Common Terms Used in Land Purchasing

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  • Abstract of Title

    A summary of all conveyances, transfers, and other facts (of record) as evidence of title or that which would impair title of real property.

  • Acceptance

    Consent to an offer to enter into contract.

  • Adjustable Rate Mortgage

    Any real estate loan in which the interest rate varies over time according to a prescribed formula or set of conditions, usually changes in economic conditions. (Also known as a variable rate mortgage).

  • Addendum

    An addition or change to a contract.

  • Ad valorem tax

    Tax based on assessed property value.

  • Adverse possession

    The acquisition of title to property through possession without the owner’s consent for a certain period of time.

  • Agency

    The relationship of trust that exists between sellers and buyers and their agents. The agency is usually formed through a written contract.

  • Agency Disclosure

    Laws in most states require agents who act for buyers or sellers to disclose who represents whom in a real estate transaction. Laws vary widely by state but in Texas it is required at the first meeting when substantive matters about real estate are discussed.

  • Allowance for Repairs

    An amount negotiated within a contract that the seller agrees to pay toward buyer’s designated repairs.

  • AMHI

    American Society of Home Inspectors.

  • Amortization

    The process of paying the principal and interest on a loan through regularly scheduled installments. Initially, most of each payment is applied toward interest owed, and later in the loan term increasingly applied toward principal.

  • Amortization Schedule

    Schedule showing principal and interest payments throughout the life of the loan.

  • Annual Percentage Rate (APR)

    A measure of interest rate that expresses the cost of a mortgage as a yearly rate on the loan balance. The APR assumes the loan is held for its full term. For adjustable-rate loans, the APR assumes the loan’s index doesn’t change from its initial value.

  • Appraisal

    An opinion or statement (written or oral) of the value of the property.

  • Appraisal Fee

    Charged by an appraiser to give an opinion or statement (written or oral) of the value of property.

  • Appreciation

    Increase in value due to any cause.

  • Arbitration

    A method of resolving a dispute in which a third party renders a decision.

  • Asbestos

    A mineral fiber used in some building materials such as flooring, siding, insulation and roofing. It is presently banned for most uses in real property.

  • Assessed Value

    Value of property for taxation purposes as determined by the tax assessor.

  • Assumption of Loan, Mortgage or Deed of Trust

    An agreement wherein the buyer assumes or takes responsibility (becomes liable) for payment of an existing note secured by a mortgage or deed of trust.

  • Assumption Transfer Fee

    Charged by existing mortgage company to process existing loan.

  • Attorney Document Preparation Fee

    Charged by attorney for preparing legal documents for the transaction.

  • Back-end ratio

    A lender calculation that compares a borrower’s total debt (principal, interest, property taxes, and insurance, plus other monthly debt payments) to gross monthly income.

  • Backup offer

    A secondary bid for a property that the seller will accept if the first offer fails.

  • Balloon Payment

    Any payment that is greater than twice the amount of the normal and periodic payment. Generally used to refer to the final payment of a note with an advanced due date.

  • Basis point

    A basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points.

  • Breach of contract

    The failure to perform provisions of a contract without a legal excuse.

  • Bridge loan

    A short-term loan for borrowers who need more time to find permanent financing.

  • Broker

    A person who brings parties together and assists in negotiating contracts between them for a commission or fee.

  • Builder upgrades

    Extra features or better finishing materials offered by a builder.

  • Building code

    A comprehensive set of laws that controls the construction or remodeling of a home or other structure.

  • Building line or setback

    Guidelines that limit how close an owner can build to the street or an adjacent property.

  • Building permit

    A permit issued by a local government agency that allows the construction or renovation of a house.

  • Building restrictions

    Regulations that limit the manner in which property can be used.

  • Built-ins

    Appliances or other items that are framed into a home or permanently attached.

  • Bundle of rights

    The various interests or rights an owner has in a property.

  • Buyer’s agent

    An agent representing a buyer in a home purchase, either as a single agent or as an exclusive buyer’s broker.

