Real Estate Glossary

BALANCE – The appraisal principle stating that the greatest value in a property will occur when the type and size of the improvements are proportional to each other as well as the land.

BALLOON PAYMENT – The final payment, remaining balance, of a note, obligation, or mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized. Repays the debt in full.

BARGAIN AND SALE DEED – A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title. The grantor may add warranties to the deed. When transferred the deed recites a consideration and conveys all the grantor’s interest in the property to the grantee.

BASE LINE – The main imaginary line running east and west and crossing a principal meridian at a definite point; used by surveyors for reference in locating and describing land under the rectangular (government) survey system of legal description.

BASIS – The financial interest which IRS attributes to the owner of an asset for purposes of determining annual depreciation and gain or loss on sale of the asset. If property was acquired by purchase, the owner’s basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. This new basis is called the adjusted basis.

BENCHMARKS – Permanent reference marks, points, or monument, such as an iron post or a brass marker (usually embedded in a cement sidewalk), established for use by surveyors in measuring differences in elevations and/or altitudes over a surveyed area.

BENEFICIARY – (1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn. (2) A lender in a deed of trust loan transaction.

BILATERAL CONTRACT – A contract in which each party promises to perform an act in exchange for the other party’s promise to perform. See contract.

BINDER – An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intent to complete the transaction.

BLANKET MORTGAGE – A mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien upon repayment of a definite portion of the debt. Often used to finance proposed subdivisions or development projects, especially cooperatives.

BLOCKBUSTING – The illegal practice of inducing homeowners to sell their properties by making representations regarding the entry or prospective entry of persons of a particular race or national origin into the neighborhood.

BLUE SKY LAWS – Common name for those state and federal laws that regulate the registration and sale of investment securities. Designed to protect the public from fraudulent practices involving the transfer of those securities.

BOOT – Money or other property given to make up any difference in value or equity between two properties in an exchange.

BOYCOTT – When individuals or businesses withhold their patronage to a business as a protest or to reduce competition.

BRANCH OFFICE – A secondary place of business apart from the principal or main office from which real estate business is conducted. A branch office usually must be run by a licensed real estate professional.

BREACH OF CONTRACT – Violation of any of the terms or conditions in a contract without legal excuse; for example, failure to make payment when due.

BRING DOWN – A second title search that is made after the closing and before any new documents are filed.

BROKER – One who acts as an intermediary between parties to a transaction for a fee or commission.

BROKER PROTECTION CLAUSE – Clause in a contract that protects broker from losing a commission in the event a transaction is not completed or is intentionally delayed until after the listing has expired.

BROKERAGE – The bringing together of parties interested in completing a real estate transaction.

BROKER’S PRICE OPINION (BPO) – An opinion of real estate value commissioned by a bank or an attorney and provided by a broker.

BROWNFIELDS – Defunct, derelict, or abandoned commercial or industrial sites; may have toxic wastes.

BUDGET COMPARISON STATEMENT – Compares actual results with the original budget, often giving either percentages or a numerical variance of actual versus projected income and expenses.

BUFFER ZONE – A strip of land, usually used as a park or designated for a similar use, separating land dedicated to one use from land dedicated to another use (e.g., residential from commercial)

BUILDING CODE – An ordinance that specifies minimum standards of construction for buildings to protect public safety and health.

BUILDING PERMIT – Written governmental permission for the construction, alteration, or demolition of an improvement, showing compliance with building codes and zoning ordinances.

BUILDING-RELATED ILLNESS (BRI) – An illness due to air quality problems, typically toxic substances, or pathogens; a clinically diagnosed condition.

BUNDLE OF LEGAL RIGHTS – The concept of land ownership that includes ownership of all legal rights to the land–possession, control within the law, enjoyment, exclusion, and disposition.

BUYDOWN – A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.

BUYER REPRESENTATION AGREEMENT – A principal-agent relationship in which the real estate professional acts on behalf of the buyer, usually as an agent, with fiduciary responsibilities to the buyer.

BUYER’S AGENT – A real estate professional who is under contract to locate property for a buyer and represent the buyer’s interests in a transaction.

BUYER’S BROKER – A residential real estate professional who represents prospective buyers exclusively.

BUYER’S REPRESENTATIVE – A residential real estate professional who represents the prospective purchaser in a transaction, often through a sales associate of the broker. The buyer’s representative who act’s as a buyer’s agent owes the buyer-principal the common-law or statutory agency duties.

CANTILEVER – A projecting beam or overhanging portion fixed at only one end.

CAPITAL GAIN – Taxable profit earned from the sale of a capital asset.

CAPITALIZATION – A mathematical process, commonly used in the income approach to appraisal, for estimating the value of the property using a proper rate of return on the investment and the annual net operating income expected to be produced by the property. The formula is expressed as follows: income ÷ rate = value

CAPITALIZATION RATE (CAP RATE) – The estimated percentage rate of return a property will produce on the owner’s investment. Often calculated by dividing the annual net operating income (NOI) produced by an asset and current market value.

CAPPING – The process of laying two to four feet of soil over the top of a landfill site and then planting grass on it to enhance the aesthetic value and prevent erosion.

CARBON MONOXIDE (CO) – A colorless, odorless gas that occurs as a by-product of fuel combustion that may result in death in poorly ventilated areas.

CASH FLOW – The net spendable income from an investment, determined by deducting all operating and fixed expenses from the gross income. When expenses exceed income, a negative cash flow results.

CASH FLOW REPORT – A monthly statement that details the financial status of the property.

CAVEAT EMPTOR – A Latin phrase meaning “let the buyer beware.”

CC&Rs – See covenants, conditions, and restrictions.

CERTIFICATE OF OCCUPANCY – Permission by the municipal inspector to occupy a completed building structure after being inspected and having complied with building codes.

CERTIFICATE OF REASONABLE VALUE (CRV) – A certificate/form indicating the appraised value of a property being financed with a VA (Veterans Administration) loan.

CERTIFICATE OF SALE – The documentation generally given to the purchaser at a tax foreclosure sale. It does not convey title; normally, it is an instrument certifying that the holder received title to the property after the redemption period passed and that the holder paid the property taxes for that interim period.

CERTIFICATE OF TITLE – A statement of opinion on the status of the title to a parcel of real property based on an examination of specified public record.

CHAIN OF TITLE – The succession of conveyances, from some accepted starting point, whereby the present holder of real property derives title.

CHATTEL – See personal property.

CIVIL RIGHTS ACT OF 1866 – An act that prohibits racial discrimination in the sale and rental of housing.

CLIENT – The principal in an agency relationship or other form of representation.

CLOSING – An event where promises made in a sales contract are fulfilled and mortgage loan funds (if any) are distributed to the buyer. The seller delivers title to the buyer, in exchange for the purchase price.

CLOSING DISCLOSURE – The CFPB form that itemizes all charges that are normally paid by a borrower and a seller in connection with settlement, whether required by the lender or another party, or paid by the lender or any other person.

CLOSING STATEMENT – A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction; also called a settlement statement.

CLOUD ON TITLE – Any document, claim, unreleased lien or encumbrance that may impair or injure the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.

CODE OF ETHICS – A written system of standards of ethical conduct.

CODICIL – A supplement or an addition to a will, executed with the same formalities as a will, which normally does not revoke the entire will.

COINSURANCE CLAUSE – A clause in insurance policies covering real property that requires the policyholder to maintain fire insurance coverage generally equal to at least 80% of the property’s actual replacement cost.

COLLATERAL – Something having value that is given to secure repayment of a debt. The collateral for a real estate mortgage loan is the mortgaged property itself, which has been hypothecated.

COMMINGLING – The illegal act by a real estate professional of placing client or customer funds with personal funds. By law, real estate professionals are required to maintain a separate trust or escrow account for other parties’ funds held temporarily by the real estate professional.

COMMISSION – Payment to a real estate professional for services rendered, such as in the sale or purchase of real property, usually a percentage of the selling price of the property.

COMMON ELEMENTS – Parts of a property that are necessary or convenient to the existence, maintenance and safety of the condominium or are normally in common use by all the condominium residents. Each condominium owner has an undivided ownership interest in the common elements.

COMMON LAW – The body of law based on custom, usage, and court decisions.

COMMON WALL – A wall separating two living units.

COMMUNITY ASSOCIATE MANAGEMENT – Provides a team of property managers, accounting staff, office staff, and property consultants to manage property.

COMMUNITY PROPERTY – A system of property ownership based on the theory that each spouse has an equal interest in property acquired by the efforts of either spouse during marriage. A holdover of Spanish law found predominately in the western U.S. states; the system was unknown under English common law.

COMMUNITY REINVESTMENT ACT OF 1977 (CRA) – Under the act, which was revised most recently in 2008, financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms.

COMPARABLES – Properties used in an appraisal report that are substantially equivalent to the subject property.

COMPARITIVE MARKET ANALYSIS (CMA) – A comparison of the prices of recently sold properties that are similar to a listing seller’s property in terms of location, style, and amenities.

COMPETENT PARTY – A person who has the capacity to be engaged in a legal contract; being of sound body and mind.

COMPETITION – The appraisal principle stating that excess profits generate competition.

COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT (CERCLA) – A federal law administered by the Environmental Protection Agency that establishes a process for identifying parties responsible for creating hazardous waste sites, forcing liable parties to clean up toxic sites, bringing legal action against responsible parties, and funding the abatement of toxic sites. See also Superfund.

