Real Estate Glossary

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Abstract

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A brief history of all recorded instruments affecting title to a parcel of land.

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Acceptance

Back 2

Time at which an offer to purchase is accepted. In order for all parties to be bound to the contract, the fact that it has been accepted must be relayed.

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Accretion

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The slow or steady addition of land through natural forces (such as shoreline movement caused by erosion). Unlike avulsion, the homeowner who lost the land has no right to reclaim it

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Acknowledgment

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A voluntary statement before a notary public or officer of the court by a person who signed a document that indicates that the signature is genuine and made by the signer's free will (ie.e. grantor's signature on a deed)

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Acre

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43,560 sq ft. There are 640 acres in a square mile

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Actual Eviction

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By order of the court

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Ad Valorem Tax (or General Tax)

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"According to Value" (Latin). It is a real estate tax based on the value of property

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ADA (Americans with Disabilities Act)

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This law requires that public properties include features that facilitate access to the building. ADA is designed to eliminate discrimination against those with disabilities by providing equal access to employment, public accommodations, government services, public transportation, and telecommunications

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Adjustable Rate Mortgage (ARM)

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The interest rate changes at predetermined intervals according to a predetermined financial market index. There are normally ceilings (or caps) that limit the amount the rate can change every year and over the life of the loan

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Administrative Law Judge

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Judges who operates under HUD to resolve discrimination complaints

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Adverse Possession

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Acquiring title to real property by using it without owner's consent. This is done openly, and with the hostile intent to own

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Agency

Back 12

Acting "on behalf" of a party; as in the relationship between the "principal" and the real estate broker or a licensed agent of said broker

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Air Rights

Back 13

Subject to US sovereignty over the air space above the nation, owners control as much air space as can be reasonably utilized

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Alienation Clause

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("Due on Sale Clause") A clause in a mortgage that allows the lender to make the entire loan balance due (or "accelerate" the loan) if the title to the property is transferred (i.e. the property is sold)

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Allocation (Abstraction; Extraction)

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A method in appraisal in which the appraiser estimates land value of an improved property by deducting the value of site improvements from the overall sales price of the property. The estimated sales price (or indicated value) of the land is the amount that remains once abstraction (deduction) is done

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Allodial System (of ownership)

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An estate with free and full ownership of rights in land individuals, which is the basis of real property law in the United States

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Alluvion (alluvium)

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New deposits of soil on a shore or riverbank as a result of erosion leading to accretion

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Amortization

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A method of loan repayment whereby the amounts of principal and interest are due at regular intervals and the unpaid balance of the loan changes after each payment is made. Part of the payment pays the interest accrued and the remainder of the payment is subtracted from the loan balance (referred as "direct principle reduction")

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Annexation

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An addition to property by joining one thing to another (i.e. attaching personal property to real property, thereby creating a fixture)

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Annual Percentage Rate (APR)

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This is a disclosure required (along with finance charges) by the Truth in Lending Act, which will inform consumersa as to how much; they are paying for credit and its relative cost in percentage terms

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Anticipation

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An appraisal principle whereby the value of property may increase or decrease based on some future event that is expected to occur

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Antitrust Laws

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Sherman Anti-Act; These laws are designed to protect free market competition by prohibiting different monopolistic or predatory business practices

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Appraisal

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The process of developing an opinion of a defined type of value for a particular property. That opinion must be developed through accepted methodology, and supported by objective data, sound reasoning, and proper judgment

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Appurtenant Easement

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These easements generally "run with the land" and may be created by a contract, a deed, by necessity ("landlocked"), or by prescription

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Appurtenance

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Rights, privileges, and improvements that belong to and pass with the transfer of property (i.e. by deed). These may include buildings, structures, fixtures, water rights, things that grow, and easements

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Arm's Length Transaction

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A transaction that occurred under typical conditions in the marketplace, with each of the parties acting in their own best interest

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Arrears

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A payment made at or after the end of the period for which expenses are due or levied; the opposite of "in advance". Mortgage interest and real estate taxes are often paid in arrears

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Assemblage

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The combining of two or more adjacent parcels of land. If as a result of assembling, the larger parcel now has a greater value than its individual components, this is called Plottage

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Assessed Value

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A value put on real and personal property by a taxing authority (i.e. Assessor's Office) as a basis to calculate the amount of real estate tax (generally a percentage of the Appraised Value of a property)

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Assignment & Sub-leasing

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When a tenant transfers all of his/her leasehold interests to another person, the lease has been assigned. On the other hand, when a tenant transfers less than all of his/her leasehold interests by leasing them to a new tenant, he or she has sub-leased (or sublet) the property. Assignment and sub-leasing are permitted whenever a lessor does not exclude them in the lease.