  • Buyer’s market

    A slow real estate market in which buyers have the advantage.

  • Bylaws

    The rules and regulations that a homeowners association or corporation adopts to govern activities.

  • Chain of Title

    The chronological list of recorded documents affecting title to a specific parcel of real property.

  • Clear Title

    A title that is free from any encumbrance, obstruction or limitation that would “cloud the title”.

  • Closing

    Closing of escrow; the final act of a transaction wherein papers are signed, monies are exchanged and title is transferred.

  • Closing Costs

    The expenses incurred in a real estate transaction including costs of title examination, title insurance, attorney’s fees, lender’s service charges, documentary transfer tax, etc.

  • Cloud of Title

    An outstanding claim of title that has yet to be proven invalid.

  • Commitment

    A title insurer’s contractual obligation to insure title to real property.

  • Common area

    An area inside a housing development that is owned by all residents.

  • Community property

    Property accumulated through the joint efforts of husband and wife. It is a classification of property peculiar to certain states, including Texas.

  • Comparables

    Properties used as comparisons to determine the value of a certain property.

  • Comparative market analysis

    An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.

  • Condominium

    Fee ownership of an individual unit (within the confines of the perimeter walls) and tenants-in-common ownership in all the underlying fees and in the common buildings and grounds designated for all the unit owners.

  • Contingency

    An item in a contract dependent on a specific condition for its fulfillment.

  • Construction loan

    A short-term loan for home or building construction. The lender disburses the funds in stages.

  • Construction-to-permanent loan

    A construction loan that is converted to a longer-term traditional mortgage after construction has been completed.

  • Convertible adjustable-rate mortgage

    A mortgage which starts as an adjustable rate loan, but allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.

  • Conveyance

    The transfer of title of property.

  • Conveyance tax

    A tax imposed on the transfer of real property.

  • Cooperating broker

    A real estate broker who finds a buyer for a property listed by another broker.

  • Cost-plus contract

    A construction contract that determines the builder’s profit based on a percentage of the cost of labor and materials.

  • Counter-offer

    A new offer as to price, terms and/or conditions made in reply to and superseding a prior offer.

  • Courier Fees

    Charged by courier to deliver documents to and from participants throughout the transaction.

  • Covenants, conditions, and restrictions (CC&Rs)

    Rules and regulations for a development, such as those pertaining to acceptable landscaping or improvements that can be made to individual units.

  • Credit history

    A record of an individual’s current and past debt payments.

  • Credit rating

    The degree of creditworthiness assigned to a person based on credit history and financial status.

  • Credit Report

    Lender run comprehensive buyer credit report.

  • Cul-de-sac

    A street or alley that is closed at one end.

  • Curable defect

    A deficiency in a property that is easy or inexpensive to fix, such as chipping paint.

  • Decorating allowance:

    An amount of money supplied by the seller and held in escrow for the buyer, to be applied toward negotiated decorating changes.

  • Deed

    A written document that transfers the interest in property from one person to another.

  • Deed of Trust

    A security document used to transfer “bare legal” title from the trustor (borrower) to the trustee (a neutral party) to be held in trust for the benefit of the beneficiary (lender) until the trustor completes performance of an obligation (monetary or otherwise).

  • Deed Restrictions

    Limitations on the use of real estate written into the deed.

  • Default

    The failure to fulfill a duty or discharge an obligation, such as making monthly mortgage payments.

  • Discount Points

    Points a lender charges to reduce interest rate; may be paid by either buyer or seller on conventional loans; one point is equal to 1 percent of the loan value.

  • Disclosure

    A statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint.

  • Documentation preparation fee

    A fee charged by the settlement agent (escrow company or attorney) to ready the necessary paperwork for closing.

  • Down Payment

    The portion of the purchase price of a home that the buyer pays in cash and does not finance.

  • Due-on-Sale Clause

    A provision in a security document calling for the automatic maturity (note is all due and payable) in the event of sale or transfer of title.

