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a b c d e f g h i j k l m n o p q r s t u v w z

A

Abstract of Title
A condensed version of the title history to a piece of land or property. Lists any transfers in ownership and any liabilities attached to it, such as mortgages.

Abutting
Bordering upon or next to; the joining or touching of adjoining land; sharing a common boundary.

Acceleration Clause
Allows the lender (mortgage company) to demand immediate payment of the outstanding loan balance (interest and principal) if the borrower (mortgager) defaults, misses payment(s), or when/if the home is sold (in this case, also know as the due-on-sale clause).

Accretion
An addition to or expansion of land through natural causes. An increase of land along the shore of a body of water through water-borne sediment.

Acre
A measurement of land equal to 4,840 square yards or 43,560 square feet.

Additional Principal Payment
Monies paid by the borrower in addition to the principal amount due, usually monthly. If you have extra money occasional months, it's a good idea to make additional principal payments in order to more quickly reduce your remaining balance.

Adjustable Rate Mortgage (ARM)
Mortgage loans in which the interest rate is adjusted periodically based on predetermined factors such as an assigned index or designated market factor (such as the weekly average of US Treasury Bills over a one-year period). There is typically a limit to how often and by how much the interest rate can fluctuate. Also known as renegotiable ratemortgages or variable rate mortgages. The adjustment date is the date the interest rate changes. The adjustment interval (or adjustment period) is the time between changes in the interest rate and/or the monthly payment (typically one, three or five years).

Adjusted Basis                                                                                      Back to Top
Original cost of the property plus capital expenditures for improvements minus depreciation.

Adjustments
Any money that the buyer and seller "credit" each other at closing, such as taxes, down payments, etc.

Ad Valorem
In proportion to the value, according to value.

Adverse Possession

Acquiring title to real property that belongs to someone else by taking possession, in the manner and for the length of time prescribed by statute.

Affidavit

A sworn statements made before a notary  public (or other official authorized to administer an oath) that has been written down and acknowledge.

Agency

A relationship of  trust created when one person(the principal) grants another(the agent) authority to represents the principal in dealings with the third parties.

Agency, Dual

When a agent represents both parties to a transaction, as when a broker represents both the buyer and the seller.

Agency, Exclusive

See: Listing, Exclusive.

Agency, Ostensible

See: Agency, Apparent.

Agent

A person authorized to represents another(the principal) in the dealings with third parties.

Agent, Dual

See: Agency, Dual.

Agent, General                                                                                      Back to Top

An agent authorized to handle all of the principal’s affairs in one area or in specified areas.

Agent, Special

An agent with limited authority to do a specific thing or conduct a specific transaction.

Agent, Universal

An agent authorized to do everything that can be lawfully delegated to a representative.

Agreement

See: Contract.

Alienation

The transfer of ownership or an interest in property from one person to another by any means.

Alienation, Involuntary

Transfer of an interest in property against the will of the owner, or without action by the owner, occurring through operation of law( a mortgage foreclosure, for example), natural processes, or adverse possession.

Alienation, Voluntary

Voluntary transfer of an interest in property from one person to another.

Alienation Clause

A provision in a security instrument that gives the lender the right to declare the entire loan balance due immediately if the borrower sells or otherwise transfers the security property. Also called due-on-sale clause.

Amortization
The loan payment is made up of two parts: one portion will be applied to pay the accruing interest on a loan and the other portion is applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time. Typical amortization periods are 15 or 30 years. Therefore, an amortized mortgage is one that requires periodic payments that include both interest and principal. An amortization schedule is a table that provides a breakdown of the principal and interest payments and the amount owed at any given point during the amortization period.

Annual Percentage Rate (APR)
An interest rate reflecting the cost of a mortgage as a yearly rate. Because it takes into account points and other credit costs, the APR is likely to be higher than the mortgage rate. It is a basis of comparison for mortgage loan costs.

Affordability Analysis                                                                            Back to Top
A detailed analysis of the borrower's ability to buy a home, made up of factors such as: income, holdings, debts, the type of mortgage that will be used, the location of the home, and closing costs.

Amenity
A feature of a home (like a pool or a garage) which isn't crucial to the home's existence. Things like a roof and doors are not amenities.

Appraised Value
An appraiser's estimate of the value of the property. Banks require appraisals to determine how much money it will lend you.

Appraiser

One who estimates the value of property, especially an expert qualified to do so by training and experience.

Appreciation
An increase in the value of a property due to changes in market conditions or for other reasons, such as additions and renovations. Opposite of depreciation.

Appurtenance

Anything that is incident to, attached to, or pertains to the land, but is not necessarily a part of it. An appurtenances may be transferred separately.

APR

See: Annual Percentage Rate.

ARM

See: Mortgage, Adjustable-Rate.

Assessment
A local tax levied against a property for a specific purpose, such as a sewer or streetlights. An assessor is a public official who establishes the value of a property for taxation.

Asset
Anything with a dollar value that you own. Banks consider your assets when determining how much you can borrow.

Assignment
The transfer of a mortgage from one person to another.

Assumable Mortgage                                                                             Back to Top
A mortgage that can be taken over by the next buyer of the home. The agreement between buyer and seller in which the buyer takes over the payments on an existing mortgage from the seller is called an assumption. Assuming a loan is usually beneficial to both seller and buyer. Because it is an existing mortgage debt, it lessens the costs and red tape involved, unlike a new mortgage where closing costs and new (possibly higher) interest rates may apply. However, the lender usually charges the buyer an assumption fee if the buyer assumes an existing mortgage.

Attachment

Court-ordered seizure of property belonging to a defendant in a lawsuit, so that it will be available to satisfy a judgment if the plaintiff wins. In the case of real property, attachment creates a lien.

Attachment, Natural

Plant growing on a piece of land, such as shrubs, or crops, See: Emblements: Fructus Industriales: Fructus Naturales.

Attorney in Fact

Any person authorized to represents another by a power of attorney; not necessarily a lawyer( an attorney at law).

B

Back-End Ratio, or Debt Ratio
The amount you pay in monthly debt (car payments, credit cards, student loans, etc.) divided by your gross monthly income.

Balloon Payment Mortgage, Term Mortgage
A short-term fixed-rate loan which involves small payments for a certain time period and then one large payment (the balloon payment, for the remainder of the loan) at a predetermined date.

Bench Mark

A surveyor’s mark at a known point of elevation on a stationary object, used as a reference point in calculating other elevations in a surveyed area; often a metal disk set into cement or rock.

Bequeath

To transfer personal property to another by will.

Bequest

Personal property(including money) that is transferred by will.

Betterment                                                                                            Back to Top
An improvement (such as renovations and additions) that increases a property's value, different from routine home maintenance and repairs.

Bill of Sale
A written document that attests the transfer of the ownership (title) of personal property.

Bi-Weekly Payment Mortgage
A mortgage in which you make payments every two weeks instead of once a month. The result is that instead of making 12 monthly payments during the year, you make 13. The total amount you pay equals the amount of 13 payments, because you pay a total of 26 half-payments (one every other week) rather than 12 whole payments (one every four weeks or so, depending on the month). The extra payment helps you reduce the principal, substantially reducing the time it takes to pay off a 30-year mortgage.

Blanket Mortgage
A mortgage covering two or more pieces of real estate.

Blended Payments
A repayment method by which the same amount is paid each month, but the composition of the interest and principal changes with each payment. With each payment, the amount allocated to the principal increases as the amount allocated to interest decreases. Most mortgages use blended payments because it provides a consistent monthly payment amount for the borrower.

Blockbusting

Attempting to induce owners to list or sell their homes by predicting that members of another race or ethnic group, or people suffering from some disability, will be moving into the neighborhood; this violates anti-discrimination laws. also called panic selling.

Blue Sky Laws

Laws that regulate the promotion and sale of securities in order to protect the public from fraud.

Bona Fide
Authentic; made or carried out in good faith; real; sincere; genuine.

Borrower
One that mortgages property; a person who applies for and receives a mortgage loan.  See also: Mortgagor.

Boundary                                                                                               Back to Top

The perimeter or the border of a parcel of land; the dividing line between one piece of property and another.

Bounds

Boundaries. See: Metes and Bounds.

Breach

Violation of an obligation, duty, or law; especially an unexcused failure to a contractual obligation.

Broker
A mortgage broker is an individual whose business is to help arrange funds or negotiate contracts for a client but who doesn't loan money himself. A real estate broker (real estate agent) helps you find a house. See realtor.

Brokerage

A real estate broker’s business.

Brokerage Fee

The commission or other fee charged fro a real estate broker’s services.

Building Codes
Local regulations regarding the design and construction buildings.

Building Restrictions

Rules concerning building size, placement, or type; they may be public restrictions( in a zoning ordinance, for example) or private restrictions(CC&Rs, for example).

Bundle of Rights

The rights inherent in ownership of property, including the right to use lease, enjoy, encumber, will, sell, or do nothing with the property.

Buy Down
A fixed-rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time, the borrower's payment is calculated at the note rate. In order to temporarily buy down the initial rate, a lump sum is paid to the lender and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller as an incentive to induce someone to buy their property.

Buyer Representation Agreement                                                        Back to Top

A contract in which a real estate broker agrees to try to locate suitable property for the other party(the buyer) in exchange for a commission.

Bylaws

The rules and regulations that govern the operations of a corporations, or of a unit owners` association in a condominium.

C

Call

In a metes and bounds description, a specification that describes a segment of the boundary; for example. “south 15 west 120 feet" is a call.

Call Cption
A clause in the mortgage that gives the lender the right to "call" the mortgage due and payable at the end of a given length of time, for whatever reason.

Cancellation

Termination of a contract without undoing acts that have already been performed under the contract. Compare: Rescission.

Capacity

The legal ability or competency to perform some act, such as enter into a contract or execute a deed or will. See also: Competent.

Capital Expenditure
The cost of an improvement made either to extend the life of a property or to increase its value.

Capital Gain

Profit realized from the sale of a capital asset. If the asset was held for more than one year, it is a long term capital gain; if the asset was held for one year, or less it is a short-term capital gain.

Capital Improvement
Any item, structure or addition which is a permanent improvement to the property.

Capitalization

A method of appraising real property by converting the anticipated net income from the property into the present value. Also called the income approach to value.

Capitalization Rate                                                                                Back to Top

A percentages used in capitalization(Net Income=Capitalization Rate Value).It is the rate believed to represent the proper relationship between the value of the property

and  the income it produces; the rate that would be a reasonable return on an investments of the type in question, or the yield necessary to attract investments of capital in property like the subject property.

Capitalize

1. To provide with cash, or capital. 2. To estimate the present value of a asset using capitalization.

Caps (interest)
Limits on the amount that the interest rate on an ARM can change per year and/or during the life of the loan. Payment caps limit the amount that monthly payments for an ARM may change.

Cash Flow
The amount of cash gained over a period of time from an income-producing property. It should be enough to pay the expenses for that property (mortgage payment , maintenance, utilities, etc.)