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Attachment

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(1) The process of changing personal property to real property. (2) Also, a type of lien whereby real or personal property is legally seized in a lawsuit by levy or judicial order, and is held in court custody as the security for satisfaction (or payoff...) of a judgment. This lien is created by operation of law (not by private agreement).

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Avulsion

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The "sudden" loss of land by an act of nature (i.e. the ocean washes away the waterfront during a typhoon)

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Balloon Payment

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(also called a partially amortized loan) A final payment on a loan in which the final payment on the loan is substantially larger than the previous installment payments, and this final payment repays the debt in full

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Bargain and Sale Deed

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A deed that states consideration and conveys all the grantor's interest in the property, but does not include warranties regarding the title to the property

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Beneficiary

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A person who receives benefits from the gifts or acts of another, in example is designated to receive he proceeds from a will, insurance policy, or trust (also see Deed of Trust as it relates to beneficiary)

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Bill of Sale

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Transfers title to personal property in a transaction (i.e. owner selling the washer and dryer to the buyer)

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Building Codes

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Rules established by local, state, or municipal governments to regulate building and construction standards. Codes are designed to provide standards to safeguard the health, safety and welfare of the public, as well as controlling design, construction, quality, use, occupancy, location and maintenance of structures. Building codes are an exercise of the state's Police Power (these can restrict an owner's use of his property)

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Bundle of Rights

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Possession (right to occupy), enjoyment (right to possess without interference), disposition (right to sell or give away), control (right to use within limits of the law) and exclusion ( right to keep other people from using) DEEPC

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Buy-down Mortgage

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Usually someone other than the borrower pays interest subsidy to a lender; the loan rate is reduced for the borrower for the first couple of years. The interest increases in the future

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Caveat Emptor

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Let the "buyer beware". Buyers should check records on property for any problems and physically examine (or have property examined by an inspector) to ensure everything is okay

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Chain of Title

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A record of property ownership connecting the present owner to the original source of title

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Chattels

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An item of tangible personal property (transferred by a bill of sale)

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Check

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24 mile square area used in the government survey system of land description

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Clear Title

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The title to a property that looks good and is good

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Clouded Title

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The title to a property that looks bad and is bad; non-marketable title

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Codicil

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An amendment to a will

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Color of Title

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The title appears to be good, but has undiscovered problems

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Community Property

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Property brought into the marriage or inherited during the marriage is separate. Property acquired during the marriage is community property

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Concurrent Estate (Concurrent Ownership)

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Ownership by two or more persons at the same time, as in joint tenancy, tenancy by entireties, tenants in common, or community property owners

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Condemnation

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The process by which property is acquired through Eminent Domain. To take property from an owner, the government must; Demonstrate that the taking is for the public good, compensate the owner; permit due process for the contentuous owner

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Condominiums

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An ownership wherein each owners owns fee simple title to his/her unit and pays his/her own taxes and mortgage payments. the common elements (i.e. pool, hallways, etc.) are owned as tenants in common. Each owner pays homeowner association dues (HOA Dues) for the common areas. A Master Deed or Declaration is recorded to show all boundaries of individual units

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Constructive Eviction

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A natural event that makes property uninhabitable

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Contentuous

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Inclined or showing an inclination to dispute or disagree even to engage in law suits; involving or likely to cause controversy

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Contract for Sale (Purchase Agreement or Sales Contract)

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A contract that has been accepted and signed by the seller (all parties) and delivered to the buyer

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Conventional Life Estate

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One that is based upon the property owner's life

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Cooperatives

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The Cooperative owns the property, while the members own stock in the Cooperative. As stockholders, the members acquire a long-term lease (Proprietary Lease) and make monthly rental payments to the co-op. A common problem with Cooperatives is that if many members cannot make their rental payments, the co-op cannot pay mortgages and taxes and could lose the property through foreclosure

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Corporation

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A legal taxable entity created by law and considered as an individual "person". A corporation is granted a corporate charter that permits the corporation to buy, sell, own and function as an entity. All business is conducted under corporate policy. The most common types of corporations are C-Corporations and S-Corporations

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Cost Approach

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A property appraisal approach based on the improvement's reproduction cost or replacement cost

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Curtesy

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A husband's interest in the wife's property

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Deed of Trust (Trust Deed)

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A legal document in which naked title to a property is transferred to a third party trustee as security for an obligation owned by the borrower (trustor) to the lender (beneficiary). The difference between a mortgage and a Deed of Trust is that the Deed of Trust involves 3 parties instead of 2

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Deed Restrictions

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Conditions and/or limitations placed in a deed by the owner (grantor) when property is transferred (i.e. sold, gifted, etc.) to another party

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Defeasance Clause

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A clause used in leases or mortgages to cancel (or "defeat") a certain right upon the happening of a specified condition. A defeasance clause typically found in mortgages provides that if the borrower pays the debt when due, the mortgage is thereby canceled, vesting title in the mortgagor (borrower) and removing title from the mortgagee (lender)

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Demise

Back 63

A conveyance of a less than freehold estate or lease interest in real property for a certain number of years, for life or at will; most commonly an estate for years, as in a lease

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Descent

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Rules used by state law to determine how title to a property will pass if the owner died without a will

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Designated Agency

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A type of representation whereby the broker gives written permission to his licensee to represent a party separate and apart from all other affiliated licensees in the company, thereby eliminating dual agency. In this type of representation, a single designated agent cannot be a designated agent for both parties in the same transaction. If one person is representing both parties, it will still be a dual agency.