  • Earnest Money

    Something of value given as part of the purchase price to show “good faith” and to secure an agreement.

  • Easement

    A limited right or interest in the land of another entitling the holder to use, privilege or benefit.

  • Eminent Domain

    The legal right and procedures for a municipality to take title and possession of private property for public use.

  • Encroachment

    Fences or other structures that extend into the property of another owner.

  • Encumbrance

    A claim or lien on a property which complicates the title process. Any right or interest in property interfering with its use or transfer.

  • Equity

    The difference between the value of property and the amount owed on the property.

  • Escrow

    A transaction wherein an impartial third party (escrow agent) acts as agent to both parties (seller/buyer-lender/borrower, etc.) acting only under instructions in delivering papers, drawing and/or recording documents and disbursing funds.

  • Escrow Fee

    Charged by title company to service transaction and to escrow money and documents; amount varies with company.

  • Estimated closing costs

    An estimate of expenses incidental to the sale of real estate, including loan, title, and appraisal fees. These costs are in addition to the price of the property, and are prepaid at closing. Some are one-time expenses and some are recurring.

  • Examination of title

    An inspection by a title company of public records and other documents to determine the chain of ownership of a property.

  • Exclusive agency

    An agreement to employ a particular broker. If another broker makes the sale, both are entitled to commissions.

  • Exclusive listing

    A contract that gives an agent the exclusive right to market a property for a specific period of time.

  • Fannie Mae

    See Federal National Mortgage Association.

  • Farmer’s Home Administration (FmHA)

    An agency of the U.S. Department of Agriculture that provides financing for purchasers of homes and farms in small towns and rural areas.

  • Federal Deposit Insurance Corporation (FDIC)

    Independent deposit insurance agency created by Congress to maintain stability and public confidence in the nation’s banking system.

  • Federal Home Loan Bank Board (FHLBB)

    Former name for the regulatory and supervisory agency of federally chartered savings institutions, now called the Office of Thrift Supervision.

  • Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)

    Quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

  • Federal Housing Administration (FHA)

    Government agency, division of the Department of Housing and Urban Development, which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

  • Federal National Mortgage Association (FNMA)

    Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

  • Federal Reserve

    Central bank of the United States and major regulatory agency for many commercial banks.

  • Fee Simple

    An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

  • FHA Loan

    A loan insured by the Federal Housing Administration (of the Department of Housing and Urban Development).

  • Finance Charge

    The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation.

  • First Mortgage

    A mortgage that is in first lien position, taking priority over all other liens. In the case of a foreclosure, the first mortgage will be paid before any other mortgage.

  • Fixed Rate

    An interest rate that is fixed for the term of the loan.

  • Fixed-Rate Mortgage

    A mortgage whose interest rate does not change for the life of the loan. The payments are also fixed.

  • Flood Insurance

    A form of hazard insurance required by lenders to cover property damage or loss in flood zones.

  • Floor

    The minimum rate of interest payable on an adjustable-rate mortgage.

  • Forbearance

    Grace period given when a lender postpones foreclosure to give the borrower time to catch up on overdue payments.

  • Foreclosure (Repossession)

    Legal process by which the lender forces the sale of a property when the borrower has not met the mortgage terms.

  • Freddie Mac

    See Federal Home Loan Mortgage Corporation.

  • Government National Mortgage Association (GNMA or Ginnie Mae)

    Government agency that provides funds for VA and FHA loans.

  • Grace Period
  • Period of time during which a loan payment may be made after its due date without incurring a late penalty.

  • Graduated Payment Mortgage

    Graduated Payment Mortgage

  • GRI

    Graduate, Realtors Institute. A professional designation granted to a member of the National Association of Realtors® who has successfully completed courses covering Law, Finance and Principles of Real Estate.

  • Gross Income

    Total income before taxes or expenses are deducted.

  • Gross Monthly Income

    The total amount earned by the borrower each month.

  • Growing Equity Mortgage

    A fixed-rate loan in which payments increase by a predetermined amount each year, reducing the outstanding balance of the loan. This accelerated payment plan allows repayment of a 30-year loan in 15 to 20 years.

