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A
Abstract of judgment
The summary of a court judgment that creates a lien against a property when filed with the county recorder.
Accelerated cost recovery system
A tax calculation that provides greater depreciation in the early years of ownership of real estate or personal property.
Acceleration clause
A provision that gives the lender the right to collect the balance of a loan if a borrower misses a payment.
Accelerated depreciation
A bookkeeping method that depreciates property faster in the early years of ownership.
Acceptance
The seller's written approval of a buyer's offer.
Actual age
The number of years a structure has been standing.
Addendum
An addition or change to a contract.
Additional principal payment
Extra money included in the monthly payment to help reduce the principal and shorten the term of the loan.
Add-on interest
The interest a borrower pays on the principal for the duration of the loan.
Adjustable Rate Mortgage (ARM)
A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.
Adjusted cost basis
The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it is sold.
Adjustment period
The amount of time between interest rate adjustments in an ARM.
Agency
The relationship of trust that exists between sellers and buyers and their agents. The agency is formed through a written contract.
Agency closing
The process in which a lender uses a title company or other firm as an agent to complete a loan.
Agent
A person licensed by the state to conduct real estate transactions.
Agreed boundary
A compromise boundary agreed to by property owners to resolve a dispute.
Agreement of sale
A document the buyer initiates and the seller approves that details the price and terms of the transaction.
Alienation clause
A provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.
Allowances
Budgets offered by builders of new homes for the purchase of carpeting and fixtures.
Alternative mortgage
Any home loan that does not conform to a standard fixed-rate mortgage.
Amenities
Parks, swimming pools, health-club facilities, party rooms, bike paths, community centers and other enticements offered by builders of planned developments.
Amortization
The process of paying the principal and interest on a loan through regularly scheduled installments.
Amortization tables
Mathematical tables lenders use to calculate a borrower's monthly payment.
Annual mortgagor statement
A yearly statement to borrowers that details the remaining principal and amounts paid for taxes and interest.
Annual Percentage Rate (APR)
The cost of the loan expressed as a yearly rate on the balance of the loan.
Application
A document detailing a potential borrower's income, debt and other obligations to determine credit worthiness.
Application fee
The fee a lender charges to process a loan application.
Appraisal
The opinion of the value of a property at a given point in time.
Appraisal fee
The fee an appraiser charges for an estimate of the market value of the property.
Appraisal report
A detailed written report on the value of a property based on recent sales of comparable sites in the area.
Appraised value
An opinion of the current market value of a property.
Appreciation
An increase in the value of a home or other property.
Arbitration
A method of resolving a dispute in which a third party renders a decision.
As-is condition
The purchase or sale of a property in its existing condition.
Asking price
A seller's initial price for a property.
Assessed value
A determination by a tax assessor of the value of a home in order to calculate a tax base.
Assessment
The estimated value of a piece of real estate or a levy placed on property in addition to taxes.
Assessment rolls
A list of taxable property compiled by the assessor.
Assumable mortgage
A mortgage that can be transferred to another borrower.
Assumption clause
A provision that allows a buyer to take responsibility of the mortgage from a seller.
Assumption fee
A fee the lender charges for processing new records for a buyer assuming an existing loan.
Average price
The price of a home determined by totaling the sales prices of all houses sold in an area and divided by the number of homes.
B
Back title letter
A letter that a title insurance company gives to an attorney who then examines the title for insurance purposes.
Back-to-back escrow
Arrangements that an owner makes to oversee the sale of one property and the purchase of another at the same time.
Backup offer
A secondary bid for a propertythat is accepted if the first offer fails.
Balloon loan
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.
Balloon payment
The final lump sum payment due at the end of a balloon mortgage.
Bankruptcy
A proceeding in which an insolvent debtor can obtain relief from payment of certain obligations. Bankruptcies remain on a credit record for seven years and can severely limit a person's ability to borrow.
Bargain sale
Bargain sale The sale of a piece of property for less than market value.
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.
Betterment
An improvement that increases a property's value as opposed to repairs that maintain the value.