Caveat Emptor

A Latin phrase meaning "Let the buyer beware"; it expresses the idea that a buyer is expected to examine property carefully before buying, instead of relying on the seller to disclose problems. This was once a firm rule of law, but it has lost most of its force, especially in residential transactions.

CC&Rs

A declaration of covenants, conditions, and restrictions; usually recorded by a developer to place restrictions on all lots within a new subdivision.

Certificate of Deposit
A certificate from a bank stating that the named party has a specified sum on deposit, usually for a given period of time at a fixed rate of interest.

Certificate of Eligibility
A document given to qualified veterans entitling them to VA loans for homes or businesses.

Certificate of Occupancy

A statement issued by a local government agency( such as the building department) verifying that newly constructed building codes and may be occupied.

Certificate of Reasonable Value (CRV)
An appraisal issued by the VA showing a property's current market value.

Certificate of Sale                                                                                 Back to Top

The documents given to the purchaser at a mortgage foreclosure sale; becomes a sheriff’s deed only after the redemption periods expires.

Certificate of Title
A document which confirms that the title to a property is legally held by the current owner.

Certificate of Veteran Status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time). This document enables veterans to obtain lower down payments on certain FHA-insured loans.

Chain of Title
The history of all of the title transfers (conveyances and encumbrances) to a piece of real estate.

Change Frequency
The frequency of payment and/or interest rate changes in an ARM, usually expressed in months.

Chattel
Personal property.

Chattel Mortgage

See: Mortgage, Chattel.

Chronological Age

See: Age, Actual.

Civil Rights

Fundamentals rights guaranteed to individuals by the law. The term is primarily used in reference to constitutional and statutory protections against discrimination or government interference.

Clear Title
A title that is free of liens and mortgages.

Client

One whom employs a broker, lawyer, appraiser, or other professional. A real estate broker’s client may be the seller, the buyer or both.

Closing                                                                                                   Back to Top
The final meeting between the buyer, seller and lender (or their agents) at which the property and funds legally change hands.

Closing Costs
Expenses incurred by buyers and sellers in transferring ownership of a property, such as an origination fee, taxes, title insurance, transfer fees, points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance.

Closing Date

The date on which all the terms of a purchase agreement must be met, or the contract is terminated.

Closing Statement
A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits made, all cash received and paid.

Cloud on Title
Anything found by the title search which indicates that a property is not owned free and clear by the purported owner.

Code of Ethics

A body of rules setting forth accepted standards of conducts, reflecting principals of fairness and morality; especially one that the members of an organization are expected to follow.

Collateral
Something of value (such as a car or a home) deposited with a lender to guarantee the repayment of a loan. The borrower risks losing the asset if the loan is not repaid properly.

Collection
Forcing a borrower to pay what he owes on a loan.

Commercial Bank

A type of financial institution that has traditionally emphasized commercial lending(loans to business),but which also makes many residential mortgage loans.

Commission
The compensation paid to a real estate broker (or by the broker to the salesman) for services rendered. It is usually a predetermined percentage of the selling price.

Commitment                                                                                          Back to Top
A promise by a lender to make a loan to a borrower or builder, or a promise by an investor to purchase mortgages from a lender.

Common Areas

1. In a building with leased units or spaces, the areas that are available for used by all of the tenants. 2. The common elements in a condominium.

Common Elements

The land and improvements in a condominium or other common interest development that are owned and used collectively by all of the residents, such as parking lots, hallways, and recreational facilities available for common use. also called common areas.

Common Elements, Limited

Common elements that are reserved for the use of a certain unit or certain units, to the exclusion of other units; examples include assign parking spaces and storage lockers.

Common Interest Ownership

the form of ownership that involved in condominiums townhouses, cooperatives, and time shares.

Compensation

Paid to a broker for services in connection with a real estate transaction( usually a percentage of the sales price).

Competent

1. Of sound mind, for the purposes of entering into a contract or executing a legal instrument. 2.  Both of sound mind and having reached the age of majority.

Comps, Comparables
Comparable properties; properties in close proximity which have sold recently that are about the same size with similar amenities, used to determine value of a property by comparison.

Compound Interest
Interest computed on the principal and the unpaid accumulated interest of a loan.

Condemnation Appraisal

An estimate of the value of condemned property to determine the just compensation to be paid to the owner

Conditional Use Permit                                                                         Back to Top

A permit that allows a special use, such as a school or hospital, to operate in a neighborhood where it would otherwise be prohibited by the zoning. Also called a special use permit or special exception permit.

Condominium
A building (or group of buildings) in which individuals own separate portions of the building(s) and possibly share common areas.

Condominium Association

The units owners` association of a condominium. See: Unit Owners` Association.

Consideration

Anything of value given to induce another to enter into a contract, such as money, goods, services, or a promise. Sometimes called valuable consideration. See also: Love and Affection.

Construction Loan (Interim Loan)
A loan to provide the funds necessary to pay for the construction of buildings or homes. The lender advances funds to the builder at periodic intervals as the work progresses.

Constructive

Held to be so in the eyes of the law, even if not so in fact. See: Annexation, Constructive; Eviction, Constructive; Notice, Constructive; Severance, Constructive.

Consummate

To complete.

Contiguous

Adjacent, abutting, or in close proximity.

Contingency
A specific condition that must be met before a contract is legally binding. Usually that the house must pass the home inspection and the borrower must get a loan.

Contingency Clause

See: Condition.

Contract                                                                                                 Back to Top

An agreement between two or more persons to do a certain thing, for consideration.

Contract, Bilateral

A contract in which each party has made a binding promise to perform(as distinguished from a unilateral contract).

Contract, Broker and Salesperson

An employment contract between a broker and an affiliated salesperson, outlining their mutual obligations.

Contract for Deed (Conditional Sales Contract, Installment Contract)
A contract for the sale of real estate where the deed (title) of the property is transferred only after all payments have been made. This is a risky contract, because buyers can lose their entire investment if the owner declares bankruptcy before the deed has been transferred.

Contract, Executed

A contract in which both parties have completely performed their contractual obligations.

Contract, Executory

A contract in which one or both parties have not yet completed performance of their obligations.

Contract, Implied

A contract that has not been put into words, but is implied by the actions of the parties.

Contract of Sale
Agreement between the buyer and seller which conveys title after certain conditions are met, outlining purchase price, terms, etc.

Contract, Real Estate

1. Any contract pertaining to real estate. 2. A contract for deed.

Contract, Unenforceable

An agreement that a court would refuse to enforce; for example, a contract is unenforceable if its contents can’t be proved or the statute of limitations has run out.

Contract, Unilateral

A contract that is accepted by performance; the Offeror has promised to perform his or her side oft the bargain if the other party has not promised to do so.

Contract, Valid                                                                                       Back to Top

A binding, legally enforceable contract.

Contract, Void

An agreement that is not an enforceable contract, because it lacks a required elements(such as consideration) or is defective in some other respect.

Contract, Voidable

A contract that one of the parties can disaffirm without liability, because of lack of capacity or a negative factor consent, such as fraud or duress.

Contractor

One who contracts to perform labor or supply materials for a construction project, or to do other work for a specified price. A general contractor is in charge of a construction project, which he or she carries out with the assistance of subcontractors.

Conventional Loan
A mortgage loan not insured by the FHA or guaranteed by the VA.

Conversion

Misappropriating property or funds belonging to another; for example, converting trust funds to one’s own use.

Convertibility Clause
A clause in some ARMs which allows the buyer (borrower) to change to a fixed-rate mortgage at a specified time.

Conveyance
A written document (such as a deed or lease) that transfers ownership interest in a property from one person to another.

Cooperative

A form of common interest ownership. A cooperative building is owned by a corporation, and the residents are shareholders in the corporation; each shareholder receives a proprietary lease on an individual unit and right to use the common areas.

Corner Influence

The increase in a property’s value that results from its location on or near a corner, with access and exposure on two streets.

Corporation                                                                                           Back to Top

An association organized according to certain laws, in which individuals may purchase ownership shares; treated by the law as an artificial person, separate from the individual stockholders.

Cost, Replacement

In appraisal, the current cost of constructing with the same utility as the subject property with modern materials and construction methods.

Cost, Reproduction

In appraisal, the cost of constructing a replica(an exact duplicate) of the subject property, using the same materials and construction methods that were originally used, but at current prices.

Cost Approach to Value

One of the three main methods of appraisal, in which an estimate of the subject property’s value is arrived at by estimating the cost of replacing (or reproducing) the improvements, then deducting the estimated accrued depreciation and adding the estimated market value of the land.

Co-Tenancy

See: Ownership, Concurrent.

Counteroffer

A response to a contract offer, changing some of the terms of the original offer; it operates as a rejection of the original offer (not as an acceptance).  Also called qualified acceptance.

 

Course

In a metes and bounds description, a direction, stated in terms of a compass bearing.

 

Covenant

1. A contract.  2. A promise.  3. A guarantee (express or implied) in a document such as a deed or lease.  4. A restrictive covenant.

 

Covenant, Restrictive

A promise to do or not do an act relating to real property, especially a promise that runs with the land; usually an owner’s promise not to use property in a specified manner.

 

Covenant Against Encumbrances                                                         Back to Top

In a deed, a promise that the property is not burdened by any encumbrances other than those that are disclosed in the deed.

 

Covenant of Further Assurance

In a deed, a promise that makes the grantor responsible for any further acts necessary to make sure the title is clear.

 

Covenant of Quiet Enjoyment

A promise that a grantee’s of tenant’s possession will not be disturbed by the previous owner, the lessor, or anyone else making a lawful claim against the property.

 

Covenant of Seizing

In a deed, a promise that the grantor actually owns the interest he or she is conveying to the grantee and has the right to convey it.

 

Covenant of Warranty Forever

In a deed, a promise that the grantor will bear the expense of defending the grantee’s title if anyone asserts a rightful claim against it.

Creditor
A person or entity (a bank or other lender) who funded the loan and to whom a debt is owed.

Cul-De-Sac
A dead-end street with a turn-around space at the end. These are attractive to some homeowners because the ending street cuts down on "thru" traffic, speeding, etc.

Customer

1. From the point of view of a seller’s real estate agent, a prospective property buyer.  2. A consumer third party.

D

Damages                                                                                                Back to Top

In a civil lawsuit, a sum of money the defendant is ordered to pay the plaintiff.

Damages, Actual

Damages awarded to a plaintiff as compensation for injuries (personal injuries, property damage, or financial losses) caused by the defendant’s act or failure to act.

 

Damages, Liquidated

A sum that the parties to a contract agree in advance (At the time the contract is made) will serve as full compensation in the event of a breach.

 

Damages, Punitive

In a civil lawsuit, an award added to compensatory damages, to punish the defendant for outrageous or malicious conduct and discourage others from similar conduct.

Debt Service

The amount of money required to make the periodic payments of principal and interest on an amortized debt, such as a mortgage.