  • Guarantee or Guaranty

    A promise by one party to pay a debt or perform an obligation contracted by another in the event of that person’s death.

  • Key tenant

    In a commercial or office development, the tenant who attracts other customers, such as a major chain store in a mall.

  • Kicker

    Any benefit to a lender above ordinary fixed-interest payments such as an equity position in a property or a percentage participation in the income stream.

  • Legal description

    A specific way of identifying and locating a piece of real estate that is acceptable to a court.

  • Lien

    A charge, hold or claim of another for the purpose of securing a debt or obligation.

  • Listing

    A written contract between an owner (principal) and an agent (broker) authorizing the agent to sell, lease or rent the owner’s property in exchange for a compensation.

  • Loan application

    The first step toward submitting a home loan requires the borrower to itemize basic financial information.

  • Loan Discount Points

    Points a lender charges to reduce interest rate; may be paid by either buyer or seller; one point is equal to 1 percent of the loan value.

  • Loan origination fee

    The lender requires a loan origination fee (or points) to cover the direct costs of arranging the loan.

  • Loan term

    The time set by a lender for a buyer to pay a mortgage. Most conforming loans have 30-year or 15-year terms. In the case of balloon loans, payments are based on the amortization period and a final payment due at term.

  • Loan to Value (LTV)

    The ratio of the amount borrowed to the property’s appraised value or selling price.

  • Lock-in

    A lender’s commitment to a borrower to guarantee (or “lock in”) a specific interest rate for a limited amount of time.

  • Lock-in period

    A period of time during which the borrower is guaranteed an agreed-upon interest rate, even if market rates rise. The longer the period, the higher the cost (in points) to the borrower.

  • Low density

    A low concentration of housing units in a specific area.

  • Low-emissivity

    A coating or film applied between panes of glass in high-efficiency glazing; abbreviated “low-E.”

  • Market Value

    The price for a property that a willing buyer and a willing seller would agree upon when neither is under abnormal pressure.

  • Master-planned community

    A suburban plan that includes homes and commercial, work, educational, and community facilities.

  • Material defect

    Any defect in a specific property that could either affect a buyer’s decision to purchase it or affect the property’s value, such as a cracked foundation.

  • Material fact

    Any information about a specific property that could affect a buyer’s decision to purchase it, such as an upcoming zoning change in the neighborhood.

  • Mechanic’s Lien

    A statutory lien to secure payment for persons contributing labor and/or material toward improvement upon real property when the compensation was not paid in a timely manner.

  • Mechanical systems

    A home’s plumbing, wiring, heating, and cooling systems.

  • Mediation

    A dispute-resolution process in which a neutral party works to resolve contract differences.

  • Metes and Bounds

    A time-honored land surveying method of describing land in terms of shape and boundary dimensions.

  • MLS (multiple listing service)

    The service combines the listings for all available homes in an area, except For Sale By Owner (FSBO) properties, in one directory or database.

  • Monthly association dues

    A payment due monthly to a homeowners’ association, to be used for maintenance and communal expenses. Condominiums, townhouse complexes, and planned unit developments (PUDs) may require monthly homeowners’ association dues.

  • Mortgage

    In casual use, a sum of money borrowed to purchase a home at a certain interest rate using the property as collateral. In formal use, a mortgage is the legal document that pledges property as collateral for a loan.

  • Mortgage banker

    A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.

  • Mortgage broker

    A company that matches lenders with prospective borrowers who meet the lender’s criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.

  • Mortgage insurance

    Required by lenders on some loans to protect lenders from a possible default. Most conventional loans with down payments or home equity percentages that are less than 20 percent of the home value require private mortgage insurance (PMI).

  • Mortgage Insurance Premium (MIP)

    Charged on a FHA loan; insurance that is paid for by the borrower, for the life of the loan, to insure lender against default by the borrower.

