Abstract of title. A summary of all of the recorded instruments and proceedings that affect the title to property. A person who is going to buy real estate or lend money on it wants assurance of ownership. Usually an attorney or title insurance company prepares an abstract or title, based on documents in the county courthouse, to be certain of ownership and property bought or the loan made. Typically, title insurance also is required.
Accelerated depreciation. Allocating the cost of a wasting asset over time, with larger deductions in early years. For tax purposes, accelerated depreciation allows greater deductions to be taken sooner than doe’s straight-line depreciations, thereby reducing taxable income in early years.
Acceleration clause. A loan provision giving the lender the right to declare the entire amount immediately due and payable upon the violation of a different loan provision, such as failure to make payments on time, without an acceleration clause, a missed payment is just that- one overdue payment. The acceleration clause means the entire loan is due, and the real estate may be foreclosed.
Acceptance. The act of agreeing to accept an offer. A valid contract must include an offer and an acceptance. The acceptance may be from either party to the other, such as buyer-seller or landlord-tenant.
Access right. The right of owners to get to and from their property. Property may be or become encircled by other property. The access right gives an easement by necessity, which allows the owner of landlocked property to cross over adjacent property to get to a street. Not all property in Texas has an access right.
Accession. Additions to property that are not created by the owner’s efforts, such as fixtures left by a tenant or alluvial deposits.
Accrued taxes. Property taxes that have been assessed against the property for a past time period, though payment is not necessarily due.
Acre. A measure of land containing 46,560 square feet, approximately .405 of a hectare.
Actual eviction. Expulsion of a tenant from the property.
Addendum. An attachment to a contract. In Texas, promulgated forms for residential earnest money contracts include a property conditions addendum and addenda for various financing arrangements.
Address. The locations of a property indicated by number, street, city and postal code. The address of the property being purchased should appear in all legal documents, including the sales contract, the deed and the mortgage contract.
Adjacent. Lying near to but not necessarily adjoining. See adjoining and contiguous. When describing the physical proximity of a property, adjacent includes touching property and other parcels such as property across the street.
Adyacente. Situado en la inmediación o proximidad. Véase colindante y contiguo, al describir la proximidad física de propiedades, las adyacentes comprenden propiedades colindantes y otras propiedades cercanas, por ejemplo propiedades al otro lado de la calle.
Adjoining. Contiguous; attaching; in actual contract with. See adjacent and contiguous. In describing the proximity of land, adjoining means actually touching.
Adjustable rate mortgage (ARM). Mortgage land that allows the interest rate to vary at specific intervals dirking the land term; there may be caps or limits on the amount the interest rate can change annually and during the loan term, ARMs are often a viable alternative to fixed rate mortgages and are especially desirable to the borrower who expects that rates will decline, often, the initial rate is lower that a fixed rate mortgage, and there are caps on the ceiling rate that can be charged should interest rates rise.
Adjustments, appraisals. A real estate appraiser selects of a comparable property to consider in estimating the value of the subset property. From the selling price of the comparables, adjustments are added or subtracted for each salient difference from the subject to estimate the price of the comparable property as if it had the same features as the subject.
Administrator. A person appointed by a court to administer the estate of a deceased person dies leaving Hill; an ejector is usually named to carry out the provisions of the Hill. When there is not executor, an administrator is appointed by the court, the administrator is appointed by the court, and the administrator receives a fee.
Administrator’s deed. A deed conveying the property of one who died without a Hill (intestate). If a person owned real estate and without leaving a will, the administrator will give a deed. However, the administrator does not want the potential liability associated with a general warranty deed; son an administrator’s deed is used.
Adult. One who has attained the age of majority. In Texas, one who is 18 years of age is considered an adult, also, some who are married or in military service may be adults though not yet 18. A contract with a minor is voidable by the minor or shortly after the person becomes an adult.
Ad valorem. Latin for “according to value” sees ad valorem tax. Used in describing a property tax rate.
Ad valorem tax. A tax based the value of the thing being taxed. For example, if the effective tax rate is 1 percent, the tax would be $1 per $100 of property value. Texas has several taxing jurisdictions that levy ad valorem taxes. Tax districts include cities, counties and school districts.
Adverse possession. A jeans of acquiring title to real estate where an occupant has been in actual, open, notorious, exclusive and continuous occupancy for the period required by state law. A person can gain or lose title to real estate by acting in a certain way for a specified time, in Texas this may take three, five, ten or 25 years, depending on the circumstances.
Affidavit. A written statement or declaration sworn to an affirmed before an officer authorized to administer an oath or affirmation. Some statements, such as a contractor’s lien, must be in the form of an affidavit before they can be recorded.
Affirm. To confirm; to ratify; to verify.
Affordable housing. Special home financing programs aimed at helping those with low or moderate income to buy homes, often, such programs are targeted to first- time homebuyers, houses in specified areas and to ethnic minorities. Affordable housing plans may offer opportunities to homebuyers who would not have access to a loan otherwise. Common elements found in these plants, are reduced cash down payments, special loans or grants to defray closing costs, relaxed underwriting standards and special counseling. Among those offering such programs are state and local housing finance agencies, Fannie Mae and the regional Federal Home Loan Banks.
Agency. The legal relationship between a principal and an agent arising from a contract in which the principal employs the agent to perform certain acts on the principal’s behalf. The law of agency governs the rights and obligations of a broker to the principal and a licensed real estate salesman to the broker.
Agency Disclosure. The legal requirement that a sales agent make known which party he or she represents in the transactions. Agents represent sellers unless there is a written agreement for the seller is legally obligated to convey all information relevant to the sale to the seller. A buyer unaware of the agent’s allegiance to the seller might share information that compromises the buyer’s negotiating ability. Disclosure ensures that buyers do not mistakenly assume the agent represents them.
Agent. One who undertakes to transact some business or to manage some affair for another, with the authority of the alter, in real estate brokerage, a property owner or buyer employs a broker to act as his or her agent in selling or buying real property; the broker in turn may employ salespersons to act as agents. An agent has certain duties to the principal, including loyalty. The agent is to act in the best interest of the principal, even when it is not in the agent’s best interest.
Agreement of sale. A written agreement between seller and purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms and conditions of the agreement.
Describes rights and obligations of each party. Also called offer and acceptance or contract of sale. An agreement of sale describes the rights and obligations of a buyer or seller of property. It should be accepted only after each party is satisfied that it contains what will be agreed upon in a final transaction.
AKA. Abbreviations of also known as, a term used when a party is known more that one name.
a. Abreviatura de alias, término que se usa tratándose de una persona que emplea varios nombres.
Alienation. The transfer of property and possession of lands, voluntary as in a sale or involuntary as in condemnations, from one person to another. In Texas, property may be transferred by voluntary alienation, such as in sale for cash, or involuntary, as in a condemnation.
Allowable debt payments. Total monthly payments for long- term debt, including mortgages and other loans running longer those six to ten months, allowed for the borrower to qualify for a loan. To qualify for a mortgage loaned, a borrower must have sufficient income that the projected mortgage payment and total debt payment are less than a specified percentage of income. For example, for an FHA loan, the mortgage interest and principal plus taxes and insurance cannot be greater than 29 percent of income. Total allowable debt payments cannot exceed 41 percent income.
Alluvion. Addition to land, as by deposit of alluvium, the increase in land area generally belongs to the owner of land where the soil is deposited.
Alluvium. Gravel, sand, silt, clay or similar material deposited by running water.
Alternative mortgages instrument. A type of mortgage is having terms other that fixed rate, fixed term, self amortizing. Important examples are those with adjustable interest rates, variable payments or shared appreciations.
Amenities. In appraisal, the tangible and intangible benefits derived from property ownership, such as a swimming pool or pride of homeownership. Ownership of real estate may add to one’s self-esteem and community involvement.
Amortizations. A gradual paying off of a debt though periodic installments. Most mortgages require the payment of at least some principal amortization with interest so that the loan is eventually retired.
Annexation. Incorporations of additional land by a city, extra territorial jurisdiction (ETJ)) in Texas allows cities to exercise some control over adjacent land use without annexation.
Annual percentage rate (APR). An estimate of the actual rate interest charged for a loan, the federal Truth- in- Landing Act requires mortgage lenders to disclose the APR to borrowers before the loan is closed. The APR s higher that the contract interest rate (the nominal rate quoted for the loan) if discount points are charged, the APR provides a true measure of the cost of the loan can be used to compare one loan with another,
Annuity. A series of equal or nearly equal periodic payments or receipts. For example, the receipt of $100 per year for the next five years constitutes a $100 five- year annuity.
Appraisal. An opinion or estimate of a property’s value. If a buyer is unfamiliar with the value of real estate in an area, it is prudent to require that, as conditions of the earnest money contract, the property appraise for at least the price being paid, also, lenders require an appraisal of property as a requirement of making a loan, and the borrower will pay the appraisal fee.
Appraisal approach. One of three, methods used in estimating the value of property. See income approach market comparison approach and cost approach. Having three separate methods to estimate the value of property will add confidence to an appraiser’s approaches are applicable for all properties.
Appraisal by summation. See const approach.
Appraisal contingency. A clause in the sales contract that allows the buyer to reject the sale if the appraisal is too low to support the loan. A mortgage lender bases the amount loaded on the lesser of the house’s price or appraised value. If the appraisal is lower that the price, the buyer may have to increase the cash down payment or raise the loan-to- value ratio to purchase the home. A buyer may reassess the transaction if this occurs.
Appraisal report. A document that describes the results of a property valuation. The report should indicate the property being appraised, the purpose of the appraisal, the type of value estimated and information about the appraisal process, in additions on the estimate of value. When a mortgage loan is made by a lender (mortgage banker, banker, bank or saving association), an appraisal may be required. A report is the written results of the appraisal.
Appraiser. A professional who estimates the value of property. Appraisers prepare value estimates for a fee. An appraisal often is prepared when a borrower applies for a mortgage loan.
Appreciate. To increase in value as a result of market forces or inflation. Every homeowner wants the home to appreciate. A certain amount of appreciation is caused by inflation, but property may become more valuable because it is more desirable (being in the right location) or more scarce (as when population is growing faster than construction). An increase in value because the home has been remodeled or enlarged is not considered appreciation.
Appreciation. An increase in the value of property such as through inflation or real income. Appreciation in one of the most significant benefits from real estate.
Appurtenance. Something that is outside the property itself but is considered a part of the property and adds to its greater enjoyment, such as the right to cross another’s land. The right to use another’s land. The right to use another’s land for a special purpose can affect the value of the subject property.
As Is. An offer of the property in its present conditions with no guarantee of soundness. If a property is advertised “as is”, the seller will not repair defects revealed by a buyer’s inspection. Consequently, such properties are listed at discounted process. Sellers of “as is” properties are liable for mandatory disclosure of material defects.
Assessed valuation. A valuation placed on property by a public officer or a borrad as a basis for taxation. A property’s assessed value is typically a reasonable estimate by the tax assessor; echo must periodically review all property in the jurisdiction. By contrast, an appraisal of a single property is more likely to approximate its market value.
Assessed value. Estimate of property value to witch property taxes are applied.
Assessment. A charge by a government against real estate for taxes or to cover the cost o fan imprudent, such as a street or sewer line. See ascended valuation. Property buyers and owners need to recognize that they may have to pay extra amounts for municipal improvements that affect their property. Frequently, the owner has little or no input in the decision.
Assessment ratio. The ratio of assessed value market value. For example, if a country requires a 40 percent assessment ratio on all property to be taxed, then property with a $10,000 value is assessed at $4,000 (40 percent of $10,000) and the tax rate is applied to $4,000. In Texas, all taxing jurisdiction are expected to assess al 100 percent of market value.
Assessor. An official who has the responsibility of placing an assessed value on property. The assessor estimate the value of each piece of real estate in the tax jurisdiction but does not fix the tax rate or amount.
Asset. Something that has a value. Ann asset can be tangible or intangible. Assets can be sold to raise cash and may be used to produce income.
Assignee. Al legal term for the person to whom an agreement or contract is sold or transferred.
Assignment. The method or manner by which a right or contract is transferred from one person to another. Contracts for the sale of real estate are generally assignable, except when there is financing to be arranged or certain conditions are imposed on party. In a lease, an assignment gives all rights of the original tenant to the new one.
Assignor. A party who assign or transfers an agreement or contract to another. While many contracts can be assigned, the assignor is not necessarily relived of the obligation. For example, debt cannot be assigned. Another party can assume a debt, but the original borrower remains liable.
Association fee. A periodic charge levied by a homeowners’ association for the purpose of maintaining common areas in a subdivision or condominium development. Nearly all condominiums and some subdivisions of detached homes have homeowners’ associations. Membership often is mandatory for by the association. A fee may be charged to pay for the association’s activities.
Assumable mortgage. A mortgage loan in which the lender agrees to substitute the buyer for the seller when the property is sold. An assumable mortgage is an asset to a seller when the mortgage has an interest rate below that currently available in the market. The seller may be able to charge a premium for such financing. For assumable loan, the mortgage contract must not have a “due on sale” clause, or the clause must allow a change in loan terms.
Assume a loan. The act f taking on the obligation for existing mortgage financing when buying property, when interest rates are high or mortgage loans difficult to obtain, it may be an advantage to the buyer to assume an existing loan. The interest rate is unchanged, and the buyer may not have to qualify for the financing. However, if the property has appreciated or the loan has been paid down, there may be a large differential between the loan amount and the house price, requiring either a large cash payment or additional financing. When a loan is assumed, the buyer takes full responsibility for repaying the loan. However, when a property in taken subject to an existing loan, the seller remains responsible for the loan.
Assumption. Purchase financing based on the buyer’s assuming the existing mortgage loan. When an assumable loan exists on a home, loan assumption offers an alternative to new mortgage financing. An assumption may offer advantages in lower interest rate, easier loan arrangement, lower closing costs and a quicker sale. However, the seller may demand a higher prince when an assumption is available, and additional financing may be needed.
Assumption of mortgage. The purchase of mortgage property whereby the buyer accepts liability for any debt. The seller remains liable to the lender unless the lender agrees to release the seller. A party entering an agreement for the purchase or sale of real estate should check the mortgage is assumable. A mortgage that carries favorable terms and is assumable adds value to the transaction.
Attachment. Legal seizure of property to force payment of a debt. Property can be taken as security for a debt provided it is done with court approval.
Attest. To witness to; witness by observation and signature. Certain documents must be attested to as a condition for recording the country courthouse.
Attorney. A person designated to act for another. See lawyer. A buyer or seller of real estate may wish to hire a lawyer to review legal documents and provide advice on accepting the legal obligations of the sales contract.
Attorney- in- Fac. one who is authorized to act for another under a power of attorney, which may be general or limited in scope. A person may give another the right to act for him or her in some or all matters. The designated person, called an attorney-in-fact, need not be an attorney al law.
