Select
the first letter of the word from the list above to jump to
the appropriate section of the glossary.
Agency
A
relationship between a principal and the principal's agent which
arises out of a contract, either express or implied, written or
verbal, wherein the agent is employed by the principal to do
certain acts dealing with a third party.
Agent
One
who acts for and with the authority of another called the
principal.
Agreement
An
exchange of promises, a mutual understanding or arrangement, a
contract.
ALTA Owner's
Policy
An owner's
extended coverage policy that provides buyers and owners the same
protection the ALTA policy gives to lenders.
ALTA Title
Policy
(American Land
Title Association) A type of title insurance policy issued by
title insurance companies which expands the risks normally insured
against under the standard type policy to include items such as
unrecorded mechanic's liens; unrecorded physical
easements; facts a physical survey would show; water
and mineral rights; and rights of parties in possession, such
as tenants and buyers under unrecorded
instruments.
Amenities
Satisfaction of enjoyable living to be derived from a
home; conditions of agreeable living or a beneficial influence from
the location of improvements, not measured in monetary consideration
but rather as tangible and intangible benefits attributable to the
property, often causing greater pride in
ownership.
Amortization
The liquidation of a financial obligation on an
installment basis; also, recovery over a period of cost or
value.
Amortized
Loan
A loan to be
repaid, interest and principal, by a series of regular payments that
are equal, without any special balloon payment prior to
maturity. Also called a Level Payments Loan.
Annual Percentage
Rate
The relative cost
of credit as determined in accordance with Regulation Z of the Board
of Governors of the Federal Reserve System for Implementing the
Federal Truth in Lending Act.
Appraisal
An
estimate of the value of property resulting from an analysis of
facts about the property. An opinion of
value.
Appraiser
One qualified by education, training and experience who
is hired to estimate the value of real and personal property based
on experience, judgment, facts, and use of formal appraisal
processes.
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Broker
A
person employed for a fee by another to carry on any of the
activities listed in the license law definition of a
broker.
Building
Code
A systematic
regulation of construction of buildings within a municipality
established by ordinance or law.
Building
Restrictions
Zoning,
regulation requirements or provisions in a deed limiting, size and
use of a building.
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CC&Rs
Covenants, conditions and restrictions. The basic
rules establishing the rights and obligations of owners (and
their successors in interest) of real property within a subdivision
or other tract of land in relation to other owners within the same
subdivision or tract in relation to an association of owners
organized for the purpose of operating and maintaining property
commonly owned by the individual owners.
Closing
(1)
The process by which all the parties to a real estate transaction
conclude the details of the sale or mortgage. The process
includes the signing and transfer of documents and distribution of
funds. (2) Condition of description of real property by
courses and distances at the boundary lines where the lines meet to
include all the tract of land.
Closing
Costs
The miscellaneous
expenses buyers and sellers normally incur in the transfer of
ownership of real property over and above the cost of the
property.
Closing
Statements
An
accounting of funds to the buyer and seller separately.
Required by law to be made at the completion of every real estate
transaction.
Commission
An agent's compensation for performing the duties of the
agency; in real estate practice, a percentage of the selling price
of property, percentage of rentals, etc. A fee for
services.
Condominium
An estate in real property wherein there is an undivided
interest in common in a portion of real property coupled with a
separate interest in space called a unit, the boundaries of which
are described on a recorded final map, parcel map or condominium
plan. The areas within the boundaries may be filled with
air, earth, water or any combination and need not be attached to the
land except by easements for access and support.
Contract
An
agreement to do or not to do a certain thing. It must have
four essential elements: parties capable of contracting,
consent of the parties, a lawful object, and consideration. A
contract for sale of real property must also be in writing and
signed by the party or parties to be charged with
performance.
Conventional
Mortgage
A mortgage
securing a loan made by investors without government underwriting,
i.e., which is not FHA insured or VA guaranteed. The type
customarily made by a bank or savings and loan
association.
Conveyance
An instrument in writing used to transfer (convey) title
to property from one person to another, such as a deed or trust
deed.
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Deed
Written
instrument which when properly executed and delivered conveys title
to real property from one person (grantor) to another
(grantee).
Deferred
Maintenance
Existing
but unfulfilled requirements for repairs and rehabilitation. Postponed or delayed maintenance causing decline in a building's
physical condition.
Deposit
Receipt
A term used by
the real estate industry to describe the written offer to purchase
real property upon stated terms and conditions, accompanied by a
deposit toward the purchase price, which becomes the contract for
the sale of the property upon acceptance by the
owner.
Discount
Points
The amount of
money the borrower or seller must pay the lender to get a mortgage
at a stated interest rate. The amount is equal to the
difference between the principal balance on the note and the lesser
amount which a purchaser of the note would pay the original lender
for it under market conditions. A point equals one percent of
the loan.