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Devise

Back 66

The transfer of real property through a will

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Dowry

Back 67

A wife's interest in the husband's property

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Dual Agency

Back 68

Representation whereby the broker (or via his salesperson) represents both principals in the same real estate transaction. Oral disclosure is required "immediately upon its occurrence" and written disclosure is required "no later than the offer to purchase". The broker does not advocate or advise the parties as to offers. Anything the broker "knew or should have known" is his duty to the principal

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Due-on-sale Clause (alienation clause)

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A clause that accelerates the payment of the mortgage debt when the property is sold. This clause is found in most mortgage loans

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Durability

Back 70

One of the physical characteristics of real estate

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Earnest Money

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A cash deposit of a prospective purchaser of real property as a good-faith intention to complete the transaction

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Easement in Gross

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Not appertaining to any one parcel of property, owned by a person or company (i.e. utility company may own the strip along residential frontage, and use it for sewer access and utility poles). They are usually commercial in nature and may be sold to others

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Easement

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The right to use another's land

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Economic Obsolescence

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A specific type of situation that negatively affects the economics of an area, and is external to the property. An example would be the relocation of a major industry that reduces the value of the property (see external obsolescence)

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Emblements

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Annual crops on a property raised by the owner (these are generally classified as personal property)

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Eminent Domain

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The right of a government to take property for the "public good/use"

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Encroachments

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The unauthorized physical intrusions of a building or other forms of real property onto an adjoining property - in example, a fence extending over property line into a neighbor's property

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Encumbrance

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A charge, claim, lien, liability or encroachment attached to and binding real property. Also, this is a right or interest in property held by someone other than the legal owner of the property. An encumbrance may lessen the value, obstruct or impair the use of a property (it may not prevent transfer or title in all cases)

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Environmental Protection Agency (EPA)

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Federal Agency created to protect human health and the environment. Involved in air & water pollution, solid-waste management, radiation, pesticides & noise (The EPA authority broadened by the passage of the following more specific laws from 1970-1972: Clean Air Amendments and Resource Recovery Act; Federal Water Pollution Control Act; Noise Control Act; Marine Protection Research and Sanctuary Act; Federal Environmental Pesticide Control Act). (1980: Comprehensive Environmental Response, Compensation, and Liability Act; Safe Drinking Water Act)

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Equal Credit Opportunity Act

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Federal law passed in 1974, to extend credit based on the applicant's ability to repay the loan and without regard to the applicant's race, color, religion, national origin, sex, marital status, age, or receipt of income from public assistance programs (i.e. social security and food stamps)

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Equitable Title

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The (ownership) interest held by a vendee (buyer) under a sales contract, contract for deed, or an installment purchase agreement. Through the vender (seller) retains the bare legal title, the vendee (buyer) has the right to demand that legal title be transferred once the purchase price has been paid in full

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Erosion

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The decrease of land by gradual wearing away. The riparian owner loses title to land washed away by erosion

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Escalator Clause

Back 83

A clause in a lease in which the parties agree to an adjustment of rent based on set increases or decreases in taxes, insurance, and maintenance and other operating expenses

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Escheat (reversion of property back to the state)

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In the event of a decedent dies intestate (without a will) and with no heirs, or when a property is abandoned, the property will revert to the state (or county) as provided by state law

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Escrow Account

Back 85

An account to hold other people's money

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Estate at Sufferance

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(Also called Tenancy at Sufferance) A tenant wrongfully remains on the premises against the landlord's wishes, and without landlord's consent. The tenant fails to surrender possession after the lease has expired (lowest estate in real estate)

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Estate at Will

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(Also called Tenancy at Will) A person holds/occupies real estate with the permission of the owner, for an unspecified term or duration. It is identified by its uncertainty of duration and its continuing permissive status. Unlike other leasehold estates, death of either the landlord or the tenant terminates a tenancy at will

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Estate For Years

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A less than freehold estate (leasehold estate) that continues for a definite period of time, with the assumption it will not renew

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Estate From Period to Period

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Also called Periodic Tenancy - A less-than-freehold estate (leasehold estate) that continues for a definite period of time, with the assumption that it will renew. For example, month to month contract

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Estate per autre vie

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An estate that is based upon the life of someone other than the owner

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Estoppel Certificate (Certificate of No Defense)

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Once a mortgagor (buyer-borrower) has executed (signed) an Estoppel Certificate, he cannot thereafter claim that he/she did not owe the amount indicated in the certificate

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Exclusive Listing

Back 92

The seller only appoints one broker to sell or lease property. A) An Exclusive Right To Sell Listing is one in which the seller appoints one broker, and regardless of who procures the buyer or tenant, the broker is entitled to a commission (best listing to have). B) An Exclusive Agency Listing is one in which only one broker is appointed to sell or lease a property. If the owner sells or leases the property himself, no commission is paid to the broker.