Bidding war
Offers from multiple buyers for a piece of property. Agents also sometimes compete to list a house for sale.
Bilateral contract
A contract in which the parties involved give mutual promises. Also called "reciprocal" contracts.
Bill of sale
A document that transfers ownership of personal property.
Binder
A report issued by a title insurance company that details the condition of a home's title. and provides guidelines for a title insurance policy.
Biweekly mortgage
A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.
Blanket insurance policy
A policy that covers more than one person or piece of property.
Blanket mortgage
A mortgage that covers more than one property owned by the same borrower.
Blue-ribbon condition
A house maintained close to its original condition. Also called mint condition.
Boilerplate
Form language used in deeds, mortgages and other documents. Details can be added by individual parties.
Bona fide
A legal term that refers to actions or persons that are honest and in good faith.
Bond
An agreement that insures one party against loss by acts or defaults of another party.
Book value
The value of a property as a capital assetbased on its cost plus any additions, minus depreciation.
Boundary
The dividing line between two adjacent properties.
Breach of contract
The failure to perform provisions of a contractwithout a legal excuse.
Breach of covenant
The failure to obey a legal agreement.
Breach of warranty
A seller's inability to pass clear title to a buyer.
Break-even point
The point in which the amount of rental income matches expenses and debt.
Bridge loan
A short-term loan for borrowers who need more time to find permanent financing.
Brokerage
The act of bringing together two or more parties in exchange for a fee or commission.
Broker
A person licensed by the state to deal in real estate.
Buffer strip
A parcel of land that separates two or more properties
Building code
A comprehensive set of laws that controls the construction or remodeling of a home or other structure.
Building inspector
A city or county employee who enforces the building code and ensure that work is correctly performed.
Building permit
A permit issued by a local government agency that allows the construction of home or renovation of a house.
Builder upgrades
Extra house features or better finishing materialsthat a builder offers.
Building line or setback
Guidelines that limit how close an owner can build to the street or an adjacent property.
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.
Bulkhead
A retaining wall designed to hold back water from the ocean or another body of water.
Bundle of rights
The various interests or rights an owner has in a property.
Buy-down mortgage
A home loan in which the lender receives a premium as an inducement to reduce the interest rate during the early years of the mortgage.
Buyer broker
A real estate broker who exclusively represents the buyer's interests in a transaction and whose commission is paid by the buyer rather than the seller.
Buyer's market
A slow real estate market in which buyers have the advantage.
Buyer's remorse
An emotion felt by first-time homebuyers after signing a sales contract or closing the purchase of a house.
Bylaws
The rules and regulations that a homeowners association or corporation adopts to govern activities.
C
Call option
A clause in a loan agreement that allows a lender to ask for the balance at any time.
Cancellation clause
A clause that details the conditions under which each party may terminate the agreement.
Cap
A limit on the amount the interest rate or monthly payment can increase in an adjustable rate mortgage.
Capital expenditure
The cost of making improvements on a property.
Capital gains
Profits an investor makes from the sale of real estate or investments.
Capital gains tax
A tax placed on the profits from the sale of real estate or investments.
Capital improvement
Any improvement that extends the life or increases the value of a piece of property.
Capitalization
A mathematical formula, to compute the value of a property based on net income.
Capitalization rate
The percentage rate of return estimated from the net income of a piece of property.
Caravan
A group of real estate agents who tour a house that has been recently listed for sale.
Cash flow
The amount of cash a rental property investor receives after deducting operating expenses and loan payments from gross income.
Cashier's check
A check the bank draws on itself rather than on a depositor's account.
Cash-out refinance
The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the extra funds in any manner.
Caveat
A formal notice, that asks a court to suspend action until the party which filed the challenge can be heard.
Caveat emptor
A legal principle derived from Latin than means "let the buyer beware."
Ceiling height
The standard height of a ceiling is eight feet.
Central air conditioning
A device that generates cold air through an outside unit that is connected to ductwork inside the house,
Certificate of deposit index
An index based on the interest rates on six-month CDs. It used to determine the interest rate for some adjustable-rate mortgages.