  • Mortgagee

    A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

  • Mortagee Title Policy

    An insurance policy or contract indemnifying against loss resulting from a defect in the title to the interest, or lien, in the real property thus insured.

  • Mortgagor

    The person who borrows money to purchase a house. The lender is called the mortgagee.

  • Multiple offers

    More than one purchase offer made on a property. Multiple offers commonly occur in seller’s markets or hot neighborhoods.

  • NAR (National Association of REALTORS®)

    A trade organization for real estate agents and brokers who become members by agreeing to abide by the organization’s code of ethics. Members may call themselves REALTORS®.

  • NAR Code of Ethics

    A formal code of ethics and standards of practice established by the National Association of REALTORS® (NAR) and by which its members must abide.

  • Negative amortization

    Occurs when a borrower’s monthly payment is too small to cover both the principal and interest of a loan, so the outstanding balance of the loan actually grows larger with each payment. Many adjustable rate mortgages are susceptible to this.

  • Negotiation

    The process of creating a meeting of the minds between two or more parties in order to reach an agreement.

  • Non-conforming loan

    A non-conforming loan is any loan that doesn’t meet the qualifications or is too large to be purchased by Fannie Mae or Freddie Mac.

  • Non-recurring closing costs

    One-time-only fees for items including an appraisal, loan points, credit report, title insurance, and home inspection.

  • Notary Public

    A public officer authorized to administer oaths to attest or certify types of documents, to take depositions and to perform certain other civil functions.

  • Note

    A legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

  • Open-End Mortgage

    Provision that allows for additional loan advances to be funded to the borrower, while keeping the same security and security documents.

  • Origination fee

    A fee charged by most lenders to cover the direct costs of arranging the loan; also called points. A point is 1 percent of the total loan amount.

  • Owner’s Title Policy

    A policy insuring the title of the owner of the property.

  • Pay-off Penalty

    Charged by lender for premature payment of conventional loan balance.

  • Personal property

    Any movable property in a house such as furniture or appliances.

  • Pest-control inspection

    A common pest-control inspection is a termite inspection, which is required in some states, such as California.

  • Photo Fees

    Charged by lender for photographing property.

  • PITI (principal, interest, taxes, and insurance)

    A payment amount calculated by the lender to include the principal, interest, taxes, and insurance on an amortizing loan. The figure is designed to represent the borrower’s actual monthly mortgage-related expenses.

  • Planned community

    A concept dating back to the 19th century that describes any town or neighborhood built with certain guidelines or goals in mind.

  • Planned unit development (PUD)

    A highly designed residential project that features relatively dense clusters of houses, which are usually surrounded by areas of commonly owned open space maintained by a nonprofit community association.

  • Plat book

    A public record containing maps showing the division of streets, blocks, and lots, and indicating the measurements of the individual parcels.

  • Policy of Title Insurance

    A contract indemnifying against loss resulting from a defect in title or outstanding liens on the real property insured

  • Point

    An amount equal to 1 percent of the loan amount. Points may be paid by the borrower at the time the loan is made to get a lower interest rate. Lenders offer various rate/point combinations.

  • Power of Attorney

    A document authorizing a person (the attorney-in-fact) to act on behalf of another (the principal); to be directive in real estate, the power of attorney must be recorded.

  • Pre-approval

    A thorough assessment made by a lender of a potential borrower’s ability to pay for a home, and a confirmation of the amount to be borrowed. The completion of a loan application is necessary to close the loan.

  • Prepaid expenses

    Expenses including taxes, insurance, and assessments that are paid before the due date.

  • Prepaid fees

    Funds collected by the lender from the borrower to pay certain recurring items in advance, including interest, property taxes, hazard insurance, and, if applicable, private mortgage insurance (PMI).

  • Prepaid interest

    Interest paid before it is due. For example, at the close of a real estate transaction the borrower may prepay interest that will accrue between closing and the first monthly payment.

  • Pre-Payment Penalty

    A provision inserted in a note whereby a penalty is to be paid by the borrower in the event the note is paid off before the due date (or, usually, more than 20 percent in any one year).