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Exculpatory Clause

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A clause that would require the lender to look only to the real property (not personal property) for satisfaction of the debt if there is default or foreclosure

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External Obsolescence (sometimes called locational or environmental obsolescence)

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A loss of value in a property (depreciation) caused from factors that exist outside of the property itself. The loss of value may be caused by environmental, social or economic forces over which an owner has little or no control (EX: Industrial plant built next door to a residence)

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Fannie Mae (Federal National Mortgage Corporation)

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The oldest secondary market for the purchase and sale of existing mortgages, originally government owned and currently privately owned

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Regulation Z

Back 96

requires credit institutions to disclose to borrowers the true cost of obtaining credit so that the borrower can compare the cost of various lenders and avoid the uninformed use of credit. Applies if loan is under 25k or secured by a residence.

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Federal Equal Credit Opportunity Act

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Prohibits lenders from discriminating credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or dependence upon public assistance. Must provide reason for rejection in writing within 30 days

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Fee Simple Estate

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The best (maximum) possible estate one can possess in real property, the most complete and absolute ownership in land and the least limited interest (freehold estate). Fee Simple Defeasible: Fee simple with which can be divested upon a specified condition

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FEMA (Federal Emergency Management Agency)

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Responsible for response and recovery planning for disasters (also mitigation and preparedness of disasters). FEMA was formerly an independent agency, but as of 2003 became a part of the new Department of Homeland Security

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Feudal System (of ownership)

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Ownership of land was vested in the King or Sovereign who allotted select land to noblemen, chiefs, and others. These allotments were revocable and represented only the right to use the land

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FHA (Federal Housing Administration)

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A federal agency that insures loans on real property made by approved lending institutions. FHA does not build homes, nor does it lend money directly

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Fixed Rate Mortgage (Loan)

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A loan with the same rate of interest for the life of the loan

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Fixtures

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An attached or affixed article of personal property. An article of personal property that is viewed as real property due to the method of its attachment. Could also be "built to fit."

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Freddie Mac (Federal Home Loan Mortgage Corporation)

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A secondary market existing for the purchase and sale of conventional loans. Freddie Mac sells MPC's (Mortgage Participation Certificates)

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Freehold Estate

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Ownership interest in real estate for an indeterminable length of time. Examples of freehold estates are fee simple and life estates

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Fructus Industriales

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Annual plantings and harvestable crops (i.e. corn, beans, wheat) requiring cultivation and usually classified as personal property

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Fructus Naturales

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Uncultivated crops and perennial plantings, such as trees and bushes, usually classified as real property

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FTC (Federal Trade Commission)

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Investigates and eliminates unfair and deceptive trade practices or unfair methods of competition, and false or misleading advertising in interstate commerce. The FTC has very broad antitrust and consumer protection authority

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Functional Obsolescence

Back 109

A loss of property value often due to poor or outdated design. Examples are inadequate closet space, poor floor plan - no bathroom on main floor, property does not conform to the neighborhood, or has an inadequate electrical system (Items of functional obsolescence may be curable or incurable)

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General Liens

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Liens that are against the person and all assets (real and personal property) as a result of a lawsuit when the court awards a judgment

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General Warranty Deed

Back 111

Provides the greatest protection for a grantee (buyer). (A seal is affixed to a deed with a glued paper seal)

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Gift Deed

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The consideration in this deed is "love and affection". Because this deed is not backed by valuable consideration, the recipient of the gift deed may not be able to enforce against the grantor certain promises or agreements contained in the deed. Usually, an attorney-in-fact is not authorized to execute a gift deed. Gift deeds usually take the form of Sheriff's Deeds.

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Ginnie Mae

Back 113

A government agency of the Department of Housing and Urban Development (HUD) that purchases mortgages to make capital available to lending institutions. As a government agency, Ginnie Mae is limited to the purchase of FHA and VA mortgages

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Grant Deed

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The grantor warrants that they have not previously conveyed the estate being granted, and that they have not encumbered the property (except as noted in the deed), and that they will convey any title to the property that they may acquire later

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Grantee (Buyer)

Back 115

This term is used when referring the Deeds. The Buyer receives the Deed from the Seller

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Grantor (Seller)

Back 116

This term is used when referring to Deeds. The Seller grants the ownership to the Buyer. ONLY the Grantor signs a Deed.

