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A.L.T.A TITLE POLICY (American Land Title Association): A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy. It is a lender's policy.

ABANDONMENT: To release a claim, as a declaration of Abandonment when property has been homestead.

ABSTRACT: A brief summary.

ABSTRACT OF JUDGMENT: A condensation of essential provisions of a court judgment.

ABSTRACT OF TITLE: A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record which may impair the title.

ABSTRACTION METHOD: A method of valuing land. The indicated value of the improvements is deducted from the sale price.

ACCELERATION CLAUSE: Clause in trust deed or mortgage giving lender right to call all sums owing him to be immediately due and payable upon the happening of a certain event.

ACCEPTANCE: When the seller or agent’s principal agrees to terms of the agreement of sale and approves the negotiation on the part of the agent and acknowledges receipt of the deposit in subscribing to the agreement of sale, that act is termed an acceptance.

ACCESS RIGHT: The right of an owner to have ingress and egress to and from his property.

ACCESSION: Acquiring title by having property added to your property.

ACCOUNTS PAYABLE: Money owed by a business. They are considered liabilities.

ACCOUNTS RECEIVABLE: Money owed to a business. They are considered assets.

ACCREDITED ASSESSMENT EVALUATOR (AAE): A professional designation. A property evaluator who has achieved the requirements of the International Association of Assessing Officers.

ACCREDITED LAND CONSULTANT (ALC): A professional designation. A person who has met the requirements of the Realtors Land Institute to aid in the marketing of real property.

ACCREDITED RESIDENTIAL MANAGER (ARM): A professional designation for a person trained to manage residential properties. A person who has earned the designation by fulfilling the requirements of the Institute of Real Estate Management (IREM), which is an affiliate of the National Association of Realtors.

ACCRETION: An addition to land from natural causes as, for example, from gradual action of the ocean or river waters.

ACCRUED: Accumulated up to this point in time. Accrued interest, accrued depreciation.

ACCRUED DEPRECIATION: The difference between the cost of replacement new as of the date of the appraisal and the present appraised value.

ACKNOWLEDGMENT: A formal declaration before a duly authorized officer by a person who has executed an instrument that such execution is his act and deed.

ACQUISTION: The act or process by which a person procures property.

ACRE: A measure of land equaling 160 square rods, or 4,840 square yards, or 43,560 square feet, or a tract about 208.71 feet square.

ACTUAL NOTICE: Knowledge of existence of a thing or fact.

ADC LOAN: A loan that finances the three major phases of a land development project: (i) acquisition, (ii) development and (iii) construction.

ADMINISTRATOR: A person appointed by the probate court to administer the estate of a person deceased.

ADDENDUM: An addition to a document that forms part of it. Similar to a Schedule to an Agreement of Purchase and Sale. May be used to add specific and detailed information material to the contract or upon which contractual terms are based.

ADDITIONAL PRINCIPAL PAYMENT: A one-time or lump-sum payment made by a borrower in addition to the regular payments on a loan or mortgage which reduces the principal owing on the debt.

ADJUSTABLE RATE MORTGAGE (ARM): A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re-negotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage.

ADJUSTED BOOK VALUE: Cost of acquisition minus depreciation (if allowed) plus capital improvements. Used when figuring profit for income tax.

ADJUSTED GROSS INCOME: Total rents received from income property, after an allowance for vacancies and bad debts.

ADJUSTED SELLING PRICE: Selling price minus expenses of sale. Used when figuring profit for income tax.

ADJUSTMENT DATE: Mortgage term usually preceded by the word "Interest" (i.e. "Interest Adjustment Date"). The date soon after the completion of a purchase and mortgage transaction on which the borrower must make a payment of accumulated interest only, usually used to place the periodic payment dates for the mortgage at the first day of the month (i.e. you borrow on March 18, your interest adjustment date is April 1 and your first regular monthly payment is May 1).

ADJUSTMENT INTERVAL: Also known as “Adjustment Period”. The period of time (i.e. week, month, year) between changes in the interest rate charged on a adjustable-rate mortgage.

ADJUSTMENT PERIOD: See Adjustment Interval.

ADJUSTMENTS: In real estate sales, the changes made to the selling price to account for the advantages and disadvantages of the subject property, market conditions etc. When closing a real estate transaction, the changes to the purchase price made as a result of realty taxes over- or under-paid by the Vendor, fuel oil provided, tenant's rental payments etc. (Contained on the Statement of Adjustments).

AD VALOREM: According to valuation.

ADVANCE FEE: A fee charged for advertising property or business opportunities in a publication other than a newspaper or general circulation.

ADVERSE POSSESSION: The open and notorious possession or business opportunities in a publication other than a newspaper or general circulation.

AFFIANT: A person who makes a worn or affirmed statement.

AFFIDAVIT: A statement or declaration reduced to writing, sworn to or affirmed before some officer who has authority to administer an oath or affirmation.

AFFIRMATION: A solemn declaration made by a person who objects to taking an oath.

AFTER-TAX CASH FLOW: The net proceeds from an income-producing property, after all costs (taxes, mortgage interest, maintenance costs etc.) of owning and operating the property have been deducted.

AGENCY: The relationship between principal and agent which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.


AGREEMENT OF SALE: A written agreement or contract between seller and purchaser in which they reach a meeting of minds on the terms and conditions of the sale.

AGREEMENT TO CONVEY: A land contract.

ALIENATION: The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.

ALIENATION CLAUSE: Clause in a loan document providing for full payment if the property is sold.

AMENITIES: Satisfaction of enjoyable living to be derived from a home; conditions of agreeable living or a beneficial influence arising from the location or improvements.

AMERICAN RURAL APPRAISER: A Professional Designation. Awarded by the American Society of Farm Managers and Rural Appraisers.

AMERICAN SOCIETY OF APPRAISERS: A Professional Society, for persons involved in the appraisal of both real and personal property.

AMERICAN SOCIETY OF HOME INSPECTORS, INC. (ASHI): A Professional Trade Organization, for persons specializing in the inspection of the physical condition of homes.

AMERICAN SOCIETY OF REAL ESTATE COUNSELORS (ASREC): A Professional Society, for persons specializing in helping people buy and sell homes.

AMORTIZATION: The liquidation of a financial obligation on an installment basis; recovery, over a period, of cost or value; also, the periodic principal pay down of a loan.

AMORTIZED LOAN: A loan that is completely paid off, interest and principal, by a series or regular payments that are equal or nearly equal. Also called a level payments loan.

AMORTIZATION SCHEDULE: The printed table of the payments to be made on an amortized loan showing the date and amount of each payment, the amount of each payment which will be applied to interest and to principal and the balance of principal still outstanding on the loan after the payment is made.

ANNUAL MORTGAGOR STATEMENT: Document sent by the lender to the mortgagor each year which sets out amounts paid for principal, interest and taxes in the given year and the amount still owing on the principal of the mortgage at the end of the year.

ANNUAL PERCENTAGE RATE (APR): An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

ANNUITY: A series of assured equal or nearly equal payments to be made over a period of time or it may be a lump sum payment to be made in the future. The installment payments due to the landlord under a lease is an annuity. So are the installment payments due to a lender.

ANTICIPATION, PRINCIPAL OF: Affirms that value is created by anticipated benefits to be derived in the future.

AO (ACCEPTED OFFER): A short form used by agents to designate that an offer to purchase has been accepted by the offer.

APPLICATION: A form filled out in order to allow a lender to consider a person for a mortgage or loan. Will contain personal and financial and personal information on the applicant.

APPLICATION FEE: The fees the lender charges the applicant. May include costs of a property appraisal and a credit report on the applicant. May be payable by applicant even if loan is not approved.

APPRAISAL: One qualified by education, training and experience who is hired to estimate a value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes.

APPRAISAL REPORT: Documentation to support an appraisal of a property. Varies in length but sets out elements considered, positive and negative aspects of property etc.

APPRAISED VALUE: The estimated market value of a property on a given date, given by a qualified person as a result of an inspection of the property and a consideration of other market forces.

APPRAISER: A professional who has been trained to assess the value of property.

APPROACHES TO VALUE: Different methods by which appraisers estimate the value of a property. Include: (1) cost approach, (2) comparison approach, and (3) income approach.

APPURTENCE: Something annexed to another thing which may be transferred incident to it. That which belongs to another thing, as a barn, dwelling, garage, or orchard is incident to the land to which it is attached.

"ARM'S LENGTH" TRANSACTION: A colloquial description of a transaction where none of the parties are related to each other or have common interests -- they have each other at "arm's length". An arms-length transaction is generally at fair market value; in a "non-arm's-length" transaction, the relationship between the parties may cause one or the other to accept less than they are entitled or pay more than fair market value.

AS IS: Implied in most Agreements of Purchase and Sale, suggests the Purchaser is accepting the property in its current condition and releases the Vendor from any liability for problems found before or after closing.

"AS-IS" AGREEMENT: A statement in the Agreement of Purchase and Sale that confirms that the Purchaser shall accept the property and all chattels included in the Purchase in the condition in which they are found at the time the Agreement is signed.

ASKING PRICE: The price at which the Vendor advertises a property. When used in the advertisement, may suggest flexibility on the part of the Vendor regarding the price.

ASSEMBLAGE: Putting together two or more parcels to increase the total value.

ASSESSED VALUE: A value placed upon property by a public officer or board, as a basis for taxation.

ASSESSMENT: The valuation of property for the purpose of levying a tax or the amount of the tax levied.

ASSESSMENT: Generally, the apportionment of liability of a general cost among individuals. The act of estimating the value of land for tax purposes or the method by which municipalities raise taxes (property tax assessment).

ASSESSOR: The official who has the responsibility of determining assessed values.

ASSETS: Everything of value, both real and personal property, owned by a business.

ASSIGN: To transfer interest in a property, contract, right etc.

ASSIGNEE: The person to whom an interest is transferred. An assignee of an Agreement of Purchase and Sale may buy the property and enforce the contract in the same fashion as the original party.

ASSIGNMENT: The transfer of any right, claim or interest to another person or corporation. Often used to refer to the transfer of a mortgage from one lender to another. Also a noun describing the document which represents the assignment of the right etc.

ASSIGNMENT OF LEASE: Subject to the terms of the lease, a transfer of either the lessor's or the lessee's interest in a lease.

ASSIGNOR: The person who assigns a right or interest to another person.

ASSIGNS (ASSIGNEES): Those to whom property shall have been transferred.

ASSOCIATE BROKER: A qualified real estate broker who works with or for another broker.

ASSUMABLE MORTGAGE: A mortgage that can be taken over ("assumed") by the buyer when a home is sold. If interest rates have risen, an assumable mortgage at a low rate may prove a selling point for the property.

ASSUMPTION: Taking over a loan and becoming personally liable for the repayment.

ASSUMPTION CLAUSE: The paragraph in the mortgage which sets out the borrower's right to have the mortgage assumed by a purchaser.

ASSUMPTION FEE: A lender’s charge for changing over and processing new records for a new owner who is assuming an existing loan.

ASSUMPTION OF MORTGAGE: The taking of title to property by a grantee, wherein he assumes liability for payment of an existing not secured by a mortgage or deed of trust against the property, becoming a co-guarantor for payment of a mortgage or deed of trust note.

ATTACHMENT: Seizure of property by a court order, usually done to have it available in event a judgment is obtained in a pending suit.

ATTORNEY-IN-FACT: One who is authorized to perform acts for another under a power of attorney; power of attorney may be limited to a specific act or acts, or be general.

ATTORNEY'S OPINION OF TITLE: A statement of a lawyer's conclusions with regard to the state of the legal title of a property, issued after the lawyer has completed the appropriate investigations of title.

AUCTION: The process of selling property to the highest bidder.


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BACK END RATIO: A comparison of a borrower's monthly expenses to her gross monthly income used to assess her ability to carry a mortgage or other loan.

BACK TITLE LETTER (OR CERTIFICATE): Notice by a Title Insurance Company to a person searching and certifying title that a previous search has been completed, setting out the status of title of the property as at a given date such that the person searching need only up-date the search.

BACKUP CONTRACT: An Agreement of Purchase and Sale for a particular property which is conditional (becomes binding) upon the failure of another Agreement for the same property.

BALANCE: Often as in "balance due", the amount of principal on a loan remaining to be paid at any given time.

BALANCE SHEET: A table of figures showing the assets, liabilities and net worth of a person or corporation on a given date.

BALLOON (payment) MORTGAGE: Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

BANKRUPTCY: A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy Court and is relieved of the future obligation to repay his unsecured debts. After bankruptcy, the debtor is discharged and his unsecured creditors may not pursue further collection efforts against him. Secured creditors, those holding deeds of trust or judgment liens, continue to be secured by the property, but they may not take other action to collect from the debtor.

BASIS POINT: One 100th of 1%.

BELOW-MARKET INTEREST RATE (BMIR): A subsidized interest rate on a mortgage or loan, often provided by a government to allow for acquisition of property or reduction in rents charged to tenants.

BENEFICIARY: (1) One entitled to receive a benefit from a trust (2) one who receives profit from an estate, the title which is vested in a trustee (3) the lender on the security of a note and deed of trust.

BEQUEATH: To give or hand down personal property by will; to leave by will.

BEQUEST: That personal property which is given by the terms of a will.

BETTERMENT: An improvement upon property which increases the property value and is considered as a capital asset, as distinguished from repairs or replacements where the original character or cost is unchanged.

BIANNUAL: Or semiannual. Occurring every six months or twice per year.

BID: An offer of a certain amount of consideration.

BIENNIAL: Occurring once in every two years.

BINDER: 1. A written commitment from an insurance company to insure a property or a certain risk; or 2. A preliminary agreement to purchase a property accompanied by a forfeitable deposit which is lost if the purchaser does not complete the purchase of the property.

BIWEEKLY LOAN OR MORTGAGE: A loan which features payments equaling one half of the usual monthly payment made every two weeks (to total 26 in a year), thus substantially reducing the life of the mortgage and the interest payable over the life of the mortgage.

BLANKET ENCUMBRANCE: An encumbrance which covers more than one parcel or property.

BLANKET INSURANCE POLICY: A single insurance policy that applies to more than one person or property.

