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Abstract-
A summary; an abridgment. Before the use of photo
static copying public records were kept by
abstracts of recorded documents.
Abstract of Title- A summary of the public records
relating to the title to a particular piece of
land. An attorney or title insurance company
reviews an abstract of title to determine whether
there are any title defects which must be cleared
before a buyer can purchase clear, marketable, and
insurance title.
Acceleration Clause- Provision in a
mortgage document stating that if a payment is
missed or any other provision is violated the
whole debt becomes immediately due and payable.
Acknowledgment- Formal declaration before a
public official that one has signed a document.
Prior to recording real estate legal documents,
such as grant deeds and deeds of trust, a Notary
Public acknowledges the person's signature on the
document.
Acre - A measure of land equal to 43,560
square feet.
Action to Quiet Title- A court action to
establish ownership of real property. Although
technically not an action to remove a cloud on
title, the two actions are usually referred to as
"Quiet Title" actions.
Adjustable Rate Mortgage (ARM) - A mortgage
where the interest rate is not fixed for the life
of the loan. These mortgages adjust periodically
based on an index that changes with market
conditions. The rate of interest is the sum of the
index plus a margin ( the margin remains fixed for
the life of the loan). Most ARMs have periodic
interest rate and payment caps, as well as a life
cap. ARM's may also be referred to as AML's or
VRM's.
Ad Valorem- Designates an assessment of
taxes against property. Literally, according to
value; based on the "ability to pay"
theory.
Adverse Possession- The actual, exclusive,
open notorious, hostile and continuous possession
and occupation of real property under an evident
claim of right or title. The time required legally
to obtain title by adverse possession varies from
state to state.
Agency- A contract by which the agent
undertakes to represent the principal in business
transactions, using some degree of discretion.
Agent- Person authorized to act on behalf
of another in dealings with third parties.
Agreement of Sale- An agreement between
parties for the sale of real estate. In some
states it is synonymous with a Purchase Agreement,
Sales Agreement, or Land Contract. In Texas it is
known as an Earnest Money Contract.
Alienation Clause- Provision in a mortgage
document stating that the loan must be paid in
full if ownership is transferred.
Amenities- The qualities and state of being
pleasant and agreeable. In appraising, those
qualities that attach to property in the benefits
derived from other than monetary. Satisfactions of
possession and use arising from architectural
excellence, scenic beauty and social environment.
American Land Title Association - Title
policy that assures a lender that it has the
proper rights as the beneficiary on a mortgage
loan.
Amortization- Gradual payment of a debt
through regular installments that cover both
interest and principal.
Annual Percentage Rate (APR)- A measure of
the total cost of credit (interest as well as
other recurring charges) expressed as a yearly
percentage rate. Because all lenders apply the
same rules in calculating the annual percentage
rate, it provides consumers with a good basis for
comparing the cost of loans.
Appraisal and Credit Report Fees- These
fees are generally collected by the lender and
paid to outside companies performing the services.
Appraised Value - An expert option of the
value of a property at a given time, based on
facts regarding the location, improvements, etc.,
of the property and surroundings.
Appraisal Report - Estimate of real estate
value, presumably by an expert. An appraisal
evaluates the property at a given time based on
facts regarding the location, improvements,
neighborhood and comparable sales. Generally, the
value is based on three approaches: cost, market
and income.
Appreciation- Increase in value or worth of
property.
Arrears- Payment made after it is due is in
arrears. Interest is said to be paid in arrears
since it is paid to the date of payment rather
than in advance.
"as is"- A clause that is
sometimes used in the transfer of property. It
means that the present property is being
transferred with no guarantee or warranty provided
by the seller.
Assessment Base- The total assessed value
of all property in a given assessment district.
Assessed Valuation- Value placed on real
estate by governmental assessors as a basis for
levying property taxes; not identical with
appraised or market value.
Assignment- Transfer of a contract from one
party to another.
Assumption- New owner assumes the
responsibility for repaying an existing mortgage.
Both FHA and VA loans are fully assumable. Some
adjustable rate mortgages may be partially
assumable, but the new owners may be required to
re-qualify for the loan.
Attached Homes - A home that has one or
more common walls adjoining another home.
Condominiums and row houses are attached homes.
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Balloon Loan- Mortgage in
which the remaining principal balance becomes
fully due and payable at a predetermined time.
Most of the time, balloon loans have level
payments until the note becomes due and payable.
Balloon Payment- The final payment of a
mortgage which is larger than the regular payment;
it usually extinguishes the debt.
Bankruptcies- A court action to restructure
debt.
Basis- Original cost of property plus value
of any improvements put on by the seller minus the
depreciation taken by the seller.
Beneficiary- The lender named on the
mortgage note. One entitled to the proceeds of
property held in trust; also proceeds of wills,
insurance policies, or trusts.
Bill of Sale- Written agreement
transferring personal property from one person to
another.
Binder- Preliminary agreement of sale,
usually accompanied by earnest money (term also
used with property insurance).
Blanket Mortgage- A mortgage covering more
than one property of the mortgage.
Bond- A debt instrument in the capital
markets. The US government, corporations and
municipalities use bonds to raise money. Bonds can
also be backed by real estate loans and the
payments from mortgages.
Bridge Financing- A form of an interim
loan, generally made between a short term loan and
a long term loan when the borrower needs
additional time before obtaining permanent
financing.
Broker- A person that represents another
for a fee in real estate transactions. Real Estate
brokers help consumers locate suitable real estate
and are paid a fee for their services.
Building Code- Government regulations
specifying minimum construction standards.
Building Line or Setback- Distances from
the ends and/or sides of the lot beyond which
construction may not extend. The building line may
be established by a filed plat of subdivision, by
restrictive covenants in deeds or leased, by
building codes, or by zoning ordinances.