COMPREHENSIVE LOSS UNDERWRITING EXCHANGE (CLUE) – A database of consumer claim history that allows insurance companies to access prior claims information in underwriting and rating process.

COMPREHENSIVE PLAN – See master plan.

COMPUTERIZED LOAN ORIGINATION (CLO) – An electronic network for handling loan applications through remote computer terminals linked to various lenders’ computers.

CONCILIATION – A form of alternative dispute resolution in which a conciliator meets with each of the parties separately to help them settle their differences voluntarily, without the formality of a hearing or trial.

CONDEMNATION – A judicial or administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use and compensates the owner, i.e., the power of the government to take private property for public use.

CONDITIONAL-USE PERMIT – Written governmental permission allowing a use inconsistent with zoning but necessary for the common good, such as locating an emergency medical facility in a predominantly residential area.

CONDOMINIUM – The absolute ownership of a unit in a multiunit building based on a legal description of the airspace the unit actually occupies, or a separate dwelling unit in a multiunit development, plus an undivided interest in the ownership of the common elements in the building or development, which are owned jointly with the other condominium unit owners.

CONFESSION OF JUDGEMENT CLAUSE – Permits judgement to be entered against a debtor without the creditor’s having to institute legal proceedings.

CONFORMITY – The appraisal principle holding that the greater the similarity among properties in an area, the better they will hold their value.

CONSIDERATION – (1) That received by the grantor in exchange for the deed. (2) something of value that induces a person to enter into a contract.

CONTRUCTION LOAN – See interim financing.

CONSTRUCTIVE ANNEXATION – The combination of items into real property that are not fixed or fastened to the property.

CONSTRUCTIVE EVICTION – Actions of a landlord that so materially disturb or impair the tenant’s enjoyment of the leased premises that a tenant is effectively forced to move out and terminate the lease without liability for any further rent.

CONSTRUCTIVE NOTICE – Notice given to the world by recorded documents. All persons are charged with knowledge of such documents and their consents, whether or not they have actually examined them. Possession of property is also considered constructive notice that the person in possession has an interest in the property.

CONSUMER – An individual who purchases goods or services that are not for resale.

CONTINGENCIES – Provisions in a contract that require a certain act to be done or a certain event to occur before the contract becomes binding.

CONTRACT – A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bond to act, or bilateral, by which all parties to the instrument are legally bond to act as prescribed.

CONTRACT BROKER – See nonagent.

CONTRIBUTION – The appraisal principle stating that the value of any component of a property is what it gives to the value of the whole or what its absence from that value.

CONTROLLED BUSINESS ARRANGEMENT – An arrangement that offers consumers a package of services (e.g., a real estate firm, title insurance company mortgage broker, and home inspection company).

CONVENTIAL LOAN – A loan the requires no federally sponsored insurance or guarantee.

CONVERSION – The illegal use of money received on behalf of the principal.

CONVEYANCE – A term used to refer to any document that transfers title to real property. The term is also used in describing the act of transferring.

COOPERATING BROKER – See listing broker.

COOPERATIVE – A residential multiunit building whose title is held by a trust or corporation that is owned by and operated for the benefit of people living within the building who are the beneficial owners of the trust or shareholders of the corporation, each possessing a proprietary lease to a property unit.

CO–OWNERSHIP – Title ownership held by two or more persons.

CORPORATION – An entity or organization, created by operation of law, whose rights of doing business are essentially the same as those of an individual. The entity has continuous existence until it is dissolved according to legal procedures.

CORRECTIVE MAINTENANCE – Correction of problems after they have occurred.

COST – The total amount of money incurred for products or services.

COST APPROACH – The process of estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation.

COST RECOVERY – An Internal Revenue Service term for depreciation.

COUNTER–OFFER – A new offer made in response to an offer received from another. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

COVENANT – A written agreement or promise between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to the property; usually found in such real estate documents as deeds, mortgages, leases, and contracts for deed.

COVENANT OF QUIET ENJOYMENT – The covenant implied by law by which a landlord guarantees that a tenant may take possession of leased premises and that the landlord will not interfere in the tenant’s possession or use of the property.

COVENANTS, CONDITIONS, AND RESTRICTIONS (CC&Rs) – Private agreements that affect land use. They may be enforced by an owner of real estate that benefits from them and can be included in the seller’s deed to the buyer.

CREDIT – On a closing statement, an amount entered in a person’s favor–either an amount the party has paid or an amount for which the party must be reimbursed.

CURTESY – A life estate, usually a fractional interest, given by some states to the surviving husband/wife in real estate owned by his deceased wife/husband. Most states have recognized other marital property rights and abolished curtesy.

CUSTOMER – The third party or non-represented consumer for whom some level of service is provided.

DATUM – A horizontal plane from which heights and depths are measured.

DEBIT – On the closing statement, an amount charged; that is, an amount that the debited party must pay.

DEBT TO INCOME (DTI) – Information about an applicant’s gross income and total debt that lenders generally look at as a percentage to determine qualification for a loan.

DECEDENT – A person who has died.

DEED – A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

DEED IN LIEU OF FORECLOSURE – A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. If accepted by the mortgagee, this is a way for the mortgagor to avoid foreclosure.

DEED IN TRUST – An instrument that grants the trustee under a land trust full power to sell, mortgage, and subdivide a parcel of real estate. The beneficiary controls the trustee’s use of these powers under the provisions of the trust agreement.

DEED OF RECONVEYANCE – A document that a trustee uses to transfer the title back to the trustor (borrower) when the note is repaid.

DEED OF TRUST – See trust deed.

DEED OF TRUST LIEN – See trust deed lien.

DEED RESTRICTIONS – Clauses in a deed limiting the future use of the property. Deed restrictions may impose a vast variety of limitations and conditions–for example, they may limit the density of buildings, dictate the types of structures that can be erected, or prevent buildings from being used for a specific purpose or even from being used at all.

DEFAULT – The nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due.

DEFEASANCE CLAUSE – A clause used in leases and mortgages that cancels a specified right upon occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.

DEFEASIBLE FEE ESTATE – An estate in which the holder has a fee simple title that may be divested upon the occurrence or nonoccurrence of a specified event. There are two categories of defeasible fee estates: fee simple on condition precedent (fee simple determinable) and fee simple on condition subsequent.

DEFICIENCY JUDGEMENT – A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. In some states, a deficiency judgement cannot be sought when the mortgage debt was used to purchase, and is secured by, the borrower’s principal residence.

DELINQUENT TAXES – Taxes that are unpaid and past due.

DELIVERY AND ACCEPTANCE – When the title to property is delivered by the grantor and accepted by the grantee.

DEMAND – The amount of goods people are willing and able to buy at a given price; often coupled with supply.

DEMOGRAPHICS – The study and description of a population.

DENOMINATOR – The number written below the line in a fraction.

DENSITY ZONING – Zoning ordinances that restrict the maximum average number of housing units per acre that may be built within a particular area, generally a subdivision.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) – Federal agency that has established rules and regulations that further interpret the practices affected by federal law; for example, HUD distributes an equal housing opportunity poster.

DEPRECIATION – (1) In appraisal, a loss in value due to any cause, including physical deterioration, functional obsolescence, and external obsolescence. (2) In real estate investment, a deduction for tax purposes taken over the period of ownership of income property, based on the property’s acquisition cost.

DESCENT – Acquisition of an estate by inheritance in which an heir succeeds to the property by operation of law.

DESIGNATED AGENCY – A process that accommodates an in-house sale in which two different agents are involved. The broker designates one agent to represent the seller and one agent to represent the buyer.

DESIGNATED AGENT – A real estate professional to authorized by a broker to act as the agent for a specific principal in a particular transaction; also, may be called assigned agent or appointed agent.

DETERMINABLE FEE ESTATE – A fee simple estate providing that the property returns to the original grantor or heirs when a specified condition occurs, indicating that the property is no longer being used for the purpose prescribed.

DEVELOPER – One who attempts to put land to its most profitable through the construction of improvements.

DEVELOPMENT – The construction of improvements that benefit land.

DEVISE – A transfer of real property by will. The decedent is the devisor, the recipient is the devisee.

DISCHARGE – The act of terminating a contract or agreement; this may be done when it has been completely performed for by another party’s breach or default.

DISCLAIMER – A statement indicating no legal responsibility for information; no warranties or representations have been made.

DISCLOSURE – Relevant information or facts that are known or should have been know.

DISCOUNT POINTS – A unit of measurement used for various loan charges; one-point equals 1% of the loan amount.

DISCOUNT RATE – The interest rate set by the Federal Reserve that member institutions are charged when they borrow money through the Fed.

DIVISOR – A number or quantity divided into another.

DOMINANT TENEMENT – A property that includes in its ownership the appurtenant right to use an easement over another person’s property for a specific purpose.

DOWER – The legal right or interest, recognized in some states, that a wife acquires in the property her husband held or acquired during their marriage. During the husband’s lifetime, the right is only a possibility of an interest; upon his death, it can become an interest in land.

DUAL AGENCY – Representing both principals (buyer and seller) to a transaction. This is unethical unless both parties agree to it, and it is illegal in some states.

DUE ON SALE CLAUSE – A provision in the mortgage stating that the entire balance of the note is immediately due and payable if the mortgagor transfers (sells) the property.

