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Message REAL ESTATE DICTIONARYAAccelerated cost recovery system (ACRS): Method for claiming tax deductions forcertain property purchased before 1987 in which it was possible to claim greaterdeductions in the early years of ownership, gradually reducing the amount deductedin each year of useful life.American Land Title Association (ALTA) policy: A title insurance policy that protectsthe interest in a collateral property of a mortgage lender who originates a new realestate loan.Americans with Disabilities Act (ADA) Act: Addresses rights of individuals withdisabilities in employment and public accommodations.Appraiser Independence Requirements (AIR) Regulations: Issued by Fannie Maethat must be followed by appraisers to ensure accurate and objective appraisals.abstract of title: The condensed history of the recorded ownership of a particularparcel of real estate, consisting of a summary of the original grant and all subsequentconveyances and encumbrances affecting the property and a certification by theabstractor that the history is complete and accurate.acceleration clause: The clause in a mortgage or deed of trust that can be enforcedto make the entire debt due immediately if the borrower defaults on an installmentpayment or other obligation.accretion: The increase or addition of land by the deposit of sand or soil washed upnaturally from a river, lake, or sea.accrued depreciation: Loss in a property’s value resulting from physicaldeterioration, external depreciation, and functional obsolescence.accrued items: On a closing statement, items of expense that are incurred but notyet payable, such as interest on a mortgage loan or taxes on real property.acknowledgment: A formal declaration made before a duly authorized officer,usually a notary public, by a person who has signed a document.

acre: A measure of land equal to 43,560 square feet, 4,840 square yards, or 4,047square meters.action to quiet title: A court action that establishes ownership when ownershipcannot be traced through an unbroken chain of title.actual eviction: The legal process that results in a tenant being physically removedfrom leased premises.actual notice: Express information or fact; that which is known; direct knowledge.ad valorem tax: A tax levied according to value, generally used to refer to real estatetax. Also called the general tax.addendum: Any provision added to an existing contract without altering the contentof the original. Must be signed by all parties.adjustable-rate mortgage (ARM): A loan characterized by a fluctuating interest rate,usually one tied to a bank or savings and loan association cost-of-funds index.adjusted basis: See basis.administrative law judge (ALJ): The official who presides over a hearing involving agovernment agency and someone affected by a decision of that agency. The ALJhears evidence, including the testimony of witnesses, and renders a decision.administrator: A court-selected person who assists with the settlement of an estateof a person who died without leaving a will. A woman might be called anadministratrix, although administrator is the term used most often to refer to either aman or a woman.adverse possession: The actual, open, notorious, hostile, and continuous possessionof another’s land under a claim of title. Possession for a statutory period may be ameans of acquiring title.affidavit of title: A written statement, made under oath by a seller or grantor of realproperty and acknowledged by a notary public, in which grantors (1) identifythemselves and indicate marital status, (2) certify that since the examination of thetitle, on the date of the contract no defects have occurred in the title, and (3) certifythat they are in possession of the property (if applicable).affiliated business arrangement (ABA): Practice of one company offering a packageof services to consumers.

agency: The relationship between a principal and an agent wherein the agent isauthorized to represent the principal in certain transactions.agent: One who acts or has the power to act for another. A fiduciary relationship iscreated under the law of agency when a property owner, as the principal, executes alisting agreement or management contract authorizing a licensed real estate brokerto be his or her agent. A prospective property buyer may authorize a real estatebroker to act as the buyer’s agent to find a suitable property.Bbroker: A person who is licensed to buy, sell, exchange, or lease real property forothers and to charge a fee for these services.brokerage: The bringing together of parties interested in making a real estatetransaction.bundle of legal rights: The concept of land ownership that includes ownership of alllegal rights to the land, for example, possession, control within the law, andenjoyment.buydown: A financing technique used to reduce the monthly payments for the firstfew years of a loan. Funds in the form of discount points are given to the lender bythe builder or seller to buy down or lower the effective interest rate paid by the buyer,thus reducing the monthly payments for a set time.Ccertificate of title: A statement of opinion on the status of the title to a parcel of realproperty based on an examination of specified public records.chain of title: The succession of conveyances, from some accepted starting point,whereby the present holder of real property derives title.chattel: Items, called chattels, that do not fit into the definition of real property;movable objects. Examples include furniture, clothing, money, bonds, and bankaccounts.client: The principal. This is the person who hires the agent and delegates to theagent the responsibility of representing the principal’s interest.closing: The consummation of a real estate transaction; when the seller delivers thedeed to the buyer, the buyer pays the purchase price, and the necessary papers areprepared and signed. Also called settlement.