Buy down- An interest rate buy down is the
temporary reduction of the note rate and resulting
monthly payments a borrower pays to the lender.
The shortfall between the rate on the note and
initial payment made by the borrower is usually
paid by a third party such as a seller or builder.
Buyer's Broker- Agent who takes the buyer
as a client, and is obligated to represent their
interest above all others, and owes specific
fiduciary duties to the buyer.
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Capital- Accumulated
wealth. A portion of wealth which is set aside for
the production of additional wealth; specifically,
the funds belonging to the partners or
shareholders of a business, invested with the
expressed intention of their remaining permanently
in the business.
Capital
Gain- Taxable profit on the sale of an
appreciated asset.
Caps- Caps are used on adjustable rate
mortgages (ARM's) to limit the interest rate
and/or the payment. Most ARMs have a periodic cap
that is around 2% per year and a life cap of
around 5%-6% over the life of the loan.
"Payment only" caps sometimes create
negative amortization where the principal balance
of the loan increases rather than decreases over
time.
Caveat Emptor- A legal term meaning
"let buyer beware".
Certificate of Eligibility- A certificate
obtained by a veteran from a Veteran's
Administration office which states that the
veteran is eligible for a VA insured loan.
Certificate of Occupancy- Document issued
by a local governmental agency that states a
property meets the local building standards for
occupancy.
Certificate of Reasonable Value (CRV)- An
appraisal of property for the purpose of insurance
by the Veteran's Administration.
Certificate of Title- A certification
issued by a title company or a written opinion
rendered by an attorney that the seller has good
marketable and insurable title to the property
which he is offering for sale. A certificate of
title offers no protection against any hidden
defects in the title which an examination of the
public records could not reveal. The issuer of a
certificate of title is liable only for damages
due to negligence. The protection offered a
homeowner under a certificate of title is not as
great as that offered in a title insurance policy.
Certified Copy- A true copy, attested to be
true by the officer holding the original.
Cestui Que Trust- One having an equitable
interest in property with the legal title being
vested to the trustee.
Chain of Title- The chronological order of
conveyance of a parcel of land from the original
owner to the present owner.
Chattel - Personal property.
Client - Person who employs the agent.
Typically the seller is a client. The buyer can be
a client (buyer's broker) or customer (seller's
broker).
Closing- Conclusion of a real estate sale
where the title of the property is transferred to
the new owners and funds are transferred to the
appropriate parties ( seller, old lender, real
estate broker, etc.).
Closing Agent- A neutral third party that
facilities the closing of a real estate
transaction. The closing agent can be an escrow
company, title company or attorney.
Closing Costs- Expenses incurred by the
buyer/borrower and the seller in a real estate or
mortgage transaction. There can be non-recurring
costs that include a one time charge for points,
appraisal fees, etc. or a prorating of recurring
costs such as taxes and insurance incurred while
the new buyer/borrower owns the real estate.
Closing Statement- Statement prepared for
the buyer and seller itemizing all of the costs of
a real estate transaction.
Closing Day- The day on which the
formalities of a real estate sale are concluded.
The buyer signs the mortgage, and closing costs
are paid. The final closing merely confirms the
original agreement reached in the agreement of
sale.
Cloud on Title - An outstanding claim or
encumbrance which, if valid, adversely affects the
marketability of title.
Code of Ethics- Standards subscribed to by
members of the National Association of Realtors.
Co-Maker- Equally responsible for repayment
as the borrower.
Commercial Property- Property intended for
use by all types of retail and wholesale stores,
office buildings, hotels and service
establishments.
Commission- Fee paid to a broker or other
entity for services rendered. Real estate brokers
and mortgage brokers receive a commission for the
services they provide; a real estate broker
secures a buyer for a property that is for sale
and a mortgage broker secures a mortgage loan for
the buyer to finance the purchase of a property.
Commissions are generally paid as a percentage of
the sales price in a real estate transaction or
the loan amount in a mortgage transaction.
Commitment- A written promise to make or
insure a loan for a specified amount and on
specified items.
Common Law- Rules based on usage as
demonstrated by decrees and judgments from the
courts.
Community Property- Property owned jointly
by husband and wife.
Comparables- Properties which are similar
in value to a particular property and are used as
comparisons to determine the fair market value of
a specified property.
Condemnation- The taking of private
property for public use by a government unit,
against the will of the owner, but with payment of
just compensation under the government's power of
eminent domain. Condemnation may also be a
determination by a governmental agency that a
particular building is unsafe or unfit for use.
Conditional Commitment- A lenders promise
to issue a loan subject to certain conditions.
Generally, the lender will not fund the loan until
the conditions have been met.
Conditional Offer- Purchase offer in which
the buyer proposes to purchase property only after
certain events (sale of another home, finding a
loan commitment, etc.) occur.
Condominium (or Condo)- A structure of two
or more units, the interior space of which are
individually owned.
Consideration- Anything of value given to
induce another to enter into a contract. Earnest
money deposit on a sales contract is
consideration.
Construction Loan- Short-term financing for
real estate construction. Generally followed by
long term financing called a "take out"
loan issued upon completion of construction.
Contingency- Condition which must be
satisfied before the buyer can consummate the
purchase of a property. Contingencies are
generally outlined in the purchase contract
between the buyer and seller.
Contract of Purchase- An agreement between
parties for the sale of real estate. In some
states it is synonymous with a Purchase Agreement,
Sales Agreement, or Land Contract. In Texas it is
known as an Earnest Money Contract.
Contract of Sale- A purchase transaction in
which the buyer receives possession of the
property, but the seller retains title.
Contract Sales Price- The full purchase
price as stated in the contract.