  • Prequalification

    A lender’s preliminary assessment of a buyer’s ability to pay for a home, and an estimate of how much the buyer may borrow.

  • Prime lending rate

    The minimum short-term interest rate charged by commercial banks to their most creditworthy clients. Home loan rates typically are several points above the prime rate, which is also used as the basis for mortgages, business loans, and personal loans.

  • Principal

    The amount of money originally borrowed in a mortgage, minus any payments made subsequently.

  • Principle of conformity

    The idea that a house will more likely appreciate in value if its size, age, condition, and style are similar to (or conform to) other houses in the neighborhood.

  • Principle of progression

    An appraisal term which states that real estate of lower value is enhanced by the proximity of higher-end properties.

  • Principle of progression

    An appraisal term which states that real estate of lower value is enhanced by the proximity of higher-end properties.

  • Principle of regression

    An appraisal term which states that the value of higher-end real estate can be brought down by the proximity of lower-end properties.

  • Private Mortgage Insurance (PMI)

    Charged on a Conventional loan; insurance that is paid for by the borrower to insure lender against default by borrower.

  • Processing

    The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

  • Processing Fee

    May be charged by a lender to initiate a loan.

  • Professional Service Fees

    An amount paid to real estate broker as compensation for REALTOR® services.

  • Procuring cause

    Legal term used to determine whether a broker is entitled to a commission.

  • Property line

    The official dividing line between properties.

  • Property value

    The value of a piece of property, based on the price a buyer will pay at a given time.

  • Prorate

    To allocate percentages of certain expenses to be paid by the buyer and seller at the time of closing.

  • Punch list

    A list compiled by a buyer prior to a sale detailing items to be fixed before closing.

  • Purchase contract:

    A legal document that binds a buyer to purchase a piece of property for a set price, and also binds the seller to sell that property to the buyer.

  • Purchase Offer

    A written document used to secure a firm offer to purchase property and provide a receipt for the buyer’s earnest money. (Also known as a purchase agreement or deposit).

  • Qualifying ratios

    Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

  • Quiet title

    To free the title to a piece of land from the claims of other persons by means of a court action called a “quiet title” action. The court decree obtained is a “Quiet Title” decree.

  • Quitclaim deed

    A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

  • Rate and Term Refinance

    A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage.

  • Rate Lock

    A lender’s commitment to a borrower that guarantees a specified interest rate for a specified period of time at a specific cost.

  • Ratification

    The adoption or approval of an act performed on behalf of a person without previous authorization.

  • Real Estate Broker

    A person licensed to negotiate and transact the sale of real estate.

  • Real Estate Investment Trust

    A special arrangement under Federal and State law whereby investors may pool funds for investments in real estate and mortgages and yet escape corporation taxes; requires one hundred persons or more.

  • Real Estate Settlement Procedures Act

    A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

  • Real Property

    Refers to the right to own land and improvements. Commonly used interchangeably with Real Estate and Realty.

  • Realtor

    A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

  • Reconveyance

    The transfer of the title of land from one person to the immediately preceding owner. This instrument is commonly used in California when the performance or debt is satisfied under a deed of trust and the trustee conveys the title he has held back to the owner.

  • Recorder

    The public official who keeps records of transactions that affect real property in the area.

  • Recording

    The act of entering in the public records, the written record of title to real property, and essentially making it a public record.

  • Redemption

    The buying back of one’s property after it has been lost through foreclosure through payment of delinquent taxes after sale to the State.

  • Refinance Transaction

    The process of paying off one loan by obtaining a new loan using the same property as security, usually done to secure better interest rates.

  • Registrar of Deeds

    The public official who keeps records of transactions that affect real property in the area.

  • Remaining Balance

    The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges; the amount of principal that has not yet been repaid.

  • Rent Loss Insurance

    Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

  • Repayment Plan

    An arrangement made to repay delinquent installments or advances.