Auction. A method of selling a property in which interested buyers submit competitive bids, with the property going to the highest bidder, bidding usually takes place in an public session in which buyers enter their dibs and are allowed to increase those bids until no higher bids are entered, auctions offer a way to sell a will not return market value. In some countries, auctions are the favored way to sell real estate, but in the United States, auctions are used primarily for disposal of repossessed properties.
Avulsion. The sudden removal of land from one owner to another when a river or other body of water abruptly changes its channel. If a stream or river is a boundary line, the boundary may not change with the addition or removal of land, depending on respective state laws.
Backfill. The replacement of excavated Herat into a hole or against a structure.
Backup contract. An offer to purchase a property that already Ander contract for sale. Backup contracts are accepted while a sale is pending. If the original transaction is cancelled or the buyers fail to secure financing, the seller may accept the secondary offer without putting the property back on the market. In markets where there are more buyers that homes for sale, backup contracts are common.
Balloon payment. The final payment on a loan, when that payment is a greater than the preceding installment payments and pays the note in full. An example is a debt requiring interest- only payments annually for five years, at the end of which time the principal balance (a balloon payment) is due. If a balloon is involved in real estate financing, the borrower will need to plan for the large balance that comes due.
Bankruptcy. A legal declaration of insolvency, that is, the inability to pay debts. Bankruptcy offers a legal refuge to those who are unable to pay money owed to their creditors. There are several types of bankruptcy, but the method used by individuals provides a court-enforced plan for satisfying action of existing debts, usually calling for extended payment schedules and, possibly, the forgiveness of some debt.
Bargain and sale deed. A deed that coveys real estate, generally lacking a warranty. The grantor will thus claim to have ownership but will thus claim to have ownership but will not defend against all claims. Sometimes a property owner does not wish to offer a warranty deed but will give more assurance than is offered by a quitclaim deed. A bargain and sale deed is compromise between those two.
Base line. Part of the rectangular survey or government survey method of land description. The base line is the major east-west line to which all north – south measurements refer.
Beneficiary. The person who receives or is to receive the resulting from certain acts.
Bequeath. To give or hand down personal property through a will.
Bill of assurance. Recorded restrictions affecting a subdivision and a part of all deeds to lose therein.
Bill of sale. A written instrument that passes title of personal property from a seller to buyer. A real estate sales agreement in Texas is prepared on an earnest money contract. A bill of sales is used when furniture and portable appliances are sold.
Blinder. An agreement, accompanied by an earnest Money deposit, for the purchase of real estate, to evidence good faith on are used in Texas because of general agreement and requirements on brokers to use promulgates earnest money insurance companies prior to closing to demonstrate their willingness to insure title.
Biweekly payment mortgage. A specialized mortgage loan in which a payment is made every two weeks and is equal to one- half of normal monthly payment. This plan was devised for borrowers who whish to retire their mortgage early. The payment schedule provides the equivalent of 13 months of payments going to retire principal. The result is faster amortizations and a shorter term for the loan.
Blanket mortgage. A single mortgage that includes more than one parcel of real estate as security. When one piece of property is insufficient collateral for a loan, the borrower might be able to satisfy the requirement by putting up more property as security. It is a good idea to negotiate release clauses whereby each parcel can be released from the mortgage without paying off the entire loan.
Blighted area. Portion of city where housing and commercial buildings are substandard, and residents tend t olive in property.
Blueprint. A set plans for construction of a home or other structure. The blueprint shows the floor plan for the building. Blueprints are used by contractors to coordinate the efforts of the various construction crews and to estimate the quantity of materials needed for the job.
Boiler plate. Description of contracts that use Standard terminology. In Texas, residential earnest money contracts promulgated by Texas Real Estate Commission may be described as boiler plate.
Bona fide. In good faith; without fraud. Examples include a purchase that pays for property without knowledge of any title defects. A bona fide sale is one in which the seller accepts consideration without notice of any reason against the sale. An act in good faith is open, sincere and honest.
Bond. A certificate that as evidence of a debt. See mortgage. Many types of bonds are used in real estate. A mortgage bond is one secured by a mortgage on property. A completion bond. (Also called performance bond) usually is issued by a boding company to assure completion construction if a contractor fails.
Borrower. One who is obligated to repay a loan; a mortgagor. Legal documents involved with a mortgage loan refer to the person who applies for a loan or the person who actually gets the loan as the borrower. The borrower is legally obligated under the terms of the mortgage contract.
Broker. One who is licensed by state to act for principals in real estate transactions, within the scope of state law. In most states, including Texas, one must be licensed as a broker to act in real estate transactions for another. A licensed real estate salesperson must be sponsored by a broker who accepts responsibility for the salesperson’s acts. A broker is regulated by the law of agency, which requires the broker to act in the best interest of the principal.
Brokerage. The business of being a broker, Brokerage brings parties together in a real estate transaction, such as a sale, lease, rental or Exchange.
Building codes. Regulations established by local governments describing the minimum structural requirements for buildings. They include foundations, roofing, plumbing, electrical and other specifications for safety and sanitation. Work on real estate must be in compliance with the building codes or it will not pass the required inspections.
Building inspection services. Businesses that inspect building on the behalf of buyers and identify any defects. The buyer has the right to hire an inspector prior to closing. The sales contract may allow the buyer to void the sale and to recover earnest money bases on an unsatisfactory inspection. The seller often is required to make repairs up to a dollar limit in response to professional inspection.
Building line. A line fixed a certain distance from the boundaries of a lot beyond which the building may not project. The building line is frequently set by the municipality in which the property lies, o by deed restrictions. When situating improvements on a lot, it is important to observe the building line. Often, one must ascertain from the city their exact location.
Building loan agreement. See construction loan.
Building permit. Permission granted by a city or other municipal authority to erect or modify a structure.
Bundle of rights theory. The theory that ownership of realty implies rights such as occupancy, use and enjoyment, and the right to sell, bequeath, give or lease all or part of these rights, in a real estate transaction, one must know what one has or is acquiring because come of the bundle of rights may be missing.
Buy down. Payment of discount points at loan origination in order to secure a codger interest rate; the reduced rate may apply to all or a portion of the loan term. When offered low rate financing on property being bought, one should determine whether the buy down applies to just the fist few years or the full term of the loan.
Buyer. In sales contract, the person that arranges to meet the sales price and takes ownership of the property.
Buyer’s agent. A real estate licensee who represents the buyer in a transaction. Often the agent who helps a buyer find a home is working as an agent or subagent of the seller. Come agents contract directly with the buyer to find a suitable property and to negotiate on the buyer’s behalf.
Bylaws. Rules adopted by an organization, the bylaws of a condominium owners association, for example, state how common areas are used, whether pets are allowed, amount of the monthly membership fee and other requirements residents must meet. Owners associations have the legal right to enforce the bylaws and collect fees of residents.
Cancellation clause. A provision a contract that gives the right to terminate obligations upon the occurrence of certain specified conditions or events. A cancellation clause in a lease upon sale of the building. A lessor may need a cancellation clause if he or she plans to sell the building because the buyer may have another use.
Cap. The limit which the interest rate on an adjustable rate mortgage may be changed; usually there are annual caps and lifetime caps. Without caps, interest rates of adjustable rate mortgages can increase without limit.
Capital gain (loss). Certain assets are defined in the tax code as not being capital assent. Anything not is defined is a capital asset, depending on current tax law, gains from capital assets often are taxed more favorably than ordinary income, whereas losses from the sale of capital assets often do not receive as favorable treatment.
Capitalization. A process whereby anticipated future income is converted to one lump sum capital value. Rental property evaluation is enhanced by the capitalization process. Income is divided by a capitalization rate to estimate value, using this formula:
Rental income less
Operating expenses
Property value= ----------------------------
Capitalization rate
Capitalization rate. A rate of return used to convert anticipated future income into a capital value. The capitalization rate includes interest and principal recovery. See capitalization.
Carrying charges. Expenses necessary for holding property, such as taxes and interest on idle property or property under construction. Investors in nonretail real estate should consider carrying changes.
Cash flow. The amount a property owner has remaining alter all out-of-pocket expenses are subtracted. Depreciation expense generally does not affect cash flow though it is deductible to arrive at net income. Mortgage amortization payments reduce cash flow but do not affect taxable income.
Cashier’s check. A bank check that guarantees the availability of funds in the payer’s account sufficient to cover the amount of the check. A cashier’s check or a certified check usually is required to pay expenses al closing.
Caveat emptor. Latin for “let the buyer beware”. The buyer must examine the goods or property and buy at his or her own risk. This was once an accepted rule. Homebuyers in Texas have much more protections than they once did, as sellers and blockers are required to disclose problems or face possible penalties.
Certificate of defense. See estoppel certificate.
Certified Commercial Investment Member (CCIM). A designation awarded by the Realtors National Marketing Institute, which is affiliated with the National Association of Realtors.
Certified Property Manager (CPM). A member of the Institute of Real Property Management, an organization affiliated with the National Association of Realtors.
Certified Residential Broker (CRB). A designation awarded by the Realtors National Marketing Institute, which is affiliated with the National Association of Realtors.
Chain. A unit of land measurement that is 66 feet long, in surveying, land descriptions sometimes uses the chain.
Chain of title. A history of conveyances and encumbrances affecting a title from the time the original patent was granted, or as far back as records are available. See abstract of title.
Chattel. Personal property, including autos and households goods and mixtures. Many laws have different applications, estate or chattel. These laws vary from state to estate.
Chattel mortgage. A pledge of a personal property as security for a debt.
Checking account. A bank account that allows the owner to pay obligations and withdraw funds by writing checks. A checking account is a convenient way of holding cash that is used for routine expenses, when applying for a loan, the lender will want to know amount in any checking accounts the borrower owns.
Clear title. Property ownership that can be transferred readily, a seller must obtain clear title before a sale can be closed. This means that any known claim to an interest in the property, such as an unpaid mortgage loan, a tax liability or unpaid contractor, must be required to uncover any such problems. If found, the seller must obtain releases and quit claim deeds to clear up title defects before the sale can be closed.
Client. One who employs a broker, lawyer, accountant, and appraiser and so on. See agency. The law describes certain relationships that a professional has with a client. In a real estate transaction it is important to know scope of the relationship.
Closing. Formal transfer of ownership from seller to buyer. The sales contract will set a date for the closing, at that time, if the date is not changed, a meeting of buyer and seller, plus agents, attorneys, lenders and other interested person, is held. At the meeting, all fees and commissions are paid, the loan is advanced, legal documents are signed and all transactions expenses, including the buyer’s down payment, are paid out of funds supplied by the buyer and seller. After closing and funding, the buyer is the owner of the property.
Closing agent. One who administers a closing. In most cases, a representative or the title company serves as closing agent. This agent schedules the closing meeting, sends notices to the persons, and prepares settlement statements and conduct the meeting.
Closing cost. In real estate transaction, amounts charged to transfer ownership. Generally includes brokerage commissions, discount points and other loan fees, appraisal and credit check fees, attorney fees, title expenses and recording fees. In residential real estate transaction these easily can exceed 10 percent of the selling price.
Closing date. The date on which the seller delivers the deed and the buyer pays for the property. Also called settlement date, the Texas earnest money contract or agreement of sale will state when closing is to take a place. A buyer or seller may be considered to have defaulted on a contract if unable to close by the agreed upon date.
Closing statement. An accounting of funds from a real estate sale, made to both the seller and the buyer separately. Most states require the broker to finish accurate closing statements to all parties to the transaction in which he or she is an agent. Shows the accounting, which should be considered with the Texas earnest money contract. The transaction should not be closed if an error is suspected in the closing statement.
Cloud on the title. An outstanding claim or encumbrance that, if valid, World affect or impair the owner’s title. A cloud on title can restrict use and affect ownership. Theses should de cleared prior to closing. An attorney or title company can give assurance of title.
Cluster housing. In a residential subdivision, detached housing with each allow for a large tract of open land to be shared by the units.
Co-applicant, co-borrower, co-debtor, co-mortgagor. One who signs with an applicant or borrower on a mortgage loan, thereby assuming an obligation to repay the loan. A co- applicant or co- borrower may be related or unrelated to the applicant or borrower may supply cash, agree to pay part of the debt service or merely guarantee repayment by the borrower. The lender then may consider the income, wealth and creditworthiness of the co-borrower in underwriting the loan.
Collateral. Item of value pledged to secure a loan. A loan backed by collateral is of lower risk to the lender that an unsecured loan. In case of default, the lender can sell the collateral to satisfy the debt. For mortgage loans, the collateral usually is the property being purchased.
Color of title. That which appears to be good title but is not. A title that appears good actually can be clouded. An attorney or Title Company’s input is essential in determining if a title is clear.
Commercial property. Property designed for use by retail, wholesale, office, hotel and service users. Nearly all cities and towns have zoning, which restricts the location of commercial property.
Commingle. To mingle or mix, such as the deposits of another’s Money in a broker’s personal account, brokers generally must maintain amounts of earnest money in an account that is separate from their personal funds.
Commission. 1. Amount earned by real estate broker for services rendered. 2. The official body that enforces real estate license laws. 1. Commissions are the way real estate brokers earn money. 2. The Texas Real Estate Commission licenses brokers and salesperson and may suspend a license for certain behavior.
Commitment. A pledge or promise; a firm agreement. When a financing is needed to buy a property, a commitment that specifies the loan terms must be obtained from a lender. The loan terms are noted in the commitment, which may include interest rate lock-in.
Commitment fee. A charge by lender for making Money available. A lender may agree to lock in an interest rate for 60 to 90 days while the necessary title works is performed, upon the receipt of 1 percent of the proposed loan.
Commitment letter. An agreement by a lender to fund a loan with specified terms including a specified period, when a buyer applies for a mortgage loan, the applicant’s credit rating, income and wealth and on a appraisal of the property. If everything is satisfactory, the lender issues a commitment letter for a loan amount at a stated rate of interest. The buyer may then proceed with the closing within the time covered by the commitment.
Common elements. Generally, in a condominium development that all owners can use and enjoy. Owners of a condominium share in the use of and payment for the common area, such as walkways, recreational facilities and ponds. A homeowner’s association typically manages the common area.
Common law. The body of law that has grown out legal customs and practices that Developer in England. Common law prevails unless superseded by other law.
Community association. An organization of property owners in a certain subdivision, condominium or cooperative development.
Community property. Property accumulated through joint effects of husband and wife and owned by them in equal shares. The doctrine now exists in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington. See separate property. Husband and wife must agree to all real estate transactions involving community property.
Comparative market analysis. An informal estimate of market value performed by a real estate agent, as a service to the seller or buyer, an agent Hill give an analysis of market data on price. The analysis is not as rigorous as an appraisal but allows the property to be priced in line with similar properties on the market. The analysis usually is provided free or charge.