closing statement: A detailed cash accounting of a real estate transaction showingall cash received, all charges and credits made, and all cash paid out in thetransaction.cloud on title: Any document, claim, unreleased lien, or encumbrance that mightinvalidate or impair the title to real property or make the title doubtful. Usuallyrevealed by a title search and removed by either a quitclaim deed or a suit to quiettitle.code of ethics: A written system of standards for ethical conduct. REALTORS® have acode of ethics.collateral: Something of value given or pledged as security for a debt or obligation.commercial broker: A person who sells, exchanges, or leases real estate used forcommercial purposes.commercial property: Real estate used for business activities, such as officebuildings, stores, and other types of commercial enterprises.commission: Payment to a real estate professional for services rendered, such as inthe sale or purchase of real property; usually a percentage of the selling price of theproperty.comparative market analysis (CMA): A comparison of the prices of recently soldhomes that are similar to a listing seller’s home in terms of location, style, andamenities.competent parties: People who are recognized by law as being able to contract withothers; usually those of legal age and sound mind.consideration: (1) That received by the grantor in exchange for the deed. (2)Something of value that induces a person to enter into a contract.construction loan: A short-term loan usually made during the construction phase ofa building project.contingency: A provision in a contract that requires a certain act to be done or acertain event to occur before the contract becomes binding.contract: A legally enforceable promise or set of promises that must be performedand for which, if a breach occurs, the law provides a remedy.conventional loan: A loan that requires no insurance or guarantee.

conveyance: A term used to refer to any document that transfers title to realproperty. The term is also used in describing the act of transferring.counteroffer: A new offer made in response to an offer received. It has the effect ofrejecting the original offer, which cannot be accepted thereafter unless revived bythe offeror.credit: On a closing statement, an amount entered in a person’s favor—either anamount the party has paid or an amount for which the party must be reimbursed.Ddeed: A written instrument that, when executed and delivered, conveys title to or aninterest in real estate.deed in lieu of foreclosure: A deed given by the mortgagor to the mortgagee whenthe mortgagor is in default under the terms of the mortgage. This is a way for themortgagor to avoid foreclosure.deed of trust: An instrument used to create a mortgage lien by which the borrowerconveys title to a trustee, who holds it as security for the benefit of the note holder(the lender); also called a trust deed.default: The nonperformance of a duty, whether arising under a contract orotherwise; failure to meet an obligation when due.defeasance clause: A clause used in leases and mortgages that cancels a specifiedright on the occurrence of a certain condition, such as cancellation of a mortgage onrepayment of the mortgage loan.deficiency judgment: A personal judgment levied against the borrower when aforeclosure sale does not produce sufficient funds to pay the mortgage debt in full.delinquent loan: A loan on which payments have not been made as agreed.depreciation: (1) In appraisal, a loss of value in property due to any cause, includingphysical deterioration, functional obsolescence, and external obsolescence. (2) In realestate investment, an expense deduction for tax purposes taken over the period ofownership of income property.discount point: A unit of measurement used for various loan charges; one pointequals 1 percent of the amount of the loan.dual agency: Representing both parties to a transaction. This is unethical unlessboth parties agree to it, and it is illegal in many states.