BLANKET MORTGAGE: A single mortgage which covers more than one piece of real estate.

BLENDED RATE: Created when an old loan is refinanced and extended at an interest rate which is different from the original rate: the old debt is still payable at the old rate; the new debt is payable at the new rate; the total amount of the debt is payable at a rate of 

interest that is somewhere between the two rates.

BLIGHTED AREA: A declining area in which real property values are seriously affected by destructive economic forces, such as encroaching inharmonious property usages, infiltration of lower social and economic classed of inhabitants, and/or rapidly depreciating buildings.

BOILER PLATE: A standard clause or provision in a contract which appears in all similar contracts.

BONA FIDE: Made in good faith, at fair market value, without deceit or fraud.

BOND: 1. A sum of money paid into court as an assurance of the performance of some requirement or as security for payment on a claim. May be used to allow for the removal of a claim for lien from a property while the court action over the lien continues. 2. An 

interest-bearing instrument.

BORROWER (MORTGAGOR): The person or company that receives money from a lender (often a bank, credit union or trust company) in exchange for a written promise to pay and a registered lien on property.

BREACH: The breaking of a law, or failure of duty, either by omission or commission.

BROKER: An intermediary who brings parties together for specific purposes. A mortgage broker brings borrowers together with lenders; a real estate broker brings purchasers together with vendors. Often charges a percentage of the contract price as a fee. Specific 

training required to become a Real Estate Broker, a professional designation.

BUDGET MORTGAGE: A mortgage in which the borrower is required to make periodic payments not only for interest and principal, but also for insurance premiums and realty tax installments.

BUILDING RESIDUAL: A method of appraising. The value of the land is subtracted from the value of the property leaving the value of the building.

BUY-BACK AGREEMENT: A contract between a purchaser and vendor in which the vendor agrees to repurchase the property from the purchaser if a certain event occurs within a specified period of time. The buy-back price is usually set out in the agreement.

BUY-DOWN: When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. Brokers usually charge a fee or 

receive a commission for their services.

BUYER'S MARKET: A condition of the real estate market where there are more properties for sale than people interested in buying them. Buyer's have more choice and less competition for the available properties, resulting in lower prices.

BUY-SELL AGREEMENT: A pact between partners in a business or shareholders in a company, obliging one to buy the other's interest (and obliging the other to sell) upon the occurrence of some event stated in the agreement.

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CALL OPTION (PROVISIONS, RIGHTS): A lender's right to demand payment of the outstanding balance of the loan at a time specified in the loan agreement.

CANCELLATION CLAUSE: Provision in a contract that gives one or more parties the right to terminate the contract if a specific event occurs.

CAP: A limit. In variable rate mortgages, a limit as to how high periodic payments may go or how much the interest may change within a given time period or over the life of the mortgage.

CAPACITY: Having legal competence to sign binding contracts.

CAPITALIZATION: In appraising, determining value of property by considering net income and percentage or reasonable return on the investment.

CAPITALIZATION RATE: The rate which is considered a reasonable return on the investment, and used in the process of determining value based upon net income.

CAPS (interest): Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or over the life of the loan.

CAPS (payment): Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

CARRYING CHARGES (COSTS): The expense required to maintain a property over a given period of time, including property taxes, maintenance, insurance payments, interest charges on financing, etc.

CASH RESERVE: An amount of money that the purchaser of a property still has after the transaction closes. Some lenders require a certain level of cash reserve (equal to two payments) before granting a mortgage.

CASH-OUT REFINANCE: When an owner renegotiates or negotiates a new mortgage and the proceeds of the new financing exceed the money required to pay out the old mortgage and any other costs, liens or expenses, leaving money for the borrower.

CAVEAT EMPTOR: “Buyer beware”. The buyer must inspect the property and satisfy himself it is adequate for his needs. The seller is under no obligation to disclose defects but may not actively conceal a known defect or lie if asked.

C.C. & R.’s: Covenants, conditions and restrictions affecting the use of a property.

CEILING: The limit over which the interest rate on a variable rate mortgage may not rise over the life of the loan.

CERTIFICATE OF ELIGIBILITY: The document given to qualified veterans which entitles them to VA guaranteed loans for homes, businesses, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (Request for Certificate of Eligibility).

CERTIFICATE OF INSURANCE: A document, issued by the insurance company, setting out the particulars of the insurance coverage for a particular property.

CERTIFICATE OF NO DEFENSE: Document which sets out a certain set of facts which the issuer is agreeing to be bound by. Same as stopple certificate.

CERTIFICATE OF OCCUPANCY: Document issued by the local municipality indicating that a new dwelling is suitable for occupation. Generally confirms that the dwelling complies with local building, safety and health by-laws.

CERTIFICATE OF REASONABLE VALUE (CRV): Document issued by the Department of Veterans Affairs (VA). Based on an appraisal, sets out market value of a particular property for the purposes of establishing maximum principal amount available for a VA mortgage on the property.

CERTIFICATE OF SALE: A certificate issued to a buyer at a judicial sale. Entitles buyer to a deed if property is not redeemed within a specified time.

CERTIFICATE OF SATISFACTION: Document registered on title which provides evidence from the lender that a loan instrument (deed of trust, mortgage, other lien) has been paid out and released.

CERTIFICATE OF TITLE: A written opinion by an attorney setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was negligent.

CERTIFICATE OF VETERAN STATUS: Document issued by Department of Veteran's Affairs confirming that the person named in the Certificate has served at least 90 days of continuous active duty (including training time) and is eligible for certain VA benefits (such as a VA mortgage).

CERTIFIED COPY: A copy of a document which bears some form of declaration (usually by the holder of the original document) that it is a true copy of the original.

CERTIFIED GENERAL APPRAISER: A person who has met the requirements to be licensed to appraise the value of property. Qualification requirements may vary from one jurisdiction to the next.

CERTIFIED HOME INSPECTOR: A person who has met the requirements to be "certified" to inspect the physical condition of homes. Qualification requirements may vary from one jurisdiction to the next.

CERTIFIED PROPERTY MANAGER (CPM): A person who has met the requirements of the Institute of Real-Estate Management.

CERTIFIED RESIDENTIAL APPRAISER: A person who has met the requirements to be licensed to appraise the value of residential properties of no more than four units.

CERTIFIED RESIDENTIAL BROKER (CRB): A person who has met the requirements of the Realtors National Marketing Institute.

CERTIFIED RESIDENTIAL SPECIALIST (CRS): A person who has met the requirements of the Realtors National Marketing Institute.

CHAIN OF TITLE: A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available.

CHANGE, PRINCIPAL OF: Holds that it is the future, not the past, which is of prime importance in estimating value.

CHATTEL: An item of personal property which is not affixed to the land or building (as opposed to a fixture, an item which is a part of the land or building). Chattels are generally not included in the sale of property unless specifically included in the Agreement of 

Purchase and Sale.

CHATTEL MORTGAGE: A debt secured against items of personal property rather than against land, buildings and fixtures.

CLEAR TITLE: Ownership of land which is marketable and free of competing claims, liens, mortgages or other encumbrances.

CLIENT: Person with whom the broker has an agency interest.

CLOSED MORTGAGE: A land loan that cannot be prepaid or re-negotiated before the end of its term without the payment of an interest penalty.

CLOSED-END MORTGAGE: A mortgage with a set principal amount which cannot be increased or extended during the life of the mortgage.

CLOSINGS: The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually is about 3 percent to 6 percent of the mortgage amount.

CLOSING COSTS: Moneys expended by a party in completing a transaction, over and above the purchase price, including : legal fees, taxes, mortgage application charges, interest adjustments, registration fees, appraisal fees, etc.

CLOSING DATE: Also known as “Completion Date”. The date set in the Agreement of purchase and Sale upon which the transaction is to be completed, the purchase price paid and the transfer of title registered.

CLOSING STATEMENT: The final accounting of a sale given by escrow to the buyer and seller.

CLOUD ON TITLE: Any conditions revealed by a title search which affect the title to property usually relatively unimportant items can be removed with a quitclaim deed or court action.

COINSURANCE: A technique used to share the risk of a larger development between several insurance companies, each company covering a certain percentage of the total value of the insured property. Each policy may include a clause setting a minimum percentage of the total value of the insured property which the owner must keep insured in order to be eligible for payment under the policy.

COLLATERAL: Property (real or personal) which is pledged to secure a loan or mortgage. If the debt is not paid, the lender has the right to sell the collateral to recoup the outstanding principal and interest on the loan.

COLLATERAL MORTGAGE: A loan which is secured by some sort of written note of indebtedness (such as a Promissory Note) which is secondarily secured by a mortgage registered against a property.

COLLECTION: The act of pursuing a debtor who is delinquent on his loan payments.

COMMERCIAL BROKER: A real estate professional who deals in properties with commercial (business, retail, etc.) uses.

COMMERCIAL PROPERTY: As opposed to residential or industrial property. Property zoned, designed or intended for use retail, office, or similar users.

COMMINGLE: To allow to mix, as in money belonging to two or more people deposited to the same account and used by each person regardless of the amount they have deposited.

COMMINGLING: Mixing client’s money or property with the agent’s.

COMMISSION: An agent’s compensation for performing the duties of his agency; in real estate practice, a percentage of the selling price of property or the rental price of a property.

COMMISSION SPLIT: The division of the payment made to the listing agent between that agent and her broker, or between the listing agent and agent representing the Purchaser (the selling agent).

COMMITMENT: A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions.

COMMITMENT FEE: The fee charged by the lender to commit itself to a mortgage or loan on specific terms.

COMMUNITY PROPERTY: Property accumulated through joint efforts of husband and wife.

COMPARABLE SALES: Sales which have similar characteristics to the subject property and are used for analysis in the appraisal process.

COMPARISON APPROACH: A means of appraising by comparing recent sale prices of similar properties.

COMPETENT: Legally qualified.

COMPOUND INTEREST: Interest paid on original principal and also on the accrued and unpaid interest which has accumulated.

CONDEMNATION: The act of taking private property for public use by a political subdivision; declaration that a structure is unfit for use.

CONDITION: A provision that must be fulfilled before title can be transferred.

CONDITION PRECEDENT: A condition that must be fulfilled before title can be transferred.

CONDITION SUBSEQUENT: A condition which provides that if the owner fails to do something, his title mat be defeated and he may lose his property.

CONDITIONAL COMMITMENT: A commitment of a definite loan amount for some future unknown purchaser of satisfactory credit standing.

CONDITIONAL SALE CONTRACT: A contract for the sale of a property stating that delivery is to be made to the buyer, title to remain vested in the seller until conditions of the contract have been fulfilled.

CONDOMINIUM: A system of individual fee simple ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may sell or encumber his own unit.

CONFIRMATION OF SALE: A court approval of the sale of property by an executor, administrator, guardian or conservator.

CONSIDERATION: Anything of value given to induce entering into a contract; it may be money, personal services, or even love and affection.

CONSTANT PAYMENT LOAN: A type of loan which requires equal, periodic payments over a certain term, at the end of which the amount owing under the loan will be completely paid out.

CONSTRUCTION LOAN: A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

CONSTRUCTIVE NOTICE: Notice given by the public records or by possession.

CONTIGUOUS: Touching at any point. Contiguous lots.

CONTINGENT: Dependant upon an uncertain future event.

CONTRACT: An agreement to do or not to do a certain thing.

CONTRACT OF SALE: Also known as “Agreement of Purchase and Sale, Offer to Purchase and Contract of Purchase”. The written agreement between the Vendor and Purchaser for the sale of property which contains all of the terms, conditions and financial details of the transaction.

CONTRIBUTION, PRINCIPAL OF: An appraising principle used when considering proposed improvements. Considers that income that would be contributed by the proposed improvements.

CONVENTIONAL LOAN: 1. A loan or mortgage to which the normal rules of such transactions apply without the inclusion of a government program (i.e. VA or FHA insurance). 2. A loan or mortgage with a fixed interest rate, fixed payments and a fixed term.

CONVERSION CLAUSE: A provision in a variable rate mortgage (adjustable rate mortgage) which allows the borrow to change the mortgage to a fixed rate mortgage upon the occurrence of certain events.

CONVEYANCE: The transfer of the title of land from one to another. It denotes an instrument which carries from one person to another an interest in land.

COOPERATING BROKER: A Broker who is involved in a real estate transaction and is, therefore, entitled to share in the commission from the transaction.

CORNER INFLUENCE: The added value of a corner lot.

CORRELATION: To bring the indicated values developed by the three approaches used in the appraisal process into mutual relationship with each other.

COST APPROACH: One of three methods in the appraisal process. An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting there from the estimated accrued depreciation, then adding the 

market value of the land.

COVENANT: A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to 

restrictive covenants even if there is no homeowner's association.

COUNTEROFFER: An answer to an offer. If a prospective Purchaser presents an offer to purchase a property to the owner of the property, that owner may accept the offer as it stands, reject it outright or respond with a "counteroffer" which changes certain terms of the original offer. Making a counteroffer, at law, entails rejection of the original offer. The Purchaser may then counteroffer back, making changes to the owner's counteroffer. Sometimes, the process of counter offering is referred to as "signing back" the offer.

CREDIT HISTORY: A statement of the debts and obligations, whether current or past, of a person which helps a lender to assess the risk of a loan to that person.

CREDIT REPORT: A report documenting the credit history and current status of a borrower's credit standing.

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DATE OF APPRAISAL: The precise day, month and year upon which an assessment of the value of a property has been given.

DATE OF INSTRUMENT: The specific day, month and year a legal document was signed or prepared.

DATE OF REGISTRATION: The specific day, month and year upon which an instrument was registered on title to the property.

DEBT COVERAGE RATIO (DCR): A comparison of the net income of a property with the cost of payments (principal and interest) on the mortgage on the property, used to assess the ability of the property to generate enough income to pay for itself.

DEBT EQUITY RATIO: A comparison of the amount owing on a property with the equity (value of property minus amount owing).

DEBT FINANCING: Paying for the purchase of a property with credit.

DEBT RATIO: Also known as “Debt-to-Income ratio”. A comparison of the total monthly payments of all of the borrower's debts (including the mortgage) with the gross monthly income of the borrower, used to assess borrower's ability to pay mortgage.

