| Click an item in the index below to view the definition of a real estate or mortgage term.
TERMS
DEFINITIONS
A
Abstract of Title
A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an option as to the condition of title. Still in use in some states, but giving way to the use of title insurance.
Acceleration Clause
Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership with the lender's consent, destruction of the property, or other event which endangers the security of the loan.
Access Right
A right to ingress and egress to and from one's property. May be express or implied.
Acknowledgement
A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.
Acre
A measure, usually of land, equal to 160 sq. rods (43,560 sq. ft.) in any shape.
Action to Quiet Title
A court action to establish ownership to real property. Although technically not an action to remove a cloud on a title, the two actions are usually referred to as "Quiet Title" actions.
Addendum
Something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, etc.
Adjustable Rate Mortgage (ARM)
A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see ARM's referred to as AML's or VRM's.
Ad Litum
A guardian "Ad Litum" prosecutes or defends a suit for a minor or incompetent.
Administrator
A person given authority by a proper court to manage and distribute the estate of a deceased person when there is no will.
Administratrix
A female administrator.
Ad Valorem
"According to value". A method of taxation using the value of the thing taxed to determine the amount of tax. Taxes can be either "Ad Valorem" or "Specific".
Adverse Possession
A method of acquiring title by possession under certain conditions. Generally, possession must be actual, under claim of right, open, continuous, notorious, exclusive and hostile (knowingly against the rights of the owner). Exact time (years) of possession and specific requirements (such as payment of property taxes) vary with the statutes of each state.
Affiant
One who makes an affidavit.
Affidavit
A written statement or declaration, sworn to before an officer who has authority to administer an oath.
After Acquired Property
As applied to a judgment lien, it means that the lien will attach to property of the debtor acquired after the judgment.
After Acquired Title
Legal doctrine by which property automatically vests in a grantee when the grantor acquires title to the property after the deed has been executed and delivered.
Agency
An Agency relationship is one in which one person is empowered to act on behalf of another, subject to the control and consent of the person being represented.
Agent
The person who is acting on behalf of the principal or client.
Agreement of Sale
In some states it is synonymous with a purchase agreement (Purchase Agreement). In other states, it is synonymous with a land contract (Land Contract).
Alienation Clause
A clause calling for a debt under a mortgage or deed of trust to be due in its entirety upon transfer of ownership of the secured property.
Amendment
A change, either to correct an error or to alter a part of an agreement without changing the principal idea or essence.
Amenities
Those settings or improvements to property that increase the desirability or enjoyment rather than the necessities of the residents.
Amortization
Payment of a debt in equal installments of principal and interest, rather than interest only payments.
Amortize
To reduce a debt by regular payments of both principal and interest, as opposed to interest only payment.
Annual Percentage Rate (APR)
A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.
Appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.
Appraised Value
An option of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.
Appreciation
An increased value of property due to either a positive improvement of the area or the elimination of negative factors. Commonly used to describe an increase in value through inflation.
Appurtenance
Something belonging to something else, either attached or not, such as a barn to a house, or an easement to land. The appurtenance is part of the property and passes with it upon sale or other transfer.
Arbitration Clause
A clause in a lease calling for the decision of a third party (arbiter) regarding disputes over future rents, based on negotiation.
Arrears
Payment made after its due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.
"As Is" Condition
Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.
Assessed Value
Value placed upon property for property tax purposes by the tax assessor.
Assessment
The estimating of value of property for tax purposes. A levy against property in addition to general taxes. Usually for improvements such as streets, sewers, etc.
Assignment
A transfer to another of any property, real or personal, or of any rights or estates in said property.
Assumability
When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to the new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.
Assumption of Mortgage
Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust.
Attorney-In-Fact
One who is appointed to act (as agent) for another (principal) under a power of attorney. The scope of the agent's authority is limited to that given by the power of attorney, which may be limited to one specific act or may be broader.
Attorney Review Notice
The Attorney Review Notice acknowledges that a licensed attorney reviewed conveyance documents. Either an Attorney or Limited Practice Officer must prepare and approve conveyance documents, according to Washington State law.