Compound interest. Interest paid on the original principal and also on the unpaid interest that has accumulated. For example, $100 deposited in a 5 percent savings account earns $5 interest the first year. Its second- year earnings are 5 percent. Of $105, or $5.25. Compound interest is the cornerstone of all financial computations, including monthly mortgage payments and remaining balances.
Condemnation. Taking private property for public use, with just compensation to the owner, under eminent domain. Used by governments to acquire land for streets, parks, schools and so on, and by utilities to acquire necessary property. Also, declaring structure unfit for use. All property is subject to condemnation, though the government must show need. The amount of compensation can be disputed.
Condition(s). Provision(s) in a contract that some or all terms of the contract must be met or the contract need not be consummated. Examples include that the buyer must obtain certain amount; the city must pay for certain repairs.
Conditional sales contract. A contract for sale of property skating that the seller retains title until the conditions of the contract have been fulfilled. See contract for deed. Generally, buyers have less of an interest under this type of contract as contrasted with receipt of a deed.
Condominium. A system of ownership of individual units in a multi- unit structure, combined with join to ownership of commonly used property such as sidewalks, hallways and stairs. See common elements. The condominium can be mortgage by its individual owner, who must pay assessments for common- area expenses.
Condominium fee. Periodic, usually monthly, charge levied by a condominium homeowner’s associations on members. One difference in owning a condominium unit, as apposed to a fee simple property, is the requirement to support and follow the bylaws established by the homeowners’ association. Buyers need information about the fee and the rules before buying a condominium unit.
Conformity principle. An appraisal principle that holds that property values tend to be maximized when the neighborhood is reasonably homogeneous in social and economic activity.
Consideration. Anything of value given to induce entering into a contract, including money, personal services, love and affection. A contract must have some consideration to be legally binding.
Constant payment loan. A loan which equal payments are made periodically to pay off the debt when the last payment is made. Although each periodic payment is the same, the portion that is interest declines over time, while the principal portion increases.
Construction loan. A loan used to build on real estate. Many construction lenders require, among there things, that the builder obtain a commitment for a permanent loan before they will issue a construction loan. Commercial banks are the most common source of construction loan. The rate is often the prime rate plus 2 percent plus one or more discount points. The loan is advanced in stages as the project is completed.
Constructive eviction. Exists when physical conditions render property unfit for the purpose for which it was leased, through the fault of the landlord.
Constructive notice. The law presumes that everyone has knowledge of a Fac. When that fact is matter of public record. For example, A buys land from B, believing that B is the owner, however, C owned the property. Because C’s deed had been properly recorder, A had constitutive notice of C’s ownership and cannot claim ownership against C.
Consumer credit reporting agency. A business that maintains historical records on individual debt repayment. Information is volunteered by creditors, and the reports are reviewed when an individual applies for a loan or line of credit. When someone applies for a mortgage loan, part of the loan underwriting process involves checking the borrower’s credit report. A history of slow payment or nonpayment may cause the loan to be denied.
Contiguous. Actually touching; having a common boundary. See adjacent and adjoining.
Contingency. A provision written into a sales contract that allows a person, usually the buyer, to void the contract if a specified condition is not met. Contingencies protect a buyer from being forced to complete a transaction even though something occurs that makes the purchase impractical. Common contingencies include a requirement for approval of financing and sale of an existing residence. The provision lest the buyer recover deposited earnest money if the contingency arises.
Contract. An agreement between competent parties to do or not to do certain things for a consideration. A valid contract is enforceable in a court or law. All contracts for real estate must be in writing to be enforceable, except leases for less than year.
Contract for deed. A type of installment sale whereby the buyer makes monthly payments of property and receives the deed upon the final payment. See land contract.
Contract of sale. See agreement of sale and earnest money contract.
Contractor. Someone who performs services Ander contract. This term is involved in real estate in two ways, first, contraction contractors supervise the building, remodeling or repair of buildings under contract with a developer or owner, second, real estate salespeople may be considered independent contractors, rather than employees, depending on their relationship with the firm.
Conventional loan. A mortgage loan other than one guaranteed by the Veterans Administration or insured by the Federal housing Administration. Conventional loans generally require a larger down payment than others; conventional loans can be decreased with private mortgage insurance.
Convey. To deed or transferor title to another, jeans a sale or transfer of ownership.
Conveyance. the transfer of the title of real estate from one to another; the jeans or medium by which title of real estate is transferred. Usually refers to use of a deed, but can also be used for a lease, mortgage, assignment or encumbrance.
Cooperating broker. An agent who helps completes the transaction and who is eligible to receive a sales commission. In a Multiple Listing Service, the broker supplying the buyer often is a cooperating blocker who earns a share of the commission paid by the seller. An agent does not have to directly enter a listing contract to earn a sales commission. Sales commonly involve a cooperating broker in addition to the listing broker.
Cooperative. A type of corporate ownership of real property whereby stockholders of the corporation are entitled to use a certain dwelling unit or other units of space. Special income tax laws allow the tenant stockholders to deduct from their tax return housing interest and property taxes paid by the corporation.
Co- purchaser. A related or unrelated person who joins with another to buy a property. A sales contract may be someone who will share the home with the purchaser or someone who will help the purchaser finance and pay for the home.
Corporeal. Visible. Corporeal rights in real estate include such things as the right in real estate includes such things as the right of occupancy under a lease.
Cosign. To become liable in a contract, such as mortgage loan. Often the lender will not extend the loan. Often the lender will not extend the loan to the party seeking it without a substantial partner who accepts liability.
Cost approach. One of the three appraisal methods of estimating value. The estimated current cost of reproducing or replacing the existing improvements, less the estimated depreciation, added to the value. Same as appraisal by summation. Most properties sell for market value. The cost approach is useful for proposed construction or for estimating the amount of insurance, two other common appraisal methods arte the market approach and the income approach.
Co tenancy. Ownership of property by two or more persons, as in tenancy in common or join tenancy.
Counteroffer. In real estate negotiations, the rejection o fan offer and substitution of a new offer to the other party. A counteroffer may bring the transaction closer to agreement but legally is a rejection of the offer.
Covenant. A promise written into deeds and other instruments agreeing to do or preventing certain acts, or requiring or preventing certain uses of the property. When buying real estate, it is prudent to determine whether any of the covenants would inhibit or prevent a proposed use of the property.
Credit history. A person’s past record in repaying deb. A person’s credit history is reviewed by a lender prior to approving a loan.
Credit rating. An evaluation of credit worthiness of an n individual base don their credit history, mortgage loan approval may be difficult to obtain with no credit rating. Someone who has never corroded money may have as much difficulty obtaining credit as a person who has a poor credit history.
Credit report. A document maintained by a credit reporting agency that describes an individual’s credit history, loan underwriters commonly order credit reports in loan applicants. Individuals have the right to inspect their credit report and make corrections as needed.
Credit score. A rating that estimates the loan applicant’s risk of defaulting on the loan. Scores depend heavily on the individual’s prior use of credit and other indications of trustworthiness. The score is based in objective information from the applicant’s credit records. A person’s credit score helps determine whether they get a mortgage loan terms that will be offered, the worse (lower) the score, the higher the interest rate on the loan will be.
Creditor. Someone who is owned a debt. Mortgage loan applications require the borrower to identify current creditors. The lender wants to know how much debt the borrower already has and whether income is sufficient to carry the additional debt loan of the proposed loan.
Cul-de-sac. A turn space at the end of a street that allows vehicles to turn around in the street without backing up but provides no outlet to other streets. Cul-de-sacs are popular with homeowners because they have no through traffic, making them quieter and safer than through streets.
Curable depreciation. Depreciation or deterioration that can be corrected at a cost less than value that Hill be added. It is economically profitable to correct curable depreciation.
Curtsey. The right of a husband to all or part of his deceased wife’s realty regardless of the provisions of her Hill exists; this is the husband’s counterpart to dower.
Damages. The amount recoverable by a person who has been injured in any manner, including physical harm, property damage or violated rights, through the act or default of another. Damages may be awarded for compensation and as punitive measures, in the case of outrageous behavior.
Deal. To negotiate a contract. An agreement on a contract. See negotiation. A buyer and seller deal for the right price and conditions of sale. Once the sales contract is signed, they have made a deal.
Debt. Money acquired by borrowing. Secured debt is Money borrowed through loans using property as collateral. Mortgage debt is money borrowed through a loan secured by real property. Investments can be financed through the use of debt or equity or a mixture of the two. The cost of debt is interest paid to creditors, while equity requires sharing profits with investors through dividends.
Decree. An order issued by one in authority; a court order or decision. A decree may be final or interlocutory (preliminary).
Dedication. The gift of land by its owner for a public use and the acceptance of it by a unit of government. An example includes streets in a subdivision, land for a park or a site for a school.
Deed. A written document, properly signed and delivered, that combers title to real property. See bargain and sale deed, general warranty deed, quitclaim deed, special warranty deed.
Deed in lieu of foreclosure. A borrower who is in default may surrender property ownership to the creditor instead of requiring the creditor to foreclose through court action.
Deed of trust. A security instrument used for mortgage loans. When a mortgage loan is secured by a deed of trust, a trustee is designated. If the borrower defaults, the trustee may sell the property to satisfy the debt, unpaid interest and lender’s expenses.
Deed restriction. A clause in a deed that limits the use of land. For example, a deed might stipulate that alcoholic beverages are not to be sold on the land for 20 years. A prospective buyer should check that deed restrictions would not inhibit an intended use of property; a prospective seller should consider whether he or she wants to restrict the use of land.
Default. Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform any acts. Upon default, the defaulting party may be liable to the other pasty (ies).
Defeasance. A clause in mortgage that gives the borrower the right to redeem the property after default, usually by paying the full indebtedness and fees incurred. For example late payments on a mortgage or other default neither do nor necessarily cause the borrower to lose the property. Defiance may loan and fees may have to be paid.
Defendant. The party sued in an action at law. See plaintiff.
Deferred payments. Money payments to de made at some future date.
Deficiency judgment. A court order skating that the borrower still owes Money when the security for a loan does not entirely satisfy a defaulted debt. When property is foreclosed, the amount or value of the collateral might not satisfy the debt. The lender may be able to get a deficiency judgment to recover the balance owned.
Delinquency. Failure to make a payment when it is due. Technically, payment is delinquent as soon as its due date passes. Most lenders do not consider late payment a cause door alarm until the delinquency is at least 30 days old.
Delinquent payment. A payment that is past due. A late payment, beyond any grade period offered by the lender, is a default of the loan contract and could lead to foreclosure. A borrower who is having trouble making loan payments on time should talk to the lender about possible courses of action.
Delivery. Transfer of the possession of a thing from one person to another. In a real estate transaction there should be delivery of a deed. If an owner dies without giving a deed to a relative while alive, a verbal promise to give the property is inadequate.
Deposit. See Earnest Money.
Depreciation. In appraisal, a loss of value in real property resulting from age. Physical deterioration or functional or economic obsolescence. Also, in accounting, the allocation of the cost of an asset over its economic useful life. The value or real estate may decline; one can reduce income taxes by claiming depreciation as a tax expense.
Developer. One who converts raw land into improver real estate. Developers create subdivisions by platting land and putting in utilities, roads and landscaping. Some construct and market homes on the sites; others sell lost to builders.
Devise. A gift of real estate by will or last testament.
Devisee. One who inherits real estate through a will.
Directional growth. The locations or area in which a city is growing. An investor often can make a profit by purchasing land in the path of a city’s growth.
Discharge in bankruptcy. The release of a bankrupt party from the obligation to repay debts that were, or might have been, proved in bankruptcy proceedings.
Disclosure. Providing adequate factual information, such as about a property, to a potential buyer.
Discount points. Amounts paid to the lender at the time of loan origination, to account for the difference between the market interest rate and the lower facer ate or the note. They are often required when Federal Housing Administration of Veterans Administration financing is used. Each point is 1 percent of the loan principal. Discount point must be paid in cash at the tine they prepare an earnest money contract, which is to pay them.
Dispossess proceedings. The legal process by a landlord to remove a tenant and regain possession of property. If a lease is breached, the landlord may want to regain possession of the property.
Distressed property. Property undergoing foreclosure, bankruptcy or on the verge of doing so. Generally caused by insufficient income or loss in value.
Distribute. A person receiving or entitled to receive land as the representative of the former owner; an heir.
Documentary evidence. Evidence that is in written or printed from. Documentary evidence often carries more weight that oral evidence.
Domicilie. A person’s legal residence.
Dower. Under common law, the legal right of a wife or child to part of a deceased husband’s of father’s property. Generally abolished or severely altered in most states. Community property applies in Texas.
Down payment. Cash payment needed to make up the difference between the amount borrowed and the price of a property; few mortgage loans cover the complete cost of a property, even when supplemented with junior mortgages. The borrowed most likely will have to contribute cash, partly to pay for transactions cost and partly to make the down payment, down payments often are substantial, equaling thousands or tens of thousands of dollars.
Due date. The last day on which a payment must be made before it is delinquent. Mortgage loans often are due on the first of the month, but often they are not considered late until after the fifteenth (a grace period). Some lenders then add on late charge for payments made after the grace period.
Due on sale clause. Found in mortgage contract, this provision causes the entire principal owned to be due upon a sale of the property.
Duplex. A structure with two dwelling units. Each unit has a separate entrance and full kitchen and bath facilities. Duplexes are popular with small investors who live in one unit and rent out the other, often receiving enough rent to pay the entire mortgage payment.
Duress. Unlawful constraint exercised upon a person whereby he or she forced to do some act against his or her will. A person who signs a contract or performs another act under duress is not legally bound to go through with the agreement.
Earnest Money. A deposit made by a purchaser of real estate to evidence good faith, Earnest Money should accompany an offer to buy property, generally a broker, attorney or title company deposit the money in a separate account beyond the control of the principals until the contract is completed.
Earnest Money contract. The term used in Texas for an agreement of sale contract. The Texas Real Estate Commission makes preprinted forms available for several types of transactions.
Basement. The right, privilege or interest that one party has in the land of another, such as the right of public utility companies to lay their lines across another’s service without requiring the public utility to buy the land. However, a potential real estate purchaser should determine exact locations of all easements to be sure they will not interfere with planned land uses.
Economic depreciation. Loss of value from all causes outsides the property itself. For example, a private home’s value may drop when a sanitary landfill is placed nearby.
Economic life. That remaining period for which real estate improvements are expected to generate income grater than operation expenses cost. As land improvements age, they tend to command less rent (in real terms) while maintenance costs rise. The economic life is the expected life of positive contributions to value by buildings or other land improvements.
Economic obsolescence. See economic depreciation.
Obsolescencia económica. Véase depreciación económica.