DEBT SERVICE: The mortgage payment for a given period of time.

DEBTOR: A person who has borrowed and therefore owes (opposite of Creditor).

DECLARATION OF ABANDONMENT: Document recorded to establish a homestead to protect the owner against judgment liens.

DECLARATION OF RESTRICTIONS: Recorded list of restrictions imposed on a subdivision by a sub divider.

DECREE OF FORECLOSURE: An order of the Court setting out the amount outstanding on a delinquent mortgage and ordering the sale of the property to pay the mortgage.

DEED: The written document conveying real property. Once recorded at the Courthouse, the original piece of paper is not needed to convey title in the future.

DEED IN TRUST: A legal instrument conveying legal title to a property to a trustee, may contain statements as to powers of trustee, duties of trustee etc.

DEED OF RECONVEYANCE: A legal instrument which conveys title from a trustee back to the borrower under a mortgage once the mortgage has been paid out.

DEED OF RELEASE: A legal instrument signed by lien claimants or mortgages which gives up their claim to the property. See Discharge and Quit Claim Deed.

DEED OF SURRENDER: A legal instrument in which a person with a life interest gives up that interest to the person with underlying title.

DEED OF TRUST: A voluntary lien to secure a debt deeding the property to Trustees who foreclose and sell the property at public auction, in the event of default on the Note the Deed of Trust secures. In many states, this document is used in place of a mortgage to secure the payment of a note.

DEED RESTRICTION: A clause in a deed which limits the use of the property in certain respects.

DEFAULT: Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

DEFEASANCE CLAUSE: The clause in a mortgage payment that gives the mortgagor the right to redeem his property upon the payment of his obligations to the mortgage.

DEFECT OF RECORD: A registered claim on title which serves to interfere with the marketability of the owner's title to the property.

DEFECTIVE TITLE: Ownership of property which is subject to some competing claim.

DEFERRED INTEREST: When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance.

DEFERRED INTEREST MORTGAGE: A technique for reducing the amount of each periodic payment on a mortgage monthly by postponing the payment of a portion of the interest until a certain date in the future (or to when the property is sold), at which time the interest postponed is added to the principle owing.

DEFICIENCY JUDGMENT: A judgment given when security pledge for a loan does not satisfy the debt upon its default.

DELINQUENCY: Failure to make payments on time. This can lead to foreclosure.

DELIVERY: The final, unconditional and absolute transfer of a deed to the Grantee so that the Grantor may not revoke it. A Deed, signed but held by the Grantor, does not pass title.

DEMAND: Desire for property. One of four elements which create value.

DEMAND LOAN: A type of loan where the lender may require payment in full of the principal (and accumulated interest) at any time.

DEMISE: Transfer to another of an estate for years, for life, or at will.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD): A federal agency focusing on programs regarding housing and renewal of city communities.

DEPARTMENT OF VETERANS AFFAIRS (VA): An independent federal agency which oversees programs for military veterans, including loan and mortgage programs.

DEPOSIT OF TITLE DEEDS: When a lender requires ownership documents to be left with it as further security for a loan.

DEPOSIT RECEIPT: Document used when accepting earnest money to bind an offer. Basic contract between buyer and seller.

DEPRECIABLE BASIS: The initial acquisition cost of an improvement on land, used for income tax purposes. Land may not be depreciated but the improvements (buildings, etc.) may be.

DEPRECIATION: Loss in value in real property brought about by age, physical deterioration or functional or economic obsolescence. Broadly, a loss in value from any cause.

DEPTH TABLE: Table used by appraisers when appraising lots of varying depths.

DERIVATIVE CONVEYANCE: A transfer of property made to correct or confirm an earlier conveyance.

DESIGNATED REAL ESTATE BROKER: Person designated by a corporation to oversee all real estate activities of that corporation. Must meet requirements for real estate broker's license.

DETACHED SINGLE-FAMILY HOME: A free-standing dwelling that is designed to house one family unit.

DETERIORATION: Impairment of condition. One of the causes of depreciation and reflecting the loss in value brought by wear and tear, disintegration, use in service, and the action of the elements.

DIRECT REDUCTION MORTGAGE: A kind of mortgage where the principal and interest to be paid are based on the principal remaining. An amortized mortgage.

DISCLOSED PRINCIPAL: The person on whose behalf an agent is acting when that person's identity is made know to the person with whom the agent is dealing.

DISCLOSURE: Sometimes known as "Vendor's Disclosure", a legal requirement in some jurisdictions in which the Vendor of a property must provide a written statement to a prospective purchaser setting out defects in the property known to the Vendor.

DISCLOSURE STATEMENT: A document issued by a lender to a borrower in which the lender sets out the terms and conditions of the loan. Often required under legislation.

DISCOUNT: A sum of money held back from a mortgage advance as prepaid interest.

DISCOUNT POINT: Prepaid interest demanded by lender when loan is negotiated. A premium paid for the privilege of borrowing at the stated interest rate. Also see point. Each point is equal to 1% of the principal.

DISCOUNT RATE: A benchmark for interest rates, the rate charged by the Federal Reserve System on loans to banks.

DISCOUNT REAL ESTATE BROKER: A licensed real estate broker who charges a commission at a lower rate.

DISTRESSED PROPERTY: A property which is to be sold in order to pay arrears on a mortgage.

DOCUMENTARY STAMP: A levy paid to the local government for registration of a document (a deed or mortgage) in the public records, often calculated as a percentage of the purchase price or the value of the mortgage.

DOCUMENTARY TRANSFER TAX: A tax collected when a deed is recorded. Stamps are affixed to the deed.

DOMICILE: The place where a person legally resides.

DOMINENT TENEMENT: The land that is benefited by an easement appurtenant.

DONEE: A person to whom a gift is made.

DONOR: A person who makes a gift.

DOWN PAYMENT: Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 5 percent to 20 percent of the sales price on conventional loans.

DRAGNET CLAUSE: A term of a mortgage which establishes the subject property as security for the present and for all future debts of the owner to the lender.

DRY MORTGAGE: Also known as "non-recourse loan" because the lender has no personal right of action against the property owner in the event of default. The lender may only sell the property to enforce the loan obligation.

DUE DATE: The date established in the loan agreement upon which all moneys then outstanding on the loan become due and payable in full.

DUE-ON-INTEREST: A clause inserted in a mortgage that allows the lender to call the loan due and payable at its option upon the transfer of the property also known as paragraph "17" in FNMA / FHLMC Mortgage.

DUE-ON-SALES CLAUSE: A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

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EARNEST MONEY: Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

EASEMENT: The right to use the land of another for a specific limited purpose.

EASEMENT BY NECESSITY: A land owner's right to make use of the property of another (or a portion of it) for a specific purpose, when such use is required to allow the land owner to enjoy his own land.

EASEMENT BY PRESCRIPTION: The continuing, unchallenged use of all or part of a property by the owner of a neighboring or nearby property for a specific period of time (20 years in many jurisdictions) such that, by law, the using owner gains a legal right to continue that use.

ECONOMIC LIFE: The period over which a property will yield a return on the investment, over and above the economic or ground rent due to land.

ECONOMIC RENT: The reasonable rental expectancy if the property were available for renting at the time of its valuation. Earnings attributable to the ground itself.

ECONOMIC GROSS INCOME: The maximum rent from income property minus vacancies.

EFFECTIVE AGE: An appraisal term for the age of improvements to a property based on an assessment of their current condition. Opposite of "actual age".

EFFECTIVE INTEREST RATE: The percentage of interest that is actually being paid by the borrower for the use of the money.

EGRESS: Means of leaving property.

EJECTMENT: Legal proceeding to evict a tenant without a lease.

EMINENT DOMAIN: The power of the state to take private property for public use upon payment of just compensation.

ENCROACHMENT: The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line.

ENCUMBRANCE: Anything which affects or limits the fee simple title to property, such as mortgages, easements or restrictions of any kind. Liens are special encumbrances which make the property security for the payment of a debt or obligation, such as mortgages 

and taxes.

ENDORSEMENT: The signature of the payee on the back of a negotiable instrument.

ENDORSER: The person who signs a document to represent the transfer of property to another.

ENTITLEMENT: 1. The legal right to a benefit or program. 2. Name for the VA home loan benefit. This entitlement is for a VA guaranteed home loan. This is also known as “eligibility”.

ENVIRONMENTAL IMPACT STATEMENT (EIS): A report on the anticipated effect of a development on the local environment. May be required for federal funding for the development.

ENVIRONMENTAL PROTECTION AGENCY (EPA): U.S. government agency for the protection of the environment.

EQUAL CREDIT OPPORTUNITY ACT (ECOA): A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

EQUALIZATION BOARD: Agency with a mandate to ensure fairness in property tax assessments.

EQUITABLE TITLE: The title held by a vendee under a land contract.

EQUITY: The interest or value which an owner has in real estate over and above the liens against it; branch of remedial justice by and through which relief is afforded to suitors in courts of equity.

EQUITY LOAN: A loan to a home owner secured against the equity the owner enjoys in the property.

EQUITY OF REDEMPTION: The right to redeem property during the foreclosure period.

EQUITY SHARING: A form of joint ownership between an owner/occupant and an owner/investor. The investor takes depreciation deductions for his share of the ownership. The occupant receives a portion of the tax write-offs for interest and taxes and a part of his monthly payment is treated as rent. The co-owners divide the profit upon sale of the property.

ESCALATION: The right reserved by the lender to increase the amount of payments and/or interest upon the happening of a certain event.

ESCALATOR CLAUSE: A clause in a contract providing for the upward or downward adjustment of certain items to cover specified contingencies.

ESCAPE CLAUSE: Any provision in a contract that allows one or more parties to end the contract upon the occurrence of certain events.

ESCHEAT: The reversion of title to a property to the state. Can occur when an owner dies with no legal heirs or when a corporate owner is dissolved by act of law or by voluntary act while holding legal title to the property.

ESCROW ACCOUNT: A form of trust account in which advance payments are held on behalf of the payer until the contract allows their use by the payee or a third party.

ESCROW AGENT: Any independent third party who receives items to be held in escrow, holds such items until transfer is allowed, and then delivers them.

ESCROW CLOSING: The completion of a transaction whereby documents, consideration etc. are held in trust (either by the parties and their representatives or by an independent third party) pending the completion of certain conditions, at which time the items held in escrow are released and the transaction is completed.

ESCROW COLLECTIONS: Moneys taken in by the agent and set aside for future payments as required by the contract (i.e., in a mortgage situation, for taxes, insurance, etc. on the property). Also known as "escrow deposits", "impounds" or "reserves".

ESCROW DEPOSIT: Similar to "escrow collections", the deposit of funds for the purpose of future payments required under the contract.

ESCROW DISBURSEMENTS: The payment out of escrow funds of taxes, insurance, etc. as required by the contract. Also known as "escrow payments".

ESCROW REIMBURSEMENT: The return to the borrower of left over funds held in escrow once the debt has been paid out.

ESCROW: Funds that are set aside and held in trust, usually for payment of taxes and insurance on real property. Also earnest deposits held pending loan closing.

ESTATE: As applied to the real estate practice, the term signifies the quantity of interest, share, right and equity, of which riches or fortune may consist, in real property. The degree, quantity, nature, and extent of interest which a person has in real property.

ESTATE AT SUFFERANCE: The continued occupation of a premises by a tenant after the lease has expired or after the landlord has taken legal and appropriate steps to remove the tenant.

ESTATE AT WILL: The occupation of a premises by a tenant for an undefined period, which either party may terminate at will.

ESTATE FOR LIFE: Also known as "Life Estate". A legal interest in property which ends with the death of the person who is entitled to the interest.

ESTATE FOR YEARS: Entitlement to land which allows a person to occupy, use and enjoy the land for a specified period of time.

ESTATE IN REVERSION: The right of an owner to re-occupy land once the estate he has granted to another person (such as an estate for years or an estate for life) has come to an end.

ESTATE TAX: A government levy against the property in the estate of a deceased person, payable out of the estate.

ESTIMATE: To form a preliminary opinion of value.

ESTIMATED REMAINING LIFE: The period of time it takes for the improvements to become valueless.

EVALUATION: An analysis of a property regarding its potential uses rather than its current value.

EVICTION: Putting out a tenant when his right to possess the property has ended.

EVIDENCE OF TITLE: Instruments or documents that provide any proof or information regarding ownership of land.

EXAMINATION OF TITLE: Similar to a sub search: a review of the current title to a property for the purposes of establishing current apparent owners and encumbrances.

EXCEPTION: Withholding part of a property when it is conveyed.

EXCLUSIVE AGENCY LISTING: A written instrument giving one agent the right to sell property for a specified time but reserving the right of the owner to sell the property himself without the payment of a commission.

EXCULPATORY CLAUSE: The term of a mortgage giving the borrower the right simply to surrender the property to the lender as payment for the loan without personal liability to the borrower for any shortfall.

EXECUTE: To complete, to make, to perform, to do, to follow out, to sign a deed, to make a deed, including especially signing, sealing, and delivery; to execute a contract is to perform the contract, to follow it out to the end, to complete.

EXECUTED CONTRACT: A contract where both parties have completely performed.

EXECUTORY CONTRACT: A contract where something remains to be done by one or both parties.

EXTENDED COVERAGE: A broad form title insurance policy which protects the owner against additional risks.

EXTENSION: The postponement of the completion date of an Agreement, agreed to by the parties to the Agreement.

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FACE RATE OF INTEREST: The rate of interest chargeable on a loan as set out in the loan document.

FAIR CREDIT REPORTING ACT: A law which standardizes the form and rules of disclosure of credit reports created by consumer/credit reporting agencies and establishes procedures for the correction of errors on a person's credit report.

FAIR MARKET VALUE: The value of an item as established by a consideration of how much an independent buyer would pay to an independent seller in a completely free transaction for the item.

FANNIE MAE: The U.S.'s largest supplier of mortgages to home buyers and owners, a corporation established by Congress. The Federal National Mortgage Association (FNMA).

FARM MORTGAGE: A mortgage secured against agricultural land.

FARMERS HOME ADIMINSTRATION (FMHA): Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A U.S. Government agency providing insurance to depositors of money into financial institutions up to a certain amount.