DURESS – Unlawful constraint or action exercised upon a person whereby the person is forced to perform an act against their will. A contract entered into under duress is voidable.

DWELLING – Any building or part of a building designed for occupancy as a residence by one or more families.

EARNEST MONEY – Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but to be applied to the purchase price if the sale is closed.

EASEMENT – A right to use the land of another for a specific purpose, such as for a right-a-way or utilities; an incorporeal interest in land because it does not include a right of possession.

EASEMENT APPURTENANT – An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor’s land.

EASEMENT BY IMPLICATION – An easement that occurs when a party’s actions reflect the intention to create an easement.

EASEMENT BY NECESSITY – An easement allowed by law as necessary for the full enjoyment of a parcel of real estate (e.g., a right of ingress and egress over a grantor’s land)

EASEMENT BY PRESCRIPTION – An easement acquired by open, notorious, continuous, hostile and adverse use of the property for the period of time prescribed by state law.

EASEMENT IN GROSS – An easement that is not created for the benefit of any land owned by the owner of the easement but that attaches personally to the easement owner. For example, a right granted by a property owner to a friend to use a portion of the property for the rest of the friend’s life would be an easement in gross. Attaches a particular right to an individual or entity rather than to the property itself.

ECONOMIC LIFE – The number of years during which an improvement will add value to land.

ELECTRONIC CONTRACTING – A process of integrating information electronically in a real estate transaction between clients, lender, and title and closing agents.

ELECTRONIC SIGNATURES IN A GLOBAL AND NATIONAL COMMERCE ACT (E-SIGN) – An act that makes contracts (including signatures) and records legally enforceable regardless of the medium in which they are created.

EMBLEMENTS – Growing crops (called fructus industriales—distinguished from fructus naturales), such as corn and wheat, that are produced annually through labor and industry.

EMINENT DOMAIN – The right of a government or municipal quasi-public body to acquire property for public use through a court action called condemnation, in which the court decides that the use is a public use and determines the compensation (fair market value) to be paid by the owner.

EMPLOYMENT CONTRACT – A document evidencing formal employment between employer and employee or between principal and agent or representative. In the real estate business, this generally takes the form of the agreement between broker and sales associate, client representation agreement (including a listing agreement or buyer representation agreement), or property management agreement.

ENABLING ACTS – State legislation that confers zoning and other powers on municipal governments.

ENCAPSULATION – A method of controlling environmental contamination by sealing off a dangerous substance, such as asbestos.

ENCROACHMENT – A building or some portion of it–a wall or fence, for instance–that extends beyond the land of the owner and illegally intrudes on the land of an adjoining owner or a public street or alley.

ENCUMBRANCE – Anything–such as a mortgage, tax, or judgement lien; an easement; a restriction on the use of the land; or an outstanding dower right–that may diminish the value or use and enjoyment of a property.

ENFORCEABLE CONTRACT – A contract that meets all the elements of a valid contract, including compliance with any applicable statute of frauds or other law that requires it to be in writing and signed by all parties.

ENVIRONMENTAL IMPACT STATEMENT (EIS) – A statement that details the impact a project will have on the environment.

ENVIRONMENTAL SITE ASSESSMENT (ESA) – An evaluation of property to show that due care was exercised in the determination of environmental impairments.

EQUAL CREDIT OPPORTUNITY ACT (ECOA) – The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, marital status, or receipt of public assistance.

EQUALIZATION – The raising or lowering of assessed values for tax purposes in a particular county or taxing district to make them equal to assessments in other counties or districts.

EQUALIZATION FACTOR – A factor (number) by which the assessed value of a property is multiplied to arrive at a value for the property that is in line with statewide tax assessments. The ad valorem tax would be based on this adjusted value.

EQUITABLE LIEN – See statutory lien.

EQUITABLE RIGHT OF REDEMPTION – The right of a defaulted property owner to recover the property before its sale by paying the appropriate fees and charges.

EQUITABLE TITLE – The interest held by a vendee (buyer) under a contract for deed or an installment contract in which title is not immediately transferred; the equitable right to obtain absolute ownership to property when legal title is held in another’s name.

EQUITY – The interest or value that an owner has in property over and above any indebtedness.

EQUITY BUILDUP – That portion of the loan payment directed toward the principal rather than the interest, plus any gain in property value due to appreciation.

EROSION – The gradual and sometimes imperceptible wearing away of the land by natural forces, such as wind, rain, and flowing water.

ESCHEAT – The reversion of property to the state or county, as provided by state law, in which a decedent dies intestate without heirs capable of inheriting, or when the property is abandoned.

ESCROW – The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered upon the performance of conditions outlined in the escrow instructions.

ESCROW ACCOUNT – The trust account established by a real estate professional under the provisions of the license law for the purpose of holding funds on behalf of the real estate professional’s principal or some other person until the consummation or termination of a transaction; trust account established by an escrow agent to hold funds pending distribution at the closing of a transaction.

ESCROW CLOSING – Occurs when a disinterested third party is authorized to act as escrow agent (escrow holder) and to coordinate the closing activities on behalf of the buyer and the seller.

ESCROW CONTRACT – An agreement between a buyer, a seller, and an escrow holder setting forth rights and responsibilities of each.

ESCROW INSTRUCTIONS – A document that sets forth the duties of the escrow agent, as well as the requirements and obligations of the parties, when a transaction is closed through an escrow.

ESTATE (TENANCY) FOR YEARS – An interest for a certain, exact period of time in property leased for a specified consideration. Can also be referred to as estate for term.

ESTATE (TENANCY) FROM PERIOD TO PERIOD – An interest in leased property that continues from period to period–week to week, month to month, or year to year.

ESTATE IN LAND – The degree, quantity, nature, and extent of interest a person has in real property.

ESTATE TAX – Federal tax on a decedent’s real and personal property.

ESTOPPEL – Method of creating an agency relationship in which someone states incorrectly that another person is his agent, and a third person relies on that representation.

ESTOPPEL CERTIFICATE – A document in which a borrower certifies the amount owed on a mortgage loan and the rate of interest.

ETHICS – A system of moral principles and rules that become the standard for professional conduct.

EVICTION – The legal process to oust a person from possession of real estate.

EVIDENCE OF TITLE – Proof of ownership of property; commonly a certificate of title, an abstract of title with lawyer’s opinion, title insurance, or a Torrens registration certificate.

EXCEPTION – The exclusion of a part of the property conveyed.

EXCHANGE – A transaction in which all or part of the consideration is the transfer of like-kind property (e.g., real estate for real estate).

EXCLUSIVE AGENCY LISTING – A listing contract under which the owner appoints a real estate professional as her exclusive agent for a designated period of time to sell the specified property, on the owner’s stated terms, for a commission. The owner reserves the right to sell the property without paying anyone a commission if the sale is to a prospect who has not been introduced or claimed by the real estate professional.

EXCLUSIVE BUYER REPRESENTATION AGREEMENT – Agreement in which the buyer works with only one broker, although the broker is free to represent other buyer clients.

EXCLUSIVE RIGHT-TO-SELL LISTING – A listing contract under which the owner appoints a real estate professional as his exclusive agent for a designated period of time to sell the specified property on the owner’s stated terms and agrees to pay the real estate professional a commission when the property is sold, whether by the real estate professional, the owner, or another real estate professional.

EXECUTED CONTRACT – A contract in which all parties have fulfilled their promises and thus performed the contract.

EXECUTION – The singing and delivery of an instrument. Also, a legal order directing an official to enforce a judgement against the property of a debtor.

EXECUTOR – An appointed person who carries out the directions of a will. A woman might be referred to as executrix, although executor is the term most commonly used to refer to either a man or woman.

EXECUTORY CONTRACT – A contract under which something remains to be done by one or more of the parties.

EXPRESS AGENCY – An agency relationship based on a formal agreement between the parties.

EXPRESS AGREEMENT – An oral or written contract in which the parties state the contract’s terms and express their intentions in words. Can also be referred to as express contract.

EXTERNAL DEPRECIATION – Reduction in a property’s value caused by outside factors (i.e., those that are off the property).

EXTERNAL OBSOLESCENCE – Incurable depreciation caused by factors not on the subject property, such as environmental or economic factors.

FACILITATOR – See nonagent.

FAIR HOUSING ACT – The federal law that prohibits discrimination in housing based on race, color, religion, sex, disability, familial status, and national origin.

FAIR HOUSING AMENDMENTS ACT OF 1988 – Expansion of the Fair Housing Act to include families with children and those with physical or mental disabilities.

FAMILIAL STATUS – One or more individuals under age 18 living with a parent or guardian; also includes a woman who is pregnant and anyone who is in the process of assuming custody of a child under age 18.

FANNIE MAE – The Federal National Mortgage Association–a government-supervised enterprise established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders. Usually buys mortgages from larger, commercial banks. Most loans back by Fannie Mae are conventional loans, which are not insured by the government.

FARMER MAC – The Federal Agricultural Mortgage Corporation–a privately owned, and publicly traded company established by Congress to create a secondary market for agricultural mortgage and rural utilities loans and the portions of agricultural and rural development loans guaranteed by the U.S. Department of Agriculture (USDA).

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) – An independent federal agency established by Congress to examine and supervise financial institutions, manage receiverships, and insure deposits (currently up to $250,000 per depositor per financial institution).

FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) – A federal agency that is responsible for assisting the nation in preparing for, protecting against, responding to, and recovering from hazards.

FEDERAL FUNDS RATE – The rate recommended by the Federal Reserve for the member banks to charge each other on short-term loans. These rates form the basis on which the banks determine the percentage rate of interest they will charge their loan customers.

FEDERAL HOME LOAN MORTGAGE CORPORATION – See Freddie Mac.

FEDERAL NATIONAL MORTGAGE ASSOCIATION – See Fannie Mae.

FEDERAL RESERVE SYSTEM (FED) – The country’s central banking system, which establishes the nation’s monetary policy by regulating the supply of money and interest rates.

FEE-FOR-SERVICE – Arrangement by which a consumer asks a real estate professional to perform specific real estate services for an agreed-upon fee.

FEE SIMPLE – The highest interest in real estate recognized by the law; the holder is entitled to all rights to the property.

FEE SIMPLE ABSOLUTE – The maximum possible estate or right of ownership of real property, continuing forever.

FEE SIMPLE DEFEASIBLE – See defeasible fee estate.

FEE SIMPLE DETERMINABLE – A fee simple estate qualified by a special limitation. Language used to describe the limitation. Language used to describe the limitation includes the words so long as, while, or during.

FEE SIMPLE SUBJECT TO A CONDITIONAL SUBSEQUENT – An estate carrying the limitation that, if it is no longer used for the purpose conveyed, it reverts to the original grantor by the right of reentry.

FEUDAL SYSTEM – A system of ownership usually associated with precolonial England, in which the king or other sovereign is the source of all rights. The right to possess real property was granted by the sovereign to an individual as a life estate only. Upon death of the individual, title is passed back to the sovereign, not to the decedent’s heirs.

FHA-INSURED LOAN – A loan insured by the Federal Housing Administration and made by an approved lender in accordance with FHA regulations.

FIDUCIARY – One in whom trust, and confidence is placed; a reference to a real estate professional employed under the terms of a listing contract or buyer representation agreement. The basic fiduciary duties a real estate professional owes to any customer/non-client or principal/client are honesty, agency disclosure and material facts disclosure, and accounting. In addition to these, a principal/client is also owed the fiduciary duties of undivided loyalty, obedience, reasonable care and diligence, confidentiality, and full disclosure of all information concerning the real estate transaction.

FIDUCIARY RELATIONSHIP – A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT (FIRREA) – This act restructured the savings and loan association regulatory system; enacted in response to the savings and loan crisis of the 1980s.

FINANCING – The business of providing the funds that make real estate transactions possible.

FIRST MORTGAGE – A mortgage that has priority over all other mortgages.

FISCAL POLICY – The government’s policy in regard to taxation and spending programs. The balance between these two areas determines the amount of money the government will withdraw from or feed into the economy, which can counter economic peaks and slumps.

FIXTURE – An item of personal property that has been converted to real property by being permanently affixed to the realty.

FORCIBLE DETAINER – Removal of a tenant from a rental property by the landlord if the tenant has breached one of the terms of the lease agreement, in compliance with statutory law.

FORECLOSURE – A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of the parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale. Depending on the priority of the foreclosed mortgage, the property may be sold free of all other encumbrances incurred prior to the sale.

FORMAL WILL/WITNESSED WILL – A document having written instructions of property disbursements upon the death of the owner. The document must be signed and witnessed.

FORMALDEHYDE – An air pollutant that is a colorless chemical used to manufacture building materials and many household products, such as particleboard, hardwood plywood paneling, and urea-formaldehyde foam insulation.

FRAUD – Deception intended to cause a person to give up property or a lawful right.

FREDDIE MAC – Federal Home Loan Mortgage Corporation-A government-supervised enterprise established to purchase primarily conventional mortgage loans in the secondary mortgage market.

FREEHOLD ESTATE – An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.

FRONT FOOTAGE – The measurement of a parcel of land by the number of feet of street or road frontage.

FRONTAGE – The length of a property along the street or waterfront.

FULLY AMORTIZED LOAN – A loan consisting of equal, regular payments satisfying the total payment of principal and interest by the due date.

FUNCTIONAL OBSOLESCENCE – A loss of value to an improvement to real estate arising from problems of design or utility.

FUTURE INTEREST – A person’s present right to an interest in real property that will not result in possession or enjoyment until sometime in the future, such as reversion or right of reentry.

GAP – A defect in the chain of title of a particular parcel of real estate; a missing document or conveyance that rises doubt as to the present ownership of the land.

GENERAL AGENT – One who is authorized by a principal to represent the principal in a specific range of matters.

GENERAL LIEN – The right of a creditor to have all of a debtor’s property–both real and personal–sold to satisfy a debt.

GENERAL PARTNERSHIP – See partnership.

GENERAL REAL ESTATE TAX – A tax that is made up of the taxes levied on the real estate by government agencies and municipalities.

GENERAL WARRANTY DEED – A deed in which the grantor fully warrants good, clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed.

GINNIE MAE – Government National Mortgage Association–A government agency that plays an important role in the secondary mortgage market. It guarantees mortgage-backed securities using FHA-insured and VA-guaranteed loans as collateral.

GOOD AND INDEFEASIBLE TITLE – A title that cannot be annulled or rendered void.

GOOD FAITH ESTIMATE (GFE) – An estimate of all closing fees that was formerly provided to a borrower within three days of the loan application as was required by the Real Estate Settlement Procedures Act (RESPA)

GOVERNMENT-SPONSORED ENTERPRISES (GSEs) – organizations created by the federal government (Fannie Mae, Freddie Mac, Farmer Mac, Ginnie Mae) to help increase loan opportunities for homebuyers.

GOVERNMENT SURVEY SYSTEM – See rectangular (government) survey system.

GRADUATED-PAYMENT MORTGAGE (GPM) – A loan in which the monthly principal and interest payments increase by a certain percentage each year for a certain number of years and then level off for the remaining loan term.

GRANTEE – The person who receives a transfer of real property from a grantor.

GRANTING CLAUSE – Words in a deed of conveyance that state the grantor’s intention to convey the property at the present time. This clause is generally worded as “convey and warrant”; “grant, bargain, and sell”; or the like.

GRANTOR – The owner transferring title to or an interest in real property to a grantee.

GROSS INCOME MULTIPLIER (GIM) – A figure used as a multiplier of the gross annual income of a property to produce an estimate of the property’s value; usually used for commercial property.

GROSS LEASE – A lease of property according to which a landlord pays all property charges regularly incurred through ownership, such as repairs, taxes, insurance, and operating expenses. Most residential leases are gross leases.

GROSS RENT MULTIPLIER (GRM) – The figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property’s value; usually used for single-family residential property.

GROUND LEASE – A lease of land only, on which the tenant usually owns a building or is required to build as specified in the lease. Such leases are usually long-term net leases; the tenant’s rights and obligations continue until the lease expires or is terminated through default.

GROUNDWATER – Water that exists under the earth’s surface within the tiny spaces or crevices in geological formations.

GROWING-EQUITY MORTGAGE – A loan in which the monthly payments increase annually, with the increased amount being used to directly reduce the principal balance outstanding and thus shorten the overall term of the loan.

HABENDUM CLAUSE – That part of the deed beginning with the words “to have and to hold,” following the granting clause and defining the extent of ownership the grantor is conveying.

HABITABILITY – A property that is suitable for living in or on.

HEIR – One who might inherit or succeed to an interest in land under the state law of descent when the owner dies without leaving a valid will.

HIGHEST AND BEST USE – The legally permitted and physically possible use of a property that would produce the greatest net income and, thereby, develop the highest value.

HOLDOVER TENANT – A tenancy in which a lessee retains possession of a leased property after the lease has expired and the landlord, by continuing to accept rent, agrees to the tenant’s continued occupancy as defined by state law.

HOLOGRAPHIC WILL – A will that is written, dated, and signed in the testator’s handwriting.

HOME EQUITY LOAN – A loan under which a property owner uses the property as collateral and can then draw funds up to a prearranged amount against the property. Also called a home equity line of credit, or HELOC.

HOME INSPECTION – A thorough visual survey of a property’s structure, systems, and site conditions conducted by a professional.

HOME MORTGAGE DISCLOSURE ACT – A federal law, implemented at its creation by Regulation C of the Federal Reserve, that requires lenders to annually disclose the number of loan applications and loans made in certain areas to avoid the practice of redlining. On July 21, 2011, the rule-making authority of the law was transferred to the Consumer Financial Protection Bureau.

HOMEOWNERS INSURANCE – Insurance that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

HOMESTEAD – Land that is owned and occupied as the family home. In some states, a portion of the area or value of this land is protected or exempt from judgements for debts other than those secured by the property.

HUD-1 – A form that was formally used to itemize fees and services charged to a borrower and seller during a real estate transaction.

HYDRAULIC FRACTURING (FRACKING) – The process used to extract natural gas from the deep layers of rock in which it is embedded.

HYPOTHECATE – To pledge real or personal property as security for an obligation or loan without giving up possession of it.

IMMOBILITY – The fact that property cannot be relocated to satisfy demand where supply is low, nor can buyers always relocate to areas with greater supply.

IMMPLIED AGENCY – If the actions of the parties imply that they have mutually consented to an agency relationship, an implied agency relationship is formed.

IMPLIED AGREEMENT – A contract under which the agreement of the parties is demonstrated by their acts and conduct.