Conventional Loan- A mortgage loan that is
not guaranteed or insured by the government. FHA
and VA loans are not conventional loans.
Convertible ARMs- ARMs that have a
provision allowing the borrower to convert the
mortgage to a fixed rate term. The conversion
feature is outlined in the mortgage note and has
certain restrictions.
Conventional Mortgage- A loan neither
insured by the FHA nor guaranteed by the VA.
Cooperative Housing- An apartment building
or a group of dwellings owned by a corporation,
the stockholders of which are the residents of the
dwellings. It is operated for their benefit by
their elected board of directors. In a
cooperative, the corporation or association owns
title to the real estate. A resident purchase
stock in the corporation which entitles him to
occupy a unit in the building or property owned by
the cooperative. While the resident does not own
his unit, he has an absolute right to occupy his
unit for as long as he owns the stock.
Cost Plus Contract - A building contract
setting the builder's profit at a set percentage
of actual cost of labor and materials.
Cost Basis- Accounting figure that includes
original cost of property plus certain expenses to
purchase, money spent on permanent improvements
and other costs, minus any depreciation claimed on
tax returns over the years.
Counteroffer- A new offer made as a result
of another offer, which cancels the original offer
County- A division within a state, usually
encompassing one or more cities or towns.
Covenant- An agreement written into deeds
and other instruments promising performance or
nonperformance of certain acts or stipulating
certain uses or non users of the property.
Customer- Typically, the buyer (before
buyer agency laws), as opposed to the principal
(seller).
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Declaration of Restrictions-
A set of restrictions filed by a sub divider to
cover an entire tract or subdivision.
Dedication- The voluntary giving of private
property to some public use by the owner, as the
dedication of land for streets, schools, etc., in
a development.
Deed- Formal written document transferring
title to real estate; a new deed is used for each
transfer. The deed should contain an accurate
description of the property being conveyed, should
be signed and witnessed according to the laws of
the State where the property is located, and
should be delivered to the purchaser at closing
day. (See also deed of trust, general warranty
deed, quitclaim deed, and special warranty deed.)
Deed of Trust- An instrument given by the
borrower to a third party (trustee) vesting title
to the property in the trustee as security for the
borrower's repayment of the mortgage loan.
Deed of Trust Rider- The document required
by the lender to be recorded along with the
security instrument for an ARM.
Deed Restriction- Restrictions placed on
use of real property by writing in a deed to
control use and occupancy of the property by
future owners.
Default- Failure to make mortgage payments
or violations other provisions of the mortgage
note.
Defective Title- Title to real property
which lacks some of the elements necessary to
transfer good title. Title to a negotiable
instrument obtained by fraud.
Deficiency Judgment- Personal claim against
the debtor when the sale of foreclosed property
does not yield sufficient proceeds to pay off the
loan (s) and accrued interest.
Deposit- Also called Earnest Money Deposit,
the deposit is money given to the seller or his
agent by the potential buyer upon the signing of
the agreement of sale to show that he is serious
about buying the house. If the sale goes through,
the earnest money is applied against the down
payment. If the sale does not go through, the
earnest money deposit will be forfeited to the
seller unless the purchase contract expressly
provides conditions for its return to the buyer.
Depreciation- Decrease in value to real
property improvements due to wear and tear,
adverse changes in the neighborhood, or any other
reason.
Devise- Real Estate left by will.
Devisee- One to whom real estate is given
by will.
Devisor- A testator who leaves real estate.
Direct Endorsement- A lender that can
complete the processing and closing of an FHA loan
without prior approval from FHA.
Direct Reduction Mortgage- An amortized
mortgage in which principal and interest are
computed on the remaining balance.
Discount- A loan funded below par (100%).
Lenders or investors will fund loans at a discount
in order to increase the overall yield on the
note.
Disbursements- Payments made during the
course of an escrow or at closing.
Documentary Tax Stamps- Stamps affixed to a
deed showing the amount of transfer tax. In
Nebraska the documentary tax is $1.75 for each
thousand dollars of the selling price.
Dower- The rights of a widow to a portion
of her deceased husband's property.
Down Payment- Cash to be paid by the buyer
at closing to consummate a real estate
transaction. Down payment is the difference
between the sales price and the mortgage amount..
Buyer cash required at closing includes the down
payment, closing costs and prepaid expenses.
Dragnet Clause- A clause in a mortgage or
deed of trust which places the real estate as
security for existing debts between the parties.
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Earnest Money- The earnest
money is the deposit money given to the seller or
his agent by the potential buyer upon the signing
of the agreement of sale to show that he is
serious about buying the house. If the sale goes
through, the earnest money is applied against the
down payment. If the sale does not go through, the
earnest money deposit will be forfeited to the
seller unless the purchase contract expressly
provides conditions for its return to the buyer.
Easement- A right-of-way created by grant,
reservation, agreement, prescription or necessary
implication which one has in land owned by
another.
Economic Obsolescence- Impairment of
desirability or useful life arising from economic
forces, such as changes in optimum land use,
legislative enactments which restrict or impair
property rights and changes in supply-demand
relationships. Loss in the use and value of
property arising from the factors of economic
obsolescence is to be distinguished from loss in
value from physical deterioration and functional
obsolescence.
Eminent Domain- A government right to
acquire private property for public use by
condemnation and the payment of just compensation.
Encroachment- Unauthorized intrusion of a
building or improvement such as a wall, fence,
etc. onto another's land.
Encumbrance- A legal right or interest in
land that affects a good or clear title and may
diminish the land's value. It can take numerous
forms, such as zoning ordinances, easement rights,
claims, mortgages, liens, charges, a pending legal
action, unpaid taxes, or restrictive covenants. An
encumbrance does not legally prevent the transfer
of real property. It is up to the buyer to
determine whether to purchase with the
encumbrance.