FEDERAL HOME BOARD: U.S. board that regulates federal savings and loan associations.

FEDERAL HOME LOAN BANK BOARD (FHLBB): A regulatory and supervisory agency for federally chartered savings institutions.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): The Federal Home Loan Mortgage Corporation provides a secondary market for mortgage financing by purchasing conventional loans. Also known as "Freddie Mac."

FEDERAL HOUSING ADMINISTRATION (FHA): A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): A secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."

FEDERAL RESERVE SYSTEM (FRS): The central bank of the United States, controls supply of money, credit availability and benchmark interest rates. Made up of the twelve Federal Reserve Banks.

FEE APPRAISER: A person who estimates the value of a property for a fee.

FHA LOAN: A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderately-priced homes almost anywhere in the country.

FHA MORTGAGE INSURANCE: Requires a small fee (up to 3.8 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent, $75,000, 30-year fixed-rate FHA loan, 

this fee would amount to either $2,850 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FICTITIOUS NAME: “Made up” name for a business.

FIDUCIARY: A person in a position of trust and confidence, as between principal and broker; broker, as fiduciary, owes certain loyalty which cannot be breached under rules of agency.

FIDUCIARY RELATIONSHIP: A relationship of trust and confidence between two people in which one person (the fiduciary) holds much more power, knowledge or skill than the other and is, therefore, held by the law to a higher standard of conduct.

FILTERING DOWN PROCESS: The gradual decline in the value of a property, whether due to market forces, changes in desirability of neighborhood or deterioration of condition of the home, such that a property once owned by a high-income family might 

eventually be owned by a low-income family.

FINAL VALUE ESTIMATE: The product of a real estate appraiser's completed work, an assessment of the value of a property based on all factors and taking into consideration the different evaluation methods available.

FINANCE CHARGE: The total cost, in dollars, of a loan or mortgage over its life, including appraisal/application/commitment fees, financing insurance, interest paid over the life of the loan.

FINANCIAL STATEMENT: A document which sets out the assets, income, expenses and debts of a person or company to allow a third person to assess that person or corporation's financial health (i.e. when considering lending money to that person or corporation).

FINANCING: The manner in which a proposed purchaser intends to make up the difference between cash on hand and the purchase price.

FINANCING STATEMENT: The instrument which is filed in a loan on personal property in order to give public notice of the security interest and thereby protect the interest of the secured parties as collateral.

FINDER’S FEE: Fee paid to a person for information helpful to a broker, for information that doesn't’t require a license.

FIRE AND EXTENDED COVERAGE INSURANCE: A promise issued by a registered insurance company to compensate the owner of a particular property for losses as a result of specified risks (i.e. fire, flood, storms, vandalism, etc.).

FIRM COMMITMENT: A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.

FIRM OFFER: An offer to purchase delivered to the potential Vendor by a potential Purchaser who will not negotiate any changes to the offer.

FIRM PRICE: An indication in a real estate advertisement that the price asked for the property is not open for negotiation.

FIRST LIEN: The registered legal claim which stands first in line to enjoy the proceeds of a sale of the property. Liens generally are ordered according to time or registration but various statutes allow some liens (realty taxes) to jump to the head of the line.

FIRST MORTGAGE: A mortgage that, when registered, is first in line on the property, giving the lender superior right to the proceeds of the sale of the property over other, later claimants.

FIXED EXPENSES: Costs of owning and operating a property that are not discretionary and, except for occasional increases, do not change from month to month. Examples are realty taxes, insurance costs, etc.

FIXED INSTALLMENT: The periodic payment made for principal and interest on a loan.

FIXED RATE MORTGAGE: The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.

FIXTURES: Items attached to the land or improvements, which usually cannot be removed without agreement, and, therefore, they become real property (example : Plumbing fixtures, built into the property).

FLOATING RATE: Rate of interest chargeable on a loan that is variable according to a specified index or the national prime rate. The loan rate is said to "float" on top of the specified index by a set amount : i.e. the loan may be set at Prime Rate plus 2%, meaning if the Prime Rate is 6%, the loan interest rate will be 8%.

FLOOD INSURANCE: A policy of insurance that specifically covers damage due to flood waters, required in designated flood areas.

FLOOR AREA: The total space covered by all floors in a building.

FLOOR AREA RATIO (FAR): A comparison of the total area of the floor of a building with the total area of the land upon which it stands. Maximum or minimum FAR's may be established by local zoning rules.

FLOOR PLAN: A sketch of an existing or proposed building showing the design and layout of the building and the specifications of each room. May also show doors, windows, stairways and other features.

FNMA (FANNIE MAE): The largest single lender on residential properties in the United States, generally purchases mortgages from primary lenders.

FOR RENT BY OWNER (FRBO): Indication that the owner of a property is attempting to find a tenant for his property on his own, without employing an agent.

FOR SALE BY OWNER (FSBO): Indication that the owner of a property is attempting to find a purchaser for her property on her own, without employing an agent.

FORBEARANCE: Any indulgence a party gives to another party to a contract who is late in meeting her obligations under the contract.

FORCED SALE: The marketing of a property as a result of some outside influence, such as bankruptcy, where the price obtained might not be optimum.

FORECLOSURE: A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a “repossession of property”.

FORFEITURE: Loss of money or anything of value due to failure to perform.

FORGERY: A document that is false, either as a result of being signed by someone other than the person represented to have signed it or as a result of being a false, worthless replica of a document that has value.

FORM REPORT: A standardized appraisal document which requires the appraiser to present her findings in a prescribed form.

FORMAL CONTRACT: A contract under seal.

FORWARD COMMITMENT: A lender's promise to make a loan in the future.

FRACTIONAL APPRAISAL: An estimate of the value of one portion of a property.

FRACTIONAL INTEREST: A legal claim or right to a portion of a property.

FRAUD: The intentional and successful employment of any cunning, deception, collusion, or artifice, used to circumvent, cheat or deceive another person, whereby that person acts upon it to the loss of the property and to his legal injury.

FREDDIE MAC (FHLMC): Federal Home Loan Mortgage Corporation. A US agency which purchases first mortgages on residences.

FREE AND CLEAR: A description of title to property which is unencumbered and subject to no competing claims.

FRONT-END FEE: A lender's charges to the borrower for the costs of the borrower's application for the loan.

FRONT-END RATIO: A comparison of a borrower's monthly cost of housing with that borrower's monthly gross income.

FRONTAGE: Land bordering a street.

FRONT FOOT: Property measurement for sale or valuation purposes; the property measured by the front foot on its street line – each front foot extending the depth of the lot.

FULL DISCLOSURE: The revelation to another party in a contract or legal dispute of all relevant information in one's possession. An agent acting for both parties in a real estate purchase must fully disclose this conflict of interest to all parties.

FULL-PRICE OFFER: A proposal by a purchaser to buy a property at the price and on the terms asked by the vendor in her property listing.

FULLY AMORTIZING PAYMENT: A periodic mortgage payment which, if paid consistently throughout the amortization period of the mortgage, will result in the total principal and interest owing on the loan being retired at the end of the amortization period.

FULLY ASSUMABLE MORTGAGE: A land loan that may be transferred to a new owner without any change to the terms, as long as the new owner qualifies.

FULLY EXECUTED SALES CONTRACT: An agreement in which all parties have agreed and signed to all terms of the agreement.

FULLY INDEXED INTEREST RATE: The interest rate as set out in the variable or adjustable rate mortgage, equaling the index rate plus the float of the mortgage.

FUNCTIONAL OBSOLESCENCE: The loss of use or value of an asset due to a change in the market demands. A property in Buffalo with no furnace may be considered to be functionally obsolete and, therefore, difficult to sell.

FUNDING FEE: The charge paid by the borrower to the VA for the mortgage insurance provided by the VA on a veteran's mortgage.

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GENERAL LIEN: A lien which affects all property of a person.

GENERAL PARTNERSHIP: A partnership where all partners can participate in management and liability.

GENERAL WARRANTY DEED: Instrument which transfers legal title to property in which the Grantor warrants clear title to the Grantee.

GENTRIFICATION: The process in which a neighborhood is transformed from low-value to high-value properties.

GI LOAN: Also known as "VA loan".

GIFT DEED: Instrument which transfers legal title to property for no consideration (except perhaps natural love and affection).

GINNIE MAC (GNMA): Government National Mortgage Association. Assistance in obtaining purchase mortgages.

GOOD AND MARKETABLE TITLE: Ownership of a property which is free of competing claims and interests.

GOOD FAITH: A term to describe a person’s legitimate and honest efforts to meet their obligations in a given situation.

GOOD FAITH ESTIMATE: A written statement of the anticipated costs of completing a loan transaction which must be provided by a lender to a borrower within 72 hours of the submission of the loan application.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA): Provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA. Also known as “Ginnie Mae”.

GRACE PERIOD: The time a borrower is allowed after a payment is due to make that payment without incurring penalties.

GRADUATED LEASE: Lease which provides for a varying rental rate, often based upon future determination; sometimes rent is based upon result of periodic appraisals; used largely in long term leases.

GRADUATED PAYMENT MORTGAGE (GPM): A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

GRADUATION PERIOD: The interval between increases in the payments on a GPM.

GRADUATION RATE: The rate at which the payments increase in a GPM, expressed as a percentage.

GRANDFATHER CLAUSE: A provision in a law that ensures that the law is not retroactive, that it does not render a previously legal thing illegal. For example, a new zoning by-law requiring all houses to be at least five feet from the side lot line would not render illegal a 20-year-old house that stands three feet from the side lot line. The property would be described as "legal non-conforming".

GRANT: A technical term made use of in deed of conveyances of land to impart a transfer.

GRANTEE: One who receives title.

GRANTOR: One who gives title to another.

GRANTOR/GRANTEE INDEX: An alphabetical listing of the parties to all transfers of land, cross-indexed by grantor, grantee and the property transferred.

GRANT DEED: A deed conveying the title. It has two implied warranties.

GRID: A chart used in rating the borrower risk, property, and the neighborhood.

GROSS MARGIN: The difference between the interest rate chargeable on a variable or adjustable rate mortgage and the rate set by the index rate upon which the mortgage rate is based.

GROSS RENT MULTIPLIER: A figure which, times the gross income of a property, produces an estimate of value of the property.

GROUND LEASE: A long-term lease of land (often 99 years) in which the tenant is allowed to improve the land and use it for the term of the lease at the end of which the land and all improvements revert to the control and occupancy of the owner.

GROWING-EQUITY MORTGAGE (GEM): A mortgage with a fixed interest rate which has periodic payments which increase at intervals, the added money per payment being applied directly to the outstanding principal on the mortgage.

GUARANTEE: 1. An enforceable warranty on the continuing usefulness of a product. 2. An agreement by a third party to a loan transaction to join in the transaction and to be held liable for the moneys secured by the loan instrument should the principal debtor fail to pay.

GUARANTY: A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

GUARANTEE MORTGAGE: A land loan that has a third party added to provide added assurance that the obligations under the loan will be met.

GUARANTY FEE: Fannie Mae's fee for insuring a mortgage

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HABENDUM CLAUSE: A clause or series of clauses in an instrument of conveyance (i.e. a Deed) which defines the extent of title (i.e. fee simple or such other title) being transferred to the new owner of land. From Latin "habendum et tenendum", meaning "to have and to hold".

HABITABLE: A description of a dwelling or property that is appropriate for human occupancy.

HANDYMAN'S SPECIAL: A descriptive term for a property which requires significant work to bring it up to normal standards of condition and repair. Often marketed at a lesser price.

HARD MONEY LOAN: The borrower receives actual cash and not just credit.

HARD SELL: A description of a style of salespersonship in which the potential purchaser is placed under extreme pressure and bombarded with information and sales pitches.

HAZARD INSURANCE: A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

HEIGHT ZONING: The establishment of local by-laws or ordinances which restrict the height of buildings in a certain area. May be used in areas near airports (for safety reasons) or natural attractions (to maintain the view) or simply to allow the flow of air or sunlight.

HEIR: Those who inherit property either by will or succession.

HEREDITAMENT: A descriptive term for any property that one is able to inherit.

HIDDEN AMENITIES: Qualities of a property which may not be immediately noticeable but add to the value of the property, such as high quality materials used in construction.

HIGH RATIO MORTGAGE: A mortgage in which the amount of money borrowed is equal to or greater than 75% of the purchase price/appraised value of the property against which it is secured. Will require some sort of insurance, usually provided by a government agency.

HOLD HARMLESS CLAUSE: Also known as "save harmless clause". A clause in a contract in which one party releases another party for legal liability for a stated risk.

HOLDBACK: A percentage of a contract price which is retained by a contractor or lender until the project is complete and all bills for that project are paid. The percentage may be set by custom or by statute.

HOLDER IN DUE COURSE: One who has taken a note, check or bill of exchange in due course : (1) before it was overdue (2) In good faith and for value (3) Without knowledge that it has been previously dishonored and without notice of any defect at the time it was negotiated to him.

HOLDER IN GOOD FAITH: A person who takes title to a property without being notified of a defect on title or a competing claim.

HOLDING OVER: Also known as "overholding", the term used to describe the action of a tenant who retains possession of a premises after the lease has expired.

HOLOGRAPHIC WILL: A testamentary document which is written entirely in the hand of the testator (the person making the will). Is a valid will in many jurisdictions despite the fact that it may not be properly witnessed, so long as it shows an intention on the part of the writer that the document be her will, it deals with the person's assets and there are no concerns with regard to fraud, coercion or lack of capacity. Originally recognized to aid soldiers in the field who, in the face of death, wished to settle their estate.

HOME EQUITY CONVERSION MORTGAGE (HECM): Also known as a "reverse mortgage", a loan designed specifically for people without income but with a great deal of equity in their home (i.e. retired people). The loan may require periodic payments or may simply accumulate interest on the original principal until the property is sold (by the borrower or after the death of the borrower).

HOME EQUITY LINE OF CREDIT: A special kind of loan (also known as a "revolving loan") which is secured against a property and allows the owner to borrow and repay money at her leisure. Periodic payments of at least accumulated interest are required but the loan is fully open : may be paid out in whole or in part at any time and, if there is still money available under the loan ceiling, the borrower may take more money for her use.

