Glossary of Terms

Addendum: Something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, etc, to modify the original. (See Amendment)

Adjustable Rate Mortgage (ARM): Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. The extent and number of these adjustments are agreed to at the inception of the loan.

Agency: Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter in agency involving real estate must be in writing, for example, listings, buyer/broker agreements, etc.

Amendment: A change either to correct an error or to alter a part of an agreement without affecting the essential intent.

Appraisal: A report from an independent third party detailing the estimated value of real estate.

Appreciation: An increase in value to real property due to positive improvement or the elimination of negative elements in the surrounding area.

Assessed Value: The valuation placed on real property for purposes of taxation. This valuation does  not necessarily correspond with the market valuation.

Balloon Note: A form of promissory note that calls for the minimum payment of principal and the payment of interest at regular intervals. This type of note requires a substantial final payment, which represents all the remaining principal.

Beneficiary (of a Trust): The recipient of benefits from a trust.

Buyer’s Agent: The licensed real estate salesperson who represents the interests of, and negotiates on behalf of, the buyer of a home or property.

Closing: The final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.

CMA: CMA, or Competitive Market Analysis, is a comparison of homes similar to a seller’s home in terms of size, style, features, and location that have sold recently or are on the market. A CMA is prepared by a real estate agent to help set a home’s listing price; it is not an appraisal.

Comparable Sales (Comps): Real estate sales on properties of similar age, location and features to subject property used for price analysis and appraisals.

Contingency: Commonly, a stated event which must occur before a contract is binding. For example, a home sale may be contingent upon the buyer obtaining financing.

Conventional Loan: A mortgage or deed of trust not obtained under a government insured program, such as FHA or VA.

Conveyance: The transfer of title to real property from one person to another.

Deed: A document through which a conveyance of property is effected.

Deposit: A portion of the down payment given by the buyer to the seller or escrow agent with a written offer to purchase. Shows good faith.

Depreciation: Loss in value occasioned by ordinary wear and tear, destructive action of the elements, or functional or economic obsolescence.

Down Payment: Cash portion of the purchase price paid by a buyer from his own funds as opposed to that portion which is financed.

Dual Agent: A licensed real estate salesperson who represents both the buyer and the seller in a transaction at the same time. Also applies to a buyer’s agent (see above) when the seller’s agent works for the same company. In either case, both parties must provide written informed consent to Dual Agency.

Earnest Money: A deposit of funds by the purchaser on a piece of real estate as evidence of good faith.

Easement: A right to use all or part of the land owned by another for a specific purpose. An easement may, for example, entitle its holder to install and maintain sewer or utility lines or provide access to a piece of property.

Encroachment: Any building, improvement or structure (such as a wall, fence or driveway) located on one property that intrudes upon the property of another.

Encumbrance: Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden or charge upon the property.

Equity: The market value of real property less the amount of existing liens.

Escrow: A procedure in which a third (neutral) party holds all funds, documents, etc. necessary to the sale, with instructions from both buyer and seller as to their use and disposition.

Escrow Account: An account held by the lender for payment of property taxes and insurance or other periodic debts against real property. The mortgagor (in this case the property owner) pays a portion of these debts with each monthly loan payment. The lender pays the billing parties from the accumulated funds when due.

Fair market Value: The average of the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing but not compelled to sell, would accept.

Foreclosure: The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower’s loan.

Fixed Rate Mortgage: A mortgage having a rate of interest that remains the same for the life of the mortgage.

Fixtures: Personal property that is attached to real property and is legally treated as real property while it is so attached. Examples: built-in appliances, window blinds, chandeliers and ceiling fans.

Hazard/Homeowners Insurance: Real estate/property insurance protecting against loss by fire, certain natural causes, covering liability, etc. depending on the terms of the policy.

Interim Financing: Temporary or short term loans. Often used with new construction. Usually replaced with a permanent long-term mortgage.

Intestate: Designates the estate or condition of failing to leave a will at death. “To die intestate.”

Judgment: A decree of a court. In practice this is the lien or charge upon the lands of a debtor resulting from the Court’s award of money to a creditor.

Legal Description: A description of a parcel of land recognized by law, based on surveys identifying the exact boundaries of the property.

Lien: A monetary charge imposed on a property, usually arising from a debt or obligation. All liens are encumbrances, but not all encumbrances are liens.

Lender’s Title Policy: Also called “mortgage policy.” A title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalidity or unenforceability of a lien, or loss of priority of the mortgage or deed of trust.

Loan Origination Fee: A one time fee frequently charged by the lender to set up a loan.

Marketable Title: Real property ownership free of liens, defects, encumbrances or claims.

Mechanic’s Lien: A lien on real estate, securing the payment of debts due to persons provide labor, services or materials incident to the construction of buildings and improvements on the real estate.

Mortgage: An instrument by which real property is pledged as security for repayment of a loan.

Owner’s Title Policy: A policy of title insurance insuring an owner of real estate against loss occasioned by defects in liens against or unmarketability of the owner’s title.

Piti: A loan payment which combine Principal, Interest, Taxes and Insurance.

Power of Attorney: An instrument in writing by which one person, the principal, authorizes another, the attorney in fact, to act in the specific actions described in the instrument.

Public Records: Records which by law impart constructive notice of matters relating to land.

Quitclaim Deed: A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed contains no covenants or warranties.

Real Property: Also called “real estate.” (1) Land and anything permanently affixed to the land, such as building, fences and those things attached to the buildings, such as plumbing and heating fixtures, or other such items that would be personal property if not attached. (2) May refer to rights in real property as well as the property itself.

Recordation: Filing instruments of a legal nature with the recorder of the jurisdiction – such as a deed or mortgage – affecting the title to real estate. When such an instrument is properly recorded, it is considered to be a matter of public record. Legally, that means that all subsequent purchasers are deemed to have constructive knowledge of that information.

Sales Contract (Purchase Agreement): The legal document contractually binding the terms of Buyer’s and Seller’s agreement to sell/purchase real estate, usually completed by the real estate agent and signed by both parties.

Short Sale: 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.

Special Assessment: A lien assessed against real property by a public authority to pay costs of public improvements, such as sidewalks, sewers and street light, which directly benefits the assessed property. Also used by homeowner associations in condominium properties.

Subdivision: A tract of land surveyed and divided into lots for purposes of sale.

Survey: The tract of land surveyed and divided into lots for purposes of sale.

VA Loans: Housing loans to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans Administration, enabling veterans to buy a residence with minimum down payment.

Warranty Deed: A deed in which the grantor warrants or guarantees that good title is being conveyed.

Zoning: Laws passed by local governments regulating the size, type, structure, nature and use of land or buildings.

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