Real Estate Glossary

A.L.T.A. (American Land Title Association)
An organization composed of title insurance companies, which has adopted certain insurance policy forms to standardize coverage on a national basis.

Acceptance
A voluntary and unqualified agreement to the terms of an offer.

ARM (Adjustable Rate Mortgage)
A financing technique in which the lender can raise or lower the mortgage interest rate according to a set index, such as six-month Treasury bills.

Agent
An authorized person who manages or transacts business for another. Laws governing real estate--especially relating to agents--vary considerably from state to state. While some standardization has been achieved, it is best to check the particulars in each state.


      

Buyer Agent:
An agent who represents the buyer in a real estate transaction. A buyer agent may be paid by the buyer, seller, or listing agent at closing, provided all parties consent.

Dual Agent:
An agent representing both parties in a transaction. In almost every state, dual agency is illegal and unethical without the written consent of both the buyer and the seller.

Listing Agent:
The agent who represents the seller.

Selling Agent:
The agent who obtains a buyer. A selling agent may represent the buyer, or may be a subagent of the seller.

Subagent:
An agent of a person who is already acting as an agent for a principal.


Agency
A relationship in which one party (principal) authorizes another party (agent) to act as the principal's representative in dealing with third parties.

Amenities
Features that enhance the enjoyment and value of a property, but are not necessary for its intended use.

Amortize
To pay a debt in equal periodic amounts until the total amount, including any interest, is paid.

Appraisal
An opinion of value by a qualified party based on a factual analysis of the property.

Appreciation
An increase in value of a property due to positive changes or the elimination of negative elements in the surrounding area.

Assessment
An official valuation of property for tax purposes. Payments made by condominium or cooperative owners for their share of building maintenance expenses.

Assumption Clause
A buyer takes over the existing loan and agrees to be liable for the repayment of the loan.

Balloon Payment
Under an installment loan, a final payment that is substantially larger than any other payment and repays the debt in full.

Beneficiary
The lender under a Deed of Trust.

Beneficiary Statement
A statement of the unpaid balance of a loan and the condition of the debt, as it relates to the Deed of Trust.

Broker
An independent business person, who sets real estate office policies, hires employees, determines their compensation, and supervises their activities. (also see Real Estate Broker)

C.C.& R.'s. (Covenants, Conditions and Restrictions)
A term which is used by homeowners associations to describe the restrictive limitations of property use.

C.L.T.A. (California Land Title Association)
A trade organization of California's title companies.

CRS (Certified Residential Specialist)
A professional designation awarded to experienced agents who complete an advanced course of study in residential real estate and demonstrate proficiency in sales and production. CRS Designees are members of the Residential Sales Council, a not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS®.

CLO (Computerized Loan Origination)
A computer network of major lenders that allows agents to initiate mortgage applications in their office. HUD has approved the procedure as long as 1) full disclosure is made of the fee; 2) multiple lenders are displayed on the computer screen to give borrowers a basis for comparison; 3) the fee charged is a dollar amount rather than a percentage of the loan.

Closing
The point at which documents are executed and recorded and real estate formally changes ownership.

Closing costs
Closing costs are fees paid for services associated with a home's closing such as loan fees, appraisal fees, title insurance, recording fees, deeds, etc.

CMA (Comparative Market Analysis)
A method of determining the value of a property by comparing the prices paid for similar properties.

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Code of Ethics
A written standard of ethical conduct embraced by the NATIONAL ASSOCIATION OF REALTORS®, a trade organization of more than 700,000 members representing all branches of the real estate industry.

Commission
Compensation paid to a real estate agent (real estate broker) as compensation for his services. The amount is negotiable by law.

Condominium (Condo)
Individual ownership of a portion of a building, with common areas shared by all owners. Maintenance fees called "assessments" are paid to the condominium association to maintain, repair, or improve the property.

Conventional Loan
A fixed-rate, fixed term loan that is not insured by the government.

Co-operative (Co-op)
An arrangement in which a corporation made up of residents owns a building. The buyer owns a proprietary lease, rather than real property, and a corresponding number of shares in the corporation. Difficult to obtain financing as there is no individual ownership of each unit.