due-on-sale clause: A provision in a mortgage or deed of trust allowing the lender todemand immediate payment of the balance of the mortgage if the mortgage holdersells the home.Eearnest money: Money deposited by a buyer under the terms of a contract, to beforfeited if the buyer defaults but applied to the purchase price if the sale is closed.easement: A right to use the land of another for a specific purpose, such as for aright-of-way or utilities; an incorporeal interest in land because it does not include aright of possession.easement appurtenant: An easement that is annexed to the ownership of oneparcel and allows the owner the use of the neighbor’s land.easement by condemnation: An easement created by the government orgovernment agency that has exercised its right under eminent domain.easement by necessity: An easement allowed by law as necessary for the fullenjoyment of a parcel of real estate; for example, a right of ingress and egress over agrantor’s land.easement by prescription: An easement acquired by continuous, open, and hostileuse of the property for the period of time prescribed by state law.easement in gross: An easement that is not created for the benefit of any landowned by the owner of the easement but that attaches personally to the easementowner. For example, a right granted by a property owner to a friend to use a portionof the property for the rest of the friend’s life would be an easement in gross.economic life: The number of years during which an improvement will add value tothe land.eminent domain: The right of a government or municipal quasi-public body toacquire property for public use through a court action called condemnation, inwhich the court decides that the use is a public use and determines thecompensation to be paid to the owner.encroachment: A building or some portion of it—a wall or fence, for instance—thatextends beyond the land of the owner and illegally intrudes on some land of anadjoining owner or a street or alley.

encumbrance: Anything—such as a mortgage, tax, or judgment lien; an easement; arestriction on the use of the land—that may diminish the value or use and enjoymentof a property.equity: The interest or value that an owner has in property over and above anyindebtedness.escheat: The reversion of property to the state or county, as provided by state law, incases in which a decedent dies intestate without heirs capable of inheriting, or whenthe property is abandoned.estate (tenancy) at sufferance: The tenancy of a lessee who lawfully comes intopossession of a landlord’s real estate but who continues to occupy the premisesimproperly after the lease rights have expired.estate (tenancy) at will: An estate that gives the lessee the right to possession untilthe estate is terminated by either party; the term of this estate is indefinite.estate (tenancy) for years: An interest for a certain, exact period of time in propertyleased for a specified consideration.estate in land: The degree, quantity, nature, and extent of interest a person has inreal property.estoppel: Method of creating an agency relationship in which someone statesincorrectly that another person is his or her agent and a third person relies on thatrepresentation.exculpatory clause: A clause that releases a contractual party from liability in theevent of monetary or physical injury, no matter who is at fault.exclusive-agency listing: A listing contract under which the owner appoints a realestate broker as the exclusive agent for a designated period to sell the property onthe owner’s stated terms, for a commission. The owner reserves the right to sellwithout paying anyone a commission if the sale is to a prospect who has not beenintroduced or claimed by the broker.exclusive-right-to-sell listing: A listing contract under which the owner appoints areal estate broker as the exclusive agent for a designated period to sell the propertyon the owner’s stated terms, for a commission. The owner agrees to pay the broker acommission when the property is sold, whether by the broker, the owner, or anotherbroker.F

Fannie Mae: A quasi-governmental agency established to purchase any kind ofmortgage loans in the secondary mortgage market from the primary lenders.fee simple: The highest interest in real estate recognized by the law; the holder isentitled to all rights to the property.fiduciary: One in whom trust and confidence are placed; a reference to a brokeremployed under the terms of a listing contract or buyer representation agreement.fixture: An item of personal property that has been converted to real property bybeing permanently affixed to the realty.foreclosure: A legal procedure whereby property used as security for a debt is sold tosatisfy the debt in the event of default in payment of the mortgage note or default ofother terms in the mortgage document.fraud: Deception intended to cause a person to give up property or a lawful right.Ggeneral lien: The right of a creditor to have all of a debtor’s property—both real andpersonal—sold to satisfy a debt.general warranty deed: A deed in which the grantor fully warrants good, clear title tothe premises. Used in most real estate deed transfers, a general warranty deed offersthe greatest protection of any deed.grantee: A person who receives a conveyance of real property from a grantor.grantor: The person transferring title to or an interest in real property to a grantee.gross lease: A lease of property according to which a landlord pays all propertycharges regularly incurred through ownership, such as repairs, taxes, insurance, andoperating expenses. Most residential leases are gross leases.ground lease: A lease of land only, on which the tenant usually owns a building or isrequired to build as specified in the lease. Such leases are usually long-term netleases; the tenant’s rights and obligations continue until the lease expires or isterminated through default.Hhabendum clause: That part of a deed beginning with the words “to have and tohold,” following the granting clause and defining the extent of ownership the grantoris conveying.