Debt-To-Income Ratio
The ratio (expressed as a percentage) which describes a borrower's monthly payments on long-term debts divided by their "net effective income" (for FHA and VA loans) or gross monthly income (for conventional loans).

Decedent

A person who has died.

Dedication

A voluntary or involuntary gift or private property for public use; may transfer ownership or simply create an easement.

Deduction

An amount a taxpayer is allowed to subtract from his or her income before the tax on the income is calculated (as distinguished from a tax credit, which is deducted from the tax owed).

Deed

An instrument which, when properly executed and delivered, conveys the title to real property from the grantor to the grantee.

 

Deed, General Warranty                                                                       Back to Top

A deed in which the grantor warrants the title against defects that might have arisen before or during his or her period of ownership.

 

Deed, Grant

A deed uses the word “grant” in its words of conveyance and carries certain implied warranties.  Not used in Minnesota.

 

Deed, Limited Warranty

A deed in which the grantor warrants the title only against defects that may have arisen during his or her period of ownership; also called a special warranty deed.

 

Deed, Sheriff’s

A deed transferring the title to the highest bidder at a mortgage foreclosure sale when the statutory redemption period has expired.

 

Deed, Tax

A deed given to a purchaser of property at a tax foreclosure sale.

 

Deed, Warranty

1. A general warranty deed. 2. Any type of deed that carries warranties.

 

Deed in Lieu of Foreclosure

A deed given by a mortgage borrower to the lender to satisfy the debt and avoid foreclosure.

 

Deed of Partition

Deed used by co-owners (such as tenants in common or joint tenants) to divide up the co-owned property so that each can own a portion in severalty.

 

Deed of Reconveyance

The instrument used to release the security property from the lien created by a deed of trust when the debt has been repaid.  Not used in Minnesota.

Deed of Trust
Used in place of a mortgage to secure the payment of a note (not in every state).

Deed Restrictions

Provisions in a deed that restrict use of the property, and which may be either covenants or conditions.

Default
Failure to make your monthly payments.

Defeasance Clause                                                                                Back to Top

A clause in a mortgage or lease that cancels or defeats a certain right upon the occurrence of a particular event.

Deferred Interest
Unpaid interest added to the loan balance.

Delinquency
Failure to make payments on time.

Delivery

The legal transfer of a deed from the grantor to the grantee, which results in the transfer of title.

Demise

The transfer of an estate or interest in property to another for years, for life, or at will.

Department of Commerce

The division of the state government that overSees the real estate industry in Minnesota.

Department of Veterans Affairs (VA)
An independent governmental agency which guarantees long-term, low- or no-money-down mortgages to eligible veterans.

Depreciation.
A decline in a property's value.

Depreciation, Accrued

Depreciation that has built up or accumulated over a period of time.

 

Depreciation, Curable

Deferred maintenance and functional obsolescence that would ordinarily be corrected by a prudent owner, because the correction cost could be recovered in the sales price.

 

Depreciation, Incurable

Deferred maintenance, functional obsolescence, or economic obsolescence that is either impossible to correct, because the cost could not be recovered in the sales price.

Devise

1. (noun) A gift of real property through a will. 2. (verb) To transfer real property by will. Compare:  Bequest; Bequeath; Legacy.

 

Devisee                                                                                                  Back to Top

Someone who received title to real property through a will.  Compare: Beneficiary; Legatee.

 

Devisor

A testator who devises real property in his or her will.

Disaffirm

To ask a court to terminate a voidable contract.

Disclaimer

A denial of legal responsibility.

Discount

1. (verb) To sell a promissory note at less that its face value. 2. (noun) An amount withheld from the loan amount by the lender when the loan is originated; discount point.

 

Discount Points

A percentage of the principal amount of a loan, collected by the lender at the time a loan is originated, to give the lender an additional yield.

 

Discount Rate

The interest rate charged when a member bank borrows money from the Federal Reserve Bank.

Discrimination in Advertising
HUD does not allow the use of words of a discriminatory nature in any printed or published material. For example, adult building, Jewish home, restricted, private, integrated and traditional.

Down Payment
Usually 10-20 percent of the sales price (on conventional loans) paid by the buyer at the time of purchase. Comprises the difference between the purchase price and the mortgaged amount.

Due-On-Interest
A mortgage clause that allows a lender to call a loan due and payable upon the transfer of the property. Known as "paragraph 17" in FNMA/FHLMC mortgages.

Due-On-Sale Clause
A provision that allows a lender to demand the immediate repayment of the mortgage balance if the borrower sells the home.

E                                                                                                          Back to Top

Earnest Money
Money given by a buyer to a seller as a form of deposit (part of the purchase price) in order to bind a transaction or to ensure payment.

Easement
A right of way which gives people other than the owner access to a property.

Easement, Prescriptive

An easement acquired by prescription; that is; by using the property openly and without the owner’s permission for the period described in the statue.

 

Easement Appurtenant

An easement that benefits a piece of property, the dominant tenement.  Compare: Easement in Gross.

 

Easement by Necessity

1. A special type of easement by implication, created by law even when there has been no prior use, if the dominant tenement would be entirely useless without an easement.  2. Any easement by implication.

 

Easement in Gross

An easement that benefits a person instead of a piece of land; there is a dominant tenant, but no dominant tenement.  Compare: Physical Life.

Economic Survey

A part of the land use planning process, in which the present and anticipated future economic needs of an area are analyzed.

Egress

A means of exiting, a way to leave a property; the opposite of ingress.  The terms ingress and egress are most commonly used in reference to an access easement.

Element of Comparison

In the market data approach to appraisal, considerations taken into account in selecting comparables and comparing comparables to the subject property; they include time of sale, location, and physical characteristics.

 

Emblements

Crops that are produced annually through the labor of the cultivator, such as wheat.

 

Eminent Domain                                                                                    Back to Top

The governments constitutional power to take (condemn) private property for public use, as long as the owner is paid just compensation.

Encroachment
An illegal intrusion on someone else's property.

Encumbrance
A lien or claim on a property.

Entitlement
VA home loan benefit are known as entitlement and/or eligibility.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
The value an owner has in real estate over and above the debt of the property. For example, if a homeowner owns a house valued at $100,000 and has a mortgage balance of $20,000, the homeowner's equity is $80,000 (the value minus the mortgage balance). The homeowner's equity increases or decreases accordingly as the value of the house increases or decreases. The lender's equity is equal to the value of the outstanding loan.

Errors and Omissions (E&O) Insurance

Protects Brokers against civil claims of malpractice.

 

Escape Clause

A Provision in a purchase agreement that allows the buyer to terminate the contract if the appraised value of the property turns out to be significantly less than the agreed price.  Required for transactions to be financed with FHA or VA loans, if the loan applicant (the buyer) signs the purchase agreement before the appraisal report is issued.

 

Escheat

Reversion of property to the state after a person dies in estate and no heirs can be located.

Escrow
Funds that are set aside and held in trust. Usually used for payment of taxes, insurance, etc.

Escrow Account                                                                                     Back to Top

A bank account maintained by a lender for payment of property taxes and insurance premiums on the security property; the lender requires the borrower to make regular deposits, and pays the expenses out of the account.  Also called a reverse account or impound account.

 

Estate

1. An interest in real property that is or may become possessory; either a freehold or a leasehold.  2. The property left by someone who has died.

 

Estate, Fee Simple

See: Fee Simple Absolute

 

Estate at Sufferance

A situation in which a tenant who originally took possession of the property lawfully stays on after the lease ends without the landlord’s consent; the lowest estate in land.  Also called a tenancy at sufferance.

 

Estate at Will

A leasehold estate for an indefinite period, which continues until either the landlord or tenant gives notice of termination to the other party.  Also called a month-to-month tenancy, periodic tenancy, or tenancy at will.

 

Estate for Life

A freehold estate that last only as long as a specified person lives; that person is referred to as the measuring life.  Commonly called a life estate.

 

Estate for Years

An estate for a definite period of time, which terminates automatically at the end of the period.  Also called a tenancy for years or a term tenancy.

 

Estoppel

A legal doctrine that prevents a person from asserting rights or facts that are inconsistent with his or her earlier actions or statements.

 

Estoppel Certificate

A document that prevents the person who signs it from later asserting facts different from those stated in the document; for example, a statement signed by a mortgage lender confirming that the remaining mortgage balance is a specified amount.  Also called an estoppel letter.

 

Ethics                                                                                                     Back to Top

A systems of accepted principles or standards of moral conduct.  See: Code of Ethics.

 

Eviction, Constructive

When a landlord’s act (or failure to act) interferes with the tenant’s quiet enjoyment of the property, or makes the property unfit for its intended use, to such an extent that the tenant is forced to move out.

 

Execute

1. To sign an instrument and take any other steps (such as acknowledgment) that may be necessary to its validity. 2. To perform or complete.  See: Contract, Executed.

 

Execution

The legal process in which a court orders an official (such as the sheriff) to seize and sell the property of a judgment debtor to satisfy a lien.

F

Facilitator

Performs services for the seller of the buyer and facilitates the transaction, but does not assume the fiduciary duties that an agent owes to a client.  Formerly known as a “non-agent”.

Fannie Mae, Federal National Mortgage Association (FNMA)
A corporation created by Congress that purchases and sells conventional, FHA and VA residential mortgages. Makes mortgage money more available and affordable.

Farmers Home Administration (FmHA)
An organization that finances loans for farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Mortgage Corporation

(FHLMC) A government-supervised secondary market agency, popularly known as Freddie Mac.

Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development (HUD) which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgages. FHA loans are insured by the FHA and open to all qualified homebuyers for moderately priced homes almost anywhere in the country. Borrowers need to be able to put 3-4 percent down, and higher qualifying ratios make it easier to qualify for FHA loans. FHA mortgage insurance is a way of insuring an FHA loan. It requires a small fee (up to 3.8 percent of the loan amount ) paid at closing or a portion of the fee added to each monthly payment. Also requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments . The lower the down payment, the more years the fee must be paid.

Fee Simple Absolute                                                                              Back to Top

The highest and most complete form of ownership, which is of potentially infinite duration.  Also called a fee or a fee simple.

 

Fee Simple Defeasible

A fee simple estate that is subject to termination if a certain condition is not met or if a specified event occurs.  Also called a conditional fee, determinable fee, qualified fee, or fee simple subject to a condition subsequent.

FHA

See also: Federal Housing Administration, and Loan, FHA

Fiduciary Duties

A real estate broker who becomes an agent of a seller or buyer is deemed to be a fiduciary.  As a fiduciary, a real estate broker is held by law to owe specific duties to his/her principal (the person who they are representing), in addition to duties or obligations set forth in a listing agreement, buyer and/or seller representation agreement, or other contract of employment. Subagents of the broker also owe the same fiduciary duties to the broker's principal. These specific fiduciary duties include:

Fiduciary Relationship

A relationship of trust and confidence, in which one party owes the other (or both parties owe each other) loyalty and a higher standard of good faith that is owed to third parties.  For example, an agent is a fiduciary in relation to the principal; husband and wife are fiduciaries in relation to one another.