Certificate of eligibility
A document issued by the Veterans Administration that verifies the eligibility of a veteran for a loan program.
Certificate of occupancy
A document which states that a home or other building has met all building codes and is suitable for habitation.
Certificate of sale
A document issued at a judicial sale, which entitles the buyer to receive a deed after court confirmation of the purchase of the property.
Certificate of title
A written opinion on the status of a piece of property based on an examination of the public record.
Chain of title
The official record that details the ownership history of a piece of property.
Change order
A modification of the construction contract to authorize a change in the work, an adjustment in the amount of the contract or a change in the contract time. The owner, architect and contractor must sign the change.
Change frequency
The adjustment schedule on an adjustable rate mortgage.
Classified property tax
A tax that varies in rate depending on the use of the property.
Clear title
A property that does not contain liens, defects or other legal encumbrances.
Closing
The final procedure in which documents are signed and recorded, and the property is transferred.
Closing costs
Expenses incidental to the sale of real estate, including loan, title and appraisal fees.
Closing statement
A document which details the final financial settlement between a buyer and seller and the costs paid by each party.
Co-housing
Individual housing units that are clustered around a common building where residents share cooking and other activities.
Collateral security
Additional security a borrower supplies to obtain a loan.
Collection
The series of steps a lender takes to bring a delinquent mortgage up to date.
Co-maker
A person who signs a promissory note with the borrower and assumes responsibility for the loan.
Commercial property
An area that is zoned for businesses.
Commission
The negotiable percentage of the sales price of a home that is paid to the agents of the buyer and seller.
Commitment
A promise by a lender to make a loan with specific terms for a specified period.
Commitment fee
The fee a lender charges for promising to make a loan.
Common area
An area inside a housing development that is owned by all residents.
Common-area assessments
Fees paid by the owners of a condominium project or planned-unit development to maintain, repair, improve or operate common areas.
Common-interest development
A project composed of individually owned units that share usage and financial responsibility for common areas.
Community property
Property accumulated through the joint efforts of husband and wife. It is a classification of property peculiar to certain states.
Community Reinvestment Act
A federal law that encourages financial institutions to loan money in the neighborhoods where minority depositors live.
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.
Competent
A term for a buyer who is "legally fit to enter into a sales contract".
Compound interest
The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.
Condemnation
The process the government uses to take private property for public use without the consent of the owner.
Conditional commitment
A promise by a lender to make a loan if the borrower meets certain conditions.
Condominium
Individual units in a building or development in which owners hold title to the interior space while common areassuch as parking lots, community rooms and recreational areas are owned by all the residents.
Condominium conversion
The change in title from a single owner of an entire project or building to multiple owners of individual units.
Consent judgment
A binding written agreement between two parties to have a judgment entered and recorded.
Consideration
Anything that is legal, has value and induces a person to enter into a contract.
Construction budget
The funding that an owner arranges for the construction of a project.
Construction documents
Drawings and specifications from an architect that provide detailed requirements for the construction of a project.
Construction loan
Short-term loans a lender makes for the construction of homes and buildings. The lender disburses the funds in stages.
Construction to permanent loan
The conversion of a construction loan to a longer-term traditional mortgage after construction has been completed.
Consumer Credit Counseling Service (CCCS)
A nationwide, nonprofit organization that helps consumers get out of debt and improve their credit profile. National headquarters: 8701 Georgia Avenue, Suite 507, Silver Springs, MD 20910. Phone: (800) 388-2227.
Contiguous lots
Pieces of property that are adjoined.
Contingency
A condition specified in a purchase contract, such as a satisfactory home inspection.
Contingency listing
A property listing with a special condition attached.
Contingent fee
A fee that must be paid if a certain event occurs.
Contract
An agreement between two or more parties that creates or modifies an existing relationship.
Contract for deed
A contract in which the seller agrees to defer all or part of the purchase price for a specified period of time.
Contract to purchase
A contract the buyer initiates which details the purchase price and conditions of the transaction and is accepted by the seller. Also known as an agreement of sale.
Contractor
The individual who contracts for the construction of a home or project.