IMPLIED CONTRACT – See implied agreement.

IMPLIED WARRANTY OF HABITABILITY – A theory in landlord/tenant law in which the landlord renting residential property implies that the property is habitable and fit for its intended use.

IMPOUND ACCOUNTS – An account that the mortgage lender may require a borrower to have to accumulate funds to pay future real estate taxes and insurance premiums.

IMPROVEMENT – (1) Any structure, usually privately owned, erected on a site to enhance the value of the property (e.g., a building, fence, or driveway). (2) A publicly owned structure added to or benefiting land (e.g., a curb, sidewalk, street, or sewer).

INCOME APPROACH – The process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life.

INCOME PROPERTY – Property held for the current income as well as a potential profit upon sale.

INCORPOREAL RIGHTS – A nonpossessory right in real estate that cannot be seen or touched but are still enforceable by law (e.g., easements, licenses, a right-of-way, profits, and the like)

INDEPENDENT CONTRACTOR – Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. Unlike an employee, an independent contractor pays for all expenses and Social Security and income taxes and receives no employee benefits. Most real estate sales associates are independent contractors, meeting the Internal Revenue Service definition for a qualified real estate agent.

INDEX – An objective economic indicator to which the interest rate for an adjustable-rate mortgage is tied.

INFLATION – The gradual reduction of the purchasing power of the dollar, usually related directly to increases in the money supply by the federal government.

INHERITANCE TAXES – State-imposed taxes on a decedent’s real and personal property.

INSTALLMENT SALE – A transaction in which the sales price is paid in two or more installments over two or more years. If the sale meets certain requirements, a taxpayer can postpone reporting such income until future years by paying tax each year only on the proceeds received that year.

INTEREST – A charge made by a lender for the use of money.

INTEREST-ONLY LOAN – A loan that only requires the payment of interest for a stated period of time with the principal due at the end of the month.

INTERIM FINANCING – A short-term loan usually made during the construction phase of a building project (often referred to as a construction loan).

INTERMEDIARY – See nonagent.

INTERNAL REVENUE SERVICE TAX LIEN – A lien charged by the Internal Revenue Service for nonpayment of income taxes.

INTERNET DATA EXCHANGE (IDX) POLICY – Policy that allows all multiple listing service (MLS) members to restrict internet access to MLS property listings.

INTERSTATE LAND SALES FULL DISCLOSURE ACT (ILSA) – A federal law that regulates the sale of certain real estate in interstate commerce.

INTESTATE – The condition of a property owner who dies without leaving a valid will. Title to the property will pass to the decedent’s heirs, as provided in the state law of descent.

INTRINSIC VALUE – An appraisal term referring to the value of a property unaffected by a person’s personal preferences.

INVERSE CONDEMNATION – An action brought by a property owner seeking just compensation for diminished use and value of land because of an adjacent property’s public use.

INVESTMENT – Money directed toward the purchase, improvement, and development of an asset in expectation of income or profits.

INVOLUNTARY ALIENATION – See alienation.

INVOLUNTARY LIEN – A lien placed on property without the consent of the property owner.

JOINT TENANCY – Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, the decedent’s interest usually passes to the surviving joint tenant or tenants by the right of survivorship.

JUDGMENT – The formal decision of a court upon the respective rights and claims of the parties to an action or suit. After a judgment has been entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant.

JUDICIAL PRECEDENT – In law, the requirements established by prior court decisions within the jurisdiction of the dispute.

JUMBO LOAN – See nonconforming loan.

JUNIOR LIEN – An obligation, such as a second mortgage, that is subordinate in right or lien priority to an existing lien on the same property.

LACHES – An equitable doctrine used by courts to bar a legal claim or to prevent the assertion of a right because of undue delay or failure to assert the claim or right.

LAND – The earth’s surface, extending downward to the center of earth and upward infinitely into space, including things permanently attached by nature, such as trees.

LAND CONTRACT – See installment sale.

LAND TRUST – A trust in which property is conveyed, and in which real estate is the only asset.

LATENT DEFECT – A hidden structural defect that could not be discovered by ordinary inspection and that threatens a property’s soundness or the safety of its inhabitants. Some states impose on property sellers and real estate professionals a duty to inspect for and disclose latent defects.

LAW OF AGENCY – See agency.

LAW OF DIMINISHING RETURNS – Points at which additional property improvements do not increase the property’s income or value.

LAW OF INCREASING RETURNS – Applies as long as money being spent on property improvements produces an increase in the property’s income or value.

LEAD – Used as pigment and drying agent in alkyd oil-based paint in about 75% of housing built before 1978. An elevated level of lead in the body can cause serious damage to the brain, kidneys, nervous system, and red blood cells. Children younger than six are most vulnerable.

LEAD-BASED PAINT HAZARD REDUCTION ACT (LBPHRA) – Federal legislation requiring disclosure of the presence of any known lead-based paint hazards to potential buyers or renters. The law does not require that anyone test for the presence of lead-based paint, however.

LEASE – A written or oral contract between a landlord (the lessor) and a tenant (the lessee) that transfers the right to exclusive possession and use of the landlord’s real property to the lessee for a specified period of time and for a stated consideration (rent). By state law, leases for longer than a certain period of time (generally one year) must be in writing to be enforceable.

LEASE OPTION – A lease under which the tenant has the right to purchase the property at an agreed-upon price either during the lease term or at its end.

LEASE PURCHASE – The purchase of real property, the consummation of which is preceded by a lease, usually long term, that is typically done for tax or financing purposes.

LEASEHOLD ESTATE – A tenant’s right to occupy real estate during the term of a lease, generally considered a personal property interest, although a long-term lease may be eligible for treatment as real property for financing purposes.

LEGACY – A disposition of money or personal property by will.

LEGAL DESCRIPTION – A description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it.

LEGAL LIFE ESTATE – A form of life estate established by state law, rather than created voluntarily by an owner. It becomes effective when certain events occur. See dower, curtesy, and homestead for legal life estates used in some states.

LEGALLY COMPETENT PARTIES – People who are recognized by law as being able to contract with others; those of legal age and sound mind.

LESSEE – See lease.

LESSOR – See lease.

LEVERAGE – The use of borrowed money to finance an investment.

LEVY – To assess; to seize or collect. To levy a tax is to assess a property and set the rate of taxation. To levy an execution is to officially seize the property of a person in order to satisfy an obligation (e.g., a legal seizure of property to satisfy a tax debt).

LIABILITY COVERAGE – Feature of homeowners insurance that covers injuries or losses sustained within the home.

LICENSE – (1) In real estate practice, the privilege or right granted to a person by a state to operate as a real estate broker or salesperson. (2) The revocable permission for a temporary use of land–a personal right that cannot be sold.

LIEN – A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court sale.

LIEN THEORY – Principle in which the mortgagor retains both legal and equitable title to property that serves as security for a debt. The mortgagee has a lien on the property, but the mortgage is nothing more than collateral for the loan.

LIFE CYCLE COSTING – In property management, comparing one type of equipment with another based on both purchase cost and operating cost over its expected useful lifetime.

LIFE ESTATE – An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons. Upon death of the life tenant, ownership of the property may revert to the original owner, or it may pass to another person.

LIFE TENANT – A person in possession of a life estate.

LIMITED AGENT – See special agent.

LIMITED LIABILITY COMPANY (LLC) – A form of business organization that combines the most attractive features of limited partnerships and corporations.

LIMITED PARTNERSHIP – See partnerships.

LINEAR MEASUREMENT – Measurement in a straight line.

LIQUIDATED DAMAGES – An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract.

LIQUIDITY – The ability to sell an asset and convert it into cash, at a price close to its true value, in a short period of time.

LIS PENDENS – A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either a state or federal court. “Lis Pendens” is a Latin term which means “action pending” and is in the nature of a quasi-lien.

LISTING AGREEMENT – A contract between an owner (as principal) and a real estate professional (as representative of the owner) by which the real estate professional is employed to find a buyer for the owner’s real estate on the owner’s terms, for which service the owner agrees to pay a commission or other form of compensation.

LISTING BROKER – The broker from whose office a listing agreement is initiated.

LITTORAL RIGHTS – (1) A landowner’s claim to use water in large navigable lakes and oceans adjacent to her property. (2) The ownership rights to land bordering these bodies of water up to the high-water mark.

LIVING TRUST – A trust that is created during the trustor’s lifetime.

LOAN COMMITMENT – a lender’s conditional promise to offer a loan or credit for a specified property of a specified amount to a borrower.

LOAN ESTIMATE – A CFPB form that highlights the information that historically has been the most important to consumers. Interest rate, monthly payment, and total closing costs are clearly presented on the first page.

LOAN ORIGINATION FEE – A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.

LOAN–TO-VALUE RATIO (LTV) – The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.

LOT-AND-BLOCK (RECORDED PLAT) METHOD – A method of describing real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as specified on a recorded subdivision plat.

MANAGEMENT AGREEMENT – A contract between the owner of income property and a management firm or individual property manager that outlines the scope of the manager’s authority.

MANAGEMENT PLAN – A highly detailed plan that lays out the owner’s objectives for a property, as well as what the property manager wants to accomplish and how, including all budgetary information.

MANAGING BROKER – The real estate professional who is responsible for supervision of the real estate professionals who act on behalf of the brokerage; may also be called a supervising broker.