Equity- The market value of the property
less the homeowner's unpaid mortgage balance and
any outstanding liens or other debts against the
property.
Escheat- Reversion of property to the State
by reason of failure to find persons legally
entitled to hold or lack of heirs. The State must
try to find heirs.
Escrow- The deposit of instruments and/or
funds into the care of a neutral third party with
instructions to carry out the provisions of an
agreement or contract once all instruments and/or
funds have been deposited. Many closings are
handled by escrow agents. In this situation, the
seller deposits the deed and the buyer deposits
the funds necessary with the escrow agent. Once
all requirements of the purchase contract are in
the control of the escrow agent, the money and
deed are distributed accordingly.
Escrow Payment- That portion of a
mortgagor's monthly payment held in trust by the
lender to pay for taxes, mortgage insurance,
hazard insurance, lease payments and other items
as they become due. Also known as
"impounds" in some states.
Escrow Reimbursement- The buyer reimburses
the seller for the current balance of his escrow
(or impounded) funds.
Estate at Will- Possession of property at
the discretion of the owner.
Estate for Years- Tenant has rights in real
property for a designated number of years.
Estimated Closing Costs Statement- The
statement which lists the financial settlement
between buyer and seller and the costs each must
pay. A separate statement for buyer and seller is
sometimes prepared.
Estoppels- An impediment to a law of
action, whereby one is forbidden to contradict or
deny one's own previous statement or act.
Exclusive Agency- Listing agreement in
which only the listing office may sell the
property and earn the commission. If the owner
sells the house, the listing office would not
receive any commission.
Exclusive Right-to-Sell- Listing agreement
under which the owner promises to pay a commission
if the property is sold during the listing period
by anyone, even the owner.
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Fannie Mae (Federal National
Mortgage Association/FNMA)- FNMA is one of the
major secondary market investors that purchases
loans from mortgage companies and other depository
institutions. The company is a private corporation
and its stock is traded on the New York Stock
Exchange.
Federal Home Board- The board which
oversees the Federal Home Loan Bank systems.
Federal Home Loan Bank- Provides liquidity
to supervised financial service companies, such as
savings and loans and credit unions. The bank
system has several districts.
Federal Home Loan Board- The board which
charters and forbids discrimination in the sale.
Federal Home Loan Mortgage Corporation (Freddie
Mac/FHLMC)- A government sponsored agency that
is also a publicly traded company on the New York
Stock Exchange that purchases mortgage loans from
mortgage bankers and financial depository
institutions. FHLMC is a major secondary market
investor.
Federal Housing Administration- A federal
agency which insures first mortgages, enabling
lenders to loan a very high percentage of the sale
price.
Federal National Mortgage Association- See
Fannie Mae.
Federal Reserve Bank- The regulatory agency
for certain commercial banks and bank holding
companies. Sets monetary policy for the country
and provides liquidity for supervised financial
institutions.
Federal Tax Lien- A lien attached to
property for nonpayment of a federal tax.
Federal Tax Return- The U.S. government's
method to identify individual and company's annual
tax responsibility. The tax returns identify the
income and taxes.
Fee Simple- Highest possible degree of
ownership of land. The estate allows owners to
have unrestricted powers to dispose of property,
and which can be left by will or inherited.
Fiduciary- A person in a position of trust
or responsibility with specific duties to act in
the best interest of a client. Real estate brokers
and mortgage brokers are fiduciaries.
Financial Depositor Institutions- Banks,
savings and loans or credit unions.
First Mortgage- Mortgage holding priority
over the claims of subsequent lenders against the
same property.
Fixture- Personal property affixed to
structures or land, usually in such manner that
they cannot be independently moved without damage
to themselves or the property housing, supporting,
or pertinent to them. Varies under state laws.
Foreclosure- A proceeding in or out of
court to extinguish all rights, title and interest
of the owner (s) of a property in order to sell
the property and satisfy a lien against it.
Freddie Mac- See Federal Home Loan Mortgage
Corporation.
Full Disclosure- Revealing all known facts
which may affect the decision of a buyer or
tenant.
Functional Obsolescence- Impairment of
functional capacity or efficiency. For example,
homes without indoor plumbing (while they may
contain working outdoor plumbing facilities) are
considered functionally obsolete.
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General Lien- A lien such
as a tax lien or judgment lien, which attaches to
all property of the debtor rather than the lien
of, for example, a trust deed, which attaches only
to a specific property.
General Warranty Deed- A deed which conveys
not only all the grantor's interests in and title
to the property to the grantee, but also warrants
that if the title is defective or has a
"cloud" on it (such as mortgage claims,
tax liens, title claims, judgments, or mechanic's
liens against it) the grantee may hold the grantor
liable.
Government National Mortgage Association (GNMA/Ginnie
Mae)- A government owned agency that acts as a
secondary market conduit for FHA and VA loans.
GNMA guarantees the timely principal and interest
payments to investors.
Grandfather Clause- The clause in a law
permitting the continuation of a use, business,
etc., which was permissible but because of a
change in the law is now no longer permissible.
Ground Rent- Rent paid for vacant land. If
the property is improved, ground rent is the
portion attributable to the land only.
Grantee- The buyer, who receives a deed.
Grantor- The seller, who gives a deed.
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Hazard Insurance- Insurance
on a property against damages caused by fire, wind
storms, and similar risks.
Heirs and Assigns- One who might inherit or
succeed to an interest in a property under the
rules of law applicable when a property owner
dies.
Holographic Will- Will written in the
testator's handwriting and not witnessed.
Homeowners Association- An association of
people who own homes in a given area for the
purpose of improving or maintaining the quality of
the area.
