by a husband or wife which is not community
property; property acquired by either prior to marriage or by gift, will or inheritance, and all of the rents, issues and profits thereof.
Sheriff's Deed - Deed given by court order in connection with the sale of property to satisfy a judgment.
Simple Interest - Interest computed on principal alone, as opposed to compound interest.
Situs - Location.
Specific
Performance -		 An action at law to compel the performance of a contract according to its terms.
S.R.E.A. - Designates a person who is a member of the Society of Real Estate Appraisers.
Statute of Frauds - State law which provides that certain contracts must be in writing in order to be enforceable at law.
Statutory Law - Rules formulated into law by legislative action.
Straight Line Depreciation - Definite sum set aside annually from income to pay cost of
replacing improvements without reference to interest it earns.
Subject to
Mortgage -		 When a grantee takes title to a real property "subject to mortgage," he is not responsible to the holder of the promissory note for the payment of any portion of the amount due. The most he can lose in the event of a foreclosure is his equity in the property." (See also "Assumption of Mortgage" in this section.) The original maker of the note is not released from his responsibility to pay off the obligation.
Sublease - A lease given by a lessee.
Subordination
Clause - 		Used in a first or senior lien permitting it to be subordinated to a subsequent lien, such as a construction loan. it converts a senior trust deed into a junior trust deed (second, third, etc.).
Subrogation - The substitution of another person in place of the creditor to whose rights he succeeds in relation to the debt. The doctrine is often used when one person agrees to stand surety for the performance of a contract by another person.
Surety - One who guarantees the performance of another. Guarantor.

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Taxes - A forced contribution of wealth to meet the public need for government.
Tax Sale - A sale of property, usually at auction, for non-payment of taxes assessed against it.
Tenancy at Sufferance - A tenancy which arises when a tenant holds over after the
termination of a lease without consent.
Tenancy at Will - A tenancy for an indefinite period which may be terminated at the will of either the lessee or the lessor.
Tenancy in
Common -		 Ownership by two or more persons who hold undivided interests without right of survivorship.
Tender - An offer of money, usually in satisfaction of a claim or demand.
Time Is Of The Essence - A clause in a contract contemplating performance by the date
specified therein.
Title - The rights of ownership.
Title Insurance - Insurance written by a title company to protect the property owner against loss if title is imperfect.
Tort - A wrongful act; wrong; injury; violation of a legal right.
Townhouse - A single family attached dwelling unit with party walls; usually an individual unit in a series of five to ten houses, with common walls between the u