MANUFACTURED HOME – A permanent installation built to federal specifications, providing a principal residence or a vacation home.

MANUFACTURED HOUSING – Dwellings that are built off site and trucked to a building lot where they are installed or assembled.

MARGIN – A premium added to the index rate representing the lender’s cost of doing business.

MARKET – A place where goods can be bought and sold and a price established.

MARKET DATA APPROACH – Also known as the sales comparison approach. An estimate of value obtained by comparing property being appraised with recently sold comparable properties.

MARKET VALUE – The most probable price that a property would bring in an arm’s-length transaction under normal conditions on the open market.

MARKETABLE TITLE – Good or clear title, reasonably free from the risk of litigation over possible defects.

MASTER PLAN – A comprehensive government plan to guide the long-term physical development of a particular area.

MASTER-PLANNED COMMUNITY – A planned combination of diverse land uses, such as housing, recreation, and shopping, in one contained development or subdivision; also called a planned unit development (PUD).

MECHANIC’S LIEN – A statutory lien created in favor of contractors, laborers, material suppliers, and others who have performed work or furnished materials in the erection or repair of a building.

MEGAN’S LAW – Federal legislation that promotes the establishment of state registration systems to maintain residential information on every person who kidnaps children, commits sexual crimes against children, or commits sexually violent crimes.

MERIDIAN – One of a set of imaginary lines running north and south and crossing a base line at a definite point, used in the rectangular (government) survey system of property description.

METES-AND-BOUNDS METHOD – A method used to describe a parcel of land that begins at a well-marked point and follows the property’s boundaries, using directions and distances around the tract, back to the place of beginning.

MILL – One-tenth of one cent. Some states use a mill rate to compute real estate taxes; for example, a rate of 56 mills would indicate a tax of $0.056 for each dollar of assessed valuation of a property.

MINIMUM LEVEL OF SERVICE – The service that real estate professionals must provide clients, as prescribed differently by certain states; for example, assisting clients in negotiation and answering questions from clients about offers , counteroffers, and contingencies.

MINISTERIAL ACTS – The necessary paperwork and formalities involved in transferring ownership of real property.

MINOR – A person who has not reached the age of majority, 18, and, therefore, does not have legal capacity to transfer title to real property.

MIXED USE – Property that accommodates more than one use, such as commercial use and residential use.

MODEL REAL ESTATE TIME-SHARE ACT – An act that governs the management, use, and termination of time-share units.

MODULAR HOME – A type of factory-built housing with components that are assembled at a building site on prepared foundation.

MOLD – A form of fungus that can be found almost anywhere and can grow on almost any organic substance, so long as moisture and oxygen are present. Mold growth can gradually destroy what it is growing on, as well as cause serious health problems.

MONETARY POLICY – Governmental regulation of the amount of money in circulation through such institutions as the Federal Reserve Board.

MONTH-TO-MONTH TENANCY – A periodic tenancy under which the tenant rents for one month at a time. In the absence of a rental agreement (oral or written), a tenancy is generally considered to be month to month. Also referred to as estate (tenancy) from period to period.

MONUMENT – A fixed natural or artificial object used to establish boundaries for a metes-and-bounds description.

MORTGAGE – A conditional transfer or pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien.

MORTGAGE BANKER – A mortgage loan company that originates, services, and sell loans to investors.

MORTGAGE BROKER – An agent of a lender who brings the lender and the borrower together. The broker receives a fee for this service.

MORTGAGE DISCLOSURE IMPROVEMENT ACT (MDIA) – Enacted in July 2008 as an amendment to the Truth in Lending Act (TILA) to require mortgage loan cost disclosures to consumers. Early disclosure (a good-faith estimate) of mortgage loan cost must be provided within three business days of receiving a consumer’s application for a mortgage loan; a creditor must wait seven business days after providing the early disclosures before closing the loan; and a creditor must provide new disclosures and wait an additional three business days before closing the loan, if a change occurs that makes the annual percentage rate quoted in the early disclosure inaccurate beyond a specified tolerance.

MORTGAGE INSURANCE PREMIUM (MIP) – The FHA insurance that is a percentage of the loan amount that the borrower is charged as a premium.

MORTGAGE LIEN – A lien or charge on the property of a mortgagor that secures the underlying debt obligation.

MORTGAGE SERVICING TRANSFER STATEMENT – Disclosure required by the lender if the lender intends to sell or assign the right to service the loan to another loan servicer. The loan servicer must notify the borrower 15 days before the effective date of the loan transfer, including in the notice the name and the address of the new loan servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments.

MORTGAGEE – A lender in a mortgage loan transaction.

MORTGAGOR – A borrower in a mortgage loan transaction.

MULTIPERIL POLICIES – Insurance policies that offer protection from a range of potential perils, such as fire, hazard, public liability, and casualty.

MULTIPLE LISTING CLAUS – A provision in an exclusive listing for the authority and obligation on the part of the listing agent to distribute the listing to other real estate professionals in a multiple listing organization.

MULTIPLE LISTING SERVICE (MLS) – A marketing organization composed of member real estate professionals who agree to share their listing agreements with one another in hope of procuring ready, willing, and able buyers for their properties more quickly than they could on their own. Most multiple listing services accept exclusive right-to-sell or exclusive agency listings from their member real estate professionals.

MUTUAL ASSENT – Requirement that there must be complete agreement between the parties about the purpose and terms of a contract.

NATIONAL ASSOCIATION OF REALTORS – The largest real estate organization in the world; NAR members subscribe to a strict code of ethics. Active brokers are allowed to use the trademarked designation, REALTOR®

NEGATIVE CASH FLOW – The investment situation where cash expenditures to maintain an investment (taxes, mortgage payments, maintenance, etc.) exceed the cash income received from the investment.

NEGOTIABLE INSTRUMENT – A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee’s right to payment.

NEGOTIATION – A strategic decision that results a conclusion that both parties find acceptable.

NET INCOME – Gross income less the expenses of a business or investment, including taxes and insurance, and allowances for vacancy and bad debts; what the property will earn in each year’s operation.

NET LEASE – A lease requiring the tenant to pay not only rent but also costs incurred in maintaining the property, including taxes, insurance, utilities, and repairs.

NET WORTH – The value remaining after deducting liabilities and estimated taxes from assets.

NOMINAL CONSIDERATION – A consideration which has no relation to the real value of the contract.

NON-COMPETITION CLAUSE – A agreement between the landlord and potential tenant that the landlord will not rent space to a competitor of the tenant.

NONCONFORMING USE – A use of property that is permitted to continue after a zoning ordinance prohibiting it has been established for the area.

NONDISTURBANCE CLAUSE – A mortgage clause stating that the mortgagee agrees not to terminate the tenancies of the lessees in the event the mortgagee forecloses on the mortgagor-lessor’s building.

NOTE – A financing instrument that states the terms of the underlying obligation, is signed by its maker, and is negotiable (transferable to a third party).

NOTICE – (1) Legal notice is notice which is required to be made by law or notice which is imparted by operation of law as a result of the possession of property or the recording of documents. (2) Notice which is required by contract, for example, when the parties agree to terminate a contract by the written notice of either party 30 days prior to termination.

NOTICE OF COMPLETION – A document recorded by a property owner to notify potential mechanics lien claimants that a specific construction project has been completed.

NOTICE OF DEFAULT – A notice from a lender indicating that the borrower has fallen behind on their payments.

NOTICE OF NONRESPONSIBILITY – A legal document used by property owners to protect themselves from liability for nonpayment for services done to improve that property.

NOTICE TO QUIT – A written notice given by a landlord to his tenant, stating that the landlord intends to regain possession of the leased premises and that the tenant is required to quit and remove himself from the premises either at the end of the lease term or immediately if there is a breach of lease or if the tenancy is at will or by sufferance.

NOVATION – Substituting a new obligation for an old one or substituting new parties to an existing obligation.

NUISANCE – An interference with a person’s enjoyment and use of his land.

NULL & VOID – Something that is not permitted or binding and is not legally enforceable.

OBSOLESCENCE – The loss of value due to factors that are outmoded or less useful. Obsolescence may be functional or external.

OFFER – A written document is used by a buyer to make an offer to buy real estate based on a certain price and upon certain contingencies being satisfied.

OFFER AND ACCEPTANCE – Two essential components of a valid contract; a “meeting of the minds”.

OFFICE EXCLUSIVE – A single agency or agent is granted the right to sell a property and may only be marketed within that broker’s firm. The listing will not be entered into the MLS and cannot be marketed publicly.

OFFSITE COSTS – Costs such as for sewers, streets, utilities, etc., which are incurred in the development of raw land, but are not connected with the actual construction of the buildings.

OPEN-END MORTGAGE – A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage.

OPEN HOUSE – A scheduled time when a house or building is designated to be available for viewing by potential buyers.

OPEN LISTING – A listing contract under which the broker’s commission is contingent on the broker’s producing a ready, willing, and able buyer before the property is sold by the seller or another broker.

OPEN SPACE – Areas of undeveloped land or water.

OPERATING EXPENSES – The costs associated with maintaining and operating a property.

OPINION OF TITLE – The legal opinion which attests to the validity of the title deed to a property.

OPTION – An agreement to keep open for a set period an offer to sell or purchase property.

ORIGINATION FEE – The upfront fee that a lender or bank charges a client to complete a loan transaction.

OVERIMPROVEMENT – An improvement that is not economically warranted.