Contractual lien
A voluntary obligation such as a mortgage or trust deed.
Conventional loan
A long-term loan a lender makes for the purchase of a home.
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 that another broker has listed
Cooperative corporation
A business trust that holds the title to a cooperative residential building and grants occupancy rights to shareholders in the corporation.
Cooperative mortgages
Any loans related to a cooperative residential project.
Cooperative project
A project in which a corporation holds title and sells shares representing individual units to buyers who then receive a proprietary lease as their title.
Corporate relocation
An arrangement by which employers pay to transfer and move employees.
Cosigner
A second party who signs a promissory note and takes responsibility for the debt.
Counteroffer
A response to an offer.
Corner influence
The effect on the value of a property because it is situated on a corner or near a corner.
Corrective work
Necessary or desired repairs to remedy problems uncovered by a home or specialized inspection.
Cost-plus contract
A construction contract that determines the builder's profit based on a percentage of the cost of labor and materials.
Covenant
A legal assurance or promise in a deed or other document, or implied by the law.
Covenants, conditions and restrictions (CC&Rs)
Rules and regulations for a development, such as acceptable landscaping or improvements that can be made to individual units.
Creative financing
Innovative home-financing arrangements that help sell a property.
Credit
The money a lender extends to a buyer for a commitment to repay the loan within a certain time frame.
Credit history
A record of current and past debt payments of an individual.
Creditor
An individual or institution to whom a debt is owed.
Credit life insurance
Insurance that pays off a mortgage in the event of the borrower's death
Credit rating
The degree of credit worthiness assigned to a person based on credit history and financial status.
Credit report
A credit bureau report that shows a loan applicant's history of payments made on previous debts. Several companies issue credit reports, but the three largest are Trans Union Corp., Equifax and Experian (formerly TRW).
Credit repository
Large companies that gather financial and credit information from various sources about individuals who have applied for credit.
Credit union
Nonprofit cooperative organizations that provide banking and financial services, including mortgages, home improvement loans and home equity loans, to their members.
Cul de sac
A street or alley that is closed at one end.
Curb appeal
The first impression of a house as seen from the street.
Custom builder
A builder who constructs a home or building based on plans created by the owner.
Custom home
A structure designed by an architect hired by the owner.
D
Days on the market
The period of time a property is listed for sale until it is sold or taken off the market
Deed
The legal document that transfers ownership of a piece of property.
Deed of trust
A document that gives a lender the right to foreclose on a piece of property if the borrower defaults on the loan.
Default
The failure to fulfill a duty or promise or discharge an obligation, such as making monthly mortgage payments.
Deferred maintenance
Any repair or maintenance of a piece of property that has been postponed, resulting in a decline in property value.
Delinquent mortgage
A mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings.
Deposit
Money given by the buyer with an offer to purchase property. Also called earnest money.
Depreciation
The decline in value of a piece of property.
Design/build
A project in which the owner contracts directly with an individual or company to perform design and construction.
Dimension plans
Plans which show the layout of a house but are less detailed than full blueprints,
Disability insurance
An insurance policy which covers an individual's ability to produce income.
Disclosure
A statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint.
Discount points
Fees that a borrower pays at the time the lender makes the loan. A point equals one percent of the total loan amount.
Distressed property
Property that is in poor physical or financial condition.
Document needs list
A list of documents a lender requires when a potential submits a loan application. The required documents range from paycheck stubs to credit card statements.
Domicile
A person's primary or permanent home.
Down payment
The amount of money a buyer agrees to give the seller when a sales agreementis signed. Complete financing is later secured with a lender.
Draw
A payment made to subcontractors or suppliers from a construction loan.
Dry rot
A fungous decay that causes wood to become brittle and crumble
Dual agency
A relationship in which a real estate agent or broker represents both parties in a transaction
Due-on-sale clause
Standard language in a mortgage which states that the loan must be paid when a house is sold.
Duplex
A structure that consists of two separate family units.
E
Early occupancy
The condition in which buyers can occupy the property before the sale is completed.
Earnest money
Money a buyer gives with an offer to purchase a property. Also called a deposit.