HOME IMPROVEMENT LOAN: A loan made for the purposes of making improvements to a property.

HOME INSPECTION (REPORT): The written statement of the results of the inspection of a given property by a professional home inspector. Will show problems and potential problems with the property not always visible to an average purchaser (i.e. a deteriorating roof, an ancient furnace, termites, wood rot, basement seepage). Many purchasers make their offer to purchase conditional upon obtaining a satisfactory Home Inspection report.

HOME INSPECTOR: A person who offers a service of making a physical inspection of homes. Qualifications may vary.

HOME KEEPER SM: A form of Home Equity Conversion Mortgage offered by Fannie Mae to older homeowners to allow them to use the equity in their home to provide either a lump sum or periodic payments to themselves.

HOME OWNER'S INSURANCE: Liability coverage for property owners covering both loss/damage to property or dwelling and personal liability.

HOMEOWNER'S (HOMESTEAD) TAX EXEMPTION: A tax break for home owners offered in certain jurisdictions which sees property tax assessments reduced by a certain percentage as a result of the fact that the taxpayer resides in the property. May require evidence of the status of ownership to be filed periodically with taxing authority.

HOMEOWNERS' ASSOCIATION: The non-profit organization that oversees the common elements in a planned unit development (PUD) or condominium project.

HOMEOWNER'S ONCE-IN-A-LIFETIME TAX EXCLUSION: A capital gain exemption of the first $125,000.00 in gains earned from the sale of a principal residence by a qualified taxpayer.

HOMESTEAD: A home upon which the owner or owners have recorded a Declaration of Homestead, protects home against judgments up to specified amounts.

HOMESTEAD DEED: A method of protecting some assets from creditors by registering a declaration on title to the owner's homestead property.

HOMESTYLE MORTGAGE LOAN: A mortgage specifically designed to allow owners to improve their existing homes.

HOUSING AND URBAN DEVELOPMENT (HUD): Federal Agency charged with the duty of overseeing a number of enactments relating to housing in America.

HOUSING EXPENSES-TO-INCOME RATIO: The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (conventional loans).

HOUSING EXPENSE RATIO: A comparison of a family's monthly gross income with the carrying costs of their home.

HOUSING FINANCE AGENCY: State body whose function is to provide loans to citizens who cannot obtain home ownership loans through normal channels.

HUD: See "Housing and Urban Development".

HUD I SETTLEMENT STATEMENT: The form in which the costs of purchasing a home are itemized.

HUD MEDIAN INCOME: Used in determining eligibility for various HUD programs, the average income for a family in a specific area.

HUD-1 STATEMENT: See "HUD I Settlement Statement".

HUNDRED PERCENT LOCATION: The benchmark for comparisons, the property location which provides the best rental income per square foot for a particular type of building.

HYBRID MORTGAGE: A form of mortgage in which the compensation to the lender may include receiving income directly from the use of the property.

HYPOTHECATE: To pledge as security for a mortgage an asset of which the pledgor retains possession (i.e. the dwelling upon which a mortgage is registered).

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IMPOUND: That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as “reserves”.

IMPOUND ACCOUNT: The trust account held by a lender into which payments for insurance, taxes, etc., paid by the borrower are placed prior to being disbursed by the lender.

IMPROVEMENTS: Things built on land which become a part of the real property.

INCOME APPROACH: An appraisal technique whereby the potential of the property to produce income is used to assess its value.

INCOME PROPERTY: A property which is owned or developed specifically to produce income for its owner.

INCOMPETENT: One who is incapable; any person who is, by reason of age, disease, weakness of mind, or any other cause, unable, unassisted, to properly manage and take care of himself or his property and, by reason thereof, would be likely to be deceived or imposed upon by artful or designing persons.

INCORPOREAL PROPERTY: Real estate in which a person has a legal interest but no right of possession and occupation.

INDEPENDENT APPRAISAL: An estimate of the value of a property prepared by someone who has no interest in the property or, if a mortgage is involved, in the lender.

INDEPENDENT CONTRACTOR: A legal term for a person who is hired to do work for another person but who is not an employee or agent of that person. The hiring person is not responsible for the actions of the Independent Contractor nor does she owe that Independent Contractor the same legal duties owed by an Employer to an Employee under labor and employment laws.

INDEX: A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

INDEXED LEASE: A rental agreement where the amount of the rent to be paid changes in accordance with changes in a specified index (i.e. the cost of living index).

INDEXED LOAN: Any loan whose interest rate is adjusted in accordance with a rate published by an independent third party (an "index").

INGRESS: The right to enter over a parcel of land not owned by you but not to occupy the land.

INHERIT: To acquire property by will or succession.

INITIAL INTEREST RATE: The rate chargeable on a mortgage on the day it is signed.

INITIAL RATE PERIOD: The period of time for which the "initial interest rate" is guaranteed on a Variable or Adjustable Rate mortgage before it begins to change according to its "index".

INSTALLMENT: A regular periodic payment.

INSTALLMENT CONTRACT: Same as land contract.

INSTALLMENT LOAN: A loan which is paid back in periodic payments.

INSTALLMENT NOTE: A note which provides the payments of a certain sum or amount be paid on the dates specified in the instrument.

INSTALLMENT SALE: The sale of a property with the Vendor taking back a mortgage from the purchaser and paying the taxes on the sale proceeds as they are collected.

INSTITUTIONAL LENDER: An accredited financial organization (i.e. a bank, trust company, credit union, etc.) which offers loans.

INSTITUTIONAL MORTGAGE: A loan secured against real property offered to the land owner by a bank, credit union, trust company or other accredited financial organization. Opposite of "private mortgage".

INSTRUMENT: A legal document in written form setting out certain rights of parties to it.

INSURABLE TITLE: Ownership of land which a Title Insurance Company is willing to insure.

INSURABLE VALUE: The cost of replacement of all improvements to a property which could conceivably be destroyed.

INSURANCE: A contract in which one party agrees to compensate another party for any losses or damages caused by risks identified in the contract in exchange for the payment of a lump sum or periodic amounts of money to the first party.

INSURANCE BINDER: Written evidence that insurance is in effect with regard to the property and the risks set out in the binder. Temporary in nature, the binder assures coverage until permanent coverage can be arranged.

INSURANCE COVERAGE: Term to describe the monetary limits and risks covered as set out in a contract or policy of insurance.

INSURED CLOSING LETTER: A promise by a Title Insurance Company to a lender to pay for all costs and losses to the lender which might result from the actions of the Company's closing agent while closing a transaction.

INSURED MORTGAGE: A loan secured against land for which an insurance policy exists promising to compensate the lender for all losses and costs resulting from the borrower's failure to meet her obligations under the loan agreement.

INTEREST: 1. A person's legal right to an asset or property. 2. The cost of borrowing money, charged as a percentage of the outstanding amount owed.

INTEREST ADJUSTMENT DATE: The date upon which the borrower is required to pay accrued interest on the borrowed principal under a mortgage, which date falls one full payment interval before the first payment date as set out in the agreement. For example, if a mortgage is advanced on May 15 to be paid on the first day of each month, June 1 would be the interest adjustment date and July 1 the first payment date. On June 1, the borrower would be required to pay the interest that has accrued on the principal since the date of the advance (May 15).

INTEREST ACCRUAL RATE: The rate, stated as a percentage, at which interest accumulates on a mortgage.

INTEREST PAYMENT: The portion of each periodic payment on a loan, expressed in dollars, which is allocated toward accrued interest.

INTEREST RATE: The percentage of a sum of money charged for its use.

INTEREST RATE ADJUSTMENT PERIOD: The length of time between changes in interest rate on an Adjustable or Variable Rate 


INTEREST RATE BUY DOWN PLAN: A method of reducing the effective interest charged to a borrower. A third party (often a vendor) deposits a lump sum into an account, portions of which are then used to reduce the amount required from the borrower for each periodic payment over a set period of time.

INTEREST RATE CAP: A clause in an Adjustable or Variable Rate Mortgage which limits the change in the interest rate charged. May limit change within a single adjustment period or over the life of the mortgage.

INTEREST RATE CEILING: The highest rate of interest chargeable under a Variable or Adjustable Rate Mortgage, as set out in the mortgage contract.

INTEREST RATE FLOOR: The lowest rate of interest chargeable under a Variable or Adjustable Rate Mortgage, as set out in the mortgage contract.

INTEREST-ONLY LOAN: A debt for which the periodic payments are enough to pay only the interest which accumulates on the principal over the payment period. Principal is due at maturity.

INTERIM FINANCING: 1. A construction loan to pay for costs up to completion; 2. Another name for a bridge loan, a short-term loan designed to cover a gap of time between the purchase of a new home and the sale of the old when equity becomes available.

INTERSTATE LAND SALES ACT: Federal law administered by HUD regulating the practice of the sale of land between people in different states.

INTESTATE: A person who dies having made no will, or one which is defective in form, in which case his estate descends to his heirs at law or next of kin.

INVERSE CONDEMNATION: A court remedy for a private land owner whose interest or ownership in land has been interfered with or taken away outright by a governmental body.

INVESTMENT PROPERTY: A piece of real estate that is owned for the purposes of financial gain, either through appreciation in value or through income from the property

INVESTOR: A money source for a lender.

INVOLUNTARY CONVERSION: Loss of land through natural forces or through government action.

INVOLUNTARY LIEN: A claim registered against a property without the consent (and sometimes without the knowledge of) the owner of the land.

IRREVOCABLE: Incapable of being recalled or revoked; unchangeable.

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JOINT AND SEVERAL NOTE: A note signed by two or more persons in which they are liable jointly and individually for the full amount of the loan.

JOINT NOTE: A note signed by two or more persons who each have liability for payment of part of the loan.

JOINT OWNERSHIP AGREEMENT: An agreement between owners defining their rights, ownership, monetary obligations and responsibilities. This could be between an investor and an occupant or the occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant's payment is deemed rent for tax purposes.

JOINT TENANCY: Two or more persons own a property. Joint tenants with the common law right of survivorship means the survivor inherits the property without reference to the decedent's will. Creditors may sue to have the property divided to settle claims against one of the owners.

JUDGMENT LIEN: A general lien which applies to all property owned by a judgment debtor located in the county where the judgment is recorded.

JUDICIAL FORECLOSURE: An enforcement action by a lender, the act of selling the property to recover the mortgage debt after obtaining judgment of a court.

JUMBO LOAN (MORTGAGE): A loan which is larger than the limits set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

JUNIOR LIEN (MORTGAGE): A claim against property which is behind at least one other lien in priority.

JUNIOR TRUST DEED: A trust deed that does not have first priority.

JUNK FEES: Slang term for extra fees charged by a lender on a mortgage loan.

JUST COMPENSATION: Payment of a fair and reasonable amount for property taken from a private person by a government body.

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KICKBACK: Gratuitous payment made to a person for a referral of business.

KICKER: Additional compensation for a lender or investor, the right to share in the income from the property in addition to payments of principal and interest. Also known as "equity kicker" or "lender participation".

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L/V: Short form for "Loan-to-value ratio".

LAND BANKING: The practice of acquiring land now for future use.

LAND / BUILDING RATIO: A comparison of the value of the land with the value of the improvements to that land.

LAND CONTRACT: A contract ordinarily used in connection with the sale of a property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer, often used when property is sold on small down payment. See also "Contract for Deed".

LAND RESIDUAL: A method of appraising. The value of the building is subtracted from the value of the property, leaving the value of the land.

LANDLORD: Also known as "lessor". The owner of a property who allows other persons to occupy a property in exchange for periodic payments of rent.

LATE CHARGE: A fee or penalty to be paid to a lender for a payment which is delivered after it is due.

LATENT DEFECTS: Problems with a property or building which are not visible to the casual observer but which may surface later. A vendor must disclose to a purchaser any serious latent defects of which he has knowledge.

LEASE: A contract between owner and tenant, setting forth conditions upon which tenant may occupy and use the property, and the term of the occupancy.

LEASE-PURCHASE MORTGAGE LOAN: A Fannie Mae loan which allows qualified persons to lease a property from a nonprofit organization with an option to purchase the home. Payments are made against the loan principal and interest but with a portion going into a savings account toward the purchase price.

LEASEHOLD MORTGAGE: A loan secured against a tenant's interest in a property.

LEGACY: A gift of personal property by will.

LEGAL DESCRIPTION: A description of a piece of real estate that is drafted according to legal requirements and which clearly and adequately establishes the identity of the property so described. Found in most instruments for registration on title to land.

LEGAL TITLE: The bundle of rights of ownership that a person acquires in purchasing a piece of property, which may be defended against competing interests.

LEGALTEE: A person to whom personal property is given by will.

LENDER: Any individual or company which provides money to third parties in return for periodic payments of interest and principal over time.

LENDER OPTION COMMITMENTS: A contract between a lender and potential borrower which allows a lender to provide certain loans at certain times on terms set out in the contract but also allows the lender to choose not to provide such loans.

LENDER'S TITLE INSURANCE: A policy of Title Insurance which covers the interest of a lender on a mortgage registered on title to a property.

LESSEE: A tenant under a lease.

LESSOR: A landlord under a lease (the owner of the property being rented).

LETTER OF CREDIT: An agreement between a bank and a borrower which allows the borrower to use money on the bank's credit.

LETTER OF INTENT: A written indication to the owner of property that the writer will be making an offer to purchase the property.

LEVEL-PAYMENT MORTGAGE: A land loan which requires regular, even payments.

LEVERAGE: Making money with borrowed money.

LEVY: To charge or assess a tax or charge.

LIABILITIES: The debts or obligations of a person.

LIABILITY INSURANCE: A contract made with an insurance company to cover costs arising out a person's responsibility for injuries to others.

LIEN: A claim or charge against property. Property is said to be encumbered by a lien and the lien must be removed to clear title.

LIEN HOLDER: The person who has the claim against the property.

LIEN WAIVER: The surrender or passing up on one's right to a claim.

LIFETIME PAYMENT CAP: The maximum increase or decrease in the amount of each periodic payment allowable over the life of an adjustable or variable rate mortgage.

LIMITED PARTNERSHIP: A partnership composed of some partners whose contributions and liability are limited.