  • Replacement Reserve Fund

    A fund set aside for replacement of common property in a condominium, PUD, or cooperative project — particularly that which has a short life expectancy, such as carpeting, furniture, etc.

  • Rescission of Contract

    Annulling a contract by mutual consent from both parties as if there had not been a contract.

  • Restriction

    Limitations on the use or occupancy of real estate contained in a deed or in local ordinances pertaining to land use.

  • Reverse Annuity Mortgage

    A loan that enables older homeowners to convert the equity they have in their homes into cash, usually in the form of monthly payments. A borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

  • Reversion

    The right to future possession or enjoyment by the person or his heirs, creating the preceding estate.

  • Reversionary Interest

    A type of interest a person may have in lands or other property upon the termination of the preceding estate.

  • Revolving Debt

    Debt owned on an account that the borrower can repeatedly use and pay back without having to reapply every time credit is used. Credit cards are the most common type of revolving debt.

  • Right of First Refusal

    A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

  • Right of Survivorship

    Right to acquire the interest of a deceased joint owner. Distinguishing characteristic of a Joint Tenancy Deed.

  • Right to Egress

    The right to leave designated premises.

  • Right to Ingress

    The right to enter designated premises.

  • Right of Way

    A privilege operating as an easement upon land where the owner agrees to give another person the right to pass over his land.

  • Sale-Leaseback

    A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.

  • Sales Contract

    A contract by which buyer and seller agree to terms of a sale.

  • Sandwich Lease

    A leasehold interest which lies between the primary lease and the operating lease. It is created when the lessee enters into a sublease.

  • Satisfaction

    A legal document recorded on the county recorder’s books when a mortgage has been paid in full. it is signed by the mortgagee and recites that the debt has been satisfied.

  • Second Mortgage

    Another mortgage which has already been pledged as collateral for an earlier mortgage and carries rights which are subordinate to those of the first.

  • Secondary Market

    The buying and selling of existing mortgages, usually as part of a “pool” of mortgages.
    Secured Loan: A loan that is backed by collateral.

  • Secured Loan

    A loan that is backed by collateral.

  • Security

    The property assigned as collateral for a loan.

  • Seller Carry-Back

    An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

  • Separate Property

    Property owned by a husband or wife and acquired prior to marriage or by gift.

  • Servicer

    An organization that deals with the ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

  • Servicer

    The collection process of mortgage payments from borrowers and related responsibilities of a loan servicer.

  • Settlement Statement

    A document that provides a complete breakdown of costs involved in a real estate sale usually prepared by broker, escrow, closing agent, title company, or lender.
    Sheriff’s Deed: Deed given at sheriff’s sale in foreclosure of mortgage.

  • Sheriff’s Deed

    Deed given at sheriff’s sale in foreclosure of mortgage.

  • Simple Interest

    Interest computed on principal alone, as opposed to compound interest.

  • Simple Interest

    A legal act to force the performance of a contract according to its terms.

  • Specific Performance

    A legal act to force the performance of a contract according to its terms.

  • Statute of Frauds

    A State law that requires certain contracts must be written in order to be enforceable at law.

  • Statutory Law

    An involuntary lien, such as tax liens, judgment liens, mechanic liens, etc.

  • Straight Line Depreciation

    Definite sum set aside annually from income to pay cost of replacing improvements without reference to interest it earns.

  • Subdivision

    A housing development that is created by dividing a tract of land into individual lots for sale or lease.

  • Subject to Mortgage

    The buyer of an already mortgaged property makes the payments, but does not take personal responsibility for the loan. Should the mortgage be foreclosed and the property sold for a lesser amount than is owed, the grantee-buyer is not personally liable for the deficiency, but the grantor-seller is.

  • Sublease

    A lease given by a lessee.

  • Subordinate Financing

    Any mortgage or other lien that has a priority and is lower than the first mortgage.

  • Subordination Clause

    Clause in some mortgages which allows subsequent mortgages on the same property to have higher claim than the current mortgage.