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Gross Lease

Back 117

A lease in which the tenant pays a fixed amount of rent and the landlord pays taxes, insurance, and other charges. this is also called "fixed" or flat fee lease

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Graduated Lease

Back 118

The cost of rent goes up at regular intervals

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Ground Lease (land lease)

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A lease of land alone. This is a long terms lease, usually 99 years. The tenant may build on the land with a ground lease, but property is still the landlord's. Whatever is built on the property by the tenant, is considered a trade fixture, meaning it is attached, but not appurtenant

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Habendum Clause

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This clause is found in a DEED and begins with the words "to have and to hold. It defines ownership taken by the Grantee (Buyer)

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Heterogeneous (Uniqueness)

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A physical characteristic of real estate referring to the fact that each piece of land, each building and each house are said to be a different piece of real estate. No two are exactly the same

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Homestead

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Provides a protection against unsecured creditors. Will not allow an unsecured creditor to force the sale of your property and be entitled to all the proceeds of the sale

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Immobility

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A physical characteristic of real estate referring to the fact that real estate cannot move from one place to another

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Inchoate

Back 124

An interest that is incomplete and imperfect, that has begun but has not been completed (i.e. mechanic's lien that has not yet been filed, but will take effect when filed)

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Income Approach (to appraisal)

Back 125

An approach to real property appraisal as determined by the amount of net income the property will produce over its remaining economic life

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Income Tax Lien

Back 126

Government charge on a property since income tax was not paid

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Index Lease

Back 127

A lease that requires adjustments in rent based on some type of price index such as cost of living. Usually the rent is adjusted upward

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Intestate

Back 128

Dying without a will. Property passes to the decedent's heirs according to the laws of descent in the state where the real property is located

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Inverse Condemnation

Back 129

Forcing the state to buy an owner's property if government action has forced loss of value or inability to use the property

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Involuntary Lien

Back 130

A lien created by operation of law (i.e. real property tax lien, judgment lien, or mechanic's lien)

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Joint Tenancy

Back 131

An estate in real estate that is owned by two or more persons, all owning equal shares with rights of survivorship. When one owner dies, his/her interest passes to the other joint tenants, and NOT to his/her heirs. Joint tenancy has unity of title, time, interest and possession

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Judgment Lien

Back 132

Loss in a lawsuit resulting in charges being brought against everything you own

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Leased Fee

Back 133

The interest and rights that a landlord (lessor) has in leased real estate. The landlord has the right to receive rental income and to possess the property at the end of the lease.

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Leasehold (less-than-freehold estate)

Back 134

The interest and rights that a tenant (lessee) has in real estate, i.e. the right to possession. A leasehold contains the covenant of "quiet enjoyment"

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Lessee

Back 135

Tenant

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Lessor

Back 136

Owner/landlord

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License

Back 137

A privilege to use the land of another for a specific purpose. They may not be assigned and can be terminated at any time (i.e. a hunting or fishing license)

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Life Estate

Back 138

An estate in which the quality of ownership is based upon a life. Life Estate in Reversion - the property is to return to the grantor or to the grantor's heirs; Life Estate in Remainder - the property is to move on to a named third party or their heirs, also a freehold estate

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Littoral

Back 139

Refers to non-flowing water, as the ocean, a pond or a lake

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Marketable Title

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A property is free and clear of problems and can be easily sold, thus giving value to it

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Market Value

Back 141

The most probable price in terms of cash that a property would bring in the open market within a reasonable time, by a buyer who is willing to buy and a seller who is willing to sell, neither being under pressure of having to act, and both having full knowledge of the highest and best use of the property

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Materialman Lien

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A supplier (i.e. lumber yard) delivers materials to be used in construction on your home

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Mechanics Lien

Back 143

A lien filed when a workman does repair or construction work on your home

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Mills

Back 144

A mill is a term to describe a tax rate. A mill is equal to one tenth (110) of a penny. In example: If the tax rate is 50 mills, then the tax rate would be .05. To calculate the annual tax on a property assessed at $65,000 and with a tax rate of 50 mills, one would multiply the assessed value by .05 (65,000 x .05 = 3,250)

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Mortgage Lien

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A bank loan taken out to purchase property

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Net Lease ("Single Net")

Back 146

A lease in which the tenant pays rent, utilities, and some or all of the landlord's expenses

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Net-Net Lease

Back 147

The tenant in this lease, pays rent, utilities, taxes, and insurance

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Net-Net-Net Lease

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The tenant in this lease, pays rent, utilities, taxes, insurance and maintenance

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Net Listing

Back 149

An employment contract in which the broker receives a commission all excess monies over and above the minimum sales price agreed on by broker and seller. This type of agreement is illegal in most states. For the Real Estate Exam, it is simply illegal