Effective rate. The rate interests on a loan, considering its face rate and discount points. See annual percentage rate.
Egress. The ability reaches a roan from a parcel of land.
Ejectment. Action to regain possession of real property and for damages for unlawful possession. Allows a rightful owner to remove a squatter or trespasser.
Encroachment. A building, a part of a building or any improvement that physically intrudes upon, overlaps or trespasses upon the property of another. A survey often is required as part of a real estate contract to determine whether there are any encroachments on the property.
Encumbrance. Any right to or interest in land that diminishes its value. Includes outstanding mortgage loans, unpaid taxes, easements, deed restrictions, mechanics’ liens and leases.
Endorsement. The act of signing one’s name on the back of a check or note, with or without further qualification; also, the signature itself.
Equity. The difference between the value of a property and outstanding mortgage debt. When a property is purchased, equity is equal to the down payment, assuming the buyer paid market value. Over time, equity increases as the property’s value increases and mortgage debt is repair. If value falls, however, equity can diminish and even become negative.
Equity redemption. The right of a real estate owner to reclaim property alters default, before foreclosure proceedings, by the payment of the debt, interest and costs. See redemptive rights.
Erosion. The gradual wearing away of land through processes of nature, as by water (oceans, lakes and streams) and winds.
Escheat. The reversion of property to the state in the event that the owner dies without leaving a will or legal Harris. The assets of a person who has no legal heirs will escheat to the state unless a will is prepared that leaves property to another party.
Escrow. An agreement between two or more parties providing that certain instruments or property de placed with a third party for safekeeping, pending the fulfillment or performance of some act or condition. It is prudent to place money or property in escrow, rather that giving it to the other principal in a pending transaction.
Escrow account. See trust account.
Escrow agent. Any person or organization engaged in the Business of receiving escrows for deposit or delivery, such as a Sawyer, title company or broker.
Escrow funds. Money deposited with and held by a third person to be dispersed for a specific purpose in the future. Usually, earnest money is held in escrow until closing when it is credited to the buyer’s account. Lenders collect funds monthly for an escrow account that pays insurance premiums and property tax assessments as they become due.
Estate. The degree, quantity, nature and extent of interest a person has in real or personal property.
Estate at sufferance. The wrongful occupancy of property by a tenant alter the lease has expired.
Estate at will. The occupation of real estate by a tenant for an indefinite period, terminable by one or both parties at will.
Estate for life. An interest in property that terminates upon the death of a specified person. See life estate.
Estate for years. An interest in land allowing possession for a definite and limited time.
Estate in reversion. An estate left by the grantor for himself or herself, to being alter the termination of some particular estate that he or she grants. For example, a landlord’s estate in reversion becomes his or hers to possess when the lease expires.
Estoppels certificate. A document by which the mortgagor (borrower) certifies that the mortgage debt is a lien for the amount stated. The mortgagor is thereafter prevented from claiming that the balance due differed fro the amount stated. Also applies to leases. The buyer of property on which there is a mortgage or lease should get estoppels to be sure the terms of those agreements are as expected. The right to get estoppel certificates is in the lease or mortgage.
Et al. Latin; abbreviation of et alii, “and others”
Et ux. Latin; abbreviation of et uxor, “and wife”.
Eviction. A legal proceeding by a lessor (landlord) to recover procession of property. Allows landlord to regain property when tenant does not uphold lease. A legal process must be followed.
Eviction, partial. Exists where the possessor of the property is deprived of a portion thereof.
Exclusive agency listing. Contract giving only broker the right to sell the property for a specified time and also allowing the owner to sell the property him self or herself without paying a commission. This is sometimes arranged when an owner wants to continue personal selling efforts to continue personal selling efforts while employing a broker. Acceptable to some brokers for some properties.
Exclusive right to sell listing. Contract living the broker the right to collect a commission if the property is old by anyone, including the owner, during the term of the agreement, and often beyond the term to someone the broker introduced. See exclusive agency listing and open listing.
Exculpation. Free from blame. An exculpatory clause in a mortgage allows the borrower to default without having personal liability.
Execute. To make out a contract; to perform a contract fully. Unsigned contracts in real estate are generally meaningless.
Executed contract. A contract, all terms and conditions of which have been fulfilled. When executed, a contract is enforceable.
Executor. A man designed in a will to carry out its provisions concerning the disposition of the estate. See executrix. The person making a will should name an executor or co- executor who is trustworthy and capable of carrying out its terms. If there is not mo will and no executor, the court appoints an administrator.
Executrix. A woman designated in a will to carry out its provisions concerning the disposition of the estate. See executor.
Exemptions. Situations not bound by the general rules.
Expenses, fees, cost. Terms used to mean transaction cost. See transfer fees. On a typical settlement statement, several charges are listed for minor services required during the transaction. These charges may include legal fees, survey expenses and document preparation cost.
Fair Housing Act. A federal law that outlaws discrimination by home seller, landlords and their agent on the basis of race, color, national origin, sex, religion, family situation or physical handicap. Real estate professionals must abide by the law when advertising and showing homes. Buyers and renters should be aware of the rights they have under the law.
Federal Deposit Insurance Corporation (FDIC). An agency that provides insurance of up to $100,000 per account in commercial banks and saving and loan associations. Federal insurance, up to $100,000 per account, provides depositors confidence in the banking system and each bank. Banks and savings and loan associations add liquidity to real estate.
Federal Home Loan Bank (FHLB). A federally chartered bank that supplies credit to member banks. Most savings and loan associations are members of the FHLB system. Helps assure a flow of money to savings and loan associations, which provide money for local real estate needs.
Federal Home Loan Mortgage Corporation. Nicknamed Freddie Mac; buys mortgage loans primarily from savings and loan associations.
Federal Housing Administration (FHA). U.S. government agency that insures the repayment of real estate loans to lenders. The FHA is instrumental in assuring that financing is available for those of low and moderate income levels. Programs include single-family homes, condominiums, apartments, nursing homes and new towns.
Federal National Mortgage Association (FNMA). Agency that buys and sells existing residential mortgages; known as “Fanny Mae”. FNMA significantly increases liquidity in the mortgage market. Without FNMA, it might be difficult for lenders who originate loans. FNMA has standardized the loan submission and approval process and brought the mortgage finance business on par with other national credit markets.
Federal Savings and Loan Insurance Corporation (FSLIC). A defunct agency that once insured deposits in federal savings and loan institutions.
Fee simple. Absolute ownership of real property; owner is entitled to the entire property with unconditional power of disposition Turing his or her life, and the property descends to heirs ad legal representatives upon his or her death intestate. Also called fee absolute. When buying real estate, the seller can give only the rights she or she has. A buyer should determinate whether complete ownership will be deeded.
FHA Loan. A mortgage loan insured by the Federal Housing Administration (FHA)> FHA loans generally reduce the required down payment to 3 percent or less but require FHA mortgage insurance. In addition to interest, at ½ percent annually.
Fiduciary. A person who, on behalf of or for the benefit of another, transacts Business or handles Money or property belonging to another. Founded on trust; the nature of trust. A fiduciary or one in such capacity must act in the best interest of the party who has placed trust.
Financial institutions. Banks, credit unions and savings associations. These institutions, along with mortgage bankers, are potential sources of mortgage loans.
Financing options. Alternative ways to borrow Money to purchase real estate. These include various types of fist mortgage loans, combinations of loans, loan assumptions and seller financing. Not every borrower has the same financial situation. Financing options allow more ways to borrow money.
Financing terms. The important characteristics of loan, such as interest rate, amount (or loan- to – value ratio), points, fees and maturity. If the interest rate is adjustable, additional terms are important, such as adjustment interval, index, margin and caps. Shopping for or negotiating financing terms can be as important as finding and bargaining for a house. Over time, these terms determine the total cost of the purchase.
First mortgage. A mortgage that has priority as a lien over all other mortgages. Generally, the first mortgage is the one recorded fist. When a fist mortgage is retired, existing mortgages of lower priority will move up. In case of foreclosure, the fist mortgage will be satisfied before other mortgages.
First-time homebuyer. A buyer who has never owned a home. First-time buyers often find the home especially difficult to finance. They usually have lower income and less cash than repeat buyers. Special government programs are available for buyers who have not owned a house in the previous three years. These programs feature lower interest rates or a lower down payment or both compared to typically available financing.
Fixed interest rate. An interest rate on a loan that remains at the original level during the entire term of the loan. The two most common types of the loans are fixed-rate and adjustable-rate interest. Fixed than the initial rate on adjustable-rate loans.
Fixed-rate mortgage. A mortgage loan with a fixed rate. Fixed-rate mortgage loans are the predominant type of financing used to purchase homes. Many borrowers like the security offered by a loan with constant monthly payments (for a principal and interest).
Fixtures. Personal property attached to the land or improvements that become part of the real estate. When buying or selling real estate, it is best to specify which appliances remain and which do not. Unless otherwise specified, fixtures remain with the property.
Floyd insurance. Bought by a property owner to cover the cost of property damage in the event of rising water from a river or stream. Coverage is encouraged by the federal government, though provided by private carries.
Floyd plain. An area prone to flooding, though it may occur only once in 100 or 500 years.
Foreclosure. A legal procedure whereby property pledged as security for a debt is sold to pay the defaulted debt. Foreclosure gives a lender the right to sell property that pledged a debt. All parties to a mortgage contract should recognize its consequences.
Forfeiture. Loss of Money or anything of value because of failure to perform under contract.
Foundation. The base upon which a house is built. Many modern homes are built on concrete slab foundations without basement or crawl space. A homebuyer should have a foundation inspected before closing. Cracked foundations are common and may require expensive repairs.
Fraud. The International use of deception to purposely cheat or deceive another person, causing that person to suffer loss. Fraud is far worse than misrepresentation, which is the act of putting forth an incorrect or untrue statement. Consequently, punishment for fraud is more severe.
Free and clear. Describes property that has no liens, leases or other encumbrances.
Freehold. An interest in real estate without a predetermined time span. For example, a free simple or a life state.
Frontage. Linear distance of a property along a street, highway, lake or river. Frontage on a well-traveled road or a waterway can add value to both residential and commercial property.
Front foot. A standard measurement of land, applied at the frontage of its street line. Used for city lots of generally uniform depth. Prices often are quoted as the number of dollars per front foot.
Functional depreciation. Loss of value from all causes within the property, except those resulting from physical deterioration. Examples include a poor floor or outdated plumbing fixtures.
Functional obsolescence. See functional depreciation.
General warranty deed. A deed in which the grantor agrees to protect the grantee against any other Claim to tile of the property and provides other promises. See warranty deed. This is the best type of deed to receive.
GI loan. Home loans guaranteed by the U.S. Veterans Administration (VA) under the Servicemen’s Readjustment Act of 1944 and later. Also know as a VA loan. The Veterans Administration guarantees restitution to the lender in the event of default. No down payment is required by most lenders. The VA guarantees 60 percent of the loan, up to $27,500. This allows lenders to be assured of no losses provided the property’s market value decline is less than $27,500, so most lenders do not require a down payment.
Gift deed. A deed for which the consideration is love and affection, and no material considerations is involved. A gift deed frequently is used to transfer real estate to relative.
Good-faith estimate. A statement that Project some or all settlement expenses based in the best current information. When applying for loan, the lender is required to provide a good-faith estimate of closing expenses. Because the closing will not occur for a several months, exact amounts for all expenses are not known. However, the lender should be able to give a reasonably accurate estimate.
Government – insured loans. Mortgage loans originated by private lenders with default insurance provided by an agency of the federal government. In most cases, the agency is the Federal Housing Administration (FHA) through the 203(b). Insured loans have higher loan-to- value rations than uninsured loans, meaning that the down payment requirement is lower. In addition to the FHA, private companies insure mortgage loans.
Grace period. Additional time in which one is allowed to perform an act to make a payment before a default occurs. Many mortgage contracts have a grade period before a late payment is considered a default; it is usually wise to solve the problem before the grace period expires.
Grade. Ground level at the foundation. Also, the degree of slope on land for elevations rises two feet for every 100 linear feet. The grade of land should be checked to determine whether it suits a planned use for the land.
Graded lease. See graduated lease.
Gradient. The slope or rate of increase or decrease in elevations of a surface, usually expressed as a percentage. See grade.
Graduated lease. A lease that provides for graduated changes in the amount of rent at stated intervals; seldom used in short-term leases. Graduated leases allow rent changes automatically, so there is not need to revise the entire lease just to change the rent. Allows long term leases that suit both landlord and tenant.
Graduated –payment mortgage. A type pr mortgage loan that features a payment schedule with low first- year payments that increase each year until they become sufficient to amortize the loan during the remaining term. The increase in payment level is fixed rather than based on an index. These types’ pr loans were created for borrowers who expected their income to rise in the near future, as mighty be the case of an entry- level professional starting a career. Payments are artificially low for the fist few years but eventually stabilize at a higher level that a corresponding level-payment loan.
Grant. A technical term used in deeds of conveyance of property to indicate a transfer.
Grantee. The party to whom the title to real property is conveyed; the buyer.
Grantor. The person who combers real estate by deed; the seller or donor.
GRI. Graduate of the Realtors Institute, which is affiliated with the National Association of Realtors. The GRI designation indicates that a real estate salesperson or blocker has gone beyond the minimum educational requirement.
Gross income. Total income from property by before any expenses are deducted, may be described as potential, which assumes either no vacancy or collection losses, or effective, which is net of vacancy and collection losses.
Gross lease. A lease of property whereby the landlord (lessor) is responsible for paying all property expenses such as taxes, insurance, utilities and repairs. See net lease. Landlord and tenant agree in writing who pays each operating expense. Otherwise, there is the possibility for disagreement.
Gross rent multiplier (GRM). The sales price divided by the rental rate. For example, if the sales price is $40,000 and the gross monthly rent is $400, then the GRM is 100. May also be expressed as the number of years of rent equaling the purchase price. In many investment situations, the price is set based on a multiple of rent level.
Guarantee (a loan). To take financial responsibility for a loan should the borrower default. For example, the Veterans Administration guarantees mortgages and reimburses the lender for all losses when the lender forecloses a loan. The guarantee allows the buyer to borrow an amount equal to home’s sales price.
Ground lease. An agreement for the rent of land only, often for a long term, at the expirations of which all the real estate belongs to the landowner. Sometimes land can be purchased or leased separate from components that are more desirable. A property buyer or lessee must be mindful of the lease terms and their affect on using or financing the property.
Ground rent. Payment to the owner for the use of land. Ground leases may be net or gross. In a bet lease, the tenant pays expenses such as insurance and real estate taxes.
Guardian. One appointed by a court to administer the affairs o fan individual who is incapable of such duties. An incompetent cannot enter a valid contract. It is important to deal with the person’s guardian.