Homeowner's Policy- Policy which expands
the insurance for a homeowner. It may include
theft, liability, earthquake, etc.
Homeowner's or Maintenance Fees- Payments
made by property owner (s) of a condominium or a
unit in PUD to the homeowners' association for
expenses incurred in upkeep of the common areas.
Homestead- Tract of land occupied as a
family home.
Housing and Urban Development (HUD)- The
federal government agency that oversees FHA.
HUD 1- A closing document required by HUD
that outlines the settlement cost of a loan. The
closing agent generally prepares the document and
buyer receives it shortly after the loan is
closed.
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Impound Account- Account
held by a lender for payment of taxes, insurance
or other related expenses. Also known as an escrow
account.
Improvement- Valuable additions to property
which raise the value of the property.
Incidental Recording, Delivery, Wire, etc.,
Fees- Other costs that are incurred when a
real estate loan is closed.
Index- A published rate or benchmark
measure of current interest rate levels used to
calculate periodic changes in rates charged on
adjustable rate mortgages.
Installment Sale- A tax term used to
describe a sale which is usually accomplished by
use of a land contract.
Insured Mortgage- A mortgage insured
against loss to the mortgagee (lender) in the
event of default and failure of the mortgaged
property to satisfy the balance owing plus cost of
foreclosure.
Interest Payment Notification (1098)- A
federal tax form that lenders use at year end to
notify borrowers of the interest that was paid on
their mortgage over the last year.
Interest Rate- The percentage of an amount
of money which is paid for its use for a specified
time.
In testate- Someone who has died without
leaving a valid will.
Investment Property- A property that is not
occupied by the owner and in most cases produces
income or is held for gains from appreciation.
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Joint and Several Liability-
A liability which allows the creditor to sue any
one of the debtors or sue all together.
Joint Tenancy- An undivided interest in
property taken by two or more joint tenants. The
interests must equal, accruing under the same
conveyance and beginning at the same time. Upon
death of a joint tenant, the interest passes to
the surviving joint tenants rather than to the
heirs of the deceased.
Judgment- The decision of a court of law.
Money judgments, when recorded, become a lien on
real property of the defendant.
Junior Mortgage- A mortgage subordinate to
another mortgage.
No Real Estate Terms for K
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Land- In a legal sense, the
solid part of the surface of the earth, as
distinguished from water; any ground, soil or
earth whatsoever regarded as the subject of
ownership and everything annexed to it, whether by
nature, e.g., trees and everything in or on it,
such as minerals and running water, or annexed to
it by man; e.g., buildings, fences, etc. In an
economic sense, land consists of all those
elements in the wealth of a nation which is
supposed to be furnished by nature as
distinguished from those improvements which owe
their value to the labor and organizing power of
man.
Land Contract- Installment plan for buying
a house. It is used as an alternative to obtaining
a loan from a traditional, source such as a
mortgage banker or savings and loan.
Late Charge- A penalty for failure to pay
an installment on time.
Latent Defect- Hidden structural defect.
Lease with Option to Purchase- A lease under which
the lessee has the right to purchase the property.
The option may run for the length of the lease or
only for a portion of the lease period.
Legal Description- An expanded and unique
description of a property that is used on legal
documents, such as deeds and deeds of trust.
Recorded documents generally require a legal
description.
Lender- A general term encompassing all
mortgages, and beneficiaries under deeds of trust.
Lender's Instructions- A document that
lenders prepare for the closing agent that
outlines the requirements for loan closing.
Lessee- One who possesses the right to use
or occupy a property under lease agreement.
Lessor- One who holds title to and conveys
the right to use and occupy a property under lease
agreement.
Letter of Intent- A formal method of
stating that a prospective developer, buyer or
lessee is interested in property.
Lien- An encumbrance against property for
the payment of debt; a lien may be a mechanic's
lien, mortgage, unpaid taxes or judgment.
Life Estate- An estate in real property for
the life of a living person. The estate then
reverts back to the grantor or to a third party.
Limited Partnership- A partnership
consisting of one or more general partners who
conduct the business and are responsible for
losses, and one or more special partners, who
contributes capital and are liable only to the
amount contributed.
Lis Pen dens- A public notice that
litigation is pending on a property.
Listing- A record of property for sale by a
broker who has been authorized by the owner to
sell. Also used to denote the property so listed.
Listing Agreement- Agreement between a
property owner and a real estate broker,
authorizing the broker to find a buyer for the
property. If the sale is consummated, the listing
broker will be paid a fee.
Loan Discount/Premium Fees- Fees that
borrowers pay (sometimes seller will pay for
borrower) that adjust to the yield requirement of
the investor. Loan discount denotes an investor
yield requirement higher than the note rate. Loan
premium denotes an investor yield requirement
lower than the note rate.
Loan Lock- Guarantee from a lender that a
borrower will receive the interest rate in effect
at the time of loan application.
Loan Officer- A person that helps borrowers
through the loan selection, processing, and
closing of a mortgage loan. Loan officers can be
paid a commission or salary for their services and
can work for mortgage brokers, mortgage bankers,
or depository institutions.
Loan Origination Fees- The cost to obtain a
loan that is paid to the originating lender or
broker.
Loan Package- The information regarding a
borrower and property necessary which is the basis
for a lender's credit decision to extend or deny
credit.
Loan Ratio- The amount of a loan to the
value or selling price of real property.
Loan Servicing- The function of collecting
loan payments, managing the property tax and
insurance escrows, foreclosing on defaulted loans
and remitting payments to the
investor/beneficiary.
Loan-to-Value Ratio- The ratio of the
mortgage loan amount to the property's appraised
value or selling price, whichever is less.