LINE OF CREDIT: A very flexible form of loan in which the lender agrees to make a certain amount of money available to the borrower at a certain rate of interest. The borrower may use as much of the amount available as she wishes and may pay out all or any part of the amount owing at any time or re-borrow such funds at her leisure.

LIQUID ASSETS: Assets readily convertible to cash.

LIS PENDENS: Latin meaning "suit pending", a recorded notice of a legal claim which may affect ownership of a parcel of land.

LIST: To place a property up for sale in the public forum, to add it to the list of properties for sale.

LISTING: The agreement that allows a real estate professional to market a property or the actual notice of the property's availability and features.

LISTING BROKER (AGENT): The real estate professional who acts for the vendor in marketing a property for sale. As opposed to Selling Broker (Agent) -- the agent representing the purchaser.

LOAN: See also "mortgage". A transfer of money or other property from one party to another upon the expectation that the money or other property will be returned (often with additional payments as well).

LOAN APPLICATION: The form completed by a potential borrower which provides information the prospective lender requires to assess the borrower's suitability for a loan.

LOAN APPLICATION FEE: The charge paid by the borrower for the honor of requesting a loan and of having the lender consider the request.

LOAN COMMITMENT: Lender’s contractual commitment to a loan based on the appraisal and underwriting. See also "commitment".

LOAN-TO-VALUE RATIO: The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

LOCK OR LOCK IN: Obtain a commitment from a lender to guarantee a certain interest rate or other loan feature for a set period of time.

LOCK PERIOD: The time span over which the lender guarantees a feature of a loan.

LOT: A measured section of land, often a particular parcel of land on a registered plan.

LOT LINE: The legal perimeter of a parcel of property, often shown on a survey of the property.

LOW-BALL OFFER: A slang term for an offer to purchase a property with an offered purchase price much lower than that asked for. An attempt to take advantage of pressures on the vendor to sell by asking him to accept much less than the property may be worth.

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M.A.I.: Member of the Appraisal Institute : Designates a person who is a member of the American Institute of Real Estate Appraisers of the National Association of Realtors.

MANDATORY DELIVERY COMMITMENT: A lender's written promise to deliver certain funds at specified dates upon terms set out in the commitment.

MARGIN: The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. The difference or the added amount. In mortgages, the difference between the index interest rate and the interest rate charged on the variable or adjustable rate mortgage. Expressed in the contract as a percentage (i.e. "prime plus three per cent").

MARGIN OF SECURITY: The difference between the amount of the mortgage loan(s) and the appraised value of the property.

MARKET DATA APPROACH: One of the three methods in the appraisal process. A means of comparing similar type residential properties, which have been recently sold, to the subject property.

MARKET PRICE: The consideration actually paid for an asset in an arm's-length transaction.

MARKET VALUE: The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

MARKET VALUE: An estimation of the price that could be obtained for a particular asset if it were sold in an arm's length transaction on the current market.

MARKETABLE TITLE: Ownership of land that is without competing claims or other defects, such that it could be sold without complication.

MATERIAL BREACH: A contravention of the terms of a contract by one of the parties that is so large that it changes the very nature of the agreement between the parties and allows the innocent party to treat the contract as being at an end and pursue legal remedies (rescission, damages, specific performance) from the contravening party.

MATERIAL FACT: An important fact about one or more of the issues involved in the contract which, if known to all parties, may result in a different contract or no contract at all.

MATURITY DATE: The date upon which a mortgage loan comes due and payable.

MECHANIC'S AND MATERIALMAN'S LIENS: A claim against property that arises as a statutory right of any person who supplies work or materials to a property and is not compensated for that work. See also "construction lien".

MINIMUM DOWNPAYMENT: The least amount of money a purchaser can provide toward the purchase price of a house under a mortgage loan program.

MINIMUM PAYMENT: The lowest amount a borrower is allowed to pay toward a loan, line of credit or other debt in a given period of time.

MINIMUM PROPERTY STANDARDS: The bare essentials in the way of construction and lot location required by the Federal Housing Administration (FHA) before it will underwrite a mortgage on a residential property.

MISREPRESENTATION: A statement of a fact that turns out to be false. May be innocent, negligent or fraudulent.

MONTHLY DEBT SERVICE: The periodic payments required to remain current on all outstanding loans.

MONTHLY FIXED INSTALLMENT: Periodic payment that is applied toward accumulated interest and reduction of principal.

MORTGAGE: A loan which is secured against property (i.e. registered on title as a claim or encumbrance on the property). Often used to 

purchase the property itself.

MORTGAGE BACK: Also known as a "vendor take-back mortgage". Financing of a purchase of property whereby the vendor accepts only a portion of the purchase price up front and accepts a mortgage (with periodic payments and interest chargeable) for the remainder.

MORTGAGE BANKER: A firm that offers mortgages for property purchases but, at times, may require financial support from larger institutions to help cover the outlay of cash.

MORTGAGE BROKER: A middleman who serves to bring borrowers together with lenders. Offers the service of doing the shopping for the borrower while often collecting a fee from the chosen lender rather than from the borrower.

MORTGAGE COMMITMENT: See "Loan commitment".

MORTGAGE CORRESPONDENT: An authorized agent of a lender for a geographic area.

MORTGAGE DISABILITY INSURANCE: A policy of insurance which promises to pay periodic mortgage payments for the borrower during any future period that borrower may be disabled from working and, therefore, incapable of making the payments himself.

MORTGAGE GUARANTY INSURANCE: Insurance against financial loss available to mortgage lenders from a private company.

MORTGAGE INSURANCE: A policy of insurance which promises to pay out the amount owing in the event that the borrower defaults.

MORTGAGE INSURANCE PREMIUM (MIP): One-half percent that borrowers pay each month on FHA insured mortgage loans. It is insurance from FHA to the lender against incurring a loss on account of the borrower's default. On September 1, 1983, the MIP was changed to a one-time charge to the borrowers.

MORTGAGE INTEREST DEDUCTION: A tax break for people who pay mortgage interest on their homes.

MORTGAGE LIFE INSURANCE: A policy of insurance which promises to pay out the remaining balance owing on a mortgage should the borrower die. The amount payable by the insurer declines as the mortgage is paid down and the policy ends upon the paying 

out of the mortgage.

MORTGAGE LOAN CORRESPONDENT: A person or company who negotiates and services loans for others.

MORTGAGE LOAN SERVICING: The lender's actions in collecting mortgage payments, allocating payments to principal, interest and escrow accounts, paying out property taxes and insurance over the life of the loan.

MORTGAGE LOAN UNDERWRITING: The action of reviewing an application for a loan and then advising the lender as to the risk factor in making the loan.

MORTGAGE PROGRAM: The bundle of features of a particular kind of mortgage offered to the public.

MORTGAGE VALUE: The estimate worth of a particular asset which is established for the purposes of obtaining financing secured against that asset.

MORTGAGEE: The lender in a mortgage transaction. Also known as "chargee".

MORTGAGEE IN POSSESSION: A lender that has taken over control and occupancy of a property upon default of the borrower to collect income from the property and prepare for foreclosure and sale.

MORTGAGOR: The borrower, purchaser or homeowner in a mortgage transaction. Also known as "chargor".

MOST PROBABLE SELLING PRICE: An estimation of the price a property is most likely to realize in a given market.

MULTIPLE LISTING: A listing,, usually an exclusive right to sell, taken by a member of an organization composed of real estate brokers, with the provision that all members will have the opportunity to find an interested client; a cooperative listing.

MULTIPLE LISTING SERVICE (MLS): A service created and run by real estate professionals which gathers all of the property listings into a single place so that purchasers may review all available properties from one source. The MLS also deals with commission splitting and other relations between brokers and agents.

MUNIMENTS OF TITLE: Written documents which may be used to prove an owner's title to a property.

MUTUAL ASSENT: A shared acceptance by two or more parties.

MUTUAL RESCISSION: The act of ending a contract by obtaining the agreement of all parties to the contract to treat the contract as being at an end.

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NAKED LEGAL TITLE: The right to sell the property if the Trustor defaults. This right is given by the Trustor to the trustee in a trust deed.

NARRATIVE APPRAISAL: A summary of all factual materials, techniques and appraisal methods used by the appraiser in setting forth his value conclusion.

NATIONAL ASSOCIATION OF INDEPENDENT FEE APPRAISERS (NAIFA): Organization of real estate appraisers, offering professional designations to qualified persons.

NATIONAL ASSOCIATION OF MASTER APPRAISERS: Organization of real estate appraisers, offering the professional designation of "master appraiser".

NATIONAL ASSOCIATION OF REAL ESTATE BROKERS (NAREB): Organization of real estate salespersons and brokers.

NATIONAL ASSOCIATION OF REAL ESTATE LICENSE LAW OFFICIALS (NARELLO): Organization of members of state real estate licensing agencies.



NATIONAL REALTY COMMITTEE: Government lobby group for large land owners and developers.

NATIONAL SOCIETY OF REAL ESTATE APPRAISERS: Organization of real estate appraisers, offering professional designations.

NATURAL VACANCY RATE: The normal, average or traditional percentage of rental properties in a community that are not leased or occupied.

NEGATIVE AMORTIZATION: Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.

NEGATIVE AMORTIZATION CAP: A limit, expressed as a percentage of the principal, of the negative amortization allowed under a variable or adjustable rate mortgage.

NEGOTIABLE: Capable of being negotiated; assignable or transferable in the ordinary course of business.

NEGOTIABLE RATE MORTGAGE (RBM): A loan in which the interest rate is adjusted periodically.

NET EFFECTIVE INCOME: The borrower's gross income minus federal income tax.

NET INCOME: The gross income of income property minus the vacancies and allowable expenses equals the net income. Also the net profit of a business.

NET LEASE: A rental agreement wherein the tenant pays a portion of the expenses of the property in addition to the rent set out in the agreement; the landlord receives the full amount of the rent paid with no liability for expenses.

NET LISTING: The marketing for sale of a property under an agreement between the agent and the owner in which the parties agree to a sale price (the net price). The vendor is guaranteed to receive the net price while the agent's commission is equal to the amount in excess of the net price for which the property actually sells. May not be legal in some jurisdictions.

NO BID: Where the VA chooses not to acquire a property in foreclosure upon default but instead to pay out on the amount it has guaranteed of the mortgage (generally 60% of the principal).

NO CASH-OUT REFINANCE: The replacement of a matured loan with a new loan where no additional principal is borrowed and added to the loan.

NO CHANGE SCENARIO: A method of calculating the future payments required under a variable or adjustable rate mortgage on the assumption that the index (and therefore the interest chargeable on the mortgage) will not change.

NO MONEY DOWN: Slang description of real estate purchase strategies which allow the purchaser to obtain title to a property while paying little or no money of her own.

NOMINAL LOAN RATE: The interest rate stated on the loan agreement.

NON-ASSUMPTION CLAUSE: A term of a mortgage contract that forbids the transfer of the mortgage to a new owner without prior consent of the lender.

NON-CONFORMING LOAN/MORTGAGE: A mortgage or loan that is not eligible for Fannie Mae (FNMA) or Freddie Mac (FHLMC) programs.

NONDISTURBANCE CLAUSE: A term of a mortgage which guarantees that leases regarding the subject property will be allowed to continue uninterrupted in the event of mortgage default.

NONEXCLUSIVE LISTING: A real estate listing to which no one agent or broker has claim.

NOTARIAL COPY: A facsimile of a document which has been examined by a Notary Public and certified to be an accurate reproduction of the original.

NOTARIZE: To confirm the signature of another in one's official capacity as a notary public.

NOTARY PUBLIC: A designation authorized by law and administered by the government, allowing a designated person to verify and certify signatures and copies of documents.

NOTE: A written promise to pay a certain sum of money at a certain time. A negotiable note starts "Pay to the order of" and is transferable by endorsement similar to a check.

NOTE RATE: The interest rate as set out in the mortgage/loan contract.

NOTICE OF COMPLETION: A document that is recorded and delivered to the borrower when a default has occurred under a deed of trust.

NOTICE OF DEFAULT: The written notice sent by a lender to a borrower stating that the borrower has not met his obligations under the loan contract and the lender may take legal action to enforce the agreement.

NOVATION: The substitution of a new person for one of the parties to an agreement, on consent of all people involved.

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OBLIGEE: The lender in a loan transaction -- the person to whom, as a result of her actions, another person owes an obligation. See also "mortgagee". 

OBLIGOR : The borrower in a loan transaction -- the person who owes an obligation to another.

OFFER: To make available, to express a willingness (whether in writing or orally), in the case of real estate, to inform another party of your willingness to sell or buy a specific property on terms set out in your offer. An offer, once made, may be accepted at any time before it is rescinded. Once accepted, the offer and acceptance generally form a binding contract.

OFFER AND ACCEPTANCE: Components of a contract, applicable to the real estate situation where a Purchaser may make an offer on a property and the Vendor may accept that offer.

OFFER TO PURCHASE: A written expression of a person's willingness to purchase a certain property on terms expressed in the offer.

OFFER TO SELL: In general, a written expression of a person's willingness to sell a certain property on terms expressed in the offer.

OFFEREE: The person who receives an offer.

OFFEROR: The person who makes an offer.

OFFICE OF INTERSTATE LAND SALES REGISTRATION: A HUD agency which has the responsibility for enforcing the Interstate Land Sales Full Disclosure Act.

OFFSET STATEMENT: Statement by owner of property or owner of lien against property, setting forth the present status of liens against said property.

OPEN-END MORTGAGE: A loan which is specifically drafted to allow the borrower to borrow further funds at a later date without requiring the preparation and registration of new mortgage documentation.

OPEN HOUSE: An advertised period of time in which a property which is for sale is available for inspection by prospective purchasers.

OPEN LISTING: An agreement whereby the owner of the property may enlist more than one broker to attempt to sell the property and the commission is payable only to the successful agent.

OPEN MORTGAGE: A mortgage which may be prepaid in full or in part at any time during that life of the mortgage without notice, bonus or penalty.

OPTION: A right given for consideration to purchase or lease a property upon specified terms within a specified time.

OPTIONEE: Receiver of an option. Usually a potential buyer.

OPTIONOR: Giver of an option. Usually a potential seller.