Documentary
Transfer Tax
A state
enabling act allows a county to adopt a documentary transfer tax on
all transfers of real property located in the county. Notice
of payment is entered on the face of the dead or on a separate paper
filed with the deed.
Dual
Agency
An agency
relationship in which the agent acts concurrently for both
principals in a transaction.
Duress
Unlawful constraint exercised upon a person whereby he or
she is forced to do something against his or her
will.
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Earnest
Money
Down payment made
by the purchaser of real estate as evidence of good faith. A
deposit or partial payment.
Easement
A
right, privilege or interest limited to a specific purpose which one
party has in the land of another.
Equity
The
interest or value which an owner has in real estate over and above
the liens against it.
Escrow
The
deposit of instruments and/or funds with instructions with a third
neutral party to carry out the provisions of an agreement or
contract.
Escrow
Agent
The neutral third
party holding funds or something of value in trust for another or
others.
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Fair Market
Value
This is the
amount of money that would be paid for a property offered on the
open market for a reasonable period of time with both buyer and
seller knowing all the uses to which the property could be put and
with neither party being under pressure to buy or
sell.
Fiduciary
A
person in a position of trust or confidence, as between principal
and broker; broker as fiduciary owes certain loyalty which cannot be
breached under the rules of agency.
Fiduciary
Duty
The duty owed by
an agent to act in the highest good faith toward the principal and
not to obtain any advantage over the latter by the slightest
misrepresentation concealment, duress or pressure.
First
Mortgage
A document
pledging collateral for a loan (See "mortgage") that has the first
priority over all other claims against the property except taxes and
bonded indebtedness. That mortgage superior to any
other.
First Trust
Deed
A document
pledging collateral for a loan (See "trust deed") that has
first priority over all other claims against the property except
taxes and bonded indebtedness. The trust deed superior to all
others.
Foreclosure
Procedure whereby property pledged as security for a debt
is sold to pay the debt in the event of default in payments or
terms.
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Grant
Deed
A limited warranty
deed using the word "grant" or like words that assures a grantee
that the grantor has not already conveyed the land to another and
that the estate is free from encumbrances placed by the
owner.
Grantee
A
person to whom the grant is made.
Grantor
A
person who transfers his or her interest in property to another by
grant.
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Homestead
(exemption) A statutory protection of real property used
as a home from the claims of creditors and judgments up to a
specified amount.
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Impounds
A
trust type account established by lenders for the accumulation of
borrowers funds to meet periodic payment of taxes, FHA mortgage
insurance premiums, and/or future insurance premiums, required to
protect their security. Impounds are usually collected with
the note payment. The combined principal, interest, taxes and
insurance payments is commonly termed a PITI payment.
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Joint
Tenancy
Undivided
ownership of a property interest by two or more persons each of whom
has a right to an equal share in the interest and a right of
survivorship, i.e., the right to share equally with other surviving
joint tenants in the interest of the deceased joint
tenant.
Junior
Mortgage
A mortgage
recorded subsequently to another mortgage on the same property and
made subordinate by agreement to a later-recorded
mortgage.
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Land
The
material of the earth, whatever may be the ingredients of which it
is composed, whether soil, rock, or other substance and included
free or occupied space for an indefinite distance upwards as well as
downwards.
Land
Contract
A contract
used in the sale of real property whereby the seller retains title
to the property until all or a prescribed part of the purchase price
has been paid. Also commonly called a conditional sales
contract, installment sales contract or real property sales
contract. (See also Real Property Sales Contract for statutory
definition).
Lease
A
contract between owner and tenant, setting forth conditions upon
which tenant may occupy and use the property and the term of the
occupancy. Sometimes used as an alternative to purchasing
property outright, as a method of financing right to occupy and use
real property.
Lessee
One
who contracts to rent, occupy, and use property under a lease
agreement; a tenant.
Lessor
An
owner who enters into a lease agreement with a tenant; a
landlord.
Liquidated
Damages
A sum agreed
upon by the parties to be full damages if certain events
occur.
Liquidated Damages
Clause
A clause in a
contract by which the parties by agreement fix the damages in
advance for a breach of contract.
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Market
Value
The highest price
in terms of money which a property will bring on the open market and
under all conditions required for a fair sale, i.e., the buyer and
seller acting prudently, knowledgeably and neither affected by undue
pressures.
Material
Fact
A fact is material
if it is one which the agent should realize would be likely to
affect the judgment of the principal in giving his or her consent to
the agent to enter into a particular transaction on the specified
terms.
Mortgage
An
instrument recognized by law by which property is hypothecated to
secure the payment of a debt or obligation; a procedure for
foreclosure in the event of default as established by
statute.