Counter Offer
A new offer as to price, terms, and conditions, made in response to a prior, unacceptable offer. A counter offer terminates an original offer.

Deed
A legal document transferring ownership of a property from one party to another.

Deposit Receipt
Also known as a sales contract; the primary document used to present an offer on real property.

Disclosure
Revealing what previously was private knowledge. Any statement of fact that is required by law.

Down Payment
A percentage of the purchase price the buyer pays in cash.

Earnest Money
A buyer's partial payment to the seller as a show of good faith in completing the transaction.

Equity
The difference between the current market value of a property and the claims (liens) that exist against it.

Escrow
The closing of a real estate transaction through a neutral third party who holds funds and/or documents for delivery after the provisions of an agreement have been carried out.

Escrow Instructions
Written directions, signed by a buyer and seller, detailing the procedures necessary to close a transaction and directing the escrow agent how to proceed.

Estate in Fee
The most complete form of ownership of real property; a freehold estate that can be passed by descent or will after the owner's death; also known as estate of inheritance or fee simple estate.

Exclusive Listing
A written agreement in which the seller appoints only one agent to market the property for a specific period of time. If the owner sells the property himself, he is not required to pay a commission.

Exclusive Right of Sale Listing
A written agreement between an agent and a property owner stating that the owner will pay a commission to the agent if the property is sold during a specific time period--whether or not the agent is responsible for the sale.

Fannie Mae (Federal National Mortgage Association)
Fannie Mae purchases home mortgages, thus serving as a source of funds for mortgage lenders. It is a privately owned corporation whose shares are traded on the New York Stock Exchange, but it is subject to the strict supervision of the secretary of the U.S. Department of Housing and Urban Development (HUD).

Federal Fair Housing Law Refers to Title VIII of the Civil Rights Act, and stipulates that discrimination based on race, color, sex, familial status, handicap, religion, or national origin is illegal in connection with the sale or rental of most dwellings. 

FHA (Federal Housing Administration)
A federal agency established to improve housing standards and conditions. The FHA provides mortgage insurance to approved lending institutions.

Freddie Mac (Federal Home Loan Mortgage Corporation)
A federally chartered corporation established to purchase mortgages in the secondary, or resale, market. Freddie Mac's policies are designed to serve the needs of savings and loan associations. It is subject to oversight by the U.S. Department of Housing and Urban Development (HUD).

Guaranty
A pledge made by one person (the guarantor) to ensure that another person (the obligor) will fulfill an obligation to a third party (the obligee).

HUD (U.S. Department of Housing and Urban Development
A federal department active in a variety of national housing programs including urban renewal and public housing.

Implied Contract
Agreement is shown by acts and conduct rather than words.

Improvements
Additions intended to increase the value of a property.

Inspection
An examination of a property by the buyer, agent, title insurance company, or other interested party.

Land Contract
A contract for the sale of a property where the seller gives up possession, but retains the title until the purchase price is paid in full; also known as a Contract of Sale or Agreement of Sale.

Legal Title
Title that is complete and perfect regarding right of ownership; may be held by a trustee under a deed of trust.

Lien
An encumbrance against a property for money as security for the payment of a debt.

Liquidated damages
A definite amount set forth in a contract to be paid by the party breaching the contract. The amount must be a reasonable estimate of damages in order to be enforceable.

Listing
A written agreement between a property owner and a real estate broker authorizing the broker to find a buyer or tenant for a specific property at a certain price and terms in return for a fee.

Market Value
The highest price a property will command after a reasonable amount of time on the open market, while the buyer and seller are fully informed.

MLS (Multiple Listing Service)
A means by which agents are informed of the properties offered for sale by other agents.

Mortgage
A legal document pledging property as security for the payment of a loan.

Mortgage Insurance
An insurance plan that protects the lender if the borrower does not repay a loan. Mortgage insurance is required when a home buyer makes less than a 20% down payment at the time of purchase. Private mortgage insurance (PMI) covers conventional (fixed-year, fixed-rate) loans. The Federal Housing Administration charges a mortgage insurance premium (MIP) on FHA loans.