OPTION RISK: The downside of giving a borrower an option, such as the possibility that she may prepay an open mortgage and reduce the income generated to the lender by the accumulation of interest over the life of the mortgage.

ORIGINAL EQUITY: The owner's original down payment on a property.

ORIGINAL FACE VALUE: The principal amount owed on a mortgage on the date of its negotiation as shown on the "face" of the agreement.

ORIGINAL PRINCIPAL BALANCE: See "original face value".

ORIGINATION FEE: The fee charged by a lender to prepare loan documents, perform credit checks, inspect and sometimes appraise a property; usually computed as a percentage of the face value of the loan. See "commitment fee".

OR MORE CLAUSE: A clause in a loan document allowing the borrower to pay additional sums at any time.

OUTSTANDING BALANCE: The amount of money (including principal and interest) owing at a given date on a loan or mortgage.

OWNER'S TITLE INSURANCE: A title insurance policy which covers the owner of the property from title defects and other flaws which were not apparent at the time of the purchase.

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PACKAGE MORTGAGE: A loan secured against both land and chattels.

PARTIAL PAYMENT: Any payment which is insufficient to meet the full amount required.

PARTIAL RELEASE: A document signed by the mortgagees holding a blanket mortgage registered on title to several properties which removes the mortgage from title to just one of the properties.

PARTIAL TAKING: Where a government body takes only a portion of a landowner's land or rights to land by condemnation.

PARTIALLY AMORTIZED MORTGAGE: A very common form of mortgage in which the term is less than the amortization period such that, at the maturity date, the mortgage is not fully paid out and either refinancing or a large balloon payment is required.

PARTICIPATION (OR PARTICIPATING) MORTGAGE: A mortgage in which the lender is entitled to a stated share of the income of the property or of sale proceeds.

PARTITION: An court ordered division of property owned by two or more owners, may take the form of a physical division of the property or a forced sale and division of the proceeds.

PARTNERSHIP: A form of business enterprise where two or more persons join together ithout forming a corporation. The partners are capable of binding each other to contracts, are liable for each other's actions.

PAR VALUE: Market value, nominal value.

PARTIAL RELEASE CLAUSE: A clause in a blanket mortgage or trust deed allowing for re-conveyance of title of part of the property when part of the loan is paid off.

PARTNERSHIP: A contract of two or more persons to unite their property, labor or skill, or some of them, in prosecution of some joint or lawful business, and to share the profits in certain proportions.

PAY OUT: To provide the lender with the total amount then required to retire a loan obligation.

PAYMENT ADJUSTMENT INTERVAL: The period of time between changes in the amount of each periodic payment on a variable or adjustable rate mortgage.

PAYMENT CAP: A term of some variable or adjustable rate mortgages in which the level to which the monthly payment may rise is limited to a certain dollar figure.

PAYMENT CHANGE DATE: The date when the amount of each payment under an adjustable, variable or graduated payment mortgage changes.

PAYMENT DECREASE CAP: A contractual limit on the amount of each periodic payment may drop at any one payment change date. Expressed as a percentage.

PAYMENT INCREASE CAP: A contractual limit on the amount of each periodic payment may rise at any one payment change date. Expressed as a percentage.

PAYMENT PENALTY: Also known as "prepayment penalty" or "early payment penalty", the fee paid by a borrower when she pays out some or all of the principal of a loan at a time when such a payment is not allowed under the terms of the loan.

PERMANENT LOAN: A long term mortgage, usually ten years or more. Also called an "end loan."

PERSONAL PROPERTY: Items owned by someone which are not land.

PERSONAL RESIDENCE: A person's home, used to establish their place for voting, taxation and other civic issues.

PITI: Principal, Interest, Taxes and Insurance. Also called “monthly housing expense”.

PLEDGE: The depositing of personal property by a debtor with a creditor as security for a debt or engagement.

PLEDGED ACCOUNT MORTGAGE (PAM): Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.

POINTS: Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).

POSSESSION: The state of occupying, controlling, using property to the exclusion of all others, exhibiting one's right or title to property.

POWER OF ATTORNEY: A written document authorizing another to act on his or her behalf as an Attorney in Fact. One does not need to be a licensed attorney to act as an attorney in fact but, power of attorney forms are powerful legal documents that should be used only under advice of a licensed attorney at law.

POWER OF SALE: Generally the fastest and cheapest mortgage enforcement method open to lenders. A common clause in a mortgage agreement which gives the lender the right to take over and sell the property to cure the borrower's default. The sale proceeds are allocated first to principal and interest, then to penalties, then to the lender's costs in exercising the power, then to other registered claimants and finally to the borrower if there is any left.

PRE-APPROVED MORTGAGE: A commitment from a lender to provide a mortgage loan on stated terms to a borrower before the borrower has found a property to buy. The pre-approved mortgage allows the borrower to make a firm, cash offer on the property of choice.

PREARRANGED REFINANCING AGREEMENT: An arrangement between lender and borrower in which the lender agrees to favorable terms for the borrower on a future refinance as an inducement to the borrower to place the original mortgage with the lender.

PRECLOSING: A meeting of the parties to a transaction prior to the scheduled closing date to allow some or all of the documents to be signed and more complicated issues settled prior to closing.

PRE-FORECLOSURE SALE: The sale of a property by a delinquent borrower under an agreement with the lender. The sale may not produce enough proceeds to pay out the loan but the lender will save the costs of foreclosing and selling.

PREMIUM: 1. The periodic payment on a policy of insurance. 2. The value of a debt instrument in excess of it face value. 3. Of highest quality.

PREPAID EXPENSES: Payments made on account of costs and disbursements that are not yet incurred, may be placed in an escrow account.

PREPAID INTEREST: Charges for interest that are paid in advance of their accrual (i.e. point charges, etc.).

PREPAYMENT: Payment of all or part of the principal of a mortgage or loan before it comes due.

PREPAYMENT CLAUSE: A term in a mortgage that establishes the rules regarding extra payments toward principal.

PREPAYMENT PENALTY: A fee charged to a borrower for paying out all or part of the principal of the mortgage or loan before it comes due.

PREPAYMENT PRIVILEGE: The right of the borrower to pay out all or part of the outstanding principal before it comes due.

PRE-QUALIFICATION: The act of going through the mortgage application process before the borrower is ready to borrow, to establish how much money the borrower could obtain under a loan.

PRESALE: Marketing of properties under construction or simply in the planning stages.

PRICE-LEVEL-ADJUSTED MORTGAGE: An adjustable or variable payment loan which uses the rate of inflation as an index.

PRIMARY MORTGAGE MARKET: Lenders making mortgage loans directly to borrower's such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary mortgage markets.

PRIME RATE: The best rate charged on loans, usually saved for the best clients of the lenders. May also be set by a national institution as a benchmark or index for other lenders. 

PRINCIPAL: 1. The amount of money borrowed or still owed on a loan, without including interest. 2. The person on whose behalf an agent acts.

PRINCIPAL AND INTEREST PAYMENT (P&I): A blended, periodic payment that is enough to pay off accumulated interest and a portion of the principal.

PRINCIPAL BALANCE: The outstanding amount owing on a mortgage without including accumulated interest.

PRINCIPAL BROKER: The head of a real estate brokerage, licensed as a broker, who is responsible for all transactions run through the firm.

PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI): The four parts of many periodic loan payments.

PRIORITY: The order in which liens are paid when property is sold to satisfy debts.

PRIVATE MORTGAGE INSURANCE (PMI): In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 5 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on you loan's structure. On a $75,000 house with a 10 percent down payment, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30.

PROGRESS PAYMENTS: Loan advances issued to a builder as construction of a building moves forward.

PROMISSORY NOTE: A document signifying an indebtedness.

PROPERTY: 1. The rights of ownership in lands or goods. 2. Land.

PROPERTY TAX: Also known as "realty tax", the tax levied on ownership of property.

PUBLIC AUCTION: A public meeting at which properties are sold to pay defaulted mortgages.

PUBLIC SALE: See "public auction".

PURCHASE AGREEMENT: See "agreement of sale" or "agreement of purchase and sale".

PURCHASE MONEY MORTGAGE (PMM): A loan from the vendor to the purchaser to help finance the purchase of the property. See also "mortgage back".

PURCHASER: The person who buys a property.

PURCHASE PRICE: The consideration paid for the purchase of a property as set out in the agreement.

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QUALIFICATION RATE: The rate of interest used to calculate whether or not a borrower qualifies for a mortgage.

QUALIFICATION REQUIREMENTS: Those guidelines set by lenders to be used when deciding whether or not an applicant will be given a loan.

QUALIFIED ACCEPTANCE: Also known as "conditional acceptance". Agreeing to enter a contract provided certain conditions are met.

QUALIFIED BUYER: A purchaser who has been pre-approved for financing.

QUIET ENJOYMENT: The legal right of an owner or tenant to have uninterrupted use of the property or premises without interference.

QUIT CLAIM DEED: A conveyance which releases any interest the conveying party may have in a property without any warranty as to that party's claim.

QUIET TITLE: A court action brought to establish title; to remove a cloud on the title.

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RATE CAP: A limit of how much an interest rate can change in a variable of adjustable rate mortgage either in a given period or over the life of the loan.

RATE COMMITMENT: A written promise by a lender to lend money to a borrower at a stated rate of interest -- usually time limited.

RATE LOCK-IN: See "rate commitment". A written agreement in which the lender guarantees the borrower a specified interest rate, provided the loan closes within a set period of time.

RATIFIED SALES CONTRACT: A firm and binding agreement for the purchase and sale of land.

REAL ESTATE AGENT: A trained professional involved in the purchase, sale and marketing of real property. The "listing agent" acts for the vendor, the "selling agent" for the successful purchaser.

REAL ESTATE BROKER: A real estate professional who is licensed to run a real estate firm, to hold trust funds, etc.

REAL ESTATE COMMISSION: 1. The fee paid to the real estate agents after a transaction. 2. An agency that enforces real estate license laws.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA): RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at a settlement. The law requires lenders to furnish the information after application only.

REALTIST: A member of the National Association of Real Estate Broker.

REALTOR: A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

REALTOR'S ASSOCIATE: Professional designation of a licensed real estate agent or salesperson who is a member of the National Association of Realtors but who has not been licensed as a broker.

RECISION: The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

RECORDING: The act of entering title instruments in the public records, thus giving notice to any interested parties of the existence of the instrument.

RECORDING FEES: The fees paid to have an instrument recorded in the public record.

REDEEM: To bring mortgage payments up-to-date after the lender has begun default proceedings. Once a borrower (or other lien holder) redeems, the mortgage is back in good standing and the relationship continues as before the default.

REDEMPTION: Buying back one’s property after a judicial sale.

REDEMPTION PERIOD: The length of time during which the borrower may redeem a mortgage.

REDLINING: An illegal practice, refusing to lend money to owners of property in certain neighborhoods or to owners on the basis of their race, color, religion, creed, age, gender, etc.

REDUCTION CERTIFICATE: A mortgage statement setting out the amount owing on the loan as of a given date. May be used for discharges or assumptions.

REFERRAL: A recommendation, a suggestion to a client of the value of the services of a person or firm. (i.e. a real estate agent may refer a purchaser to a particular banker or lawyer.)

REFINANCE: To replace an existing and perhaps mature mortgage with a new mortgage on the same property. New mortgage may have different terms than the old one.

REGULATION Z: A federal rule which requires lenders to provide borrowers with full disclosure of the terms of a loan.

REHABILITATE: To restore, refurbish, bring back to original condition.

RE-ISSUE RATE: A reduction in the fee for title insurance on a property which was previously title insured.

RELEASE CLAUSE: A term of a mortgage which allows the borrower to pay out the loan and have the mortgage removed from title.

RELEASE OF LIEN: A document which, once registered, removes certain kinds of claims from title to property.

RELEAE STATEMENT: A document filed to release the encumbrance when personal property is used for security for a loan.

REPAYMENT PLAN: A schedule arranged between a lender and borrower to set out how a debt is to be paid out.

REPLACEMENT COST: An insurance term, the total cost of erecting a new home or building which adequately takes the place of the existing one.

REPORT: A document sent by a lawyer to a bank certifying that title to the subject property is clear and marketable.

REPORTING LETTER: A letter sent by a lawyer to a client after a transaction is completed (or when sent during the process of the transaction, called "interim reporting letter") in which the lawyer certifies title to the property and informs the client of all other 

matters relating to the transaction.

REPRODUCTION COST: The cost of making an exact duplicate of a property.

RESCISSION OF CONTRACT: The act of declaring a contract null and void and taking the necessary actions to return the parties to the position they were in prior to entering the contract.

RESERVE PRICE: The amount set prior to an auction which must be met in the bidding for a particular item before the item will be sold. Also known as "reserve bid".

RESIDENCE: The dwelling in which a person lives, may also refer to the country or state where a person lives.

RESIDENTIAL BROKER: A real estate professional who deals in dwelling properties.

RESIDENTIAL PROPERTY: Real estate that is occupied by the owner.

RESIDENTIAL SERVICE CONTRACT: A warranty or insurance contract which covers services such as electrical, plumbing etc. in a resale home.

REVERSE ANNUITY MORTGAGE: Form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as Satisfaction of Mortgage: The document issued by the mortgagee when the mortgage loan is paid in full. Also called a "release of mortgage."

REVERSE LEVERAGE: A term for the situation where the income from ownership of property is lower than the rate of interest paid to finance the ownership.

RIDER: A document which contains additional or amending clauses to a contract.

ROLLOVER LOAN: A loan where the amortization period is much longer than the term and the borrower is allowed to refinance at the end of the term at the interest rate then applicable.

ROOT DEED: The first conveyance in a chain of title. If a jurisdiction has legislation which cures any title defects that are older than a certain number of years, the root deed will be the first deed beyond that period.

ROOT OF TITLE: Any defect in ownership of property which throws into question the very basic issue of who actually owns the property. An unresolved problem going to the root of title is grounds for rescission of the Agreement of Purchase and Sale no matter when it is discovered before closing.

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SALE AGREEMENT: Also known as "Agreement of Purchase and Sale" or "Purchase Agreement¡±. The contract that sets out the terms and conditions agreed to by the purchaser and the vendor in the sale of land.