Habendum clause. The “to have and to hold” clause that defines or limits the quantity of the estate granted in the deed. For example, the clause “to have and to hold for one’s lifetime” creates a life.
Hazard insurance. Protection for a homeowner against property damage, loss and legal liability caused by fire, storm, theft and other common hazards. Mortgage lenders usually require a borrower to carry hazard insurance on the mortgaged property for the term of the loan. Special policies cover landlords, renters and condominium owners. Some hazards are not covered by standard policies. Special flood insurance is available from the federal government in participating communities.
Heirs and assigns. Terminology used in deeds and wills to provide that the recipient receive a fee simple estate in lands rather than a lesser interest. These words give the recipient complete ownership, not just an estate for a limited time.
Hereditaments. Any property that may be inherited, whether real or personal, tangible or intangible.
Highest and best use. An appraisal term meaning the legally and physically possible use that at the time of appraisal, is most likely to produce the greatest net return to the land or building or both over a given time period. To realize the full value of land, the improvements built on it must fulfill its highest and best use.
Holder in due course. One who has taken a note, check or similar asset (1) before it was overdue, (2) in good fait and for value, and (3) without knowledge that it had been previously dishonored and without notice of any defect at the time it was negotiated. A holder in due course is an innocent buyer of paper (a debt).
Holding period. The time that an investor holds an assent, generally from acquisition until it is sold or exchanged.
Holdover tenant. A tenant who remains in possession of leased property alter the lease term expires. A holdover tenant has a tenancy at sufferance. The landlord may dictate the terms of the lease.
Home, house, housing. A residential structure. Home implies an occupied structure. House is the physical structure alone. Housing usually means an inventory of houses.
Home equity loan. A loan by a second mortgage on home. Homeowners often use the money borrowed for no housing expenses, such as an automobile or college tuition. Alternatively, homeowners may raise cash by refinancing the first mortgage for a larger amount of principal.
Home inspection. A professional examination of a house check for defects. The buyer usually has the option to have a house inspected before the closing. The sales contract may obligate the seller to repair, up to a dollar cost limit, any defects discovered by the inspections.
Home inspector. A licensed professional who performs home inspections for a fee.
Homebuyer. Someone in the process of shopping for or purchasing a home.
Homeowner. An individual or household who own the home they occupy.
Homeowners’ association fee. A periodic charge required of all homeowners within the association’s jurisdiction. The fee pays to maintain common areas and support the efforts of the associations. See condominium fee and maintenance fee. Homeowners’ associations often are organized by a condominium or subdivision developer to be turned over to the homeowners when all the units or homes are sold. In a subdivision, the association may maintain common recreational facilities, or the association may serve merely to enforce deed restrictions. Each homeowner who buys in the subdivision agrees to abide by the strictures and to pay fees to the association when accepting the deed to the property.
Homeowners’ insurance. Hazard insurance covering the interest of a homeowner. See insurance.
Homeowners’ warranty. A guarantee against defects provided by a seller o Developer to a buyer. Most often associated with newly constructed home, a warranty is intended to protect the buyer from problems that may occur during the first few years of ownership.
Homestead. Status provided to a homeowner’s principal residence by some state statutes; protects home against judgments up to specified amounts. In states that honor homesteads, the owner can continue possession and enjoyment of a home against the wishes of creditors.
Homestead exemption. In some jurisdictions, a reduction in the assessed value allowed for one’s principal residence. In Texas, the homestead exemption reduces assessed values may be claimed by those past age 65.
HUD-1 form. Uniform settlement statement required by federal law to be used for residential closings. Both buyer and seller should receive the form prior to closing. The form details all transaction expenses and identifies the person obligated to pay them. If a net amount is due from anyone, that person should take a certified or cashier’s check for the specified amount to the closing.
Hypothecate. To pledge a thing as security without having to give up possession of it. The world hypothecate comes from the French language and has the same meaning as mortgage in English.
Improvements. Additions, upgrades and replacements that increase a property’s value. Improvements to a home increase the adjusted tax basis of the property and may reduce any capital gain realized when the property maintain value, do not affects tax basis.
In persona. Latin for “against the person”. A judgment may be filed against all property owned by a person.
In rem. Latin for “against the thing”. A proceeding against the realty directly, as distinguished from a proceeding against a person (such as used in taking land for nonpayment of taxes).
Inchoate. Recently or just begun; unfinished, begun but not completed. Examples in real estate include dower or curtsey rights prior to the death of a spouse, instruments that are supposed to be recorded and interest that can ripen into a vested estate.
Income. The Money or other benefit coming from the use of something. Gross sales or income is the full amount received; net income is the remainder after subtracting expenses. Many in real estate prefer to use cash flow as the measure of income, whereas those in accounting net income.
Income approach. One of the three appraisal methods used in arriving at an estimate of the market value of property; the value of property is present worth of the income it is expected to produce Turing its remaining life. Annual income for rental property can be capitalized into value to estimate its worth.
Income property. Property whose ownership appeal is that it produces income. Examples include office buildings, shipping centers, rental apartment and hotels.
Incompetent. One no legally capable of completing a contract includes the mentally ill, minors and others considered incapable. When conducting business with an incompetent, the guardian’s consent is required.
Incurable depreciation. A defect that cannot be corrected or that is financially impractical to correct; a defect in the structure of a building. When appraising real estate using the cost approach, incurable to indicate the actual loss in value sustained by the property.
Indenture. A written agreement made between two or more persons having different interests. Indentures, Such as deeds of trust, describe the terms of the agreement in mortgage, deeds and bonds.
Index lease. A lease in which rental rates are tied to an agreed upon index of costs, such as the Consumer Prince Index. An index lease can allow fairness to both parties in a long-term leasing arrangement.
Industrial property. Property used for industrial purposes, such as factories and power plants, land to be used for industrial purposes often must be zoned for that purpose.
Injunction. A writ or order issued by a court to restrain one or more parties to a legal proceeding from performing an act that is deemed inequitable or unjust to another party or parties in the proceeding while the legal process continues.
Installments. Pats of the same debt, payable at successive periods as agreed; payments made to reduce a mortgage. Many debts are paid in installments that include interest for a recent period plus some amount for amortization.
Instrument. Written legal document, created to affect the rights and liabilities of the parties to it, such as a deed, will or lease.
Insulation. Material added between walls and above ceilings to reduce heating and cooling costs. The amount of insulation in a house helps determine inside temperature and the utility bills, the effectiveness of insulation material is indicated bye its R-value; the higher the number, the better the insulation. Homeowners may take other actions, such as limiting air leakage around windows and doors, to supplement the effectiveness of insulation.
Incurable title. A title that be insured by a title insurance company. When acquiring real estate, determine whether the title is insurable. If a title is not insurable, there are likely to be valid claims that affect its use or ownership.
Insurance. A service that reimburses losses caused by specific hazards. The beneficiary pays a premium to be covered for a limited period. If damage occurs during the insured period, the beneficiary may file a claim for repayment of losses subject to limitations. Insurance against fire, theft and liability is essential for any property owner. Most lenders require insurance coverage at least in the amount of the loan.
Insurance coverage. The extent of insurance service. Includes a description of the pyres of events that qualify for valid claims and the dollar limit on a claim. For hazard insurance, most homeowners should have coverage equal to the cost of replacing the structure, while liability coverage should be high enough to prevent financial disaster. The types of events covered are described in the policy documents provided by the insurance company.
Insurance policy. The document that describes the coverage and terms of the protection provided. Insurance policies are legal documents that explain the rights of the beneficiary should something occur that is covered by the policy.
Intangible value. Value that cannot be seen or touched, such as the goodwill o fan established Business.
Interest. 1. Money paid for the used of Money. 2. The type and extent of ownership.
Interest- Only loan. Loan in which all periodic payments go toward interest only. At the end of the loan term, the entire principal is due. By restricting payments to interest only, the monthly payment is minimized, and the entire payment may be deducted from taxable income. Interest only loans usually are refinanced before the principal payment comes due.
Interest rate. The percentage of a sumo f Money charged for its use. Also, the rate of return on an investment. The loan interest rate is an important ingredient in determining the periodic installment.
Interim Financing. A loan used when a property owner is unable or unwilling to arrange permanent Financing. Interim financing is used to finance construction of a home.
Intestate. Used to describe a person who dies leaving no will or leaving a defective will. His or her property goes to legal heirs. State law determines inheritance rules for those who die interstate. If there are no heirs, the property escheats to the state.
Investment property. Property that is owned for its income generating capacity or expected resale value, such as apartments, office buildings or undeveloped land.
Involuntary lien. A lien imposed against property without the owner’s consent, as in unpaid taxes or special assessments. A lien can be created without any action by the landowner.
Irrevocable. Incapable of being recalled or revoked; unchangeable. Unalterable.
Jeopardy. Peril, danger or risk. For example, property pledged as security for a delinquent loan is in jeopardy of foreclosure.
Join tenancy. Ownership of realty by two or more person, each of whom has an undivided interest with the right of survivorship. For example, A and B own land in join tenancy. Each owns half of the entire (undivided) property. Upon A’s death, B will own the entire property and vice versa.
Judgment. A court decree stating that one individual is indebted to another and fixing the amount of the indebtedness, a judgment is a final determination of the matter, decided by a court.
Judgment creditor. One who received court decree or judgment for Money due from the judgment debtor.
Judgment debtor. One against whom a judgment has been issued by a court for Money owned to the judgment creditor.
Judgment lien. The claim upon the property of a debtor resulting from a judgment. For example, A will not pay his debt to B. after establishing the debt in court, B may be allowed by the court to put lien on A’s real estate.
Judicial foreclosure. Transfer of ownership on a property by a court because of default on a debt.
Junior lien. A lien that will be paid alter earlier liens have been paid.
Junior mortgage. A mortgage whose claim against the property will be satisfied only alter prior mortgages have been sold. A junior (second, third) mortgage has value as long as the borrower continues payments or the property’s value is in excess of the mortgage debts provided the junior mortgage qualifies under any homestead laws.
Larches. Delay or negligence in asserting one’s legal Rights. If one does not act in a reasonable time to assert one’s rights, he or she may be barred from doing so because of the delay.
Land. The surface of the Earth; any part of the surface of the Earth. Legal definitions often distinguish land from water.
Land contract. A real estate installment selling arrangement whereby the buyer may use, occupy and enjoy land, but no deed is given by the seller (so no title passes) until all or a specified part of the sale price has been paid. Compared with a deed, use of a land contract is easier to foreclose if the buyer fails to make the payments.
Land patent. Document that conveys public land; also, the land conveyed in this manner.
Land, tenements and hereditaments. A phrase used in early English law to express all sorts of real estate. This is the most comprehensive description of real estate.
Landlord. One who rents property to another; a lessor.
Landmark. A fixed object serving as a Boundary mark or reference point for a tract of land. In surveying, a landmark serves as a reference point.
Late charge. A penalty the borrower must pay if a payment is made after the due date. Late charges are used to encourage timely payment of mortgage, utility and other periodic bills. Chronic late payment not only adds to expense buy also may harm an individual’s credit rating.
Lawyer. An attorney at law is referred to as a lawyer; a person who practices law. See attorney.
League. A measure of approximately three miles.
Lease. An Essentials contract in which, for a consideration called rent, one who is entitled to the possession of real property (lessor) transfers those Rights to another (lessee) for a specified period of time. A lease is an essential agreement, allowing an owner to transfer possession to a user for a limited amount of time.
Lease with option to purchase. A lease that gives the lessee (tenant) the right to purchase the property at an agreed-upon price under certain conditions. Because the option allows but does not compel the purchase, it gives the tenant time to consider acquisition.
Leasehold. The interest or estate on which a lessee (tenant) of real estate has a lease. Leasehold can be quite valuable when the tenant’s rent is below the market rate, and the lease is long term.
Legal description. Legally acceptable identification of real estate by (1) the rectangular Surrey, (2) metes and bounds or (3) recorded plat (lot and block Lumber).
Lender. Bank, savings association, mortgage Banker or broker, or individual who provides the funds for a loan.
Lending institution. See financial institution.
Lessee. A person to whom property is rented under a lease; a tenant.
Arrendatario. El que toma en arrendamiento una propiedad conforme a un contrato de arrendamiento; un inquilino.
Lessor. One who rents property to another under a lease; a landlord.
Leverage. The use of borrowed funds to increase purchasing power and, ideally, to increase the investment’s profitability. If the property increases in value or yields financial benefits at a rate above the borrowed money interest rate, leverage is favorable or positive. But if the rate of property benefits is less than the interest rate, the inventor’s losses are increased.
Liability. A debt or financial obligation, or the responsibility of make up for potential damages incurred by those using or visiting a property.
License. 1. Permission. 2. A privilege or right granted by a state to an individual to operate as a real estate broker or salesperson. 1. License allows one to use property for a limited time. 2. Un Texas, one must be licensed as a broker or salesperson to receive payment for sale, lease or other transaction.
Licensee. One who holds a real estate license. In Texas, only licensees are entitled to receive compensation for assign with a real estate transaction. Educations, experience and passing grades on examinations are required for licensure.
Lien. A charge against property, making it security for the payment of a debt, judgment, mortgage or taxes; a type of encumbrance. A lien makes the property collateral for a debt. Some liens may allow the property to be sold to satisfy the debt..
Life estate. A freehold interest in land that expires upon the death of the owner or another specified person. One with a life estate may use the property, but not abuse it, for as long as he o she lives. Then, it reverts to the remainderman.
Life of loan. Te period that a loan is outstanding. The period extending from loan origination to the date when the loan is prepaid, retired or foreclosed. The shorter this period, the less total interest paid.
Life tenant. One who is allowed to se property for his or her Lifetime or the Lifetime of another designated person.
Life tenant. One who is allowed to use property for his or her Lifetime or the Lifetime of another designated person.
Lifetime cap. Also called a life of loan cap. The maximum extent, in percentage points that the interest rate on an adjustable- rate mortgage can vary from its original rate during the life of the loan. A lifetime cap limits the risk taken on by the borrower of an ARM. If the loan originates at 7 percent and has a lifetime cap of 5 percentage points, the rate can never be higher than 12 percent, regardless of how high the index goes.
Liquidity. Ability to convert value into cash. The more “liquid” an asset is, the more readily it can be converted to cash with minimal loss in value. Assets that require a lot of time and expense to sell and those fluctuating in value are not very liquid.
Lis pendens. Latin for “suit pending.” Recorded notice that a suit has been filed, the outcome of which may affect title to certain land. Title to the property under consideration may be in jeopardy.
Listing. A written employment contract between a principal and an agent authorizing the agent to perform services involving the principal’s property. Also, a record of property for sale by a broker who has been authorized by the owner to sell, or the property so listed. In Texas, a listing must be in writing. See open listings, exclusive agency listing and exclusive right to sell listing.
Litigation. The act of carrying out a lawsuit.