Finance Charge

Any charge a borrower is assessed, directly or indirectly, in connection with a loan.  See also: Total Finance Charge.

 

Financial Statement

A summary of facts showing the financial condition of an individual or business, including a detailed list of assets and liabilities.  Also called a balance sheet.

 

Financing Statement                                                                             Back to Top

A brief instrument that is recorded to perfect and give constructive notice of a creditor’s security interest in an article of personal property.  The modern version of a chattel mortgage.

First Mortgage
The mortgage which is the primary lien against a property.

Fixed-Rate Mortgage
A mortgage with a set interest rate for the entire loan, regardless of interest rate fluctuations. This creates consistent, predictable payments, but it's not always the cheapest option.

Fixed Term

A period of time that has a definite beginning and ending.

 

Fixture

An item that used to be personal property but has been attached to or closely associated with real property in such a way that it has legally become part of the real property.  See: Annexation, Actual; Annexation, Constructive.

Forbearance

An agreement in which one of the parties agrees to not do something.

 

Foreclosures, Judicial

1. The sale of property pursuant to court order to satisfy a lien. 2. A lawsuit filed by a mortgagee to foreclose on the security property when the mortgagor has defaulted.  Also called foreclosure by action.

 

Foreclosure, Strict

When a court orders title to mortgaged property to be transferred directly from the defaulting mortgagor to the mortgagee, without public auction.

 

Foreclosure by Advertisement

Foreclosure by a mortgagee without court supervision, under the power of sale clause in a mortgage.  Also called nonjudicial foreclosure.

 

Forfeiture

Loss of a right or something else of value as a result of failure to perform an obligation or condition.

 

Franchise                                                                                               Back to Top

A right or privilege granted by a government to conduct a certain business, or a right granted by a private business to use its trade name in conducting business.

 

Fraud

An intentional or negligent misrepresentation or concealment of a material fact, which is relied upon by another, who is induced to enter into a transaction and harmed ads a result.

Freddie Mac, Federal Home Loan Mortgage Corporation (FHLMC)
A quasi-governmental agency that purchases conventional mortgage loans from insured depository institutions (savings and loans) and HUD-approved mortgage bankers.

Freehold

A possessory interest in real property that has an indeterminable duration; it can be either a fee simple or an estate for life.  Someone who has a freehold estate has title to the property (as opposed to someone who has a leasehold estate, who is only a tenant).

Frontage

The distance a property extends along a street or a body of water; the distance between the two side boundaries at the front of the lot.

Front-End Ratio
Your prospective monthly mortgage payments divided by your gross monthly income. This comes out to a percentage, and a lender uses this percentage to get an idea of how much of your income will be going to pay your loan. If they like the number (say, below 29%) then they will be more inclined to sell you the loan.

G

Gain

Under the federal income tax code, that portion of the proceeds from the sale of a capital asset, such as real estate, that is recognized as taxable profit.

Ginnie Mae, Government National Mortgage Association (GNMA)
A governmental agency that provides sources of funds for residential FHA-insured or VA-guaranteed mortgages.

Government Lot

In the rectangular survey system, a parcel of land that is not a regular section (one mile square), because of the convergence of range lines, or because of a body of water or some other obstacle; assigned a government lot number.

Government Mortgage                                                                          Back to Top
A mortgage insured by the FHA or guaranteed by the VA or the Rural Housing Service (RHS).

Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a period of time and then level off.

Grant

To transfer or convey an interest in real property by means of a written instrument.

 

Grantee

One who receives a grant of real property.

 

Granting Clause

Words in a deed that indicate the grantor’s intent to transfer an interest in property.  Also called the words of conveyance.

 

Grantor

One who grants an interest in real property to another.

 

Gross Income Multiplier Method

A method of appraising residential property by reference to its rental value.  Also called the gross rent multiplier method.

 

Gross Rent Multiplier

A figure which is multiplied by a rental property’s gross income to arrive at an estimate of the property’s value.

Guaranteed Mortgage, Guaranteed Loan
A mortgage guaranteed by a third party.

Guaranty
An agreement by which one person assumes responsibility of assuring payment or fulfillment of another's debts or obligations, or something given as security for the execution, completion, or existence (or payment) of something else.

Guide Meridians

In the rectangular survey system, lines running north-south (parallel to the principal meridians) at 24-mile intervals.

H                                                                                                         Back to Top

Habendum Clause

A clause included after the granting clause in many deeds; it begins “to have and to hold” and describes the type of estate the grantee will hold.

Hazard Insurance
A form of insurance that protects the insured from specified losses due to hazards such as fire, flood, wind damage, etc.

Heir

Someone entitled to inherit another’s property under the laws of intestate succession.

 

Heirs and Assigns

A phrase used in legal documents to cover all successors to a person’s interest in property; assigns are successors who acquire title in some manner other than inheritance, such as by deed.

Hold-harmless Clause

One party agrees to indemnify and protect the other party from injuries or lawsuits arising out of a particular transaction.  In a lease, the lesSee agrees to hold harmless the lessor from claims of third parties for damage resulting from the lesSee’s negligence.

 

Holdover Clause

A provision in a listing agreement or buyer representation agreement which states that the agreement will renew itself indefinitely unless cancelled by the principal; illegal in Minnesota.

Home Equity Line of Credit
A loan against the amount of equity you have in a property. The equity serves as security for the new loan.

Home Inspection
A complete and thorough inspection of the physical condition of a property, including all major systems and structural elements, conducted by someone who knows what to look for and who will disclose the findings to you.

Homeowner's Insurance
An insurance policy required by many lenders when you take ownership that combines personal liability insurance and hazard insurance for the home as well as its contents.

Homeowner's Warranty                                                                        Back to Top
A warranty provided by the seller (or the builder on new homes) as a condition of the sale. Covers repairs to specified parts of a house for a specific period of time.

Homestead

Real estate that is occupied and used as the principal residence of the owners and the owner’s family.

 

Homestead Law

A state law that provides limited protection against creditors’ claims for homestead property.

Hot Market
A market in which houses are selling fast. Also known as a seller's market, because the seller will benefit by selling their house at or above their asking price because, theoretically, high demand drives the price up.

Housing Expenses-To-Income Ratio
A borrower's housing expenses divided by his /her net effective income (for FHA/VA loans) or gross monthly income (for conventional loans). Expressed as a percentage.

HUD-1 Statement, Closing statement, Settlement Sheet
An itemized listing of whatever costs must be paid at closing, such as real estate commissions, loan fees, points, and initial escrow amounts.

Hypothecate

To make property security for an obligation without giving up possession of it (as opposed to pledging, which involves surrender of possession).

I

Implied

Not expressed in words, but understood from actions or circumstances. Compare: Express

Impound Reserves
A portion of the monthly payment held by the lender to pay for things like taxes, hazard insurance and mortgage insurance as they become due.

Improvement                                                                                         Back to Top

A man-made addition to real property.

Income, Effective Gross

A measure of a rental property’s capacity to generate income; calculated by subtracting a bad debt/vacancy factor from the economic rent (potential gross income).

 

Income, Net

The income that is capitalized to estimate the property’s value; calculated by subtracting the property’s operating expenses (fixed expenses, maintenance expenses, and reserves for replacement) from the effective gross income. (Note that debt service is not subtracted in calculating net income.)

 

Income, Potential Gross

A property’s economic rent; the total income it could earn if it were available for lease in the current market, before making any deductions (for bad debts, vacancies, operating expenses, etc.).

 

Income Approach to Value

One of the three main methods of appraisal, in which an estimate of the subjects property’s value is based on the net income it produces; also called the capitalization method or investor’s method of appraisal.

 

Income Ratio

A standard used in qualifying a buyer for a loan, to determine whether he or she has sufficient income; the buyer’s debts and proposed housing expense should not exceed a specified percentage of his or her income.

 

Incompetent

Not legally competent; not of sound mind.

Increasing and Decreasing Returns, Principle of

An appraisal principle which holds that a point is reached where additional investments (in the form of labor or capital) in a piece of property will not be justified by the resulting increase in net income.  Also called the principle of contribution.

 

Increment

An increase in value; the opposite of decrement.

Index                                                                                                     Back to Top
A published interest rate against which lenders measure the difference between the current interest rate on an ARM and that earned by other investments (such as one-, three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans).

Ingress

A means of entering a property; the opposite of egress.  The terms ingress and egress are most commonly used in reference to an access easement.

Initial Interest Rate, Start Rate, Teaser
The interest rate of the mortgage at the time of closing.

Instrument

A legal document, usually one that transfers title (such as a deed), creates a lien (such as a mortgage), or establishes a right to payment (Such as a promissory note or contract).

 

Insurance, Hazard

Insurance against damage to real property caused by fire, flood, theft, or other mishap.  Also called casualty insurance.

 

Insurance, Homeowner’s

Insurance against damage to the real property and the home owner’s personal property.

 

Insurance, Mortgage

Insurance that protects a lender against losses resulting from the borrower’s default.  Also called Mortgage default insurance.

 

Insurance, Mutual Mortgage

The mortgage insurance provided by the FHA to lenders who make loans through FHA programs.

 

Insurance, Private Mortgage (PMI)

Insurance provided by private companies to conventional lenders for loans with loan-to-value ratios over 80%.

 

Insurance, Title, Extended Coverage                                                   Back to Top

Title insurance that covers problems that should be discovered by an inspection of the property (such as encroachments and adverse possession), in addition to the problems covered by standard coverage policies.

 

Insurance, Title, Standard Coverage

Title insurance that protects against latent title defects (such as forged deeds) and undiscovered recorded encumbrances, but does not protect against problems that would only be discovered by an inspection of the property.

Interest
The amount of money charged for the use of the money borrowed.

Interest Adjustment
If the closing (the date on which the buyer takes possession of the property) occurs at a time of the month other than the date on which the mortgage payment is due, the borrower will pay an amount to cover interest from the interest adjustment date.

Interest, Prepaid

Interest on a new loan that must be paid at the time of closing; covers the interest due for the first month of the loan term.  Also called interim interest.

Interest Rate Ceiling
The maximum interest rate for an ARM loan.

Interest Rate Floor
The minimum interest rate for an ARM loan.

Interest, Simple

Interest that is computed on the principal amount of the loan only (which is the type of interest charge in connection with real estate loans). Compare: Interest, Compound.

Interim Financing
A construction loan made during completion of a building or a project which is replaced by a permanent loan once the building is completed.

Intestate                                                                                                Back to Top

Without a valid will.

 

Intestate Succession

Distribution of the property of a person who dies intestate to his or her heirs.

Invalid

Not legally binding or legally effective; not valid.

 

Inventory

A detailed list of the stock-in-trade of a business.

 

Inverted Pyramid

A way of visualizing ownership of real property; in theory, a property owner owns all the earth, water, and air enclosed by a pyramid that has its tip at the center of the earth and extends up through the property boundaries out into the sky.