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Margin- The number of
percentage points the lender adds to the index
rate to calculate the adjustable rate mortgage
(ARM) interest rate at each adjustment.
Market Value- The most likely price a given
property will bring if widely exposed on the
market, assuming fully informed buyer and seller.
Marketable Title- A title that is free and
clear of objectionable liens, clouds or other
title defects. A title which enables an owner to
sell his property freely to others and which
others will accept without objection.
Marketing- The management process through
which efforts to conceive, develop and deliver
goods and services are integrated to satisfy the
needs and wants of selected customers as a means
of achieving company objectives.
Market Price- The price paid for a
property; the amount of money that must be given
or which can be obtained at the market in exchange
under the immediate conditions existing at a
certain date. To be distinguished from market
value.
Market Value- The highest price estimated
in terms of money which a buyer would be warranted
in paying and a seller justified in accepting,
provided both parties were fully informed, acted
intelligently and voluntarily and, further, that
all the rights and benefits inherent in or
attributable to the property were included in the
transfer.
Mechanics 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.
Misrepresentation- False statement made to
or concealment of knowledge from another party
with the intent to provoke action from that party.
Mortgage- A lien or claim against real
property given as security for a loan. It is a two
party agreement as apposed to the three-party
agreement of a deed of trust.
Mortgage Broker- A professional that helps
consumers through the loan selection, processing
and closing of a mortgage loan. Most mortgage
brokers have access to a wide range of mortgage
products through many mortgage lenders. Mortgage
brokers are paid a fee by the borrower when a
suitable mortgage is found and closed.
Mortgage Commitment- A written notice from
the bank or other lending institution saying it
will advance mortgage funds in a specified amount
to enable a buyer to purchase a house.
Mortgagee- The lender of money or the
receiver of the mortgage document.
Mortgage Insurance- Insurance required for
a loan-to-value ratio above 80.01%.
Mortgage Banker- Financial intermediaries
that originate mortgage loans through loan
officers or independent mortgage brokers and sell
the mortgages into the secondary mortgage market.
Mortgage Note- The document outlining the
amount of the debt, the terms and payments, the
interest rate, margins and caps for ARMs, the name
of the lender and the borrower, and any other
material item required by the lender.
Mortgage Warehousing- A funding facility,
such as a commercial bank, that is used by
mortgage companies to fund loans which are sold to
an investor shortly thereafter. The mortgage notes
are used as collateral for this interim financing.
Mortgagor- The borrower of money or the
giver of the mortgage document.
Multiple Listing Service (MLS)- A means of
making possible the orderly dissemination and
correlations of listing information to its members
so that REALTORS may better serve the buying and
selling public.
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NATIONAL ASSOCIATION OF
REALTORS- The association of REALTORS
dedicated to the protection and the preservation
of the free enterprise system and the right of the
individual to own real property as guaranteed by
the Constitution of the United States of America.
Each member of the NATIONAL ASSOCIATION OF
REALTORS must adhere to a strict Code of Ethics
and Standards of Practice designed to provide
assurances to the public of the REALTORS integrity
and professionalism.
Negative Amortization- An increase in
principal balance which occurs when the monthly
payments do not cover all of the interest cost.
The interest cost which is not covered by the
payment is added to the unpaid principal balance.
Net Listing- An arrangement whereby the
Broker receives as commission all monies received
above a minimum sales price agreed to by the
owners and the Broker.
Non-conforming Loan- Loans that are above
the loan limits set by FNMA and FHLMC. Also known
as jumbo loans.
Nonconforming Use- A property which does
not conform to the zoning of an area.
Note- A written promise to repay a certain
sum of money on specified terms.
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Obsolescence- Impairment of
desirability and usefulness brought about by
changes in the art, design or process or from
external influencing circumstances that make a
property less desirable and valuable for a
continuity or use.
Offer- A promise by one party to do a
specified deed as the other party in turn performs
a specific deed.
Office of Comptroller Currency- A federal
government regulatory agency that oversees some
commercial banks.
Office of Thrift Supervision- A federal
government regulatory agency that oversees savings
and loans.
Open End Mortgage- A mortgage permitting
the mortgagor to borrow additional money under the
same mortgage, with certain conditions.
Open Listing- An authorization given by a
property owner to a real estate Broker wherein
said Broker is given the nonexclusive right to
secure a purchaser; open listings may be given to
any number of Brokers 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.
Origination Fee- A fee or charge for work
involved in the evaluation, preparation and
submission of a proposed mortgage loan.
Owner of Record- The individual (s) named
on a deed that has been recorded at the local
municipality.
Owners Policy- Title insurance for the
owner of property, rather than a lien holder.
Ownership- The right to possess and use
property to the exclusion of others.
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Package Mortgage- Mortgage
covering both real and personal property.
Paper- A mortgage, deed of trust or land
contract which is given instead of cash.
Parole Evidence- The legal rule which
prevents previous oral or written negotiations to
a signed contract from changing the contract.
Partial Release- A release of a portion of
property covered by a mortgage.
Permanent Mortgage- A mortgage on completed
construction on the same property under one
mortgage or trust deed.
Personality- Property which is movable. All
property is either personality, realty or mixed.
Physical Depreciation- A term that is
frequently used when physical deterioration is
intended. In a broad concept it may relate to
those elements contributing to depreciation that
are existent or inherent in the physical property
itself, as distinguished from other and external
circumstances that may influence its utilization.
Not a clear or proper them without qualification
and explanation.
PITI- Abbreviation for principal, interest,
taxes and insurance, often combined in a single
monthly mortgage payment.
Plat- A map or chart of a lot, subdivision
or community, showing boundary lines, buildings
and easements.