OVERRIDE – A percentage of commission paid by a salesperson to a supervisor their organization.

PACKAGE MORTGAGE – A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances.

PARCEL – A defined portion of a larger land tract.

PARTIAL RELEASE – A clause found in a mortgage that allows some of the collateral to be released from a mortgage after the borrower pays a certain amount of the loan.

PARTICIPATION MORTGAGE – A mortgage loan wherein the lender has a partial equity interest in the property or receives a portion of the income from the property.

PARTITION – A division of cotenants’ interest in real property when the parties do not all voluntarily agree to terminate the co-ownership; takes place through court procedures.

PARTNERSHIP – An association of two or more individuals who carry on a continuing business for profit as co-owners.

PARTY WALL – A shared wall which is located on or at a boundary line between two adjoining properties.

PENTHOUSE – A luxury apartment located on the top floor of a building.

PERCENTAGE LEASE – A lease, commonly used for commercial property, whose rental is based on the tenant’s gross sales at the premises; it usually stipulates a base monthly rental plus a percentage of any gross sales above a certain amount.

PERCOLATION TEST – A test of the soil to determine if it will absorb and drain water adequately to use a septic system for sewage disposal.

PERFORMANCE BOND – A financial instrument that helps ensure the successful completion of a large project in areas like road construction or real estate development.

PERIODIC TENANCY – An interest in leased property that continues from period to period – week to week, month to month, or year to year.

PERMANENT FINANCING – A long-term loan.

PIGGYBACK LOAN – Two or more lenders participate in the total financing of a single mortgage.

PLANNED UNIT DEVELOPMENT (PUD) – A planned combination of diverse land uses, such as housing, recreation, and shipping, in one contained development or subdivision.

PLAT – A detailed map that illustrates the geographic boundaries of individual lots.

PLOTTAGE – The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot.

POCKET LISTING – An exclusive listing that is not available to the general public.

POINT OF BEGINNING – In metes-and-bounds legal description, the starting point of the survey, situated in one corner of the parcel; all metes-and-bounds descriptions must follow the boundaries of the parcel to the point of ending, which is also the point of beginning.

POINTS – A term used for a percentage of the principal loan amount charged by the lender. Each point is equal to 1 percent of the loan amount.

POLICE POWER – The government’s right to impose laws, statutes, and ordinances, including zoning ordinances and building codes, to protect the public health, safety, and welfare.

PORTE COCHERE – A roofed structure extending from the entrance of a building over an adjacent driveway that allows a vehicle to pass through, or to stop and unload passengers.

POSSESSION – Owning or occupying a property.

POWER OF ATTORNEY – A written instrument authorizing a person, the attorney-in-fact, to act as the agent for another person to the extent indicated in the instrument.

POWER OF SALE – A clause written into a mortgage authorizing the mortgagee to sell the property in the event of default in order to repay the mortgage debt.

PREMISES – Land and the improvements on it.

PREPAID INTEREST – The paying of interest before it is due.

PREPAYMENT PENALTY – A charge imposed on a borrower who pays off the loan principal early. This penalty compensates the lender for interest and other charges what would otherwise be lost.

PREPAYMENT PRIVILEGE – The right of the borrower to pay more than the monthly amount and to retire the loan early without penalty prior to maturity.

PRE-SALE – A developer sells a buyer the property pre-construction. The Developer is required to sell a certain percentage of units before a lender will commit to finance construction of the project.

PRESCRIPTION – An easement acquired by continuous, open, and hostile use of the property for the period of time prescribed by state law.

PRIME RATE – The interest rate that commercial banks charge their most creditworthy corporate customers.

PRINCIPAL – (1) A sum loaned or employed as a fund or an investment, as distinguished from its income or profits. (2) The original amount (as a loan) of the total due and payable at a certain date. (3) A main party to a transaction – the person for whom and agent works.

PRINCIPAL BROKER – The licensed broker directly in charge of and responsible for the real estate operations conducted by a brokerage company.

PRIVATE MORTGAGE INSURANCE – Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.

PROBATE – A legal process by which a court determines who will inherit a decedent’s property and what the estate’s assets are.

PROCURING CAUSE – The effort that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives commission.

PRO FORMA STATEMENT – A projection of future income and expenses.

PROMISSORY NOTE – A financing instrument that states the terms of the underlying obligation, is signed by its maker, and negotiable (transferable to a third party).

PROPERTY – The interests, benefits, and rights inherited in real estate ownership.

PROPERTY MANAGEMENT – Someone who manages real estate for another person for compensation. Duties include collecting rents, maintaining the property, and keeping up with all accounting.

PROPERTY REPORT – The mandatory federal and state documents compiled by subdividers and developers to provide potential purchasers with facts about the property prior to their purchase.

PROPRIETARY LEASE – A lease given by the corporation that owns a cooperative apartment building to the shareholder for the shareholder’s right as a tenant to an individual apartment.

PRORATE – To divide or distribute proportionately.

PROSPECT – A potential customer or client interested in making a sale for a product or service.

PROSPECTUS – A document distributed to describe, advertise and give advance information on a business, venture, project or stock issue to help an investor make an informed decision on whether to invest or not.

PUFFING – Exaggerated or superlative comments or opinions.

PUNCH LIST – An itemized list showing defects in a home or building, that need to be rectified prior to its sale or acceptance by a new owner.

PURCHASE MONEY MORTGAGE – A note secured by a mortgage or deed of trust given by a buyer, as borrower, to a seller, as lender, as part of the purchase price of the real estate.

QUALIFIED FEE – An estate in fee which is subject to certain limitations imposed by the owner.

QUANTITY SURVEY – An appraisal method of estimating construction cost or reproduction cost.

QUIET ENJOYMENT – The right to the undisturbed use and enjoyment of real property by a tenant or landowner.

QUIET TITLE ACTION – A court action to remove a cloud on the title.

QUITCLAIM DEED – A conveyance by which the grantor transfers whatever interest he or she has in the real estate, without warranties or obligations.

RANGE – A strip of land six miles wide, extending north and south and numbered east and west according to its distance from the principal meridian in the rectangular (government) survey system of legal descriptions.

RATE OF RETURN – An estimate of the value your property generates during the time frame in which you own it. Percentage of interest you earn on each dollar you have invested into a property over the entire time of ownership.

RAW LAND – Unimproved land; land in its most natural state prior to any construction.

REAL ESTATE – Land; a portion of the earth’s surface extending downward to the center of the earth and upward indefinitely into space, including all things permanently attached to it, whether natural or artificial.

REAL PROPERTY – The interests, benefits, and rights inherent in real estate ownership.

REALTOR – A registered trademarked term reserved for the sole use of active members of the local REALTOR® boards affiliated with the National Association of REALTORS®.

REALTY – Land and everything permanently affixed thereto.

REBATE – Compensating a purchaser with a reduction or cashback of a stipulated charge.

RECAPTURE CLAUSE – A clause usually found in percentage leases, permitting the landlord to cancel a lease and recover the property if the tenant’s sales fall below a specified level.

RECEIVER – An independent party appointed by a court who takes possession of a property, but not the title, during a bankruptcy process. The receiver is responsible for collecting funds, paying bills, and carrying out normal business operations.

RECORDING – The act of entering or recording documents affecting or conveying interests in real estate in the recorder’s office established in each county. Until it is recorded, a deed or mortgage ordinarily is not effective against subsequent purchasers or mortgagees.

REDEMPTION PERIOD – A period of time established by state law during which a property owner has the right to redeem his or her real estate from a foreclosure or tax sale by paying the sales price, interest, and cost.

REDUCTION CERTIFICATE – The document signed by a lender indicating that amount required to pay a loan balance in full and satisfy the debt; used in the settlement process to protect both the seller’s and the buyer’s interest.

REFINANCE – The act of obtaining a new loan to pay off an existing loan; the goal is to have a better interest rate and better terms than the current existing loan.

REFORMATION – A legal action to correct or modify a mutual error in the original contract or deed which has not accurately portray the intentions of the parties due to some mechanical error, such as a typo graphical error in the legal description.

RELEASE – The discharge or relinquishment of a right, claim or privilege.

RELEASE CLAUSE – A contract provision, usually seen in blanket mortgages, that allows for the freeing of all, or part of a property, through a proportional or full amount of the mortgage being paid.

REMAINDER – A future interest in real estate that becomes possessory when a life estate terminates, and that is held by someone other than the grantor of the life estate.

RENEWAL OPTION – A clause in a lease that grants the lessee the privilege of renewing the lease.

RENT – A fixed, periodic payment made by a tenant of a property to the owner for possession and use, usually by prior agreement of the parties.

RENT CONTROL – Regulation by state or local governmental agencies that put a limit on the amount that a landlord can demand for leasing a home or renewing a lease.

RENTAL AGREEMENT – An agreement, written or oral, which establishes or modifies the terms, conditions, rules, regulations, or any other provisions concerning the use and occupancy of a dwelling unit and premises for a stated time period.

RENTAL POOL – A rental arrangement whereby participating owners of rental apartments agree to have their apartment units available for rental as determined by the rental agent, and then share in the profits and losses of all the rental apartments in the pool according to an agreed formula.

REPRODUCTION COST – The construction cost at current prices of an exact duplicate of the subject property.

RESCISSION – The practice of one party canceling or terminating a contract, which has the effect of returning the parties to their original positions before the contract was made.