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Non-conforming Use

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The permitted use of a real property that was lawfully established at the time it was originally constructed, but no longer conforms to the current zoning law

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Non-disturbance Clause

Back 151

A clause requiring that the tenant cannot be disturbed if the property is foreclosed upon

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Non-freehold Estate

Back 152

Can be measured in calendar time (leasehold)

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Novation

Back 153

The substitution of a new obligation for an old one (i.e. new contract replaces an old one, thereby liability of the original party is removed; liability now is with the new party)

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Offer to Purchase

Back 154

When a contract has been prepared and signed by the buyer only

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Oil and Gas Lease

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Landlord grants the sole and exclusive right for the tenant to extract oil and/or gas from beneath the surface of the land. Such a lease is generally for a specified term of years and is subject to a payment of royalties in the event of production

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Open Listing

Back 156

This type of listing is not used in the MLS. The seller (or landlord) hires a broker, but reserves the right to appoint other brokers, as well as market the property himself. Only the property who is the procuring cause of the sale or lease receives a commission

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Open-end Mortgage

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A loan in which the borrower is given a limit up to which he may borrow, with advances given in increments which are secured by the same mortgage

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Option

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A written agreement (contract) to keep open an offer to sell or lease real property, for a set period of time. An option only creates a contractual "right"; it does not give the optionee any estate in the property. Some type of consideration is given to the owner for the period of time allowed the buyer. When the option is signed, the owner does not sell, nor does the buyer purchase the property. The owner, however, is obligated to sell if given notice by the buyer within the agreed upon period of time; but the buyer is not obligated to purchase. An option is a contract signed by two parties, but with only one party (the owner) promising to perform if the other party acts, thereby making this a unilateral agreement.

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Package Mortgage

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Financing whereby the loan for the purchase of a a home is also secured by personal property such as an appliance or a vehicle

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Parol Evidence Rule

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States that oral agreements, promises or inducements made by the parties prior to the entering into a written contract may not be used in court to dispute or contradict some written provision expressed in the contract

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Partnership

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A business organization where two or more persons carry on a business as co-owners and share the business's profits and losses.

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General Partnership

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A partnership in which all partners participate in the management and may be held liable for all losses connected with the partnership.

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Limited Partnership

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A partnership that must have at lease one general partner and the other partners are silent partners or limited partners. Limited partners cannot be held liable for any debts beyond their own personal investments

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Percentage Lease

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The tenant pays a flat fee plus a percentage of the monthly or annual gross sales made on the premises

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Percolation Test

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Soil test to determine water absorption and drainage ability of the ground; also called a "perk" test. Used for the installation of septic tanks or injection wells for sewage treatment plants

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Personal Property

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All tangible property that is not classified as real estate. Sometimes referred to as Chattels (identifiable tangible objects that are considered by the general public as personal - transferred by a bill of sale, unlike the deed which transfers real property)

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Physical Depreciation or Deterioration (Obsolescence)

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The loss of property value often due to normal wear and tear from wind, snow, etc. (paint job needed, new roof needed)

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Planned Unit Development (PUD)

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A developer has more freedom in the number of houses built in a particular area. Usually, homes are more clustered, leaving greater open space for recreation facilities or parks and green space (whereas a regularly zoned subdivision to be developed, has a restriction on the average maximum number of houses per acre)

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Points

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A point is a 1% fee of the loan. The points are typically paid by the borrower. Lenders charge fees (loan origination fees) to originate a loan. Another use of points is to raise the yield on the loan (the profit the lender will actually make) by charging "discount points." In this case the discount points are actually prepaid interest.

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Police Powers

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Government powers that give state and local governments authority to pass laws to protect the pubic health and safety, and enforce those laws. The laws would include, zoning laws, building codes, and environmental protection laws

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Primary Market

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The market in which lenders originate loans and make funds available directly to borrowers. Examples of primary source lenders are savings banks, commercial banks, credit unions, mutual savings banks, life insurance companies, pension funds, individual (sellers of homes sometimes provide loans to buyers), mortgage bankers, and mortgage brokers (who do not make loans, but act as intermediaries between borrowers and lenders. They take the loan and "shop" for the lender. Mortgage brokers to do not service the loan once the loan is made."

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Principle of Laches

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Legal doctrine used to bar a claim that is asserted AFTER the passing of a statutory period of time

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Protection Clause (aka Safety or Extender Clause)

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A clause which entitles the broker to a commission for a set period of time after a listing has expired, if the property is sold to a party which the Broker procured during the listing period

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Quiet Title Action

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Is generally used to extinguish easements; remove any clouds in title; release a homestead, dower or curtesy interest; transfer title without warranties (as in a quit claim deed); clear tax titles; or simply release an interest when the grantor may have some remote claim to the property

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Quit Claim Deed

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A deed of conveyance that functions only as a release of whatever interests the grantor has in the property. Grantors therefore do not warrant title or possession. Grantors only pass whatever interest they may have, if any.