Investor
A source of money for a lender to loan.

J

Judgment

1. A court’s binding determination of the rights and duties of the parties in a lawsuit. 2. A court order requiring one party to pay the other damages.

 

Judgment, Default

A court judgment in favor of the plaintiff due to the defendant’s failure to answer the complaint or appear at a hearing.

 

Judgment, Deficiency

A personal judgment entered against a borrower in favor of the lender if the proceeds from a foreclosure sale of the security property are not enough to pay off the debt.

Jumbo Loan
A loan which is larger than the limits set by the FNMA and the FHLMC.

Just Compensation

The compensation that the constitution requires the government to pay a property owner when the property is taken under the power of eminent domain.

K                                                                                                         Back to Top

Key Lot
The one property in a development that is key to the entire development's success.

Kicker, Equity Kicker, Lender Participation
A lender or investor's right to share any income from a property, in addition to loan payments.

L

Land

In the legal sense, it is the sold part of the surface of the earth, everything affixed to it by nature or by man, and anything on it or in it, such as minerals and water; real property.

 

Landlocked Property

A parcel of land without access to a road or highway.

 

Landlord

A landowner who has leased his or her property to another.  Also called a lessor.

 

Landmark

A monument, natural, or artificial, set up on the boundary between two adjacent properties, to show where the boundary is.

 

Lawful Objective

An objective or purpose of a contract that does not violate the law or a judicial determination of public policy.

 

Lease

A transfer of a leasehold estate from the fee owner (the landlord or lessor) to a tenant (or lesSee); a contract in which on party pays the other rent in exchange for the possession (and profits) of real estate.  Sometimes called a rental agreement.

 

Lease, Escalator

A lease in which the tenant pays a fixed rent based on the landlord’s estimate of annual operating expenses charged to the tenant at the end of the year.

 

Lease, Fixed

A lease in which the rent is set at a fixed amount, and the landlord pays most or all of the property’s operating expenses.  Also called a gross lease, flat lease, or straight lease.

 

Lease, Graduated

A lease in which it is agreed that the rental payments will increase at certain intervals by a specified amount or according to a specified formula.  Also called a step-up lease.

 

Lease, Index                                                                                          Back to Top

A type of graduated lease in which the periodic rent increases are tied to increases in the consumer price index, or some other economic indicator.

 

Lease, Land

A lease of the land only, usually for a long term, to a tenant who intends to construct a building on the property.  Also called a ground lease.

 

Lease, Net

A lease requiring the tenant to pay the property’s operating expenses (such as taxes, insurance, maintenance, and repairs), in addition to the rent paid to the landlord.

 

Lease, Percentage

A lease in which the rent is based on a percentage of the tenant’s monthly or annual gross sales.

Lease-Purchase Mortgage Loan
A way for homebuyers to lease a home with an option to buy from a nonprofit organization. A portion of each month's rent payment goes toward principal, interest, taxes, insurance and a down payment.

Lease, Sandwich

A leasehold interest lying between the property owner’s interest and the interest of the tenant in possession; for example, when a tenant subleases the property to a subtenant, the original tenant’s interest is sandwiched between the interest of the landlord and that of the subtenant.

 

Leased Fee Estate

The estate held by the lessor.

 

Leasehold

A possessory interest in real property that has a limited duration.  Also called a less-than-freehold estate.

 

Leasehold Estate

Created by a lease, the owner gives the tenant an exclusive right of possession.

 

Legal Description

A precise description of a parcel of real property; the three main types of legal descriptions are metes and mounds, rectangular survey, and recorded plat.

 

Lender, Institutional                                                                              Back to Top

A bank, savings and loan, or similar financial institution that invests other people’s funds in loans; as opposed to an individual or private lender, which invests its own funds.

 

Lessee

One who leases property from another; a tenant.

 

Lessor

One who leases property to another; a landlord.

 

Leverage

The effective use of borrowed money to finance an investment such as real estate.

 

Levy

To impose a tax.

 

Liability

1. A debt or obligation.  2. Legal responsibility

 

License

1. Official permission to do a particular thing that the law does not allow everyone to do.  2. Revocable, non-assignable permission to use another person’s land for a particular purpose.  Compare: Easement.

Lien
A claim upon real or personal property for the satisfaction of some debt or obligation.

Lien, Attachment

A lien intended to prevent transfer of the property pending the outcome of litigation.

 

Lien, Construction

A lien on property in favor of someone who provided labor or materials to improve it.  Also called a mechanic’s lien or materialman’s lien.

 

Lien, Equitable

A lien arising as a matter of fairness, rather than by agreement or by operation of law.

 

Lien, General

A lien against all the property of a debtor, rather than a particular piece of his or her property.  Compare: Lien, Specific.

 

Lien, Involuntary                                                                                   Back to Top

A lien that arises by operation of law, without the consent of the property owner.  Also called a statutory lien.

 

Lien, Judgment

A general lien against a judgment debtor’s property, which enables the judgment creditor to force the sale of the property and collect the judgment from the proceeds if the judgment debtor does not pay.

 

Lien, Mechanic’s

A lien on property in favor of someone who provided labor or materials to improve it.  Also called a construction lien or statutory lien.

 

Lien, Property Tax

A specific lien on property to secure payment of general real estate taxes.

 

Lien, Specific

A lien that attaches only to a particular piece of property (as opposed to a general lien, which attaches to all of the debtor’s property).

 

Lien, Tax

A lien on property to secure the payment of taxes.

 

Lien, Voluntary

A lien placed against property with the consent of the owner; a mortgage.

Lienholder, Junior

A secured creditor whose lien is lower in priority that another’s lien.

 

Lien Notice

A written notice from a contractor or subcontractor informing a property owner that a lien could be enforced against the property if bills for construction labor or materials are not paid.

 

Life Estate

A freehold estate that lasts only as long as a specified person lives.  That person is referred to as the measuring life.  Also called an estate for life.

 

Life Tenant

Someone who owns a life estate; the person entitled to possession of the property during the measuring life.

 

Limited Broker                                                                                       Back to Top

A property owner who is licensed to participate as a seller in five or more real estate transaction per year without being represented by another broker, but is not allowed to represent others in real estate transactions.

 

Limited Liability Company (LLC)

A form of business organization that combines certain characteristics of corporations and partnerships; the managing members are not personally liable for the company’s obligations.

 

Lis Pendens

A recorded notice stating that there is a lawsuit pending that may affect title to the defendant’s real estate.

 

Listing

A written agency contract between a seller and a real estate broker which provides that the broker will be paid a commission for finding (or attempting to find) a buyer for the seller’s property.  Also called a listing agreement.

 

Listing, Exclusive

Either an exclusive agency listing or an exclusive right to sell listing.

 

Listing, Exclusive Agency

A listing agreement that entitles the broker to a commission if anyone other than the seller finds a buyer for the property during the listing terms.

 

Listing, Exclusive Right to Sell

A listing agreement that entitles the broker to a commission if anyone—including the seller—finds a buyer for the property during the listing term.

 

Listing, Net

A listing agreement in which the seller sets a net amount he or she is willing to accept for the property; if the actual selling price exceeds that amount, the broker is entitled to keep the excess as his or her commission.   IS THIS LEGAL IN MINNESOTA?

 

Listing, Open

A nonexclusive listing, given by a seller to as many brokers as he or she chooses.  If the property is sold, a broker is only entitled to a commission if he or she was the procuring cause of the sale.

Listing Price
The price at which a house is listed for sale; the asking price.

Littoral Land                                                                                           Back to Top

Land that borders on a stationary body of water (such as a lake, as opposed to a river or stream).  Compare: Riparian Land.

 

Littoral Rights

The water rights of an owner of littoral land, in regard to use of the water in the lake.

 

Loan, Amortized

A loan that requires regular installment payments of both principal and interest (as opposed to interest-only payments).  It is fully amortized if the installment payments will pay off the full amount of the principal and all of the interest by the end of the repayment period.  It is partially amortized if the installment payments will cover only part of the principal, so that a balloon payment of the remaining principal balance is required at the end of the repayment period.

 

Loan, FHA

A loan made by an institutional lender and insured by the Federal Housing Administration, so that the FHA will reimburse the lender for losses that result if the borrower defaults.

 

Loan, Fixed-Rate

A loan on which the interest rate will remain the same throughout the entire loan term.  Compare: Mortgage, Adjustable-Rate.

 

Loan, Guaranteed

A loan in which a third party has agreed to reimburse the lender for losses that result if the borrower defaults.

 

Loan, Interest-Only

A loan that requires the borrower to pay only the interest during the loan term, so that the entire amount borrowed (the principal) is due at the end of the term.

 

Loan, Participation

A loan from which the lender receives some yield in addition to the interest, such as a percentage of the income generated by the property, or a share in the borrower’s equity in the property.

 

Loan, Take-Out

Long-term financing used to replace a construction loan (an interim loan) when construction has been completed.  Also called a permanent loan.

 

Loan, VA-Guaranteed

A home loan made by an institutional lender to an eligible veteran, where the Veterans Administration will reimburse the lender for losses if the veteran borrower defaults.

Loan-To-Value Ratio                                                                              Back to Top
The relationship between the amount of the mortgage loan and the appraised value of the property.

Lock-In
A written agreement from the lender to offer a specified interest rate if the mortgage closes in a certain time period.

Lot

A parcel of land; especially, a parcel in a subdivision.

 

Lot and Block Description

The type of legal description used for platted property; it states the property’s lot number and block number and the name of the subdivision, referring to the plat map recorded in the county where the property is located.  Sometimes called a maps and plats or lot, block and subdivision description.

M

Majority, Age of

The age at which a person becomes legally competent; generally, 18 years old.  Compare: Minor.

Margin
The amount a lender adds to the index on an ARM to establish the adjusted interest rate.

Market Data Approach

One of the three main methods of appraisal, in which the sales prices of comparable properties are used to estimate the value of the subject property.  Also called the sales comparison approach.

 

Market Price

1. The current price generally being charged for something in the marketplace.  2. The price actually paid for a property.  Compare: Value, Market.

Market Value
The amount that a seller may expect to obtain in the open market.

Master Development Plan

A comprehensive, long-term plan of development for a community, which is implemented by zoning and other laws.  Also called a comprehensive plan or a general plan.

 

Material Fact

An important fact; on that is likely to influence a decision.

Maturity                                                                                                  Back to Top
The date at which a note or bond is due.

Meridian

An imaginary line running north and south, passing through the earth’s poles.  Also called a longitude line.

 

Meridian, Principal

In the rectangular survey system, the main north-south line in a particular grid, used as the starting point in numbering the ranges.

 

Meridians, Guide

In the rectangular survey system, lines running north-south (parallel to the principal meridian) at 24-mile intervals.

 

Metes

Measurements.

 

Metes and Bounds Description

A legal description that starts at an identifiable point of beginning, then describes the property’s boundaries in terms of courses (compass directions) and distances, ultimately returning to the point of beginning.