heir: One who might inherit or succeed to an interest in land under the state law ofdescent when the owner dies without leaving a valid will.home equity loan: A loan (also known as a line of credit) under which a propertyowner uses his or her residence as collateral and can then draw funds up to aprearranged amount against the property.homeowners’ association (HOA): An organization of property owners in asubdivision, planned community, or condominium that makes and enforces rules forthe properties within its jurisdiction.hypothecation: The pledge of property as security for a loan without surrenderingpossession of the property.Iincome approach: The process of estimating the value of an income-producingproperty through capitalization of the annual net income expected to be producedby the property during its remaining useful life.incurable depreciation: Depreciation that cannot be corrected economically.index: An objective economic indicator to which the interest rate for anadjustable-rate mortgage is tied.involuntary lien: A lien placed on property without the consent of the propertyowner.Jjoint tenancy: Ownership of real estate between two or more parties who have beennamed in one conveyance as joint tenants. Upon the death of a joint tenant, thedecedent’s interest passes to the surviving joint tenant or tenants by the right ofsurvivorship.judgment: The formal decision of a court upon the respective rights and claims ofthe parties to an action or suit. After a judgment has been entered and recordedwith the county recorder, it usually becomes a general lien on the property of thedefendant.judgment lien: A lien imposed upon property by a court order to secure thepayment of a judgment as well as interest and costs.junior lien: An obligation, such as a second mortgage, that is subordinate in right orlien priority to an existing lien on the same property.

Lland: The earth’s surface, extending downward to the center of the earth and upwardinfinitely into space, including things permanently attached by nature, such as trees.land contract: A contract for the sale of real estate whereby the purchase price ispaid in periodic installments by the purchaser, who is in possession of the propertyeven though title is retained by the seller until a future date, which may not be untilfinal payment.lease: A written or oral contract between a landlord (the lessor) and a tenant (thelessee) that transfers the right to exclusive possession and use of the landlord’s realproperty to the lessee for a specified period of time and for a stated consideration(rent). By state law, leases for longer than a certain period of time (generally one year)must be in writing to be enforceable.lease option: A lease under which the tenant has the right to purchase the propertyeither during the lease term or at its end.leasehold estate: A tenant’s right to occupy real estate during the term of a lease,generally considered to be a personal property interest.legal description: A description of a specific parcel of real estate complete enoughfor an independent surveyor to locate and identify it.lessee: A tenant.lessor: A landlord.levy: To assess; to seize or collect. To levy a tax is to assess a property and set the rateof taxation. To levy an execution is to officially seize the property of a person in orderto satisfy an obligation.lien: A right given by law to certain creditors to have their debts paid out of theproperty of a defaulting debtor, usually by means of a court sale.life estate: An interest in real or personal property that is limited in duration to thelifetime of its owner or some other designated person or persons.liquidated damages: An amount predetermined by the parties to a contract as thetotal compensation to an injured party should the other party breach the contract.listing agreement: A contract between an owner (as principal) and a real estatebroker (as agent) by which the broker is employed to find a buyer for the owner’s real