RESERVE FUND – Savings account to meet any future costs or financial obligations, especially unexpected costs.

RESTRICTIONS – Limitations or rules placed on the use of real property. Private restrictions are created by the owner or subdivider.

RESTRICTIVE COVENANT – A clause in the deed that limits the way real estate ownership may be used.

RETALIATORY EVICTION – An illegal process by which the landlord evicts tenant from the rented property through unlawful measures (ex: increase of rent, removal of basic utilities).

REVERSION– The return of property to the grantor or his/her heirs after all interests in the property given to others has been terminated.

RIGHT OF SURVIVORSHIP – Upon the death of a joint tenant, the deceased’s interests transfer directly to the surviving joint tenant or tenants. Essentially, there is one less owner.

RIGHT-OF-WAY – The right given by one landowner to another to pass over the land, construct a roadway, or use as a pathway, without transferring ownership.

RIPARIAN – An owner’s rights in land that borders on or includes a stream, river, or lake. These rights include access to and use of water.

RISK OF LOSS – The responsibility of damages to the property. The risk of loss passes to the buyer when either title or possession passes.

RUNNING WITH THE LAND – Rights or covenants in a real estate deed that remain with the land regardless of ownership.

SALE AND LEASEBACK – A transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises.

SCHEMATICS – Preliminary architectural drawings and sketches; general concepts of the design.

SECOND MORTGAGE – A mortgage which is subordinate to a first mortgage; typically, an additional loan imposed on top of the first mortgage.

SECONDARY MORTGAGE MARKET – A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called secondary money market.

SECURITY AGREEMENT – A document that provides a lender a security interest in a specified asset or property that is pledged as collateral.

SECURITY DEPOSIT – A payment by a tenant, held by the landlord during the lease term, and kept (wholly or partially) on default, or on destruction of the premises by the tenant.

SEPTIC TANK – A sewage settling tank is placed beneath the ground to accumulate sewage. Usually needs to be pumped on a scheduled plan and treatment plans should be maintained annually.

SETBACK – The amount of space local zoning regulations requires between a lot line and a building line.

SETTLEMENT – The final stage in the transaction. The act of signing closing documents, adjusting and prorating the various credits, charges and settlement costs to conclude a real estate transaction.

SEVERALTY – Sole ownership of real property.

SHELL LEASE – A lease wherein a tenant leases the unfinished interior of a building that the tenant will customize to their specific requirements and needs.

SHOPPING CENTER – A group of retailers, merchants, or service providers typically with on-site parking and storefront identity signage. Subject to a uniform development plan, and usually with careful analysis given to the proper merchant mix – department stores, small retailers.

SHORELINE – The dividing line between private land and public beach on beachfront property.

SIMPLE INTEREST – Interest computed on the original principal balance only.

SPECIAL ASSESSMENT – A tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement like a street or sewer.

SPECIAL WARRANTY DEED – A deed in which the grantor warrants, or guarantees, the title only against defects arising during the period of his or her tenure and ownership of the property and not against defects existing before that time.

SPECIFIC PERFORMANCE – A legal action to compel a party to carry out the terms of a contract.

STANDING LOAN – A interest-only loan in which the repayment of the principal is expected at the end of the loan term. The borrower is required to make only interest payments during the life of the loan.

STATUTE OF FRAUDS – The part of a state law that requires certain instruments, such as deeds, real estate sales contracts, and certain leases, to be in writing to be legally enforceable.

STATUTE OF LIMITATIONS – That law pertaining to the period of time within which certain actions must be brought to court.

STEP-UP LEASE – A lease that includes predetermined increases in rental payments that are agreed upon at the lease signing. This allows landlords to anticipate rising costs or the effects of inflation that could occur in the future.

STRAIGHT NOTE – A loan in which only interest is paid during the term of the loan, with the entire principal amount due with the final interest payment.

SUBJECT TO MORTGAGE – A grantee taking title to real property “subject to mortgage” is not personally liable to the mortgagee for payment of the mortgage note. In the event the grantor-mortgagor defaults in paying the note, the grantee could, however, lose property, and thus his equity, in a foreclosure sale.

SUBORDINATION AGREEMENT – A written agreement between holders of liens on a property that changes the priority of mortgage, judgement, and other liens under certain circumstances.

SUMMARY POSSESSION – A legal process used by a landlord to regain possession of the leased property if the tenant has breached the lease or is holding over after the termination of tenancy.

SURRENDER – A Surrender refers to the termination of a lease agreement, in the form of a Deed of Surrender.

SURVEY – The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and position of a house on a lot, including the determination of any existing encroachments or easements.

TAKE-OUT FINANCING – Long-term permanent financing.

TAX LIEN – A charge against property, created by operation of law. Tax liens and assessments take priority over all other liens.

TAX SHELTER – A phrase often used to describe some of the tax advantages of real estate investment, such as deductions for depreciation, interest, taxes, etc., which may offset the investor’s other ordinary income to reduce the investor’s overall tax payment.

TENANCY AT SUFFERANCE – A tenancy which exists when a tenant holds over after the expiration of a lease, without the landlord’s consent, as where the tenant fails to surrender possession after termination of the lease.

TENANCY AT WILL – A tenancy that exists without a contract or lease and can be terminated at any time by either the tenant or the owner/landlord.

TENANCY BY THE ENTIRETY – The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. Upon the death of one spouse the survivor becomes the owner of the property.

TENANCY IN COMMON – A form of co-ownership by which each owner holds an undivided interest in real property as if each were sole owner. Each individual owner has the right to partition. Unlike joint tenants, tenants in common have right of inheritance.

TENANCY IN SEVERALTY – Ownership of real property by one person only. Also called sole ownership.

TENANT – One who holds or possesses lands or tenements by any kind of right or title.

TIME IS OF THE ESSENCE – A phrase in a contract that requires the performance of a certain act within a stated period of time.

TIME SHARING – A form of ownership interest that may include an estate interest in property and that allows use of the property for a fixed or variable time period.

TITLE INSURANCE – A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters specifically excluded by the policy.

TITLE SEARCH – The examination of public records relating to real estate to determine the current state of the ownership.

TOWNHOUSE – A type of residential dwelling with two floors that is connected to one or more dwellings by a common wall or walls. Title to the unit and lot vest in the owner who shares a fractional interest with other owners for the common areas.

TOWNSHIP – The principal unit of the rectangular (government) survey system. A township is a square with 6-mile sides and an area of 36 square miles.

TRADE FIXTURES – An article installed by a tenant under the terms of a lease and removable by the tenant before the lease expires.

TRIPLE NET LEASE – A lease agreement, where in addition to the rent and utility fees, the lessee assumes payment of all expenses associated with the operation of the property including real estate taxes, building insurance, and maintenance.

TRUST DEED – An instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder (the lender). Also called a deed of trust.

TRUST FUND ACCOUNT – An account set up by a broker at a bank or other recognized depository, into which the broker deposits all funds entrusted to him by his principal or others.

TURNKEY PROJECT – A real estate asset that does not require any repairs or improvements and is completely move-in or rental ready.

UNILATERAL CONTRACT – A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.

UPSET PRICE – A judicially determined minimum selling price for an auctioned property.

USEFUL LIFE – A period of time over which a capital asset, such as a building, can be expected to be usable by the owner.

USURY – Charging interest at a higher rate than the maximum rate established by the state law.

VACANCY FACTOR – A percentage of total units in a single rental property that remain uninhabited during a specific period of time.

VALUE – The power of a good or service to command other goods in exchange for the present worth of future rights to its income or amenities.

VARIANCE – Permission obtained from zoning authorities to build a structure or conduct a use that is expressly prohibited by the current zoning laws; an exception from the zoning ordinances.

VENDEE – A buyer, usually under the terms of a land contract.

VENDOR – A seller, usually under the terms of a land contract.

VOID – A contract that has no legal force or effect because it does not meet the essential elements of a contract.

VOIDABLE – A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both parties.

WAIVER – To voluntarily give up or surrender a right.

WAREHOUSE – A commercial building used to store merchandise and other materials or equipment in an industrial area.

WAREHOUSING – A term used in financing to describe the process of assembling a number of mortgage loans into one package which the correspondent has originated and selling them in the secondary mortgage market.

WARRANTY – A guaranty by the seller to the buyer to satisfy, for a specified time period, the problems in the quality or performance of the items within the home.

WARRANTY DEED – A deed in which the grantor fully warrants good, clear title to the premises. Used in most real estate deed transfers, a warranty deed offers the greatest protection of any deed. Also called a general warranty deed.

WASTE – An improper use or abuse of a property by a possessor who holds less than fee ownership, such as a tenant, life tenant, mortgagor, or vendee. Such waste ordinarily impairs the value of the land or the interest of the person holding the title or the reversionary rights.

WEAR AND TEAR – The gradual physical deterioration of property, from ordinary, everyday use, passage of time and weather.

WRAP-AROUND MORTGAGE – A method of refinancing in which the new mortgage is placed in a secondary or subordinate position. The new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount without disturbing the existence of the first mortgage.

YEAR-TO-YEAR TENANCY – A periodic tenancy in which the rented property is reserved from year to year.

YIELD – The measurement of future return on an investment. Generally calculated annually as a percentage, based on the asset’s cost or market value.

ZONING – A regulatory tool that helps communities regulate and control how land is used.