 

Mill

One-tenth of one cent; a measure used to state property tax rates in some cases.  For example, a tax rate of one mill on the dollar is the same as a rate of one-tenth of one percent of the assessed value of the property.

 

Mineral Rights

Rights to the minerals located beneath the surface of a piece of property.

 

Minor

A person who has not yet reached the age of majority; generally

 

Misrepresentation

A false or misleading statement. See: Fraud

 

Monument

A visible marker (natural or artificial) used in a survey or a metes and bounds description to establish the boundaries of a piece of property.

Mortgage
A conveyance of or lien against property until it is paid or until other stipulated terms are met.

Mortgage, Adjustable-Rate (ARM)

A loan in which the interest rate is periodically increased or decreased to reflect changes in the cost of money. Compare: Loan, Fixed-Rate

 

Mortgage, Balloon                                                                                  Back to Top

A partially amortized mortgage loan that requires a large balloon payment at the end of the loan term.

Mortgage Banker
An individual who originates mortgages for resale in the secondary mortgage market.

Mortgage, Blanket

A mortgage that covers more than on parcel of property.

Mortgage Broker
An individual or company that offers loans to borrowers from numerous sources and is paid a commission for their services.

 

Mortgage, Budget

A loan in which the monthly payments include a share of the property taxes and insurance, in addition to principal and interest; the lender places the money for taxes and insurance in an escrow account.

 

Mortgage, Chattel

An instrument that makes personal property (chattels) security for a loan.  In states that have adopted the Uniform Commercial Code, the chattel mortgage has been replaced by the security agreement.

 

Mortgage, Graduated Payment (GPM)

A loan that provides for lower payments in the first years of its term; the payments increase in steps, then level off, typically after three to seven years.

Mortgage, Junior

A mortgage that has lower lien priority than another mortgage against the same property.  Sometimes called a secondary mortgage.

Mortgage Insurance
Money paid to insure the mortgage when the down payment is less than 20 percent.

Mortgage Insurance Premium (MIP)
The 0.5 percent borrowers pay each month on FHA-insured mortgage loans. It is insurance from the FHA to the lender against incurring a loss on account of the borrower's default.

Mortgage, Open-End

A loan that permits the borrower to reborrow the money he or she has repaid on the principal, usually up to the original loan amount, without executing a new loan agreement.

 

Mortgage, Purchase Money

1. When a seller extends credit to a buyer to finance the purchase of the property, accepting a mortgage instead of cash.  Sometimes called a carry-back loan.  2. In a more general sense, any loan the borrower uses to buy the security property (as opposed to a loan secured by property the borrower already owns).

 

Mortgage Company                                                                                Back to Top

A type of real estate lender that originates and services loans on behalf of large investors (acting as a mortgage banker) or for resale on the secondary mortgage market.

Mortgagee
The lender; one who holds a mortgage.

Mortgagor
The borrower or homeowner; one who mortgages.

Mutual Agreement

When all parties freely agree to the terms of a contract, without fraud, undue influence, duress, menace, or mistake.  Mutual consent is achieved through offer and acceptance; it is sometimes referred to as a “meeting of the minds.” Also called mutuality.

N

Negative Amortization
When your monthly payments are not large enough to pay all the interest due on the loan, the unpaid interest is added to the unpaid balance of the loan. The homebuyer ends up owing more than the original amount of the loan.

Negotiable Rate Mortgage
A loan in which the interest rate is adjusted periodically.

Net Effective Income
Gross income minus federal income taxes.

Net Proceeds

The amount of money a property seller will receive from the sale after all selling costs have been paid.

No-Doc Loan
A loan requiring very little loan documentation. These loans usually require large (25%) down payments.

Nominal Interest Rate

The interest rate stated in a promissory note.  Also called the note rate or coupon rate.  Compare: Annual Percentage Rate.

 

Nonagency

An arrangement in which a real estate licenSee acts as a facilitator or go-between for a seller and a buyer, without establishing an agency relationship with either party.  Compare: Facilitator.

Non-Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the lender's approval.

Nonconforming Use                                                                                Back to Top

A property use that does not confirm to current zoning requirements, but is allowed because the property was being used in that way before the present zoning ordinance was enacted.

 

Nonpossessory Interest

An interest in property that does not include the right to possess and occupy the property; an encumbrance, such as a lien or an easement.

 

Notarize

To have a document certified by a notary public.

 

Notary Public

Someone who is officially authorized to witness and certify the acknowledgment made by someone signing a legal document.

Note
A signed obligation to pay a debt.

Notice, Constructive

Knowledge of a fact imputed to a person by law.  A person is held to have constructive notice of something when he or she should have known it (because he or she could have learned it through reasonable diligence or an inspection of the public record), even if he or she did not actually know it.

 

Notice of Default

A notice sent by a secured creditor to the debtor, informing the debtor that he or she has breached the loan agreement.

 

Novation

1. The withdrawal of one party to contract and the substitution of a new party, relieving the withdrawing party of liability.  2. The substitution of a new obligation for an old one.

O

Obligatory Advances

Disbursements of construction loan funds that the lender is obligated to make (by prior agreement with the borrower) when the borrower has completed certain phases of construction.

 

Obsolescence

Any loss in value (depreciation) due to the reduce desirability and usefulness.

 

Obsolescence, Economic

Loss in value resulting from factors outside the property itself, such as proximity to an airport.  Also called external obsolescence, external inadequacy, or locational obsolescence.

 

Obsolescence, Functional                                                                      Back to Top

Loss in value due to inadequate or outmoded equipment, or as a result of poor or outmoded design.

 

Obsolescence, Locational

See: Obsolescence, Economic.

 

Offeree

One to whom a contract offer is made.

 

Offeror

One who makes a contract offer.

 

Option

A contract giving one part the right to do something, without obligating him or her to do it.

 

Optionee

The person to whom an option is given.

 

Optionor

The person who gives an option.

 

Option to Purchase

An option giving the optionee the right to buy property owned by the optionor at an agreed price during specified period.

 

Ordinance

A law passed by a local legislative body, such as a city council.

Origination Fee
The fee (usually a percentage of the loan) a lender charges to prepare loan documents, make credit checks, inspect and sometimes appraise a property, etc.

Override (Broker Protection) Clause

A clause in a listing agreement providing that for a specified period after the listing expires, the broker will still be entitled to a commission if the property is sold to someone the broker dealt with during the listing term.  Also called a carryover clause, extender clause, or safety clause.

 

Owner’s Policy

Protects the purchaser and the purchaser’s heirs for as long as they have an interest in the property.

 

Ownership

Title to property, dominion over property; the rights of possession and control.

 

Ownership, Concurrent                                                                          Back to Top

Shared ownership of one piece of property by two or more individuals, each owning an undivided interest in the property (as in a tenancy in common or joint tenancy).  Also called multiple ownership, co-ownership, or co-tenancy.

 

Ownership in Severalty

Ownership by on individual or entity; sole ownership.

P

Parcel

A lot or piece of real estate, especially a specified part of a larger tract.

 

Partial Performance

When one party to a contract has not completely accomplished all of the terms of the agreement, but the other party agrees to accept the incomplete performance and consider the contract discharged.

 

Partial Release Clause

See: Release Clause.

 

Partial Satisfaction

The instrument given to the borrower when part of the security property is released from a blanket mortgage under a partial release clause.

 

Partition

The division of a property among its co-owners, so that each owns part of it in severalty; this may occur by agreement of all the co-owners (voluntary partition), or by court order (judicial partition).

 

Party Wall

A wall located on the boundary line between two adjoining parcels of land that is used or intended to be used by the owners of both properties.

 

Pending Special Assessment

An assessment that has been approved but not yet levied.

 

Per Annum

Per year; usually refers to an annual rate of expense.

 

Per Diem

Per day; usually refers to the daily rate of an expense, or to a daily stipend paid.

Permanent Loan
A long-term mortgage (10 years or more).

Personal Property

Any property that is not real property; movable property not affixed to land.  Also called chattels or personalty.

 

Personalty                                                                                              Back to Top

Personal Property.

 

Personal Use Property

Property that a taxpayer owns for his or her own use (or family use), as opposed to income property, investment property, dealer property, or property used in a trade or business.

 

Physical Deterioration

Loss in value (depreciation) resulting from wear and tear or deferred maintenance.

 

Physical Life

An estimate of the time a building will remain structurally sound and capable of being used.  Compare: Economic Life.

PITI
Principal, interest, taxes and insurance.

Planned Unit Development (PUD)

A development (usually residential) with small, clustered lots designed to leave more open space than traditional subdivisions have.

 

Planning Commission

A local government agency responsible for preparing the community’s master development plan.

 

Plat

A detailed survey map of a subdivision, recorded in the county where the land is located.  Subdivided property is often called platted property.

Pledged Account Mortgage (PAM)
When the borrower places money in a pledged savings account, and these funds, plus interest earned, are gradually used to reduce mortgage payments.

Points
Prepaid interest assessed at closing by the lender. Each point equals 1 percent of the loan amount. (2 points on a $100,000 mortgage would cost $2,000 )

Power of Attorney
A legal document authorizing one person to act on behalf of another.

Point of Beginning (POB)

The starting point in a metes and bounds description; a monument or a point described by reference to a monument.

Police Power                                                                                          Back to Top

The constitutional power of the state government (delegated to local governments) to enact and enforce laws for the protection of the public’s health, safety, morals, and general welfare.

 

Possession

1. The holding and enjoyment of property. 2. Actual physical occupation of real property.

 

Possessory Interest

An interest in property that includes the right to possess and occupy the property.  The term includes all estates (leasehold as well as freehold), but does not include encumbrances.

 

Power of Sale Clause

A clause in a mortgage giving the lender the right to foreclose non-judicially (sell the security property without a court action) if the borrower defaults.

Prepaid Expenses
Money necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment
A privilege in a mortgage which allows the borrower to make payments before they are due.

Prepayment Penalty
Fees for early repayment of debt, allowed in 36 states and the District of Columbia.

Prepayment Privilege

A borrower’s right to pay off a loan before it is due, in the absence of a prepayment penalty provision.

Prescription

Acquiring an interest in real property (usually an easement) by using it openly and without the owner’s permission for the period prescribed by statute.

 

Prescriptive Easement

Rights to a property acquired by someone claiming continuous use.

 

Prime Rate

The interest rate a bank charges its largest and most desirable customers.

Primary Mortgage Market
Lenders making mortgage loans directly to borrowers such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets such as FNMA or GNMA, etc.

Principal                                                                                                 Back to Top
The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)
Default insurance for conventional loans, normally required with smaller down-payment loans.

Private Restrictions

Restrictions on the use of land that are contained in deeds or contracts; as opposed to public restrictions, which are imposed by zoning laws and other government regulations.

 

Probate

A judicial proceeding in which the validity of a will is established and the executor is authorized to distribute the estate property; or, when there is no valid will, in which an administrator is appointed to distribute the estate to the heirs.