  • Subrogation

    The substitution of another person in place of the creditor to whose rights he succeeds in relation to the debt. The doctrine is often used when one person agrees to stand surety for the performance of a contract by another person.

  • Surety

    One who guarantees the performance of another.

  • Survey

    A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

  • Sweat equity

    Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash. Tax Sale: A sale of property, usually at auction, for non-payment of taxes assessed against it.

  • Taxes

    A forced contribution of wealth to meet the public need for government.

  • Tenancy at Sufferance

    A tenancy which arises when a tenant holds over after the termination of a lease without consent.

  • Tenancy at Will

    A tenancy for an indefinite period which may be terminated at the will of either the lessee or the lessor.

  • Tenancy in Common

    Ownership by two or more persons which does not pass ownership to the others in the event of death.

  • Tender

    An offer of money.

  • Third-Party Origination

    A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

  • Time is of the Essence

    A clause in a contract contemplating performance by a specified date.

  • Title

    A legal document showing rights of ownership.

  • Title Company

    A company that specializes in examining and insuring titles to real estate.

  • Title Insurance

    nsurance issued by a title company to protect the property owner against loss if the title is questionable.

  • Title Search

    A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

  • Tort

    Damage, injury, or a wrongful act done willfully, negligently, or in circumstances involving strict liability, but not involving breach of contract, for which a civil suit can be brought.

  • Townhouse

    A single family attached dwelling unit with common walls.

  • Transfer of Ownership

    Any means by which the ownership of a property changes hands.

  • Transfer Tax

    State or local taxes that must be paid when title passes from one owner to another.

  • Treasury index

    An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury’s daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

  • Trust Deed

    An instrument which transfers (conveys) the bare legal title of a property to a trustee to be held pending fulfillment of an obligation, usually the repayment of a loan to a beneficiary.

  • Trustee

    A person who holds or controls property for the benefit of another in order to meet an obligation.

  • Trustee’s Sale

    A sale at auction by a trustee under a deed of trust, pursuant to foreclosure proceedings.

  • Trustor:

    The borrower of money secured by a trust deed. One who transfers his bare legal title to a trustee to be held as security until he has performed his obligation to a lender under terms of a note secured by a deed of trust.

  • Truth-in-Lending

    A federal law that requires lenders to fully disclose the terms and conditions of a mortgage, in writing, including the annual percentage rate (APR) and other charges.

  • Two- to Four-Family Property

    A property that consists of a structure that provides living space (dwelling units) for two to four families, but the property is under one ownership.

  • Two-Step Mortgage

    An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term AND a different interest rate for the remainder of the amortization term.

  • Underwriting

    The process in which lenders evaluate the risks posed by a particular borrower and set appropriate conditions for the loan.

  • Underwriting fee

    A fee charged by the lender to verify information on the loan application, authenticate the property’s worth as collateral, and make a final determination about whether to grant a loan to the applicant.

  • U.S. Department of Housing and Urban Development

    Also known as HUD. A federal agency that oversees the Federal Housing Administration and a variety of housing and community development programs.

  • Upgrades

    Options offered to buyers in a new-home project that go beyond the standard carpeting, lighting, finish carpentry, and other amenities.

  • VA

    The U.S. Veterans Administration.

  • VA Loan

    A loan through the Veterans Administration program, which allows most veterans to purchase a house without a down payment.

  • Variable-Rate Mortgage

    Any real estate loan in which the interest rate varies over time according to a prescribed formula or set of conditions; usually changes in economic conditions. (Also known as an adjustable-rate mortgage).

  • Walk-through

    A buyer’s final inspection of the home to determine if conditions in the purchase agreement have been satisfied.

  • Warehouse Fee

    May be charged by a lender to initiate a loan.

  • Warranty Deed

    A deed in which express covenants of good title and the right of possession are detailed and guaranteed.

  • Zero-lot line

    The positioning of a house near or on top of the lot boundary, resulting in little or no space between houses.

  • Zoning

    Regulations that control the use of land within a jurisdiction.

  • Zoning variance

    A one-time modification of existing zoning law.

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