Littoral. Part of the shore zone of a large body of water. Littoral rights differ from riparian rights, which pertain to a river or stream.
Loan. Money advanced for a specific purpose with the expectation that it will be repaid according to an established schedule.
Loan origination fee. A charge to help defray the cost of originating a loan. The fee is paid by the borrower at closing as a specific percentage of the amount borrowed. See Discount points. Mortgage loan terms often are quoted as “8 percent with 1 plus 2 points.” This means that three discount points (equal to 3 percent of the loan amount) will be charged with one of the points considered a loan origination free. If the origination fee is charged to pay for specific services, such as an appraisal or credit check, it may not be included in tax deductible interest expenses.
Loan processing. The activities required to approve or disapprove a loan. After a loan application is submitted and all supporting documents are included, the information is analyzed to qualify the borrower, credit history is checked and an appraisal ordered. After a loan is processed and approved, the borrower receives a commitment promising a loan at specific terms as long as closing is held within a specific period.
Loan servicing. The administration of the loan repayment process. Servicing includes billings and collection, maintenance of escrow accounts with payouts as required and record keeping. The loan servicer, who may or may not own the loan, is the company with which the borrower has active contract with the owner of the loan, and the firm servicing the loan may change over time.
Loan term. The period from loan origination to full repayment. Commonly, mortgage loans have terms of 25 to 30 years. An increasingly popular option is the loan with a 15 year term. Shorter terms reduce the total interest paid but require larger monthly payments.
Loan- to value ratio (LTV). The amount of outstanding debt divided by the market value of the property. The loan-to- value ratio is used by lenders to measure the risk of default. The higher the LTV, the less equity held by the borrower and the lower any financial attachment to the property. Consequently, the risk is higher. Lenders make home loans with LTV more than 80 percent only if the loan is insured or guaranteed against default.
Location. All the factors related to the site of a property that affects its value. These include its relation to other important locations in the area, the neighborhood, crime, traffic, the street and its surrounding homes. See neighborhood. Location is a primary factor in the property value, as it determines the convenience of accessing other places of interest and now well the property can be used for its intended purpose.
Long term. An extended period of time. The exact length of time depends on the context. On loan applications, long-term debts may be defined as those not repaid within six months to a year. A long-term loan is one with more than a ten-year term.
Lot and block number. A means of describing land by referring to a recorded plat. An example is Lot 6, Block F of the Sunnybrook Estates, District 2 of Texas City, Texas.
Lot line. A line bounding a lot as described in a survey of the property. Lot lines mark boundaries. There also may be building setback requirements, or building lines, within a lot.
MAI. A member of the American Institute of Real Estate Appraisers, which is affiliated with the National Association, is one of the most covered ones in real estate. Many appraisals of large commercial properties are done by MAIs.
Maintenance costs. Routine expenses required to keep a property operating and in good repair, such as paining, lawn maintenance and replacement of roofing and heating equipment. When putting together a housing budget, it is important to estimate and include periodic maintenance costs, which can be a significant expense.
Maintenance fee. A charge levied on homeowners to maintain common areas in a subdivision or condominium development. It may be included in a general homeowners’ association fee or condominium fee. See homeowners’ association fee and condominium fee.
Majority. The age at which one is no Langer a minor and is fully able to conduct one’s own affairs; in Texas, majority is 18. A contract with a minor is voidable by the minor.
Manufactured housing. Homes produced in a factory and transported to and installed on a site. Before 1976, manufactured homes were referred to as mobile homes. Since then, all manufactured homes are covered by a uniform federal inspections standard that supercedes local building codes.
Marginal property. Property that is barely profitable. For example, the sale of cotton that has been efficiently raised yields $100; yet the cotton cost $99.99 to rise. The land, therefore, is considered marginal land.
Market approach. See market comparison approach.
Market comparison approach. The most often used of the three appraisal approaches. Value is estimated by analyzing sales prices of similar properties (comparables) recently sold. Virtually all appraisals of homes and many heavily I the market approach. The two other approaches are cost and income.
Market data approach. See market comparison approach.
Market price. The actual price in a market transaction, a historical fact. Market value is a theoretical concept. Whereas market price is what actually occurred.
Market value. The highest price a buyer, willing but not compelled to buy, would pay, and the lowest price a seller, willing but not compelled to sell, would accept. Many conditions are assumed to exist, including:
1. open and competitive market
2. typically motivated principals, acting
3. Normal time on the market for the type of property.
4. Payment to seller in cash or equivalent.
5. buyer nay arrange typical financing terms available in the market
In theory, property would sell for its market value.
Marketable title. A title that a court will consider so free from defect that it will enforce its acceptance by a purchaser. Similar to insurable title.
Material fact. A fact that is germane to a particular situation; one that participants in the situation may be reasonably expected to consider. In a contract, a material fact would not have been made.
Maximum mortgage amount. The largest dollar amount that a lender can loan given the borrower’s income or that the FHA will insure. A lender determines the maximum size of the loan by applying a maximum loan-to-value ratio to the value of the house. If the borrower does not qualify for a loan of that size, the loan amount must be reduced. If the loan requires FHA insurance, different rules are used for setting maximum size and for qualifying borrowers. In additions, FHA loans have maximum size limits that vary by location.
Mechanic’s lien. A lien given by law upon a building or other improvement upon land, and upon the land itself, as security for the payment for labor done upon, and materials furnished for, the improvement. A mechanic’s lien protects those who helped build or supply materials.
Meeting of the minds. Agreement by all parties to a contract to its terms and substance. When there is a meeting of the minds, the contract is not based on secret intentions of one party that were withheld from another.
Mates and bounds. A land description method that relates the boundary lines together with their terminal points and angles from an initial reference point. One can follow a metes and bounds description on a plat or on the ground.
Medidas y colindancias. Métodos de descripción de tierras que recita los linderos de un terreno, consignando los linderos respectivos con sus puntos de inicio y rumbos desde un punto de partida inicial. Se puede apreciar la descripción por medidas y colindancias en un plano o en el mismo terreno.
Mill. One tenth of a cent used in expressing tax rates on a per-dollar basis. For example, a tax rate of 60 mills means that taxes are six cents per dollar of assessed valuation.
Minor. A person under an age specified by law; in Texas, one under age 18. Real estate contracts entered into with minors are voidable by the minor.
Misrepresentation. Putting forth an untrue statement or other act. Can be intentional, whereby wrong information is given in an attempt to deceive a party who then will enter the agreement; or it can be an innocent mistake. Misrepresentation may allow a party to rescind a contract.
Monthly mortgage payment. The monthly payment required by a mortgage contract. The payment usually includes interest on outstanding principal accrued during the previous month, a contribution to principal reduction and a contribution to an escrow account and a contribution to an escrow account used to pay insurance premiums and property taxes. Sometimes called “PITI.” This is one of the major expenses of owning a home. The interest portion of the payment can be taken as an itemized deduction against taxable income. The principal portion directly reduces the amount of debt outstanding on the loan. Escrow amounts are collected and paid out as necessary.
Monthly payment. Same as monthly mortgage payment.
Monument. A fixed objet and point established by surveyors to establish land locations, such as pots, pillars, stone markers, unique trees, stones, pipes or a watercourse.
Mortgage. A written instrument that creates a lien upon real estate as security for the payment of a specified debt. The mortgage allows a defaulted debt to be satisfied by forcing a sale of the property.
Mortgage bank. A business firm that originates home loans and sells them in the secondary market. A mortgage bank has no depositors but must raise funds by selling the loans it originates. Mortgage bankers are important sources of loans, especially those baked by the FHA and VA.
Mortgage Banker. A lender who originates mortgage loans and sells them to investors and other purchasers of mortgages.
Mortgage banking institutions. Firms engaged in loaning money for hones and other property.
Mortgage commitment. An agreement between a lender and borrower to lend money at a future date, subject to the conditions described in the agreement. The terms of the commitment are important, especially the interest rate lock-in, if there is one.
Mortgage companies. Firms that engage in mortgage banking.
Mortgage Financing. Debt secured by one or more mortgages. Mortgages loans carry lower interest rates than unsecured credit because the rights provide to the lender under the mortgage lower the risk of the loan. On the other hand, the property could be lost if payments are not made in time to the lender by the buyer-owner.
Mortgage insurance. Insures, to the lender, the top 10 to 20 percent of the loan in the event of default. Generally cost one to two discount points at closing plus an annual fee of the fourth to one half of 1 percent.
Mortgage insurance company. A private firm that insures mortgage loans.
Mortgage loan application. An official request for a mortgage loan commitment of a specific amount for the purpose o buying (or refinancing) a specific property. After a sales contract is signed, the buyer usually applies for a mortgage loan. This requires contacting a lender and completing a lender and completing a loan application form, providing a copy of the sales contract and additional information about the borrower’s income and financial status. An application fee may approval process. If the loan is approved, the buyer will receive a loan commitment and can proceed with the closing.
Mortgage note. A note secured by a mortgage. A borrowed taking a mortgage loan sings a mortgage note that establishes the debt and a mortgage that pledges the property against on the note.
Mortgage term. Same as loan term.
Plazo de la hipoteca. Igual al plazo del préstamo o crédito.
Mortgage underwriting. The process of approving (or disapproving) a loan base don an analysis of the borrower’s credit history and the quality of the collateral. See loan processing.
Mortgage. One who holds a lien on or title to property as security for a debt. The mortgagee receives the mortgage; the mortgagor receives the loan.
Mortgagor. One who pledges his or her property as security for a loan.
Multiple listing. An arrangement among a group of real estate brokers who agree in advance to provide information about some or all of their listings to the others and also agree that commissions on sales of such listings will be split between listing and selling brokers.
National Association of Realtors (NAR). An organization devoted to encouraging professionalism in real estate activities. NAR has strong lobbies that protect interests of the real estate community, especially homeowners. It also has affiliates related to appraising, counseling and managing real estate. Members are required to abide by the code of ethics of the NAR.
Negotiation. Interaction of the buyer and seller to arrive at a sales contract including price and sales conditions agreeable to both persons. See deal. Negotiation of a home sales contract starts with an offer from the buyer (complete with earnest money). The seller may accept the offer, make a counteroffer at a higher price or reject the offer outright. Counteroffers go back and forth until one side accepts the offer of the other or negotiations are called off.
Neighborhood. The properties. Surrounding a home. Neighborhoods nay have distinctive names. See location. The character of neighborhood can greatly affect the quality of life derived from a home. Selecting a neighborhood that suits the buyer may be more important than finding the right house.
Net income. In real estate, the correct term in now net operating income. In according, net income is the actual earning, after deducing all expenses, including interest and depreciation, from gross sales.
Net lease. A lease whereby, in addition to the rent stipulated, the lessee (tenant) pays such things as taxes, insurance and maintenance. The lesson’s rent receipt is thereby “net” of those expenses. The responsibility for maintenance cost is shifted to the lessee; the lessor is a passive investor.
Net listing. A listing in which the blocker’s commission is the excess of the sale price over an agreed-upon net price to the seller; illegal in some states. For example. A house is listed for sale at $100,000 net. The broker’s commission is $1 if it sells for $100,001. But if it sells for $150, 000, the broker receives $50,000.
Net operating income (NOI). Income from property or Business alter operating expenses have been deducted but before deducting income taxes and Financing expenses (interest and principal payments).
Net worth. Total value of all assets owned minus all outstanding debt. A statement of net worth is often required when applying for a loan.
Nonconforming use. A use that violates zoning regulations or codes but is allowed to continue because it began before the zoning restriction was enacted. This allows a prior use to continue, but puts restrictions on future uses of the property.
Notary public. An officer who is authorized to take acknowledgments to certain types of documents, such as deeds, contracts and mortgages, and before whom affidavits may be sworn, most documents must be notarized as a condition to being recoded.
Note. The document that establishes a debt and specifies how it is to be repaid.
Pagare. Documento que establece un adeudo, señalando la forma de restituir el mismo.
Notice to quit. An announcement to a tenant vacates rented property. The tenant is permitted to complete the term of the lease unless the tenancy is at will or at sufferance.
Oblige. The person in whose favor an obligation is entered into.
Obligor. The person who binds himself to another; one who has engaged to perform some obligation; one who makes a bond.
Obsolescence. A loss in value resulting from reduced desirability and usefulness of a structure because its design and construction have become outdated; loss due to a structure’s becoming old-fashioned, not in keeping with modern needs, with consequent loss of income.
Occupancy. The use of a residence by dwelling in it. May denote extent of use, as in “year-round occupancy,” or ownership, as in “owner-occupancy,” as in “occupancy status.”
Occupant. The person or persons dwelling in a residence without reference to their ownership status or legal right to occupy the space.
Offer and acceptance. See agreement of sale.
Open-end mortgage. A mortgage under which the mortgagor (borrower) may secure additional funds from the mortgage (lender), usually stipulating a ceiling amount that can be borrowed. A recent development in real estate finance is a line of credit home equity loan, which works the same as the open-end mortgage.
Open house. Marketing event in which a seller or a gent allows the public to tour a home for sale to generate purchase offers. Open houses often are held in weekends to maximize attendance.
Open listing. A listing given to any number of brokers without liability to compensate any except the one who first secures a buyer Reddy, willing and able to meet the terms of the listing or secures the seller’s acceptance of another offer. The sale of the property automatically terminates all open listings. This type of listing is used frequently for commercial property. Because of smaller commissions, home is typically listed with a broker’s exclusive listing; brokers would not make efforts to market a home that could be sold by another broker.
Open mortgage. A mortgage that has matured or is overdue and is therefore “open” to foreclosure at any time.
Operating expenses. Costs associated with an operation o fan income-producing property. These include maintenance, management, repairs, utilities, insurance, property taxes and replacement reserves. Income taxes, debt service and expenses associated with remodeling the property are not considered operating expenses.
Operating lease. A lease between the lessee and the sublessee who actually occupies and uses the property. In an operating lease, the lessee runs the property; by contrast, a financing lease is one in which the lessee becomes lessor to the operating tenant.
Option. The right, but not the obligation, to purchase or lease a property upon specified terms within a specified period. An example is the right to buy certain land within 90 days at $5,000 per acre. The property becomes “reserved” for that period.
Owner. One who holds title to a property.
Owner Financing. Also called “seller financing”. A note taken by the seller as all or part of the purchase price of a property. The note establishes a debt to the seller and a schedule for repayment. Seller financing may be useful when interest are high or mortgages loans are difficult to obtain, it also nay allow a sale to someone with no credit rating. When seller financing is used, the terms of the financing are negotiated along with the price. If the terms are favorable to the buyer, the seller may insist on a higher price.
Owner-occupied. The owner’s household loves in the residence. Most housing is either owner-occupied or rental housing. The ratio of owner- occupied units to total occupied units is the homeownership rate.