 

Procuring Cause

The real estate agent who is primarily responsible for bringing about a sale; for example, by negotiating the agreement between the buyer and seller.  The agent who produces a buyer ready, willing, and able to buy the property on the seller’s terms.

 

Property

1. The rights of ownership in a thing, such as the right to use, possess, transfer, or encumber it. 2. Something that is owned.

 

Property Management Agreement

An employment contract between an income-producing property owner and a real estate broker, appointing the broker as the owner’s general agent for the purpose of leasing and managing the property.

 

Property Manager

A person hired by a property owner to administer, market, and maintain property, especially rental property.

 

Proprietary Lease

In a cooperative, the right of a shareholder/resident to occupy a particular unit.

 

Proration

The process of dividing or allocating something (especially a sum of money or an expense) proportionately, according to time, interest, or benefit.

 

Public Record

The official collection of legal documents that individuals have filed with the county recorder in order to make the information contained in them public.

 

Puffing

Superlative statements about the quality of a property that should not be considered assertions of fact.

 

Purchase Agreement                                                                             Back to Top

A contract in which a seller promises to convey title to real property to a buyer in exchange for the purchase price.  Also called a purchase and sale agreement, deposit agreement, earnest money agreement, sales contract, or contract of sale.

Q

Qualification Rate
Rate of interest used to calculate whether or not a borrower qualifies for a mortgage.

Qualification Requirements
guidelines used by lenders to decide whether to loan money to an applicant.

Qualified Acceptance, Conditional Acceptance
acceptance for a loan (or other contract) provided that certain conditions are met.

Qualified Buyer
A person who has been pre-approved for a mortgage loan.

Quantum
A quantity or amount, a specified portion.

Quiet Enjoyment

Use and possession of real property without interference from the previous owner, the lessor, or anyone else claiming title.  See: Covenant of Quiet Enjoyment.

 

Quiet Title Action

A lawsuit to determine who has title to a piece of property, or to remove a cloud from the title.

Quit Claim Deed
A document that transfers a title, right or claim to another person, giving up all claims to a possession.

R

Radon
A radioactive gas which seeps up from the ground and can cause health problems. A radon test is often part of the home inspection.

Range

In the rectangular survey system, a strip of land six miles wide, running north and south.

 

Range Lines

In the rectangular survey system, the north-south lines (meridians) located six miles apart.

 

Real Estate                                                                                             Back to Top

Land an everything attached to or appurtenant to it, including the improvements on the land and the rights that go with ownership of the land.  Also called realty or real property.  Compare: Personal Property.

 

Real Estate Education, Research and Recovery Fund (REERRF)

A fund made up of fees paid by real estate licenSees and administered by the commissioner of Commerce, which is used for education of the public and licenSees, research concerning the real estate industry, the Advisory Task Force, and other related purposes.  The recovery portion of the fund is used to satisfy unpaid claims against licenSees.

 

Real Estate Contract

1. A purchase agreement. 2. A contract for deed. 3. Any contract having to do with real property.

 

Real Estate Investment Trust (REIT)

An unincorporated real estate investment business with at least 100 investors, organized as a trust, which is allowed to pass profits through to investors without paying corporate income taxes; the investors have limited liability.

Real Estate Settlement Procedures Act (RESPA)
A federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to (or at) settlement.

Real Property

Land and everything attached to or appurtenant to it, including the improvements on the land and the rights that go with ownership of the land.  Also called realty or real estate.  Compare: Personal Property.

Realtor
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors and followed by codes of ethics.

Receiver

A person appointed by a court to manage and look after property or funds involved in litigation.

Recision
The cancellation of a contract.

Reconciliation

In states where deeds of trust are used, releasing the security property from the lien created by a deed of trust by recording a deed of reconveyance (the equivalent of a satisfaction of mortgage).

 

Recording                                                                                              Back to Top

Filing a document at the county recorder’s office, so that it will be placed in the public record and give constructive notice.

 

Recording Numbers

The numbers stamped on documents when they are recorded, used to identify and locate the documents in the public record.

 

Rectangular Survey System

A system of grids made up of range and township lines that divide the land into townships, which are further subdivided into sections; a particular property is identified by its location within a particular section, township, and range.  Also called the government survey system or the section, township, and range system.

 

Redemption

1. Payment of all delinquent amounts, plus costs, by a defaulting mortgagor, thereby reinstating the loan and preventing foreclosure.  2. Payment of whatever the foreclosure sale purchaser paid for the property, plus interest and expenses, which allows a mortgagor to keep the property after the foreclosure sale.

 

Redemption, Equitable Right of

The right of a mortgagor to cure the default and reinstate the loan prior to the foreclosure sale.

 

Redemption, Statutory Right of

The right of a mortgagor to keep his or her property after a foreclosure sale by paying the amount that the highest bidder at the sale paid, plus interest and expenses.  Also called post-sale redemption.

 

Redlining

Refusal by a lender to make loans secured by property in a certain neighborhood because of the racial or ethnic composition of the neighborhood, in violation of fair lending laws.

Recording fees
Money paid to the lender for recording a home sale with local authorities, making it public record.

Refinance
Obtaining a new mortgage loan on a property already owned, often to replace existing loans.

Regression, Principle of                                                                        Back to Top

An appraisal principle which holds that a property of noticeably lower quality that those around it will tend to decrease the value of those neighboring properties; the opposite of the principle of progression.

 

Regulation Z

The Federal Reserve Board’s regulation that implements the Truth in Lending Act.

 

Reinstate

To prevent foreclosure by curing the default.

 

Release

1. To give up a legal right. 2. A document in which a legal right is given up.

 

Release Clause

1. A clause in a blanket mortgage that allows the borrower to get part of the security property released from the lien when a certain portion of the debt has been paid or other conditions are fulfilled.  Often called a partial release clause. 2. A clause in a contract for deed providing for a deed to a portion of the land to be delivered when a certain portion of the contract price has been paid.  Also known as a deed release provision.

 

Remainder

A future interest that becomes possessory when a life estate terminates, and that is held by someone other than the grantor of the life estate; as opposed to a reversion, which is a future interest held by the grantor (or his or her successors in interest).  Often called an estate in remainder.

 

Remainderman

The person who has an estate in remainder.

 

Rent

Compensation paid by a tenant to the landlord in exchange for the possession and use of the property.

 

Rescission

Termination of a contract when each party gives anything acquired under the contract back to the other party. (The verb form is rescind.) Compare: Cancellation.

 

Restriction

A limitation on the use of real property.

 

Restriction, Deed

A restrictive covenant in a deed.

Reverse Annuity Mortgage (RAM)
A mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as collateral.

Reversion                                                                                               Back to Top

A future interest that becomes possessory when a temporary estate (such as a life estate) terminates, and that is held by the grantor (or his or her successors in interest).  Often called an estate in reversion.  Compare: Remainder.

 

Reverter

The person who holds an estate in reversion.

Right of First Refusal
A portion of an agreement that requires a property owner to give one party the opportunity to buy or lease the property before the property is made available to other potential buyers.

Riparian Land

Land that is adjacent to or crossed by a body of water, especially flowing water such as a stream or a river.  Compare: Littoral Land.

 

Riparian Rights

The water rights of a landowner whose property is adjacent to or crossed by a body of water.  Compare: Appropriation, Prior.

 

Rural Housing Service

See: United States Department of Agriculture Rural Housing Service.

S

Sale Price
The price at which the house actually sold. The difference between a home's sale price and the listing price is useful for buyers in making offers on comparable homes.

Satisfaction of Mortgage, Release of Mortgage
The document issued by the mortgagee when the mortgage loan is paid in full.

Scarcity

A limited or inadequate supply of something; this is one of the four elements of value (along with utility, demand, and transferability).

Second Mortgage
A mortgage made subsequent to the primary mortgage.

Secondary Mortgage Market
The market in which primary mortgage lenders sell their loans to obtain more funds to originate more new loans.

Security Deposit                                                                                    Back to Top

Money a tenant gives a landlord at the beginning of the tenancy to protect the landlord in case the tenant fails to comply with the terms of the lease; the landlord may retain all or part of the deposit to cover unpaid rent or repair costs at the end of the tenancy.  According to the Minnesota Landlord-Tenant Act, a security deposit is any deposit of money the function of which is to secure the performance of a residential rental agreement (not including an advance payment of rent).

Security Interest
Interest that a lender takes in the borrower's property to assure repayment of a debt.

Seizin

Actual possession of a freehold estate; ownership.  Sometimes spelled seisin or seizen.

Separate Property

In a community property state (but not in Minnesota), property owned by a married person that is not community property; includes property acquired before marriage or by gift or inheritance after marriage.

Servicing
The operations a lender performs to keep a loan in good standing, such as collection of payments and payment of taxes, insurance, property inspections, etc.

Setback Requirements

Provisions in a zoning ordinance that do not allow structures to be built within a certain distance of the property line.

 

Settlement

1. Closing. 2. An agreement between the parties to a civil lawsuit in which the plaintiff agrees to drop the suit in exchange for money or the defendant’s promise to do or refrain from doing something.

 

Settlement Statement

A document that presents a final, detailed accounting for a real estate transaction, listing each party’s debits and credits and the amount each will receive or be required to pay at closing.  Also called a closing statement.

 

Severance

1. Termination of a joint tenancy. 2. The permanent removal of a natural attachment, fixture, or appurtenance from real property, which transforms the item into personal property.

Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a below-market interest rate and, in return, the lender (or other investor) receives a portion of the future appreciation in the value of the property.

Sheriff’s Sale                                                                                         Back to Top

A foreclosure sale.  Sometimes called an execution sale.

Short Sale

1. A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. 2. A short sale is the sale of real property where the fair market sale price is less than the loan balance.

Simple Interest
Interest which is computed only on the principal balance.

Soft Market
A market where houses aren't selling much or quickly, so the sales price is likely to be significantly lower than the asking (listing) price. It's a good time for buyers to buy, but not the best time for prospective sellers to sell.

Special Assessment

A tax levied only against the properties that have benefited from a public improvement (such as a sewer or a street light), to cover the cost of the improvement; creates a special assessment lien.

 

Specific Performance

A legal remedy in which a court orders someone who has breached a contract to actually perform the contract as agreed, rather than simply paying money damages to the other party.

 

Spot Zoning

A rezone of one property or a small area within a neighborhood.

 

Statue

A law enacted by a state legislature or the U.S. Congress.

 

Statute of Frauds

A state law that requires certain types of contracts to be in writing and signed in order to be enforceable.

 

Statute of Limitations

A law requiring a particular type of lawsuit to be filed within a specified time after the event giving rise to the suit occurred.

 

Statutory New Home Warranty Law

A state law which establishes that certain warranties are implied in every sale of a newly completed welling, and in every contract for the sale of a dwelling to be completed.

 

Steering

Channeling prospective buyers or tenants to or away from particular neighborhood based on their race, religion, national origin, or ancestry, in violation of anti-discrimination laws.