B
Backup Offer
A secondary offer to buy property, used in case the first (primary) offer fails.
Balloon Note
A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "Balloon" is due at maturity.
Balloon Payment
The final payment of a mortgage which is larger than the regular payment; it usually extinguishes the debt.
Bearing Wall
A wall that supports the weight of a part of structure in addition to its own weight.
Bequeath
To give personal property by will.
Binder
A report issued by a title insurance company setting forth the condition of title and setting forth conditions, which, if satisfied, will cause a policy of title insurance to be issued.
Blanket Mortgage
A mortgage covering more than one property of the mortgage.
Breach of Contract
Failure to perform a contract, in whole or part, without legal excuse.
Bridge Financing
A form of interim loan generally made between a short-term loan and a long-term loan, when the borrower needs to have more time before taking on long term financing.
Buydown
With a buydown, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period of a loan. The seller may increase the sales price to cover the cost of the buydown.
By-Laws
Rules and regulations, adopted by an association or corporation, which govern its activities.
C
Cap
A limit on how much the interest rate or monthly payment of an ARM can change, either at each adjustment or during the life of the mortgage. Payment CAP's don't limit the amount of interest the lender is earning so this may cause negative amortization.
Certificate of Eligibility
A certificate obtained by a veteran from a Veteran's Administration office that states that the veteran is eligible for a V.A. insured loan.
Certificate of Occupancy
A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied.
Certificate of Reasonable Value (CRV)
An appraisal of property for the purpose of insurance by the Veteran's Administration.
Certified Copy
A true copy, attested to be true by the officer holding the original.
Cestui que Trust
One having an equitable interest in property, legal title being vested in trustee.
Chain of Title
The chronological order of conveyancing of a parcel of land, from the original owner to the present owner.
Chattel
Personal property.
Chattel Mortgage
A lien on personal property. Also called a security interest or financing statement.
Closing
The final procedure in which documents are executed and the sale (or loan) is completed.
Closing Costs
Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc.
Closing Statement
The statement that lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.
Cloud on Title
An invalid encumbrance on real property, which if valid, would affect the rights of the owner.
Co-Maker
Equally responsible for repayment as the borrower.
Commitment
A written promise to make or insure a loan for a specified amount and on specified items.
Common Area
The area owned in common by the owners of condominiums or planned unit development homes in a subdivision.
Comparables
Properties used as comparisons to determine the value of a specified property.
Condemnation
The taking of private property for public use without the consent of the owner, but only upon payment of just compensation.
Condominium
A structure of two or more units, the interior space of which are individually owned.
Conservator
A guardian, court appointed.
Construction Loan
Short term financing of real estate construction. Generally followed by the long term financing called a "take out" loan, issued upon completion of improvements.
Contingency
The dependence upon a stated event that must occur before a contract is binding.
Contract of Sale
Depending on area of country it may be a Land Contract or a Purchase Agreement.
Contract Sales Price
The full purchase price as stated in the contract.
Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.
Conversion Clause
A provision in some ARM’s that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually the conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed-rate mortgages. The conversion feature may be available at extra cost.
Corporate Resolution
An action taken by vote of the directors of a corporation. A title insurance company may require a corporate resolution before insuring a sale or loan made by a corporation.
Cost Plus Contract
A building contract setting the builder's profit at a set percentage of actual cost of labor and materials.
County
A division within a state, usually encompassing one or more cities or towns.
Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
D
Declaration of Restrictions
A set of restrictions filed by a subdivider to cover an entire tract or subdivision.
Deed of Trust
The Deed of Trust is the security for payment of the loan and creates a lien on the property when recorded with the county. The lender is the deed's beneficiary and through it is given the right to take the property and sell it for the value of the loan if payments are not timely. As long as the note payments are made as they become due, the borrower retains possession of the property and legal title to it.
Defective Title
Title to a negotiable instrument obtained by fraud. Title to real property which lacks some of the elements necessary to transfer good title.
Depreciation
Decrease in value to real property improvements caused by deterioration or obsolescence.