SALE AND LEASEBACK (SALE-LEASEBACK): Where the vendor sells the property to the purchaser, then leases it back immediately for a long term.

SALE PRICE: Also known as "purchase price", the amount of money paid by the purchaser to the vendor for the property under the agreement.

SALES ASSOCIATE: A real estate professional in the employ of another such real estate professional.

SALES COMPARISON APPROACH: Method of estimating value of a property by comparing similar properties that have been sold recently.

SALES CONTRACT: See "sale agreement".

SALESMAN: A natural person employed by a broker to do real estate acts for compensation or in expectation of compensation.

SATISFACTION OF MORTGAGE: Written evidence from the lender that a loan has been paid out in full and the borrower released from any obligation to the lender.

SAVINGS AND LOAN ASSOCIATION (S & L): Another form of mortgage lender.

SCHEDULED MORTGAGE PAYMENT: The periodic payment the borrower is obliged to pay on a loan.

SEASONED LOAN: An old loan under which the borrower has proven herself capable of meeting loan obligations.

SECOND MORTGAGE: A mortgage made subsequent to another mortgage and subordinate to the first one.

SECONDARY FINANCING: Another term for a second mortgage; a loan which stands behind the principal loan.

SECONDARY MORTGAGE MARKET: The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

SECURED PARTY: This is the party having the security interest. Thus the mortgagee, the conditional seller, the pledge, etc., are all now referred to as the secured party.

SECURITY: An asset held as a guarantee of payment of a loan.

SECURITY AGREEMENT: An agreement between the secured party and the debtor which creates the security interest.

SECURITY DEPOSIT: Money held by the landlord to ensure the tenant meets his obligations under the lease.

SECURITY INTEREST: Legal term for the claim the lender has against the borrower's property which has been pledged under a loan.

SELF-AMORTIZING MORTGAGE LOAN: A loan which will be paid off by the end of its term, such that its term equals its amortization period.

SELLER FINANCING: Also known as "vendor take-back mortgage" or "mortgage back", where the seller of a property agrees to payment of part of the purchase price over time with the debt to the seller registered on title as a mortgage.

SELLER'S MARKET: Demand is greater than supply, such that the vendor may demand a higher price.

SELLER-TAKE-BACK: See "seller financing".

SELLING AGENT: The real estate professional who brings the eventual purchaser to the property and the vendor. As opposed to "listing agent".

SEMIANNUAL: Occurring twice per year.

SERVICING: All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.

SERVICING FEE: The fee charged to the borrower for the lender's costs of collecting payments and administering a loan.

SETTLEMENT BOOK: An information pamphlet given by lender to borrower which explains the process of the loan, settlement of the loan, etc.

SETTLEMENT COSTS: See "closing costs".

SETTLEMENT SHEET: The information sheet which sets out the allocation of funds on closing.

SEVERALTY OWNERSHIP: Owned by one person only. Sole ownership.

SHARED APPRECIATION MORTGAGE: A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to a mortgage where the borrowers share the monthly principal and interest payments with another party in exchange for part of the appreciation.

SIMPLE INTEREST: Interest which is computed only on the principle balance.

S.I.R.: Society of Industrial Realtors.

SPECIAL ASSESMENT: Legal charge against real estate by a public authority to pay cost of public improvements such as: street lights, sidewalks, street improvements, etc.

SPECIAL WARRANTY DEED: An instrument of conveyance in which the vendor warrants she has done nothing to cloud title but nothing further.

SPECIFIC LIEN: A lien which affects only a particular parcel of property.

S.R.A.: Designates a person who is a member of the Society of Real Estate Appraisers.

STANDARD MORTGAGE: A mortgage which has equal periodic payments and is paid out at the end of its term.

STATUTORY LIEN: A claim which may be registered against property and is created by a law.

SUBMORTGAGE: Where a mortgage is pledged as security for a loan to the mortgagee (the original lender).

SUBORDINATE FINANCING: See "secondary financing".

SUBORDINATION CLAUSE: An agreement by the lender which allows the current mortgage to be "postponed" or placed behind a later mortgage in priority.

SUBLEASE: A lease given by a lessee.

SURVEY: A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any buildings.

SUCCESSION: Acquiring property of a deceased person who died intestate.

SURETY: One who guarantees the performance of another.

SWEAT EQUITY: Equity created by a purchaser performing work on a property being purchased.

SWING LOAN: A short-term loan designed to bridge the borrower's finances between two events. For example, a person who buys a new home in April but cannot sell her old home until June may require a swing loan to carry both homes for the interim period until the old home may be sold and the proceeds used to pay out the swing loan. Also known as "bridge financing".

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TAKING: 1. Government acquisition of land through condemnation. 2. Restrictions on the use of land that are so harsh as to block any reasonable use of the property.

TANDEM PLAN: A joint program of the Government National Mortgage Association (GNMA) and the Federal National Mortgage Association (FNMA) to provide low-interest home loans.

TENANTS BY THE ENTIRETY: A husband and wife own the property with the common law right of survivorship so, if one dies, the other automatically inherits.

TENANT IN COMMON: Two or more persons own the property with no right of survivorship. If one dies, his interest passes to his heirs, not necessarily the co-owner. Either party, or a creditor of one, may sue to partition the property.

TERM LOAN: A loan that comes due on a given date, often before the periodic payments would pay the loan out.

TERM, AMORTIZATION: Term: The period of time during which the loan contract is active, during which the borrower makes periodic payments to the lender and at the end of which the balance of the loan becomes due and payable. Amortization: The period of time after which, if all periodic payments are made on time and in full, the loan will be paid out. Term may not be the same as amortization: a normal mortgage may be amortized over 25 years with just a five year term at which time the borrower has to re-finance.

TERMITE CLAUSE: A term in an Agreement for sale which allows the Purchaser to inspect for termites. If any are found, the Vendor may be required to treat the problem or the Purchaser may rescind. Many clauses now refer more generally to "wood-damaging or destroying insects".

TERMITE INSPECTION: The examination of a building for wood destroying insects.

TERMS: The various clauses that make up a contract. Sometimes used to described the financial portions of the contract only.

TESTAMENT: A person's will.

TESTATOR: One who leaves a will in force at his death.

TITLE: The legal term for one's ownership interest in land.

TITLE COMPANY: Also known as "title insurance company" or "title insurer". A corporation which is in the business of selling policies of insurance guaranteeing the ownership and quality of title to land.

TITLE COVENANTS: Clauses and promises inserted into instruments of conveyance which are designed to give the Purchaser assurances that she is receiving good title.

TITLE DEFECT: A claim against or competing interest in a property which affects the title of the registered owner.

TITLE INSURANCE: A document which sets out the current state of title to a property.

TITLE INSURANCE POLICY: A form of insurance contract which guarantees to indemnify an owner or mortgagee of property for damages suffered as a result of undiscovered title defects which arise later.

TITLE REPORT: A document which sets out the current state of title to a property.

TITLE SEARCH OR EXAMINATION: The act of examining in detail the public records relating to ownership of a parcel of land to ensure that the current owner has clear title, free of any liens, claims, mortgages or competing and adverse interests. Usually performed by a lawyer, qualified title searcher, or title insurance company on behalf of a proposed purchaser or mortgagee.

TITLE THEORY STATES: Jurisdictions in which ownership of land is divided into two interests: legal title and equitable title. When an owner registers a mortgage in favor of a lender, legal title is transferred to the lender while the owner retains equitable (or beneficial) title. Once the mortgage is paid out, legal title is transferred back to the owner.

TOTAL INTEREST PAYMENTS: A calculation of all interest paid on a loan over its life.

TRUST ACCOUNT: A bank account held by a professional for the purposes of keeping money held on behalf of clients separate from the funds of the professional or her business.

TRUST DEED: An instrument of conveyance of title to property wherein the transferee will be holding the title to the property on behalf of another person.

TRUSTEE: A person who holds title to property on behalf of another (a "beneficiary of the trust").

TRUSTEE'S SALE: Sale conducted by a trustee (often the lender) under the terms of the deed of trust.

TRUTH-IN-LENDING ACT (TILA): Federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan.

TWO-STEP MORTGAGE: Mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often 7 or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of 7 or 10 years. Also called "Super Seven" or "Premier" mortgage.

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UNDERINSURANCE: Insurance which would provide insufficient proceeds to compensate for the loss of the value of the insured item.

UNDERWRITER: A person who reviews and evaluates an application for a loan or insurance policy.

UNDERWRITING: The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

UNDISCLOSED AGENCY: When a person deals with another party on behalf of a third person but does not inform the party with whom he is dealing of this relationship.

UNDISCLOSED PRINCIPAL: The identity of the person whom an undisclosed agent represents.

UNENCUMBERED PROPERTY: Land that has no claims, liens or mortgages registered against it.

UNENFORCEABLE CONTRACT: Any agreement that will not stand up to legal challenge. May result from the incapacity of a party, the illegality of the terms of the agreement, or the presence of undue influence, threat or coercion upon a party which caused that party to sign the contract.

UNIFORM VENDOR AND PURCHASER RISK ACT: A law that apportions responsibility for damage due to fire between a purchaser and vendor for the period between the signing of the agreement of sale and the closing date.

UNINSURABLE TITLE: Ownership of land which is subject to flaws such that a title insurance company refuses insure it.

UNIT: A single dwelling within a larger complex: especially in condominium projects where the unit is the portion of the complex which is for the exclusive use of the owner of the unit.

UNITY OF POSSESSION: A right of each joint tenant to use, occupy and enjoy the entire property.

UNITY OF TIME: For joint tenants, the requirement that each of the tenants acquires her interest at the same time, as part of the same conveyance.

UNITY OF TITLE: For joint tenants, the requirement that each of the tenants acquires her interest in the same instrument of conveyance.

UNLAWFUL DETAINER: The illegal possession of land by one whose original possession was legal.

UNMARKETABLE TITLE: Similar to "uninsurable title:, ownership of land which is defective such that no one would wish to purchase it.

UNRECORDED/UNREGISTERED INSTRUMENT: A legal document which purports to affect rights and interests in land but which has not been added to the public record for the property.

UNSECURED LOAN: IA loan in air, with no asset pledged as collateral or security for it.

UPSET PRICE: An amount set by the court which creates the reserve bid for an auction of property; the property may not be sold for less than the upset price.

URBAN DEVELOPMENT ACTION GRANT (UDAG): A program of the Department of Housing and Urban Development (HUD) lending money for the revitalization of commercial areas.

USE: Term for the purpose for which a property is occupied, mostly related to zoning by-laws or ordinances. Some typical uses would be residential, commercial, industrial, etc.

USEFUL LIFE: An estimation of the period of time over which a property, building or other asset will be of value or use to its owner.

USURY: Interest charged in excess of the legal rate established by law.

UTILITIES: Services, such as gas, electricity, water, sewers, which are required in any dwelling and for which the owner must pay separately. In some jurisdictions, arrears in payment of charges for utilities may form a lien on the property.

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VA: See Department of Veteran's Affairs and related entries.

VA LOANS: Long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA MORTGAGE FUNDING FEE: Premium of up to 1-7/8 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

VALID: Legally binding; authorized.

VALUATION: The estimation of the worth or sale price of an asset.

VARIABLE INTEREST RATE: An interest rate that may change according to change in the index rate. See "adjustable interest rate".

VARIABLE-MATURITY MORTGAGE: A long-term loan in which the date the balance is due may be changed to adjust the level of periodic payments.

VARIABLE RATE MORTGAGE (VRM): See "adjustable rate mortgage".

VARIANCE: An indulgence granted by a local zoning commission or authority to allow a non-conforming use of a property to continue. The zoning bylaw or ordinance is actually amended as it pertains to the particular property.

VENDOR: Seller. Purchasee.

VENDOR TAKE-BACK MORTGAGE: See "mortgage back".

VERIFICATION OF DEPOSITS (VOD): Document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

VERIFICATION OF EMPLOYMENT (VOE): Document signed by the borrower's employer verifying his/her position and salary.

VEST: To become the property of someone through action of law.

VIOLATION: Any breach of a contract, rule, law or ordinance.

VOID: Null, not legally enforceable.

VOIDABLE: A contract that may be treated as legally unenforceable at the option of a party (usually the injured party) but remains enforceable until that party exercises her option.

VOLUNTARY ALIENATION: Transfer of title to an asset with the consent of the owner.

VOLUNTARY LIEN: A claim that is recorded/registered with consent of the owner.

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WAIVE: To voluntarily give up a legal right or claim.

WAIVER: The voluntary giving up of a right or claim. A document to evidence such a relinquishment.

WALK-THROUGH INSPECTION: A physical examination of the property which usually takes place immediately prior to closing to ensure that no changes have taken place and no new damage has been done to the property. May also be used to confirm that fixtures and chattels included in the sale remain on the premises.

WAREHOUSE FEE: Charge to a borrower to cover the costs of the lender taking short term loans from other lenders to cover the borrower's mortgage.

WAREHOUSING: The process of assembling mortgages for sale to the secondary mortgage market.

WARRANTY DEED: A deed used to convey real property which contains warranties of title and quiet possession, and the grantor, thus, agrees to defend the premises against the lawful claims of third person.

WASTE: Allowing or causing a property to suffer damage or undue wear and tear to the detriment of another person who has an interest in or claim to the property.

WEEKLY PAYMENTS: An alternative to the more traditional monthly payments on a loan or mortgage. Results in faster pay-down of principal, lower total interest paid.

WRAPAROUND MORTGAGE: A secondary financing option in which new money borrowed is blended with money already owed and registered on title to the property. A second mortgage is registered as security for the new money but the old mortgage remains in existence and the rate of interest is a blend of the rate chargeable on the old mortgage and the rate chargeable on the newly borrowed money.

WRIT OF EXECUTION: A claim or lien which is registered with the local enforcement officer to enforce a judgment of a court. The officer is then required to enforce the judgment against the judgment debtor and any property owned by that debtor in the jurisdiction.

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ZONE: An area of a municipality to which certain rules, regulations, bylaws or ordinances apply.

ZONING BYLAW: A rule passed by the local government which regulates the use of property according to its location within the municipality, placement of structures on the property, maximum floor area, minimum lot area, minimum floor-to-lot area ratios, etc.

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