estate on the owner’s terms, for which service the owner agrees to pay acommission.Mmarket value: The most probable price that a property should bring in a competitiveand open market under all conditions requisite to a fair sale, the buyer and sellereach acting prudently and knowledgeably, and assuming the price is not affected byundue stimulus.mechanic’s lien: A statutory lien created in favor of contractors, laborers, materialsuppliers, and others who have performed work or furnished materials in theerection or repair of a building.metes-and-bounds description: A legal description of a parcel of land that begins ata well-marked point and follows the boundaries, using directions and distancesaround the tract, back to the place of beginning.mortgage: A conditional transfer or pledge of real estate as security for the paymentof a debt. Also, the document creating a mortgage lien.mortgage lien: A lien or charge on the property of a mortgagor that secures theunderlying debt obligations.mortgagor: A borrower who conveys his or her property as security for a loan.Nnet lease: A lease requiring the tenant to pay not only rent but also costs incurred inmaintaining the property, including taxes, insurance, utilities, and repairs.note: A financing instrument that states the amount of the debt, the time andmethod of payment, and the rate of interest.novation: Substituting a new obligation for an old one or substituting new parties toan existing obligation.Oopen listing: A listing contract under which the real estate professional’scompensation is contingent on the professional’s producing a ready, willing, andable buyer before the property is sold by the seller or another real estate professional.option: An agreement to keep open for a set period an offer to sell or purchaseproperty.

Ppartition: The division of cotenants’ interests in real property when the parties do notall voluntarily agree to terminate the co-ownership; takes place through a courtprocedure.party wall: A wall that is located on or at a boundary line between two adjoiningparcels of land and that is used or intended to be used by the owners of bothproperties.percentage lease: A lease, commonly used for commercial property, whose rental isbased on the tenant’s gross sales at the premises; usually stipulates a base monthlyrental plus a percentage of any gross sales above a certain amount.percolation test: A test of the soil to determine its ability to absorb and drain water;used to determine the suitability of the soil for a septic system.personal property: Items, called chattels or personalty, that do not fit into thedefinition of real property; movable objects. Examples include furniture, clothing,jewelry, money, vehicles, and bank accounts.plat: A detailed map that illustrates the geographic boundaries of individual lots. Itshows the lots, blocks, sections, streets, public easements, and monuments in asubdivision.police power: The government’s right to impose laws, statutes, and ordinances,including zoning ordinances and building codes, to protect the public health, safety,and welfare.power of attorney: A written instrument authorizing a person, the attorney-in-fact,to act as agent for another person to the extent indicated in the instrument.prepaid items: On a closing statement, items that have been paid in advance by theseller, such as insurance premiums and some real estate taxes, for which the sellermust be reimbursed by the buyer.principal: (1) A sum loaned or employed as a fund or an investment, as distinguishedfrom its income or profits. (2) The original amount (as in a loan) of the total due andpayable at a certain date. (3) A main party to a transaction—the person for whom theagent works.Q

quitclaim deed: A conveyance by which the grantor transfers whatever interest he orshe has in the real estate, without warranties or obligations.Rreal estate: Land; a portion of the earth’s surface extending downward to the centerof the earth and upward infinitely into space, including all things permanentlyattached thereto, whether by nature or by a person.real property: The interests, benefits, and rights inherent in real estate ownership.REALTOR®: A registered trademark term reserved for the sole use of active membersof state and local REALTOR® boards affiliated with the National Association ofREALTORS®.recording: The act of entering or recording documents affecting or conveyinginterests in real estate in the recorder’s office established in each county. Until it isrecorded, a deed or mortgage ordinarily is not effective against subsequentpurchasers or mortgagees.redemption: The right of a defaulted property owner to recover his or her propertyby curing the default.refinancing: The process of obtaining a new mortgage on a property already owned,often to replace existing loans on the property.replacement cost: The construction cost at current prices of a property that is notnecessarily an exact duplicate but serves the same purpose or function as theoriginal.right of first refusal: A clause allowing the tenant the opportunity to buy theproperty before the owner accepts an offer from another party.riparian rights: An owner’s rights in land that borders on or includes a stream, river,or lake. These rights include access to and use of the water.Ssales contract: A contract containing the complete terms of agreement between abuyer of a parcel of real estate and the seller.satisfaction: The discharge of an obligation by paying a party what is due to him orher, such as satisfaction of a mortgage by payment of the mortgage debt.