 

Subagent

A person to whom an agent has delegated authority, so that the subagent can assist in carrying out the principal’s orders; the agent of an agent.

 

Subcontractor                                                                                         Back to Top

A contractor who, at the request of the general contractor, provides a specific service, such as plumbing or dry-walling, in connection with the overall construction project.

 

Subdivided Lands Act

A state law applying to subdivisions of ten or more parcels located outside a municipality, which requires that subdivisions be registered with the Commissioner of Commerce and that all prospective purchasers be given a public offering statement.

 

Subordination Clause

A provision in a mortgage that permits a later mortgage to have higher lien priority that the one containing the clause.

 

Substitution, Principle of

A principle of appraisal holding that the maximum value of a property is set by how much it would cost to obtain another property that is equally desirable, assuming that there would not be a long delay or significant incidental expenses involved in obtaining the substitute.

 

Succession

Acquiring property by will or inheritance.

 

Sufferance

Acquiescence, implied permission, or passive consent through a failure to act, as opposed to express permission.

 

Supply and Demand, Principle of

A principle holding that value varies directly with demand and inversely with supply; that is, the greater the demand the greater the value, and the greater the supply the lower the value.

Survey
A detailed measurement of a property, including the location of the land in reference to known points, its dimensions, and the location and dimensions of any structures on the land. Prepared by a registered land surveyor.

Survivorship, Right of

A characteristic of joint tenancy; surviving joint tenants automatically acquire a deceased joint tenant’s interest in the property.

Sweat Equity
Equity created by a purchaser performing work on a property being mortgaged.

Syndicate                                                                                               Back to Top

An association formed to operate an investment business.  A syndicate is not a recognized legal entity; it can be organized as a corporation, partnership, limited liability company, or trust.

T

Tacking

Adding together successive periods of use or possession by more than one person to make up the statutory period required for adverse possession or prescription.

 

Taking

When the government acquires private property for public use by condemnation, it’s called :a taking.”  The term is also used in inverse condemnation lawsuits, when a government action has made private property virtually useless.

 

Tax, Ad Valorem

A tax assessed on the value of property.

 

Tax, General Real Estate

An annual ad valorem tax levied on real property.  Often called property taxes.

 

Tax, Mortgage Registry

A state tax charged on all new mortgages of real property in Minnesota.

 

Tax, Property

1. The general real estate tax. 2. Any ad valorem tax levied on real or personal property.

 

Tax, State Deed

A state tax charged on the difference between the purchase price and any assumed mortgage balance when real estate is sold.  If no mortgage is assumed, the tax is based on the total purchase price.

 

Tax-Free Exchange

A transaction in which on piece of property is traded for a piece of like-kind property.  If the property involved is held for investment or the production of income, or used in a trade or business, tax on the gain may be deferred.

 

Tenancy

Lawful possession of real property; an estate.

 

Tenancy, Joint

A form of concurrent ownership in which the co-owners have equal undivided interest and the right of survivorship.

 

Tenancy by the Entirety                                                                        Back to Top

A special for of joint ownership of property by husband and wife used in some states, but not in Minnesota.

 

Tenancy in Common

A form of concurrent ownership in which two or more person each have an undivided interest in the entire property, but no right of survivorship.  Compare: Tenancy, Joint.

 

Tenant

Someone in lawful possession of real property; especially, someone who has leased property from the owner.

 

Tenant, Dominant

A person who has easement rights on another’s property; either the owner of a dominant tenement, or someone who has an easement in gross.

 

Tenant, Holdover

A lesSee who remains in possession of the property after the lease has expired.

 

Tenant, Life

Someone who owns a life estate; not necessarily used as the measuring life for the life estate.

 

Tenement, Dominant

Property that receives the benefit of an easement appurtenant.

Term
The lifespan of the contract to repay a loan.

Testate

Refers to someone who has died and left a will.  Compare: Intestate.

 

Third Party

1. A person Seeking to deal with a principal through an agent.  2. In a transaction, someone who is not one of the principals.

 

Timely Renewal

An application for renewal and renewal fee mailed by June 15 of the real estate licenSee’s renewal year.

 

Timeshare                                                                                              Back to Top

An ownership arrangement in which co-owners each have an exclusive right to use a condominium unit (or other property) for a specified time period each year.

Title
A document that gives evidence of an individual's ownership of property.

Title, Abstract of

A short account of what appears in the public record affecting the title of a particular parcel of real property; ordinarily includes a chronological summary of all grants, conveyances, wills, transfers, and judicial proceedings that have in any way affected title, together with all liens and other encumbrances of record, showing whether or not they have been release.

 

Title, Chain of

The chain of deeds (and other documents) transferring title to a piece of property from one owner to the next, as disclosed in the public record; more complete than an abstract.

 

Title, Clear

A good title to property, free from encumbrances or defects; marketable title.

 

Title, Equitable

The vendee’s interest in property under a real estate contract.  Also called an equitable interest.  Compare: Title, Legal.

 

Title, Legal

The vendor’s interest in property under a real estate contract.  Compare: Title, Equitable.

 

Title, Marketable

Title free and clear of objectionable liens, encumbrances, or defects, so that a reasonably prudent person with full knowledge of the facts would not hesitate to purchase the property.

Title Insurance
Insurance, usually issued by a title insurance company, which insures a homebuyer against errors in the title search. The cost of the policy is usually a percentage of the property value.

Title Report

A report issued by a title company, disclosing the condition of the title to a specific piece of property, before the actual title insurance policy is issued.  Often called a preliminary title report.

Title Search                                                                                            Back to Top
The examination of municipal records by a title company to determine the legal ownership of property.

Torrens System

A system of land registration used in Minnesota and some other states, which allows title to be verified without a standard title search; title to registered land is free of all encumbrances or claims not registered with the title registrar.

 

Total Finance Charge

Under the Truth in Lending Act, the total finance charge on a loan includes interest, any discount points paid by the borrower, the loan origination fee, and mortgage insurance costs.

 

Township

In the rectangular survey system, a parcel of land six miles square, containing 36 sections; the intersection of a range and a township tier.

 

Township Lines

Lines running east-west, spaced six miles apart, in the rectangular survey system.

 

Township Tier

In the rectangular survey system, a strip of land running east-west, six miles wide and bounded on the north and south by township lines.

 

Tract

1. A piece of land of undefined size.  2. In the rectangular survey system, an area made up of 16 townships; 24 miles on each side.

 

Trade Fixtures

Articles of personal property annexed to real property by a tenant for use in his or her trade or business, which the tenant is allowed to remove at the end of the lease.

 

Transferability

If an item is transferable, then ownership and possession of that item can be conveyed from one person to another.  In appraisal, transferability is one of the four elements of value, along with utility, scarcity, and demand.

 

Trust

A legal arrangement in which title to property (or funds) is vested in one or more trustees, who mange the property on behalf of the trust’s beneficiaries, in accordance with instructions set forth in the document establishing the trust.

 

Trust Account

A bank account, separate from a real estate broker’s personal and business accounts, used to segregate trust funds from the broker’s own funds.

 

Trustee                                                                                                  Back to Top

1. A person appointed to manage a trust on behalf of the beneficiaries.  2. In other states, a neutral third party appointed in a deed of trust to handle the nonjudicial foreclosure process in case of default.

 

Trust Funds

Money or things of value received by an agent, not belonging to the agent but being held for the benefit of others.

Truth-In-Lending
A federal law requiring disclosure of the APR to homebuyers shortly after they apply for the loan.

Two-Step Mortgage, Premier Mortgage
A mortgage in which the borrower receives a below-market interest rate for a specified number of years (7 to 10) and then receives a new interest rate adjusted (within limits) to market conditions at that time.

U

Underwriting
The decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate and term or loan amount.

Undue Influence

Exerting excessive pressure on someone so as to overpower the person’s free will and prevent him or her from making a rational or prudent decision; often involves abusing a relationship of trust.

 

Uniform Commercial Code

A body of law adopted in slightly varying versions in most states, which attempts to standardize commercial law dealing with such matters as negotiable instruments and sales of personal property.  Its main applications to real estate law concern security interests in fixtures and bulk transfers.

 

Uniform Settlement Statement

A settlement statement required for any transaction involving a loan that is subject to the Real Estate Settlement Procedures Act (RESPA).

 

Unit Owner’s Association

In a condominium, an organization that all unit owners automatically belong to, which governs the common elements of the condominium.  Often called a condominium association.

Usury
Interest charged in excess of the legal rate established by law.

V                                                                                                         Back to Top

VA Loan
A long-term, low- or no-down-payment loan guaranteed by the Department of Veterans Affairs restricted to those qualified by military service or other entitlements .

VA Mortgage Funding Fee
A premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a VA-backed loan.

Valid

The legal classification of a contract that is binding and enforceable in a court of law.

 

Value

Generally, how much something is worth; the present worth of future benefits.  In real estate, the term is most often used to refer to market value.

 

Value, Assessed

The value placed on property by the taxing authority (the count assessor, for example) for the purposes of taxation.

 

Variance

Permission (obtained from the local zoning authority) to build a structure in a way that violates the strict terms of the zoning ordinance.

 

Vendee

A buyer or purchaser; particularly, someone buying property under a contract for deed.

 

Vendor

A seller; particularly, someone selling property by means of a contract for deed.

 

Void

Having no legal force or effect.

W

Waive
To give up a claim or right voluntarily, to relinquish. A waiver is a document that evidences that relinquishment.

Walk-Through Inspection
A final walk-through immediately prior to closing to verify that no changes have taken place and no new damage has occurred.

Warranty, Implied                                                                                  Back to Top

In a sale or lease of property, a guarantee created by operation of law, whether or not the seller or landlord intended to offer it.

 

Waste

Destruction, damage, or material alteration of property by someone in possession who holds less than a fee estate (such as a life tenant or a lesSee), or by a co-owner.

 

Water Rights

The right to use water from a body of water.  See: Appropriation, Prior; Littoral Rights; Riparian Rights.

Wear and Tear
Normal use and the resulting reduction in value of a property.

Will

A person’s stipulation regarding how his or her estate should be disposed of after he or she dies.  Also called a testament.

 

Words of Conveyance

The portion of a deed stating an intention to convey the property to the grantee.  Also called a granting clause.

Wraparound Mortgage
A mortgage that encompasses the balance of one mortgage plus an additional mortgage loan. Payments are then made to the mortgagee of the wraparound mortgage, who forwards appropriate portions of that money to the mortgagee of the first mortgage.

Z

Zone

An area of land set off for a particular use or uses, subject to certain restrictions.

Zoning
City regulations determining the character or use of property. Zoning laws divide cities into different areas according to use, from single-family residences to industrial plants. Zoning ordinances control the size, location, and use of buildings within these different areas.

Zoning Amendment

An amendment to a zoning ordinance, usually changing the uses allowed in a particular zone.  Also called a rezone.

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