Multiple Listing
Service
An association
of real estate agents providing for a pooling of listings and the
sharing of commissions on a specified basis.
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Negative
Amortization
Occurs
when monthly installment payments are insufficient to pay the
interest accruing on the principal balance, so that the unpaid
interest must be added to the principal due.
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Offer to
Purchase
The proposal
made to an owner of property by a potential buyer to purchase the
property under stated terms.
Open Housing
Law
Congress passed a
law in April 1968 which prohibits the discrimination in the sale of
real estate because of race, color, or religion of
buyers.
Over-Improvement
An improvement which is not the highest and best use for
the site on which it is placed by reason of excess size or
cost.
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Personal
Property
Any property
which is not real property.
Power of
Attorney
A written
instrument whereby a principal gives authority to an agent.
The agent acting under such a grant is sometimes called an attorney
in fact.
Property
Everything capable of being owned and acquired
lawfully. 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 classified into two groups, personal property and real
property.
Proration
Adjustments of interest, taxes, and insurance, etc., on a
pro rata basis as of the closing or agreed upon date. Fire
insurance is normally paid for three years in advance. If a
property is sold during this time, the seller wants a refund on that
portion of the advance payment that has not been used at the time
the title to the property is transferred. For example, if the
property is sold two years later, seller will want to receive 1/3 of
the advance premium that was paid. Usually done in escrow by
escrow holder at time of closing the transaction.
Proration of
Taxes
To divide or
prorate the taxes equally or proportionately to time and use,
between seller and buyer.
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Quit Claim
Deed
A deed to
relinquish any interest in property to which the grantor may have,
without warranty of title or interest.
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Real
Estate
(See Real
Property)
Real
Property
In the strict
sense, land appurtenances, that which is affixed to the land, and
that which by law is immovable. It usually refers to the
"bundle of rights" inherent to ownership.
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Sale and
Leaseback
A financial
arrangement wherein at the time of sale the seller retains occupancy
by concurrently agreeing to lease the property from the
purchaser. The seller receives cash while the buyer is assured
a tenant and a fixed return on buyer's investment.
Septic
Tank
An underground
tank in which sewage from the house is reduced to liquid by
bacterial action and drained off.
Specific
Performance
An action
to compel performance of an agreement, e.g., sale of land as an
alternative to damages or rescission.
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Tenancy in
Common
Co-ownership of
property by two or more persons who hold undivided interest, without
right of survivorship; interests need not be equal.
Termites
Ant-like insects which feed on wood and are highly
destructive to wooden structures.
Title
Indicates "fee" position or lawful ownership and right to
property. "Bundle of Rights" possessed by the owner.
Combination of elements constituting proof of
ownership.
Title
Insurance
Insurance to
protect a real property owner or lender up a specified amount
against certain types of loss, e.g., defective or unmarketable
title.
Title Insurance
Report
A report which
discloses condition of the title made by a title company preliminary
to issuance of a title insurance policy.
Trust
Deed
Just as with a
mortgage, this is a legal document by which a borrower pledges
certain real property or collateral as guarantee for the repayment
of a loan. However, it differs from the mortgage in a number
of important respects. For example, instead of there being two
parties to the transaction there are three. There is the
borrower who signs the trust deed and who is called the trustor.
There is a third, neutral party, to whom the trustor deeds
the property as security for the payment of the debt, who is called
the trustee. And finally, there is the lender who is called
the beneficiary, the one who benefits from the pledge agreement in
that in the event of a default the trustee can sell the property and
transfer the money obtained at the e sale to the lender as payment
of the debt.
Trustee
One
who holds property in trust for another to secure the performance of
an obligation. Third party under a deed of
trust.
Trustor
One
who borrows money from trust deed lender, then deeds the real
property securing the loan to a trustee to be held as security until
trustor has performed the obligation to the lender under the terms
of the deed of trust.
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Under-Improvement
An improvement which, because of its deficiency in size
or cost, it is not the highest and best use of the
site.
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Vacancy
Factor
The percentage
of a building's space that is not rented over a given
period.
Variable Interest
Rate
(VIRs or VRMs,
Variable Mortgage Rates). An interest rate in a real estate
loan by which the terms of the note varies upward or downward over
the term of the loan depending on money market
conditions.
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Wrap Around
Mortgage
A financing
device whereby a lender assumes payments on existing trust
deeds of a borrower and takes from the borrower a junior trust deed
with a face value in an amount equal to the amount outstanding on
the old trust deeds and the additional amount of money
borrowed.
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Zone
The area set off by the proper authorities for specific
use; an area subject to certain restrictions or
restraints.
Zoning
Act of city or county authorities specifying type of use
to which property may be put in specific
areas.
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