Real Estate Glossary
Listed below are a glossary of real estate terms in alphabetical order that you may find usefull when considering a real estate transaction.
Absorption rate: The total number of vacant square feet of office space divided by the square footage leased per year historically. Used for analyzing demand of office space in a given market area.
Abstract of judgment: A full summary by the court of a judgment. This becomes a general lien in the county where it is recorded on all of a debtor's property.
Acceleration clause: A specific clause in your mortgage, which allows the lender to call for the outstanding loan immediately.
Accord and satisfaction: When an obligation is settled. An accord when the creditor agrees to accept less than bargained for from a debtor. The creditor's acceptance of the accord constitutes satisfaction of the debt.
Accretion: The increase or addition of land by the deposit of soil or sand washed up naturally from a river, lake or sea.
Acknowledgment: A formal declaration made before an authorized officer, most likely a notary public, by a person who has signed a document; also, the document itself. This is designed to prevent fraudulently and forged induced documents from taking effect.
Acre: A measure of land equal to 43.560 square feet, 4,840 square yards, 4,047 square meters, 160 square rods or 0.4047 hectares.
Actual damages: Just, real, and substantial damages, or the amount awarded to a complainant in compensation for his actual and real injury or loss.
Addendum: Additional documents attached to and made part of a document. If there is not enough space to write all the details of a transaction on the sales contract form, the parties will attach an addendum or supplement to the document. The sales contract should incorporate the addendum by referring to it as part of the agreement. The addendum should refer to the sales contract and be signed and dated or initialed by all the parties.
Adjustable-rate mortgage (ARM): A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.
Adjustment date: The date when the interest rate changes on an adjustable-rate mortgage (ARM).
Adjustment period: Used for an adjustable rate mortgage (ARM), the "adjustment period," is the period of time between changes in one interest rate charged and the next interest rate to be charged.
Advance fee: A fee paid before any services are completed. Sometimes received by agents when selling a property or business that would cover the cost of advertising and other expenses giving no guarantee that a buyer will be found, which is often held to be improper conduct. Brokers must keep accurate records of expenditures.
Adverse possession: The acquiring of title to real property owned by someone else by means of open, notorious, hostile and continuous possession for a statutory period of time. The burden to prove title is on the possessor, who must show that four conditions were met: 1. Person has been in possession by claim of right. 2. He or she was in actual, open and notorious possession as to constitute reasonable notice to the record owner. 3. Possession was both exclusive and hostile to the title of the owner 4. Possession was uninterrupted and continuous for at least the prescriptive period stipulated by state law.
Affidavit: A sworn written statement made under oath before a notary public or other official authorized by law to administer an oath. The term literally means "has pledged one's faith." The person giving the statement must swear before the notary that the facts contained in the affidavit are true and correct.
Agency: A relationship created when one person (the home buyer) gives another person (the agent), the right to act on his or her behalf in business transactions and to exercise some degree of discretion while so acting. An agency gives rise to a fiduciary relationship and imposes on the agent, certain duties, obligations, and high standards of good faith and loyalty.
Agent: One authorized to represent and to act on behalf of another person (the principal or home buyer). Unlike an employee, who works for a principal, an agent works in the place of a principal. The main difference between an agent and an employee is that the agent may bind his or her principal by contract, if within the scope of authority, whereas an employee must be given authorization.
Alienation clause: A provision that is sometimes found in a promissory note or mortgage that provides the balance of the secured debt becomes immediately due and payable at the option of the mortgagee upon the alienation of the property by the mortgagor. Alienation is usually broadly defined to include any transfer of ownership, title, interest, or estate in real property, including a sale by way of a contract for deed. Also called a due-on-sale clause.
Amendments: An amendment is a change to the existing contract. Any time words or provisions are added or deleted from the body of the contract, the contract has been amended.
Amortization: The loan payment consists of a portion that will be applied to pay the accruing interest on a loan, with the rest being 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.
Amortization schedule: A table which shows how much of every payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it has been paid off.
Annexation: An addition to property by the act of joining/uniting one thing to another, as in attaching personal property to real property, thereby creating a fixture. For example, a toilet becomes a fixture when it is annexed to the plumbing outlet.
Annual percentage rate (APR): This is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always going to be higher than the actual not rate on your loan.
Antitrust laws: State and federal laws that are designed to maintain and preserve business competition. The Sherman Antitrust Act (1890) is the principal federal statute covering competition, which is defined by most courts as "that economic condition in which prices are determined by market forces without interference from private concerns and there is reasonable freedom of entry into most businesses."
Certain real estate brokerage activities have come under public scrutiny by the Federal Trade Commission. These activities include the fixing of general commission rates by local boards or groups of brokers and the exclusion of brokers from membership in local boards or in multiple-listing arrangements due to unreasonable membership requirements. As a result of court cases, local real estate boards can no longer influence fixed commission rates or commission splits between cooperating brokers. In addition, in some states, clients must be specifically informed that the commission rates are negotiable between client and broker.
Application: The form that is used to apply for a mortgage loan. It contains information about a borrower’s income, savings, assets, debts, and more.
Appraisal: A written justification of the price paid for a property. Usually based on an analysis of comparable sales of similar homes nearby.
Appraised value: This is an opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
Appraiser: An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.
Appreciation: The increase in the value of a property due to changes in market conditions, inflation, or other causes.
Assessed value: The valuation placed on property by a public tax assessor for purposes of taxation.
Assessment: The placing of a value on property for the purpose of taxation.
Assessor: A public official who establishes the value of a property for taxation purposes.
Asset: Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
Assignment: When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment.
Assumable mortgage: A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.
Assumption: The term applied when a buyer assumes the seller’s mortgage.
Arbitration: A nonjudicial method of resolving disputes by selecting a neutral party to make a final determination. This method was either previously agreed to by the disputing parties or stipulated by law.
Asbestos: A mineral once used in insulation and other materials that can cause respiratory diseases. Asbestos has been classified as carcinogenic. (
“As-is”: Words in a contract intended to signify that no guarantees, whatsoever, are given regarding the subject property and that it is being purchased exactly as it is found. An "as-is" indicator is intended to be a disclaimer of warranties or representations. The recent trend in the courts to favor consumers tends to prevent sellers from using "as-is" wording in a contract to shield themselves from possible fraud charges brought on by neglecting to disclose material defects in the property.
Asset: An asset is something of value, encumbered or not, owned by a person, corporation or other entity. Assets are financial (cash or bonds), tangible or intangible, or physical (real or personal property).
Associate broker: A real estate license classification used in some states to describe a person who has qualified as a real estate broker but still works for and is supervised by another broker; also called a broker-salesperson, broker-associate or affiliate broker.
Attorney-in-fact: A competent and disinterested person who is authorized by another person to act in his or her place. In real estate conveyance transactions, an attorney-in-fact, who has a fiduciary relationship with his or her principal, should be so authorized by way of a written, notarized and recordable instrument called a power of attorney.
The sudden tearing away of land, as by earthquake, flood, volcanic
action or the sudden change in the course of a stream.