Easement
A right given to a third party to use a portion of the property for certain purposes, such as power lines or water mains.
Effective age
The age of a structure estimated by its condition rather than its actual age.
Elevations
The exterior view of a home design that shows the position of the house relative to the grade of the land.
Eminent domain
The government's right to condemn private land for public use, such as the routing of a public highway.
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.
End loan
The conversion from a construction loan to permanent financing a condominium buyer secures after all units in a project have been completed.
Endorser
A person who signs over ownership of property to another party.
Environmental impact statement
A government-mandated evaluation of all aspects and effects a development will have on the environment of a proposed site.
Environmentally friendly home construction
A method of construction that utilizes recycled materials
Equal Credit Opportunity Act.
A federal law that prohibits a lender or other creditor from refusing to grant credit based on the sex, marital status, race, religion, national origin or age. The law also prohibits a creditor from refusing to grant credit because the applicant receives public assistance.
Equity
A determination of the value of a property after existing liens are deducted.
Errors and omissions insurance
A policy that pays for any mistakes a builder or architect makes in a project.
Escrow
A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.
Escrow account
An account a lender or mortgage servicer establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.
Escrow agent
A neutral third party who ensures that all conditions of a real estate transaction are met.
Escrow analysis
A periodic examination of an escrow account by a lender to determine if enough funds are being withheld from a borrower's monthly mortgage payment to pay for expenses such as property taxes and insurance.
Escrow closing
Escrow closes when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer.
Escrow company
Firms that act as neutral third parties to ensure that all conditions in a real estate transaction established by the buyer, seller and lender are met.
Escrow payment
Funds that a mortgage servicer withdraws from a borrower's escrow account to pay property taxes and insurance.
Eviction
A legal procedure to remove a tenant for reasons including failure to pay rent.
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 listing
A contract that gives an agent the exclusive right to market a property for a specific period of time.
F
Fair Housing Act
Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability.
Fannie Mae
The official name of the Federal National Mortgage Association, it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market.
Farmer's Home Administration
A U.S. Department of Agriculture agency that provides credit to farmers and rural residents.
Federal Home Loan Mortgage Corp.
The Federal Home Loan Mortgage Corp., commonly known as Freddie Mac. The company buys mortgages from lending institutions, pools them with other loansand then sells shares to investors.
Federal Housing Administration
The government agency operates a variety of home-loan programs. Its most popular is the Sec. 203(b), program, which provides low-rate mortgages to buyers who make a down payment as small as 3 percent.
Federal National Mortgage Association
Now officially dubbed Fannie Mae, the federally chartered agency buys mortgages from lending institutions, pools them with other loansand sells shares to investors.
Fee simple
This type of ownership is the maximum interest a person can have in a piece of real estate. It entitles the owner to use the property in any manner they see fit, in accordance with state and local laws.
Fee simple defeasible
The owner of the property holds a fee simple title contingent upon certain conditions.
FHA loans
Mortgages that are insured by the Federal Housing Administration. The FHA's 203(b) loan program provides low-rate mortgages to buyers who make a down payment as small as 3 percent. The agency also operates loan plans for investors and purchasers of rural property.
Finder's fee
A fee in any amount that is paid to someone.
Firm commitment
A promise made by a lender when it agrees to loan money for the purchase of property.
First mortgage
The primary mortgage on a propertythat has priority over all other voluntary liens.
Fixed installment
The monthly payment on a home loan.
Fixed rate mortgage
A home loan with an interest rate that will remain at a specific rate for the term of the loan . About 75 percent of all home mortgages have fixed rates.
Fixed time
The specific weeks in a year an owner of a time-share arrangement has access to accommodations.
Fixer-upper
A house that needs refurbishment or remodeling It usually sells at a below-market price.
Fixture
Personal property permanently attached to a house, such as drapery rods, toilets, built-in bookcases or a furnace.
Flat fee
A set fee charged by a broker instead of a commission.
Floor area ratio
The calculation of the floor area of all homes or buildings in a project. It is used in the planning and development of a site.
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