PMI- Abbreviation for private mortgage
insurance: insurance issued by a company, which
insures the lender against loss in the event that
the borrower defaults on the mortgage.
Points- Origination fees charged by the
originating lender or broker and/or discount fees
charge by lenders to increase the overall yield. A
point is equal to one percent of the principal
amount of your mortgage.
Portfolio Loan- Loans held as an investment
by a bank, savings and loan or credit union.
Power of Attorney- A written instrument
authorizing a person to act as the agent of the
person granting it, and a general power
authorizing the agent to act generally in behalf
of the principle. A special power limits the agent
to a particular or specific act as: a landowner
may grant an agent special power of attorney to
convey a single and specific parcel of property.
Under the provisions of a general power of
attorney, the agent having the power may convey
any or all property of the principal granting the
general power of attorney..
Prepaid Interest- Prepaid interest is the
interest charged to borrowers at loan closing to
pay for the cost of borrowing for a partial month.
For example, if a loan closes on the 15th of the
month and the first payment is due 45 days later,
the lender will charge 15 days of prepaid
interest.
Prepaid Items of Expense- Perorations of
prepaid items of expense which are credited to the
seller in the closing statement.
Prepayment- Full payment of the principal
before the due date; occurs when a property is
sold or the borrower refinances the existing loan.
Prepayment Penalty- Charge levied by the
lender for paying off a mortgage loan before its
maturity date.
Primary Mortgage Market- The process of
obtaining a real estate loan, including the
consumer's completion of a loan application form,
validation of the credit and property information,
loan underwriting by the lender and closing of the
mortgage loan.
Primary Residence- Considered the permanent
location of residency.
Principal- 1) The outstanding balance of a
loan. 2) A party to a real estate transaction. 3)
The head of a real estate firm.
Private Mortgage Insurance (PMI)- Insurance
which covers the portion of a mortgage loan above
80% thereby reducing the lenders risk to principal
loss in the event of a borrowers default. The
insurance coverage allows lenders to make higher
loan-to-value ratios (95% LTV).
Processing, Underwriting and Document Fees-
Charges for the lender's services associated with
making the loan.
Property- The rights of ownership. The
right to use, possess, enjoy, and dispose of a
thing in every legal way and to exclude everyone
else from interfering with these rights. Property
is generally classified into two groups, personal
property and real property.
Property Tax- A tax levied by the local
municipality or county on real and personal
property.
Perorations- The allocation of expenses,
such as taxes between buyer and seller at closing
based on the number of days the property is owned
during the month of closing.
Prorate- To divide in proportionate shares,
such as taxes, insurance, rent, or other items.
Planned Unit Development (PUD)- A housing
development where there is a homeowners
association and common areas owned by the
homeowners.
Purchase Money Mortgage- A mortgage used to
finance the purchase of real property.
Quit Claim Deed- A deed
operating as a release; intended to pass any
title, interest or claim which the grantor may
have in the property.
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Real Estate- Land and
anything permanently affixed to the land and those
things attached to the building.
Real Estate Broker- A middle man or agent
who buys and sells real estate for a company,
firm, or individual on a commission basis. The
broker does not have title to the property, but
generally represents the owner.
Real Estate Tax- A pecuniary charge laid
upon real property for public purposes.
REALTOR- Registered name for a member of
the NATIONAL ASSOCIATION OF REALTORS.
REALTOR ASSOCIATE- Salesperson associated
with a broker who is a member of a the NATIONAL
ASSOCIATION OF REALTORS.
Realty- A synonym for real estate.
Recital- Setting forth in a deed or other
writing some explanation for the transaction.
Recording- The act of writing or entering
an instrument in a book or public record, usually
in the office of the county clerk and recorder.
Such recording constitutes notice to all persons
of the rights or claims contained in the
instrument. This type of notice is called
"constructive notice" or "legal
notice."
Recourse- The right of the holder of a note
secured by a mortgage or deed of trust to look
personally to the borrower or endorser for
payment.
Redlining- The practice of refusing to
provide loans or insurance in a certain
neighborhood.
Refinancing- The repayment of a debt from
the proceeds of a new loan using the same property
as security.
Reissue rate- A charge for a title
insurance policy if a previous policy on the same
property was issued within a specified period of
time. Reissue is less than the original charge.
REIT (Real Estate Investment Trusts)- A
method in investing real estate in a group, with
certain tax advantages.
Recession of Contract- Annulling a contract
and placing the parties to it in a position as if
there had not been a contract.
Release- An instrument releasing property
from the lien of the mortgage, judgment, etc.
RESPA (Real Estate Settlement Procedures Act)-
A federal regulation that requires lenders and
mortgage brokers to disclose to borrowers, in
advance, the fees required to obtain a mortgage
loan.
Restrictive Covenants- Private restrictions
limiting the use of real property. Restrictive
covenants are created by deed and may "run
with the land," binding all subsequent
purchasers of the land, or may be
"personal" and be binding only between
the original seller and buyer.
Revenue Stamps- Formerly, federal tax on a
sale of real property. Canceled and replaced by
state tax stamps.
Reverse Mortgage- A special program for the
elderly that provides income until death. Payment
requirements are arranged through the increase in
the principal amount of the loan.
Riparian- Pertaining to the banks of a
river, stream, waterway, etc.
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Sales Agreement- See
agreement of sale.
Satisfaction of Mortgage- Document issued
by mortgagee when the mortgage is paid off.
Second Home- Commonly known as a vacation
home. This home is not rented and is occupied
occasionally by the owners.
Secondary Financing- A loan secured by a
mortgage or trust deed, which lien is junior to
another mortgage or trust deed.
Secondary Market- The buying and selling of
mortgage notes between sophisticated investors
such as pension funds, commercial banks, savings
and loans and wall street firms.