Ownership Rights to Realty. Possession, enjoyment, control and disposition of realty.
Derechos de dominio a bienes raíces. Posesión, goce, control y disposición de propiedades raíces.
Packaged mortgage. A mortgage arrangement whereby the principal amount loaned is creased to include personality such as appliances, as well as realty; bith realty and personality serve as collateral.
Partition. The division or real property between those who own it in undivided shares. For example, A and B own land as tenants in common until they partition it. Thereafter, each owns a particular tract of land.
Party wall. A wall built along the line separating two properties, partly on each. Either owner has the right to use the wall and has an easement over that part of the adjoining owner’s land covered by the wall.
Ownership Rights to realty. Possession, enjoyment, control and disposition of Realty.
Packaged mortgage. A mortgage arrangement whereby the principal amount loaned is increased to include personality such as appliances, as well as realty; both realty and personality serve as collateral.
Partition. The division of real property between those who own it in undivided shares. For example, A and B own land as tenants in common until they partition it. Thereafter, each owns a particular tract of land.
Party wall. A wall built along the line separating two properties, partly on each. Either owner has the right to use the wall and has an easement over that part of the adjoining owner’s land covered by the wall.
Patent. Conveyance of title to government land, also called a land patent.
Pay stub. An official paper included with a pay check that indicates the amount of salary or wages earned and itemizes deductions from income, such as federal income tax withholding and retirement contributions. When applying for a loan, the borrower may use recent pay stubs to verify current income.
Payment. Full or partial money given to decrease a debt.
Percent. A portion of the whole. One percent equals one hundredth (1/100) of the whole. One percent of $100 is $1, 2 percent is $2.
Percentage lease. A lease of property in which the rental is base don a percentage of the volume of sales made upon the leased premises. It usually provides for minimum rental and is regularly used for retailers who are tenants. The retailer pays additional rent only if sales are high; the shopping center owner has incentive to make the shopping area attractive.
Percolation test. A procedure to estimate the drainage characteristics of soil, especially to determine suitability for a septic system.
Permanent mortgage. A mortgage for more than years. A permanent mortgage usually replaces construction or interim financing and provides steady income whit amortization payments to the lender.
Personality. Personal property; all property that is not Realty. Many laws and terms that apply to real property are not the same as those of personality. When dealing with both types, one should de certain to apply appropriate law and terminology.
Physical depreciation. The loss of value from all causes of age and action of the elements. For example, a broken window, hole in plaster, collapsed porch railing or sagging frame. Also called physical deterioration.
PITI. Acronym for principal, interest taxes and insurance. The monthly mortgage payment, by most homeowners, consisting of calculated principal and interest plus one twelfth of the estimated annual taxes and insurance.
Plaintiff. The person who brigs a lawsuit. See defendant.
Plant. A plant or map of a certain piece or certain pieces of land. Examples include a subdivision plant or plat of one lot.
Plant book. A public record containing maps of lands shoeing the division of the land into streets, blocks and lots and indicating the measurements of the individual parcels. The tax assessor’s office, usually in a city or country, maintains a plan book open for public inspection.
Pottage. Increment in the value of a Plot of land that has been enlarged by assembling smaller plots into one ownership. Combining several small tracts into one ownership can provide a large enough land area for a more profitable use than otherwise. However, it is often difficult to get several owners to sell because some hold out for a high price.
Plumbing. The system of pipes, fittings and fixtures that provide fresh water and dispose of sewage and wastewater from a home. When inspecting home before purchase, the plumbing should be checked for proper operation, leaks and good ventilation. It also is important to have enough bathrooms to support the occupants.
Pocket card. Document that is required for salesperson and brokers in Mist estates. Issued by the state licensing agency, a pocket card identifies its holder as a licensee and must be carried at all times.
Police power. The right of any political body to enact laws and enforce them for the order, safety, health, morals and general welfare of the public. For example, zoning ordinances are an exercise of police power. Government authorities are granted the power of eminent domain through the police power.
Possession. Occupying a property as owner; part of the bundle of Rights that define property ownership. Mere possession can infer ownership of unchallenged, such as laws that recognize squatter’s rights or those that grant easements for long-standing use of someone else’s property.
Power of attorney. An instrument authorizing a person to act as the agent of the person granting it. By using a power of attorney, one can grant a specific person a wide or limited scope of power.
Predatory lending. Methods used by unscrupulous lenders to take advantage of borrowers with unnecessary expenses or high interest charges. In some cases, predatory practices force foreclosure of the property.
Premises. Land and tenements; an estate; the subject matter of a conveyance.
Prepaid items. At closing, the purchaser may be reimbursing the seller for some expenses that the seller paid in advance; the purchaser, as a borrower, may be required to pay certain expenses in advance.
Prepayment clause. A clause in a mortgage that gives a mortgagor (borrower) the privilege of a paying the mortgage indebtedness before it becomes due. Sometimes a penalty must be paid if prepayment is made, but payments of the interest that is not yet due is waived.
Cláusula de pago anticipado. Cláusula de una hipoteca que le otorga al deudor hipotecario que le otorga al deudor hipotecario (prestatario) la opción de pagar el adeudo de la hipoteca antes del vencimiento de este. A veces se incurre en castigo al anticiparse el pago, aunque se perdona el pago de intereses no vencidos.
Prepayment penalty. A charge, usually a percentage of the outstanding balance of the loan, made by the lender for paying off the loan before the end of its term. The right of a lender to charge a penalty is included in the prepayment clause of the mortgage contract. However, some states preclude prepayment penalties when the contract interest rate is more then a stated amount. Some penalties expire after the fist several years of the term.
Prequalification. An analysis to estimate the largest mortgage loan a borrower could qualify for based in income and current debts. Prequalifying provides a homebuyer with current financing. Lendes will prequalify homebuyers without charge, often over the telephone. However, prequalifying does not imply any type of commitment to make a loan.
Price range. A span of prices describing homes that a particular homebuyer can afford and finds acceptable. Establishing a buyer’s price range requires prequalifying to estimate affordability and a preliminary market search to find out the homes available at various prices.
Primary lease. A lease between the owner and a tenant who, in turn, has subset all or part of his or her interest. The tenant in the primary lease is still responsible to the landlord, even though the subtenant(s) are occupying the space.
Principal. The amount of money remaining to be paid on a loan. Also, the client of a brokerage agent; the person who engages an agent by contract. The principal of a loan determines how much interest must be paid. During the term of a mortgage loan, the principal declines and less of each payment is interest. The principal of agent is the person the agent serves, who is most often the seller unless the buyer has made specific arrangements with an agent.
(1) Capital o monto principal. Saldo del adeudo pendiente que corresponde al préstamo o crédito. El capital del préstamo o crédito, determina el monto de los intereses a pagar. Durante la vigencia de un crédito hipotecario, disminuye el capital, siendo menor la porción de cada uno de los abonos sucesivos correspondientes a intereses.
(2) Mandante o representado. Cliente del corredor; la persona que ocupa por contrato los servicios de un apoderado o agente. El mandante del agente es la persona a quien presta servicio el agente, mayormente la parte vendedora salvo que el comprador haya llegado algún acuerdo concreto con el agente.
Principal residence. The address persons establish as their official dwelling place. A person’s principal residence has special status under state law, the federal income tax code and some financing programs. For example, in Texas, principal residences are subject to the homestead exemption.
Private mortgage insurance (PMI). Mortgage insurance provided by a private firm, the federal government provides mortgage insurance through the Federal Housing Administration (FHA). However, the size of loan that can be insured is limited, and other restrictions may make private insurance a better choice in some cases.
Probate. To establish the validity of the will of a deceased person. Also called prove. Private relates not only to the validity of a will but also to matters and proceedings of estate administration.
Probate court. Court with authority over proving wills and administering estates.
Proceeds. The cash remaining after all expenses are deducted, usually from a sale of property. When a property is sold, various expenses are connected with the sale, a mortgage loan usually has to be repaid and some taxes may be accrued. The money remaining after paying expenses can be used by the seller, perhaps as a down payment on a replacement property.
Promulgate. To make known to the public; to put into prin. In Texas, certain printed forms for real estate transactions and their regulations have been released by Texas Real Estate Commission.
Property. The Rights that one individual has in lands or goods to the exclusion of all others; Rights gained from the ownership of wealth. See real property and personality.
Property line. The recorded boundary of a Plot of land. A survey is performed in order to establish property lines and describe them on a plat.
Property management. The operation of property as a Business, including rental, rent Collection, maintenance and so on. Property managers remove the daily burden from investors, thus allowing real estate owners to be free of daily operations.
Property owner. One who holds title to real estate.
Property taxes. Same as ad valorem taxes.
Prorate. To allocate between seller and buyer their proportionate share o fan obligation paid or due; for example, to prorate real property taxes or insurance. Many items of expense are prorated between buyer and seller, to the date of closing.
Purchase. To buy or obtain title to a property in Exchange for something, usually money.
Purchase Money mortgage. A mortgage given by a grantee (buyer) to a grantor (seller) in partial payment of the purchase price of real estate. Institutional lenders often are unable or unwilling to finance certain types of property, so the seller must accept a purchase money mortgage to facilitate a sale.
Purchase price. The contract price paid for a property but not including transaction costs.
Purchaser. The buyer.
Qualify. To determine if a loan made to a particular borrower is an acceptable risk. Analysis is based on the borrower’s income and debts, credit rating and the value of the home being financed. See credit rating.
Qualifying ratios. Standard maximum percentages for monthly loan payment to income used by lenders when qualifying to borrowers. Two ratios are applied: one for loan payments to income and one for total debt payments to income; the latter includes existing debts of the borrower that extend for more than several months. Loans insured by compared to conventional loans.
Quiet enjoyment. The right o fan owner or any other person legally entitled to possession to use of a property without interference. A landlord should not interfere with a tenant who is in compliance with a lease.
Quiet title suit. A suite in court to remove a defect, cloud or suspicion regarding legal rights o fan owner to a certain parcel of real property. A potential claimant is told to bring forward the claims so they can be judged as valid or not. If they are not valid, the claimant must stop interfering with the owner.
Quitclaim deed. A deed that conveys only the grantor’s Rights or interest in real estate, without skating their nature and with no warranties of ownership. Often used to remove a possible could from the title.
Range lines. In the government survey land description, lines parallel to the principal meridian, marking off the land into six-mile strips known as ranges; they are numbered east or west of the principal meridian.
Rate cap. Same as cap.
Tope afectando la tasa. Igual a tope.
Rate lock-in. An agreement by a lender to make a loan at as specified rate Turing a specified period pending approval of the loan application. It is common practice for home mortgage lenders to lock in the terms of the loan, including the interest rate, at the time of application, the lock-in can not be changed for a certain period, generally, the time required for loan approval. The lock-in protects the borrower from an unexpected increase in interest rates while the loan is being processed. When the loan is approved, the borrower receives a commitment letter fixing the terms of the loan for a stated period.
Rate of return. The percentage yield of an investment. Specifically. Rate of return is the percentage of invested cash that is returned in cash income, increased market value or both during the holding period. Rate return is over and above the return of the invested capital.
Real estate. Land and all attachments that are or a permanent nature; same as Realty. Real estate is distinguished from personal property. At one time real estate was the sole source of wealth, and thus achieved a special place in the law because of its importance.
Real estate agent. See agent.
Agente de bienes raíces. Véase agente.
Real estate attorney. A lawyer who specializes in real estate. Most lawyers can explain the standard real estate contract, but a specialist is called for in most real estate disputes as well as to help arrange nonstandard transactions.
Real estate commission. A governmental body charged with enforcing the laws of real estate agency in an estate. Members of the public may lodge complaints about the conduct of licensed agents with the commission.
Real estate Investment Trust (REIT). A real estate mutual fund, allowed by income tax laws to avoid the corporate tax. It sells shares of ownership and must invest in real estate or mortgages. A REIT allows small investors to participate in the ownership and must allows small investors to participate in the ownership of large, potentially profitable, real estate projects.
Real estate owned (REO). Real property held as an asset on the books of a lender, mortgage investor, insurer or guarantor. Most of this inventory has been acquired in the course o foreclosing mortgage loans. Inventories of REO can be a good place to find properties for sale. They often are sold at favorable prices and sometimes with lower interest rates. The terms depend on the type of institution holding the property and how aggressively they want reduce the inventory.
Real estate professional. Someone who’s Business is real estate, most often brokers and salespersons. See agent.
Real Estate Settlement Procedures Act (RESPA). Federal law enacted in 1974 that requires buyer and seller to have knowledge of closing cost. Applies to fist mortgage loans on one- four family homes, information provided includes:
1. The booklet Settlement Cost and you, to be given to potential borrowers.
2. Good faith estimate of closing cost.
3. Use of a uniform settlement statement for review one day before closing with whatever figures are known.
4. Availability of settlement statement for review one day before closing with whatever figures are known.
5. Prohibition against kickbacks.
Real estate taxes. See ad valorem taxes.
Contribuciones afectando bienes raíces. Véase impuestos al valor.
Real property. The right to use real estate as (1) fee simple estate, (2) life stare or (3) leasehold estate. Sometime defined as real estate.
Realtor. Designation given a professional in real estate who subscribes to a strict code of ethics as a member of the local and state boards and of the National Association of Realtors. Less than half of those licensed to sell real estate are Realtors. In many areas, one must be a Multiple Listing Service.
Realty. Same as real estate.
Reappraisal lease. A lease which the rental level is periodically reviewed and reset by independent appraisers. The landlord and tenant can agree on a long term lease knowing that the rent will be fair throughout the term because of the reappraisal clauses in the lease.
Recording. The act of entering in a book of public record instruments affecting the title to real property. Recording in this manner gives notice to the public of the facts involved.
Recording fees. Charges, usually nominal, required recording a document in the public records at the country courthouse. Real estate deeds, mortgage lien and other claims to ownership are publicly recorded to provide an official title record.
Reduction certificate. A document in which the mortgagee (lender) acknowledges the sum due on the mortgage loan. Used when mortgaged property is sold, and the buyer assumes the debt.
Refinance. To change the loan structure without selling the mortgaged property. Mortgage loans are refinanced most often when lower cost financing is available, and the owner can reduce the monthly payment amount with a new loan. An adjustable loan might be refinanced with a fixed-rate loan to lock in a currently low interest rate.
Release. The act by which some claim or interest is surrendered. Release clauses frequently are used when a mortgage covers more than one property (blanket mortgage), so that a particular parcel can be released upon some payment.
Release clause. A mortgage clause that gives the owner of the property the privilege of payment off a portion of the mortgage indebtedness, thus freeing a portion of the property from the mortgage.
Reelection. Gradual subsidence of Waters, leaving dry land, ownership of land beneath a lake, for example, can become more important as reelection occurs.