secondary mortgage market: A market for the purchase and sale of existingmortgages, designed to provide greater liquidity for mortgages. Mortgages are firstoriginated in the primary mortgage market.security agreement: See chattel mortgage.seller’s agent: A residential real estate broker or salesperson who represents only theseller in transactions and owes all fiduciary duties to the seller. The agent must dealhonestly and fairly with the buyer.special warranty deed: A deed in which the grantor warrants the title only againstdefects arising during the period of his or her tenure and ownership of the propertyand not against defects existing before that time, generally using the language, “by,through, or under the grantor but not otherwise.”specific lien: A lien affecting or attaching only to a certain, specific parcel of land orpiece of property.statutory lien: A lien imposed on property by statute—for example, a tax lien; incontrast to an equitable lien, which arises out of common law.steering: The illegal practice of channeling home seekers to particular areas fordiscriminatory reasons.sublease: The leasing of premises by a lessee to a third party for part of the lessee’sremaining term.surety bond: An agreement by an insurance or bonding company to be responsiblefor certain possible defaults, debts, or obligations contracted for by an insured party;in essence, a policy insuring one’s personal and/or financial integrity.survey: The process by which boundaries are measured and land areas aredetermined; the on-site measurement of lot lines, dimensions, and position of ahouse on a lot, including the determination of any existing encroachments oreasements.Ttax lien: A charge against property, created by operation of law. Tax liens andassessments take priority over all other liens.tenancy by the entirety: The joint ownership of property acquired by husband andwife during marriage. Upon the death of one spouse, the survivor becomes theowner of the property.

tenancy in common: A form of co-ownership by which each owner holds anundivided interest in real property as if each were sole owner. Each individual ownerhas the right to partition. Unlike joint tenancy, there is no right of survivorshipbetween tenants in common, and each may have an unequal interest in theproperty.title: (1) The right to or ownership of land. (2) The evidence of ownership of land.title insurance: A policy insuring the owner or mortgagee against loss by reason ofdefects in the title to a parcel of real estate, other than encumbrances, defects, andmatters specifically excluded by the policy.title search: The examination of public records relating to real estate to determinethe current state of the ownership.town house: A form of housing in which a building contains two or more living units,each having its own separate entrance and each generally consisting of two floors.trust deed: See deed of trust.trustee: The holder of bare legal title in a deed of trust loan transaction.trustor: The borrower in a deed of trust loan transaction; one who places property ina trust.Uunderwriting: The process of evaluating a borrower’s loan application to determinethe risk involved for the lender.usury: Charging interest at a higher rate than the maximum rate established by statelaw.VVA (Veterans Affairs) loan: A mortgage loan on approved property made to aqualified veteran by an authorized lender and guaranteed by the Department ofVeterans Affairs.valid contract: A contract that complies with all the essential elements of a contractand is binding and enforceable on all parties to it.

variable lease: A lease in which the rental amount fluctuates according to anagreed-on index or schedule.variance: A departure from the zoning ordinance; it permits the use of land that isprohibited by current zoning regulations.vendee: A buyer.vendor: A seller.void contract: A contract that has no legal force or effect because it does not meetthe essential elements of a contract.voidable contract: A contract that seems to be valid on the surface but may berejected or disaffirmed by one or both of the parties.Wwarranty deed: A deed that contains one or more covenants of title; it is used inmost real estate deed transfers and offers the greatest protection of any deed.wraparound loan: A method of refinancing in which the new mortgage is placed in asecondary or subordinate position; the new mortgage includes both the unpaidprincipal balance of the first mortgage and whatever additional sums are advancedby the lender. In effect, it “wraps around” the existing mortgage.zoning: The regulation of land use by a government body.