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Range line

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A strip of land measuring six miles wide, running in a north-south direction, and used in the government survey system

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Real Estate

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The land and all improvements on and to that period of land (including rights, privileges, and improvements)

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Real Estate Settlement and Procedures Act (RESPA)

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A Federal Law (1974) that requires all closing/settlement costs to be disclosed when a 1-4 family unit dwelling (residential only) is purchased, and financed by a federally related mortgage loan (RESPA does not apply to the purchaser of a property purchased owner-finance, or a property more than 25 acres, contracts for deed (installment contracts), or home improvement loans). It only applies to first mortgages.

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4 Requirements of RESPA

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1) Special Information Booklet must be given to borrower

2) Good-faith Estimate of Closing Costs must be given to borrower within 3 business days of the completed application for the loan

3) Uniform Settlement Statement must be used on which to prepare the closing (HUD form-1)

4) Kickbacks are prohibited, i.e. lender refers client to an insurance agent and receives a kickback

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Reality of Consent

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A contract was entered into without duress, menace, misrepresentation, or fraud. The contract is voidable by the innocent party, but valid as to he wrongdoer

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Reappraisal Lease

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This lease states that at a future date a new appraisal will be done. If the appraisal is higher than the last appraisal, the rent will go up accordingly

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Recapture Lease (recapture clause in a lease)

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Usually found in percentage leases, giving the landlord the right to recapture the premises, if the tenant does not maintain a specified minimum amount of business

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Reconciliation

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The final step in the appraisal process. A final value conclusion should always be based on the approach that was supported with the most reliable information

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Reverse Annuity Mortgage

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A mortgage in which a lender makes payments to the borrower creating a mortgage over time. The interest accrues, but repayment isn't required until the buyer sells, dies, or moves out of the property

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Riparian Rights (water rights)

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Along a navigable river (commercial traffic) one owns to the water's edge; along a non-navigable stream one owns the land to the center of the stream (the government owns the water). Riparian has to do with the flowing or moving waters.

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Sale and Leaseback

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A property owner sells the property an an investor or lender and, at the same time, leases it back

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Sales Comparison Approach (to appraisal)

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This appraisal approach is a comparative analysis of recent sales prices of properties similar to the subject property, after adjusting for seller concessions, time financing and any differences in the properties used as comparables

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Section

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A land area of one square mile or 640 acres in the government survey method (1/36th of a Township)

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Severalty (Estate in Severalty)

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Ownership of property by one person alone ("sole ownership") rather than held jointly with another

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Severance

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Property that was once considered real property, but has been detached, and thereby became personal property

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Sheriff's Deed

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A deed given by the court to sell a property due to a judgement against it. (Gift deeds usually take the form of a Sheriff's Deed)

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Special Assessment (or special tax)

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A tax or levy usually imposed against only specific pieces of real estate that will benefit from a proposed public improvement. These taxes are levied for local improvements such as streets, curbs, sewers, sidewalks, irrigation, drainage, parks and recreational facilities

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Special Warranty Deed

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The grantor ONLY warrants or guarantees the title against defects during the period of his or her ownership and DOES NOT warrant against defects that existed before the current owner's (grantor's) time

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Specific Liens

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Liens that are applied to a specific piece of property and affect only that piece or property

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Statute of Frauds

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A State Law which requires that certain contracts be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable

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Statue of Limitations

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A Law pertaining to the period of time within which certain actions must be brought to court. After the time period expires, the claim may not be enforced in court

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Statutory Redemption

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The borrower's right to redeem property after the foreclosure sale

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Stigmatized Property

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Property that has been involved with some undesirable event, such as a crime or suicide

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Sub-Agency

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A relationship whereby one brokerage "represents" the principal of another brokerage. This relationship must be on a written document. The assisting brokerage is only representing the principal of another, and is NOT licensed with the other company. The sub-agent is allowed to make all of the disclosures for the listing company. For this reason, companies may not be as inclined to allow this type of representation. It is important that the listing agent and the sub-agent communicate and are both clear on the details (disclosures) of the property being sold.