Remainder. An estate that takes effect after the termination of a prior estate. Such as a life estate. The remainderman owns the property outright upon the death of the life tenant.
Remainder man. The person who is to receive possession of the property alter the death of a life tenant, many people wish to allow a surviving spouse to occupy property for the rest of the spouse’s life, with a child being the remainderman.
Rent. The compensation paid for the use of real estate. Rent is the most important portion of a lease. Rent may be paid in money services or other valuable property.
Renter. Someone who lives in a housing unit subject a lease; a rental tenant; a lessee.
Repayment period. The period arranged to repay the loan principal; same as mortgage terms.
Replacement cost. The cost of erecting a building to take the place of or serve the functions of a previous structure. See reproduction cost. Replacement cost often sets the upper limit on value; it is often used for insurance purposes.
Replacement value. The cost, using current technology, of producing a structure with the same utility as the subject property. The structure does not have to be a perfect reproduction but an acceptable replacement for the subject. Hazard insurance should be carried in an amount to cover the replacement cost of the home. If the home is completely destroyed, the insurance would allow a replacement to be built on the site.
Reproduction cost. The normal cost of exact duplication of a property as of a certain date. Reproduction cost as of a certain date. Reproduction cost differs from replacement requires the same functional utility for a property, whereas reproduction is an exact duplicate, using the same materials and craftsmanship.
Reserves. Money accumulated for a specified future purpose.
Residence. The dwelling where someone lives, either as a homeowner or a renter. The residence may be a principal residence or a second home. See principal residence.
Restriction. A limitation placed upon the use of property, contained in the deed or other written instrument in the chain of title. If buying property with restrictions, one should determine its suitability for the uses required.
Reversion. The right a lessor to possess leased property upon the termination of a lease. A lease is valid for an established term, after which the lessor receives the reversion.
Reversionary interest. The interest a person has in property upon the termination of the preceding estate. A lesson’s interest in leased property is a reversionary interest.
Revocation. An act of recalling a power of authority confereed, such as revocation of a power of attorney, a license, an agency and so forth, those with the authority to recoke, with reason.
Rider. A set of qualifying conditions attached to a contract. An insurance policy may have one or more riders that apply special conditions to the coverage of glass or protection from water damage. A mortgage contract may have a rider to allow interest rate adjustments.
Right of survivorship. The right of a surviving joint tenant to acquire the interest of a deceased Joint owner; the distinguishing feature of joint tenancy by the entirety. The right of survivorship is often used where the joint tenants are closely related.
Right-of-way. The right to use a particular part for access or passage; a type of easement. Also, the areas of subdivisions dedicated to government for use as streets and other public access to lots.
Riparian owner. One who owns land bounding a lake, river or other body of water.
Propietario ribereño. El que es dueño de propiedades a las orillas de un lago, río y otras aguas.
Riparian rights. Rights pertaining to the use of water on, under or adjacent to one’s land. In most states, riparian rights provide that property owners cannot alter the flow of water to their downstream neighbors.
Risk. The probability that the outcome o fan investment venture will deviate from the expected. Most investment risk may be reduced by diversifying the types of assets by purchasing insurance.
Salary. Income from a job that pays a fixed amount per week, for two weeks or one month, regardless of how many hours is worked or how much is produced.
Sale pending. A listed property for which a contract of sale has been written but not yet closed. When a sales contract is signed, a listed property becomes a sale pending, until the closing date or the date the listing goes back into inventory.
Sales contract. See agreement of sale and earnest money contract.
Salesperson. One who is licensed to deal in real estate or perform any other act enumerated by state real estate licensed by the state. A salesperson’s license is required for anyone to sell another’s property. The salesperson must have a sponsoring broker.
Salvage value. The estimated value that an asset will have at the end of its useful life. Real estate improvements, though long lasting, have a limited useful life, at the end of which there may be salvage or scrap value.
Sandwich lease. Leases held by a lessee who sublets all or part of his o her interest, thereby becoming a lessor. Typically, the sandwich leaseholder is neither the owner of the fee estate nor the user of the property. The sandwich lessee tries to profit from the rent differential of the other leases.
Satisfaction piece. An instrument for recording and acknowledging final payment of a mortgage loan. After a loan has been paid off, the borrower should record a satisfaction of mortgage or satisfaction piece.
Savings and loan association (S&L). A lending institution that specializes in mortgage loans.
Second mortgage. Same as a junior mortgage.
Secondary mortgage market. A group of large. Quasi-governmental agencies and other investors that purchase existing mortgage loans. After a mortgage loan is originated, it can be sold into the secondary market to provide funds for more mortgage originations. This means that mortgage loans can be made across the country regardless of how many deposits local lending institutions contain.
Section (of land). One square mile in the government survey, containing 640 acres. There are 36 sections in a six-mile-square township.
Seisin. The possession of Realty by one who claims to own a fee simple estate or Seisin is a covenant needed to transfer ownership to another.
Self-employed. Earning income directly from one’s own Business, trade or profession or working on a contract, strict commission or piece work basis rather than as a wage-earning or salaried employee. The self-employed need special proof of income when applying for a loan. Usually, tax returns for the past several years are sufficient.
Seller. The person who transfers title to the buyer for a consideration.
Seller Financing. Same as owner financing.
Selling agent. The real estate agent who finds the buyer. Homes often are sold under cooperative arrangements, such as the Multiple Listing Service. One agent may be the listing agent for the seller and another agent may be the selling agent who brings a willing buyer to the deal. Both agents may be represent the seller or the buyer and share in the commission.
Senior Residential Appraiser (SRA). A designation awarded by the Society of Real Estate Appraisers. Many of the most qualified residential appraisers have this designation.
Perito Valuador Superior de Casas Habitación. (SRA). Distinción que otorga la Sociedad de Peritos Valuadores de Bienes Raíces. Muchos de los peritos valuadores de casas habitación mas destacados cuentan con esta distinción.
Separate property. Property acquired by either spouse prior to marriage or by gift or devise after marriage or by gift or devise after marriage, as distinct from community property. In community property states including Texas, separate property can remain that way; property acquired during marriage by joint effort is community.
Setback. The distance from the curb or other established line within which no buildings may be erected. Setbacks must be observed- if violated during construction, the property might be required to be razed.
Settlement. Same as closing.
Settlement statement. See closing statement.
Severalty. The ownership of real property by an individual as an individual. Severalty is distinguished from joint ownership, whereby two or more persons are owners.
Sewage system. A network of drainage pipes and Collection and treatment facilities that dispose of household liquid wastes. Urban and suburban properties usually are connected to a city sewage system. Homeowners pay a monthly fee for this service. Outlying and rural homes have this service. Outlying and rural homes have individual septic tank systems.
Shopping center. A Collection of retail establishments with common parking facilities and sometimes with an enclosed mall area. Larger centers generally have an anchor tenant – large department or grocery store that draws customers to the center.
Shopping for a home. The procedure of searching for a suitable home in the market; includes checking advertising and brokers’ inventory and personal visits to neighborhoods and houses for sale. Because real estate is a significant purchase, care should be exercised in its selection. Homebuying involves satisfying housing needs and desires plus investing in an expensive, durable asset.
Single-family home. Technically, a structure that contains only one housing unit. However, many mortgage loans that are restricted to single-family homes can be used to finance duplexes, triplexes and quadraplexes that contain two, three or four units, respectively, in the same structure. Single- family homes are the most popular form of housing, particularly among homebuyers. Even large percentage o rental housing is single-family.
Site. A plot of land prepared for or underlying structure or development.
Special assessment. An assessment made against a property to pay a public improvement by which the assessed property is considered to be especially benefited. A municipality may install a new sewer line or sidewalk; each owner along the path may be charged a special assessment, in addition to a regular tax.
Special warranty deed. A deed in which the grantor limits the title warranty given to the grantee to anyone claiming by, from, through or under him or her, the grantor. The grantor does not warrant against title defects arising from conditions that existed before her or she owned the property, the seller does not guarantee title against all claims- just those while he or she was the owner.
Specific performance. A legal action in which the court requires a party to a contract to perform the terms of the contract when he or she has refused to fulfill obligations. Used in real estate because each parcel of land is unique. In other types of property transactions, a court may award compensation as damages in terms of money; by contrast, in real estate the court may insist on specific performance.
Statute. A law established by an act of a legislature. Statutes are written laws; laws are also made through judicial interpretation and government administration.
Statute of frauds. A state law that provides that certain contracts must be in writing to be enforceable. Applies to deeds, mortgages and other real estate contracts, with the exception of leases for periods shorter than one year. The statute of frauds requires that contracts involving real estate must be in writing.
Statute of limitations. Certain statutory periods alter which a claimant is barred from enforcing a claim by suit. If a practice continues beyond the statute of limitations, the person who is adversely affected may be barred fro trying to prevent it.
Step-up-lease. See graduated lease.
Contrato de arrendamiento por incrementos. Véase contrato de arrendamiento graduado.
Stipulation. An important requirement, condition or item within a written contract.
Straight-line depreciation. Equal annual reductions in the book value of property. Used in accounting for replacement and tax purposes. Straight-line provides less depreciation in the early years of an asset than does an accelerated method. Most taxpayers prefer accelerated depreciation because it minimizes current taxes. However, for financial reporting purposes, most companies prefer straight-line because it provides a higher net income.
Subdividing. Dividing a tract of land into smaller tracts. Subdividing allows raw acreage to be developed with streets, utilities and other amenities added to result in lots ready for improvements such as houses to be built.
Subdivision. A tract of land divided into lots or plots suitable for home-building purposes. Some states and localities require that a subdivision plat be recorded.
Subject to mortgage debt. Describes the situation of a buyer taking title to mortgaged real property but not personally responsible for the payment of any portion of the amount due. The buyer must make payment to keep the property; however, if he or she fails to do so, only his or her equity in that property is lost.
Sublease. A lease from a lessee to another lessee. The new lessee is a sublessee or subtenant. See sandwich lease.
Subset. See sublease.
Subordination clause. A stipulation or document that permits a mortgage recorded at a later date to take priority over an existing mortgage. Ordinary, a second mortgage automatically moves up to become a first lien when the fist mortgage is retired. If the second mortgage has a subordination clause, it will remain a second mortgage when a fist mortgage is refinanced.
Subprime loan. Loan designed for high-risk borrowers who generally have lower credit scores. Subprime loans have less favorable terms- higher interest rates, more discount points- that those offered to lower-risk borrowers.
Surety. One who guarantees the performance of another; similar to a guarantor. The surety becomes liable for the contract, just as the original principal. The surety is contacted when the principal fails to perform some duty.
Surrender. The cancellation of a lease before its expiration by mutual consent of the sessor and the lessee. Surrender occurs only when agreed upon by both parties.
Surrogate’s court. A court having jurisdiction over the Prof. of wills and the settling of estates and of citations. Also called probate court.
Survey. The process by which a parcel of land is measured and its area ascertained; also, the blueprint showing the measurements, boundaries and area. A survey is needed to determine exact boundaries and any easements or encroachments.
Tax. A charge upon persons or things by a government. Many different taxes affect real estate. Most local governments levy an ad valorem tax based on property value. The federal government and many states have an income tax, but rental property owners may claim operating expense, interest and depreciation expense to reduce their taxable income.
Tax assessment. The amount charged the owner of property for ad valorem taxes. The annual assessment is based on an appraisal of property’s value, the tax rate (sometimes called the millage rate) and any exemptions the property owner may be entitled to claim. The property owner should receive an advance notice of the valuation. The owner may challenge the estimate before the tax district’s appraisal review board to protest the amount if it seems unfair of unrealistic.
Tax benefits. Special income tax deductions available to homeowners. These include: itemized deduction of mortgage interest and property taxes, deferred capital gains when a home is sold and another purchased within two years and another purchased within two years and a one-time exemption of $ 125,000 in deferred capital gains for persons older than 55. Tax benefits effectively reduce the cost of owning a home and offer an incentive to become a homeowner.
Tax certificates. Documents purchased for at closing that provide assurance that taxes by a new or previous owner will be paid when due.
Tax consultant. An expert in tax law and methods to reduce tax liability.
Tax sale. The sales of property alter a period of nonpayment of taxes. See redemptive rights. Unpaid taxes become
Valid. Having force, or binding force; legally sufficient and authorized by law. A valid contract can be enforced in court.
Valuation. Estimated worth or price; also, valuing by appraisal. Valuation is the process of estimating the worth o fan object.
Value. The worth of all the Rights arising from ownership; the quantity of one thing that will be given in exchange for another. Price is the historic amount that was paid; value is an estimate of what it is worth. Often value is qualified as to a specified type; market, user, assessed, insurable, and speculative.
Vera. In Texas, a measure of length equaling 33 1/3 inches.
Vendee. A purchaser; buyer.
Vendee’s lien. A lien against property under a contract of sale, to secure the deposit paid by a purchaser.
Vendedor. A seller.
Verification. Sworn statements before a duly qualified officer concerning the correctness of the contents o fan instrument.
Veterans Administration Loan. See GI loan.
Violation. An act, a deed, or conditions contrary to law or permissible use of real property. When there is a violation of a law or contract, the perpetrator may be liable for damages or penalties or both.
Void. Having no force of effect; unenforceable.
Voidable. Capable of being made unenforceable, but not made so unless certain action is taken. For example, real estate contracts entered into by minors are voidable only the minors.
Waiver. The voluntary renunciation abandonment or surrender of some claim, right or privilege a person may waive a right when that right is unimportant in the overall scheme.
Warranty. A promise or representation contained in a contract. Usually a seller’s warranty pertains to the quality, character or title of goods sold.
Warranty deed. One that contains a covenant that the grantor will Project the grantee against any and all claims. Usually contains covenants assuring good title, freedom form encumbrances and quiet enjoyment. See general warranty deed, special warranty deed.
Water table. The level at which natural groundwater is found. The water table may affect type of building possible and access to well water.
Will. The disposition of one’s property, to take Ester death. If a person dies without a will (intestate), the property goes to his or her heirs al law. The property of one who dies intestate without heir escheats to the state.
Without recourse. Words used in endorsing a note or bill to connote that the future holder is not to look to the debtor personally in the event of nonpayment; the creditor has recourse only to the property. A form of exculpation. In default, the borrower can lose the property mortgaged, but no other property. There can be no deficiency judgment.
Workout agreement. A plan drafted by a lender to help a borrower by modifying the terms of a loan temporarily of permanently. Workout agreements offer borrowers a way to avoid loan default and loss of the property. They offer lenders a possibility of avoiding the expense of foreclosing the loan.
Zone. An area set off by the proper authorities for specific use, subject to certain restrictions or restraints. Changing the zoning of property usually requires approval by the city council.
Zoning ordinance. Act of city or country or other authorities specifying the type of use to which property may be put in specific areas, such as residential, commercial, and industrial.