NATIONAL ASSOCIATION OF REALTORS ®
A trade organization serving over 700,000 members from all branches of the real estate industry. Members subscribe to a strict Code of Ethics which governs their conduct.

Note
Evidence of a debt, usually provides for interest and is secured by a mortgage or trust deed.

Offer
A proposal to purchase property at a specified price and terms.

Open House
The common real estate practice of showing "For Sale" homes to the public during established hours.

Origination Fee
A lender's charge for establishing and processing a new mortgage loan. It is generally computed as a percentage of the loan and may be tax deductible.

Owner of Record
The person named in the public record as the owner of a property or mortgage.

Points
A one-time charge paid to the lender for issuing a loan. Each point equals one percent of the loan amount and is used to obtain revenue in addition to the interest rate.

Principal
The amount of money upon which interest is paid.

Qualified Buyer
A buyer who has demonstrated the financial ability to afford the asking price of a home. Prequalifying with a lender can expedite the home buying transaction.

Real Estate Agent
Someone licensed by the Department of Real Estate, holding either a broker or salesperson license, who negotiates sales for other people.

Real Estate Broker
Someone holding a broker license and permitted by law to employ those holding a salesperson license, who may negotiate sales for other people.

Real Property
Land, anything affixed to the land, anything appurtenant to the land, anything immovable by law.

REALTOR®
A registered trade name that may only be used by members of the NATIONAL ASSOCIATION OF REALTORS®, an organization with over 700,000 members who represent all branches of the real estate industry. REALTORS® subscribe to a strict Code of Ethics which governs their conduct.

Refinance
Obtaining a new loan to pay off an existing loan. Refinancing is a popular practice when interest rates drop.

Residential Sales Council
A not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS®. The Council awards the Certified Residential Specialist (CRS) Designation, to experienced members who have completed an advanced course of study in residential real estate.

Short Sale
When the payoff of a loan that is secured by a property falls short of the balance owed when selling a property. A short sale requires lenders approval in order to release the security. But, in many cases the borrower still owes a deficient balance to the lender.

Subject-To Clause
A buyer takes over the existing loan payments, but assumes no personal liability for the loan.

Swing Loan
A short-term loan used to enable the purchaser of a new property to buy that property on the strength of the equity from the property the purchaser is now selling.

Timely Manner
An act must be performed within certain time limits described in the contract.

Title
Evidence of land ownership.

Title Insurance
An insurance policy that protects against losses arising from title defects such as forged or misfiled documents

Title Search
An examination of the public records to determine whether the current title is clear or defective.

Town House
Also known as a row house, generally refers to a type of dwelling having two floors, with the living area and kitchen on the first floor, and the bedrooms on the second. Town houses share a common wall between units.

Trust Deed
A document where title to property is transferred to a third party trustee as security for a debt owed by the trustor (borrower) to the beneficiary (lender). In California the Trust Deed is used rather than a Mortgage.

Trust Funds
Money received by real estate brokers or salespersons on behalf of others.

Trustee
Holds naked legal title to property as a neutral third party where there is a deed of trust (trust deed).

VA (Veterans Administration)
A federal agency designed to help veterans enter the housing market.

VA Loan
A loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are made to honorably discharged veterans or their unremarried widows or widowers. Such loans require a minimal or no down payment and offer lower interest rates.

Valid
Legally binding.

Value
The power of goods or services to command other goods in exchange for the present worth of future benefits arising from property ownership.

Valuable Consideration
Each party to a contract must give up something to make the agreement binding.

Void
An agreement which is totally absent of legal effect.

Voidable
An agreement which is valid and enforceable on its face, but may be rejected by one or more of the parties.

Walk-Through
A final inspection of a property before it changes ownership.

Wrap-Around Loan
A method of financing where a new loan is placed in a secondary position; the new loan includes both the unpaid principal balance of the first loan and whatever sums are loaned by the lender; sometimes called an All-Inclusive Trust Deed (AITD)