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Subordination

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A written agreement between lien holders to change the priority of their liens (i.e. a second-mortgage which is larger in amount than a first mortgage may change positions)

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Sub-surface Rights

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Rights a property owner has in any material below the surface of the land (i.e. mineral rights)

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Surface Rights

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Rights a property owner has in any material on the surface of the land

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Survey

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A method of measuring the size and shape of a parcel of land to identify its boundaries

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Syndication

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This is when many investors bring in additional investors as a means of raising money and spreading the risk of the investment

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Tax Rate

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A rate that is applied to the assessed value of a property to establish the amount of annual property tax

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Tenancy At Sufferance

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Without landlord's consent, a tenant wrongfully holds over (remains in the premises) after the expiration of a lease. Tenancy at sufferance is the lowest estate in real estate, and does not require the landlord to give notice of termination in order to evict the tenant

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Tenancy at Will

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The owner gives permission to a person to hold or occupy real estate, for an unspecified or uncertain period of time. Unlike other leasehold estates, a tenancy at will is terminated by death of either the landlord or the tenant, or by the sale of the property

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Tenancy By the Entirety (Entireties)

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A tenancy between a lawfully married husband and wife, which places all title to property into the marital unit. Both spouses have an equal, undivided interest in the whole property. Upon the death of one spouse, the survivor succeeds to the entire property to the exclusion of heirs and creditors of the deceased spouse and without the need for probate

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Tenancy in Common

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Concurrent ownership of property between two or more persons, with each person having an undivided interest in the whole property. Unlike joint tenancy, there is not right of survivorship in tenancy in common. If one of the co-tenants dies, the interest passes to his/her heirs or beneficiaries. The property interest of a tenant in common is subject to probate

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Term Loan

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Normally a short-term mortgage securing a loan that requires interest only payments until the maturity date, at which time the entire principle is due and payable (also referred to as a straight loan)

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Testate

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Dying with a will

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Testator

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A person who leaves a last will and testament

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Testimony (Testimonium) Clause

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Clause found in a legal document, beginning with "In Witness Whereof..." and then citing the act and date of execution of the document (this clause may be omitted as long as the grantor signs the deed)

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Time-Share (Referred to as 1-52 or owned 1 week out of the year)

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Persons can own or lease a specified time interval in a property. If owned, it is in fee simple and the purchaser owns the unit for the same period of time each year in perpetuity. If leased, the owner has the right to use the property for the same time period each year for a certain number of years. After that period, any rights held by the owner end

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Title Insurance

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A standard title insurance policy covers only things that appear on public record. An extended title insurance policy also covers things that don't appear on public record

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Township

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An area used in the government (rectangular) survey system of and description, that is 6 miles square; contains 36 sections, each of which is one mile square

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Trade Fixture

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Considered personal property and is defined as the property of a tenant that is installed and is necessary for their trade or business. A trade fixture may be removed by the tenant at the end of the lease term (if not removed before the expiration of the lease, the trade fixture becomes the property of the landlord at the end of the lease term)

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Transaction Brokerage

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Non-agency (neutral) representation whereby the Broker (or via his salesperson_ does not represent the parties, but serves as a "facilitator", making required disclosures and giving required notices, as well as seeing to all necessary contracts and paperwork needed to prepare for closing. The broker does not advocate or advise the parties as to offers. Anything in which the broker has "actual knowledge" or "notice" of is his duty to the client

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Truth-in Lending Act

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(National Consumer Credit Protection Act; went into effect July 1, 1969 under Reg Z of the Federal Reserve Board). TIL is to ensure that borrowers and customers who need credit are given important information regarding the cost of credit/borrowing so that they may compare the different credit terms available to them. This Act is for disclosure purposes, i.e. in advertising

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Uniform Vendor and Purchaser Risk Act

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A law adopted in many states regarding which party in a purchase agreement (sales contract), bears the loss if the property is damaged or destroyed before legal title passes to the vendee (buyer). Unless otherwise stated in the contract, the vendor (seller) will be liable for damages to the property prior to legal title being passed to the vendee (buyer), or until the buyer takes possession of the property

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VA (Veteran's Administration Loan)

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Based on a "VA Guarantee" or entitlement. A mortgage assistance program (also called GI loan) for eligible veterans and un-remarried widows or widowers of veterans whereby partially guaranteed loans may be obtained for purchasing or construction of home or refinancing mortgage debts

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Valid

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Enforceable (With regard to a contract - contains all of the essential elements)

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Variance

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An exception to zoning laws. Permission is obtained from government zoning authorities to build a structure or conduct a use that is not allowed by the current zoning laws

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Void

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Having no legal force or binding effect; unenforceable. A void agreement is not a contract at all

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Voidable

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An agreement that has been signed by both parties, yet may be rejected by one of the parties (i.e. wherein breach occurs regarding fraud or duress)

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Voluntary Lien

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This is a mortgage lien (all others are involuntary)

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Zoning

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The regulation of uses and structures within designated areas or zones. Zoning laws affect things like, use of the land, lot sizes, structures allowed, density, building heights, set-backs. Zoning laws are enacted through the exercise of police powers and are upheld as long as they are for public, health, safety, morals and general welfare of an area

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Typical Zoning Classifications

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1) Residential

2) Commercial

3) Industrial

4) Special Purpose (motels, schools, mobile home parks)