Secondary Market Investor- An entity, such
as FNMA or FHLMC, that buys mortgage loans for
investment or sells them again to another
secondary market investor. Secondary market
investors do not service loans and do not collect
payments from borrowers.
Secondary Mortgage Market- The buying and
selling of first mortgages of trust deeds by
banks, insurance companies, government agencies,
and other mortgagers.
Security- Real or personal property pledged
by a borrower as additional protection for the
lender's interest.
Seller's Broker- Agent who takes the seller
as a client, is legally obligated to a set of
fiduciary duties and is required to put the
seller's interests above all other's.
Septic Tank- An Underground tank in which
sewage from the house is reduced to liquid by
bacterial action and drained off.
Set Back Ordinance- Regulates the distance
from the lot line to the point where improvements
may be constructed.
Settlement- See "closing".
Settlement Cost, a HUD Guide- This booklet
gives an overview of the lending process and is
required by HUD. It is provided to consumers after
the loan application is completed.
Settlement Statement- A statement prepared
by broker, escrow or lender giving a complete
breakdown of the cost associated with a real
estate transaction.
Sheriff's Deed- A deed given at the
sheriff's sale in foreclosure of a mortgage.
Single Family Detached Home- A residential
home that is not attached physically to another
home.
Special Assessments- A special tax imposed
on property, individual lots or all property in
the immediate area, for road construction,
sidewalks, sewers, street lights, etc.
Special Lien- A lien that binds a specified
piece of property, unlike a general lien, which is
levied against all one's assets. It creates a
right to retain something of value belonging to
another person as compensation for labor,
material, or money expended in that person's
behalf. In some localities it is called
"particular" lien or
"specific" lien. (See lien).
Special Warranty Deed- A deed in which the
grantor conveys title to the grantee and agrees to
protect the grantee against title defects or
claims asserted by the grantor and those persons
whose right to assert a claim against the title
arose during the period the grantor held title to
the property. In a special warranty deed the
grantor guarantees to the grantee that he has done
nothing during the time he held title to the
property which has, or which might in the future,
impair the grantee's title.
Specific Performance- Lawsuit requesting
that a contract be exactly carried out, usually
asking that the seller be ordered to convey the
property as previously agreed.
Standard Uniform Application- An
application developed by FNMA and FHLMC that is
widely used in the mortgage industry.
State and Local Housing Programs- Unique
housing finance programs to assist first time home
buyers and low to moderate housing groups. Each
state and local group has different sets of
criteria.
Statute of Frauds- The law requires that
certain contracts, such as agreements of sale, to
be in writing in order to be enforceable.
Statutory Lien- An involuntary lien,
includes tax liens, judgment liens, mechanic
liens, etc.
Substitute of Trustee- A document which is
recorded to change the trustee under the deed of
trust.
Survey- Map or plat made by a licensed
surveyor who measures land and charts its
boundaries, improvements, and relationship to the
property surrounding it. A survey is often
required by the lender to assure him that a
building is actually sited on the land according
to its legal description.
Survivorship- All rights of a joint tenant
passes to the surviving joint tenant.
Sweat Equity- Equity created by the labor
of the purchaser or borrower that increases the
value of the property.
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Tax- Tax as applied to real
estate is an enforced charge imposed on persons,
property, or income to be used to support the
State. The governing body in turn utilizes the
funds in the best interest of the general public.
Tax Lien- Lien for nonpayment of taxes.
Tax Sale- Public sale of property at an
auction by a governmental authority, due to non
payment of property taxes.
Tenancy- A holding, as of land, by any kind
of title, occupancy of land, a house or the like
under a lease or on payment of rent or tenure.
Tenancy at Sufferance- A tenancy which
arises when a tenant holds over after expiration
of his lease.
Tenancy at Will- A tenancy which may be
terminated at the will of either the Lessor or
lessee.
Tenancy by the Entirety- A form of
ownership by husband and wife whereby each owns
the entire property. In event of the death of one,
the survivor owns the property without probate.
Tenant- Any person in possession of real
property with the permission of the owner.
Testate- Having made a will before death.
Time is of the Essence- Legal phrase in a
contract requiring punctual performance of all
obligations.
Title- Often used interchangeably with the
word ownership. It indicates the accumulation of
all rights in property by the owner and others.
Title, Escrow and Closing Agent Fees- These
companies charge various fees for their services.
Title Insurance- An insurance policy which
protects the insured (purchaser and lender)
against loss arising from defects in title.
Title Search- A review of the public
records generally at the local courthouse, to make
sure the buyer is purchasing a house from the
legal owner and there are no liens, overdue
special assessments, or other claims or
outstanding restrictive covenants filed in the
records, which would adversely affect the
marketability or value of title.
Trustee- A party who is given legal
responsibility to hold property in the best
interest of or "for the benefit of"
another. The trustee is one placed in a position
of responsibility for another, a responsibility
enforceable in a court of law. (See deed of
trust).
Truth in Lending Statement (Regulation Z)-
A federal government regulation that provides
details of the cost of obtaining a mortgage loan.
Lenders must provide this shortly after the loan
application has been completed.
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Usury- On a loan, claiming
a rate of interest greater than permitted by law.
Valuation- The act or
process of estimating value; the amount of
estimated value.
Warranty Deed- Most
valuable type of deed in which the grantor makes
formal assurance of title.
W2 Form- Income tax form that is provided
by employers to employees that states the income
and taxes paid in a calendar year.
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There are No Real Estate Terms
for X
Yield- The interest earned
by an investor on his investment (or bank on the
money it has lent). Also called Return.
Zoning Ordinances- The acts
of an authorized local government establishing
building codes, and setting forth regulations for
property land usage.
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