Devise
Real estate left by will.
Devisee
One to whom real estate is given by will.
Devisor
A testator who leaves real estate.
Direct Reduction Mortgage
An amortized mortgage. One on which principal and interest being computed on the remaining balance.
Disbursements
Payments made during the course of an escrow or at closing.
Discount
Is an ARM with an initial discount, the lender gives up a number of percentage points of interest to give you a lower rate and lower payments for part of the mortgage term. After the discount period, the ARM rate will probably go up depending on the index rate.
Downpayment
The cash portion paid by a buyer from his own funds, as opposed to that portion of the purchase price which financed.
Dragnet Clause
A clause in a mortgage or deed or trust which places the real estate as security for existing debts between the parties.
Due-On-Sale Clause
A type of acceleration clause, calling for a debt under a mortgage or deed of trust to be due in its entirety upon transfer of ownership of the secured property.
E
Earnest Money
A deposit made by the buyer with an offer to purchase. Shows good faith.
Easement
A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.
Egress
A term concerning a right to come and go across the land (public or private) of another. Another part of the term ingress and egress.
Eminent Domain
A Government right to acquire private property for public use by condemnation, and the payment of just compensation.
Encroachment
Construction onto the property of another, wall, fence, etc.
Encumbrance
A claim, line charge, attached to and binding real property.
Endorsement
The act of the holder of a note, bill, check, or other negotiable instrument, of assigning said instrument by signing the back of the instrument.
Equity
The difference between the market value of the property and the homeowners mortgage debt.
Escalation Clause
A clause in a lease providing for an increased rental at a future time.
Escheat
A reversion of property to the state in the absence of an individual owner. Usually occurs when a property owner dies intestate, and without heirs.
Escrow
Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event.
Escrow Instructions
Escrow Instructions are written instructions from the Buyer and Seller to the escrow company. They enable the closing agent to proceed with the payoff of existing liens, title clearance, determining whether the terms and conditions of the Purchase and Sale Agreement have been met, and other functions as required to close the transaction by a specified date.
Escrow Payment
That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments, and other items as they become due, also know as "impounds" in some states.
Escrow Reimbursement
An assumptions or wrap loan transactions, the buyer reimburses the seller for the current balance of his escrow (or impounded) funds.
Estate
The interest or nature of the interest which one has in property, such as a life estate, the estate of a deceased, real estate, etc.
Estate Tax
A tax against the property of a deceased, based on the value of the estate.
Et Al
And others.
Et Con
And husband.
Et Ux
And wife.
Executor
One who is appointed under a will to carry out (execute) the terms of the will.
Executrix
A female executor.
F
Federal Home Board
The board which charters and regulates federal savings and loan associations, as well as controlling the system of Federal Home Loan Banks.
Federal Home Loan Board
The board which charters and forbids discrimination in the sale.
Federal Housing Administration
A federal Agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.
Federal Tax Lien
A lien attached to property for nonpayment of a federal tax.
Fee Simple
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited.
FHA Mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). Also known as a government mortgage.
Fixed Rate Mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
Foreclosure
A proceeding in or out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.
Freddie Mac (FHLMC)
Federal Home Loan Mortgage Corporation. A federal Agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System, and the Federal Home Loan Bank System.
Free and Clear
Real property against which there are no liens, especially voluntary liens (mortgages).
Full Disclosure
Revealing all the known facts which may affect the decision of a buyer or tenant.
G
General Lien
A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to a specific property.
Ginnie Mac (GNMA)
Government National Mortgage Association. A federal association working with FHA which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity.
Good Faith Estimate
An estimated breakdown of the buyers closing costs given by the lender prior to the closing.
Grandfather Clause
The clause in a law permitting the continuation of a use, business, etc., which, when was permissible but, because of a change in the law is now not permissible.
Ground Rent
Rent paid for vacant land. If the property is improved, ground rent is the portion attributable to the land only.
H
Hazard Insurance
Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
Heir and Assigns
Words usually found in a deed, showing the interest the grantee is receiving.
Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
Home Owner Association
An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.
Home Owner Association Letter
This form serves to notify the Buyer of the Association’s existence, as well as the amount and frequency of their dues payments.
Homeowner's Insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
HUD-1 Statement
A document that provides an itemized listing of the closing costs and funds that are payable at closing. Also known as the "closing statement' or "settlement statement".
I
ID Affidavit
An Identification Affidavit, commonly called an ID Affidavit, is sometimes needed to clear a potential cloud on the title. When Title Insurance is ordered, the title company searches the public records of the county in which the property is located. Judgments are sometimes found in names very similar to the parties of our transaction. After completion of an ID Affidavit, the title company is able to research and determine whether the judgment is for our party. The title company will remove the judgment from our party’s title report if it finds that the judgment is for someone else.
Impound Account
Account held by a lender for payment of taxes, insurance, or other.
Indemnity Agreement
An agreement by which one party agrees to repay another for any loss or damage the latter may suffer.
Index
The index if the measure of interest rate changes that the lender uses to decide how much the interest rate on an ARM will change over time. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.
Independent Contractor
The term is most important as used to describe the relationship of broker and salesperson, employee or independent contractor. If employee, the broker must withhold income tax and pay social security, provide workmen's compensation, and may be liable for some negligent acts of the salesperson while on the job. All of this is avoided by the broker if salesperson is an independent contractor.
Ingress and Egress
A right to enter upon and pass through land.
Installment Note
A note calling for payment of both principal and interest in specified amounts, or specified minimum amounts, at specific intervals.
Installment Sale
A tax term used to describe a sale which is usually accomplished by use of a land contract.
Instrument
Any writing having legal form and significance, such as a deed, mortgage, will, lease, etc.
Insured Mortgage
A mortgage insured against loss to the mortgagee in the event of default and failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.
Intangible Property
Property which has value but cannot be physically touched, such as a patent, the goodwill of a business, etc.
Interest Rate
The percentage of an amount of money which is paid for its use for a specified time.
Interpleader
A court action which may be filed in an existing case to be the initial action. One holding funds which are in dispute, but not having an interest in the funds, would file an interpleader.
Intestate
Without leaving a will, or leaving an invalid will so that the property of the estate passes by the laws of succession rather than by direction of the deceased.
J
Joint and Several
A liability which allows the creditor to sue any one of the debtors or sue all together.
Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. The interests must equal, accruing under the same conveyance, and beginning at the same time. Upon death of a joint tenant the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Judgment
The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
Judgment Lien
A lien against the property of a judgment debtor. An involuntary lien.
K
L
Land Contract
An installment contract for the sale of land. The seller (vendor) has legal title until paid in full. The buyer (vendee) has equitable title during the contract term.
Landlocked Parcel
A parcel of land surrounded entirely by privately owned land, with no access to a public right of way (road).
Late Charge
A penalty for failure to pay an installment on time.
Leasehold
An estate in realty held under a lease; an estate for a fixed term.
Lease with Option to Purchase
A lease under which the lessee has the right to purchase the property. The option may run for the length of the lease or only for a portion of the lease period.
Legal Description
A method of geographically identifying a parcel of land, which is acceptable in a court of law.
Lender
A general term encompassing all mortgages, and beneficiaries under deeds of trust.
Lessee
The party to whom a lease (the right to possession) is given in return for a consideration (rent).
Lessor
The party (usually the owner) who gives the lease (right to possession) in return for a consideration (rent).
Letter of Intent
A formal method of stating that a prospective developer, buyer or lessee, is interested in property.
Liber
A Latin word for book.
Lien
An encumbrance against property for money, either voluntary or involuntary.
Life Estate
An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party.
Limited Partnership
A partnership consisting of one or more general partners who conduct the business and are responsible for losses, and one or more special partners, contributing capital and liable only to the amount contributed.
Lis Pendens
A legal notice recorded to show pending litigation relating to real property and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.
Loan Package
The information given to the lender regarding the borrower and the property necessary to decide to give or not to give the loan.
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