Real Estate

ABSTRACT OF TITLE.
	Summarized history of the legal title to property, shows changes of title, records of liens and encumbrances.

ALTA OWNER.S POLICY.
	(American Land Title Association) An owner.s extended coverage policy that provides buyers and owners the same protection the ALTA policy gives to lenders.

ALTA TITLE POLICY.
	A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy to include unrecorded mechanics’ liens; unrecorded physical easements; facts a physical survey would show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.

AMORTIZATION.
	The liquidation of a financial obligation on an installment basis; also, recovery over a period of cost or value.

AMORTIZED LOAN.
	A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity. Also called a Level Payments Loan.

ANNUAL PERCENTAGE RATE.
	The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.

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

APPRAISAL.
	An estimate of the value of property resulting from an analysis of facts about the property. An opinion of value.

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

ASSESSED VALUATION.
	A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

ASSESSMENT.
	The valuation of property for the purpose of levying a tax or the amount of the tax levied. Also, payments made to a common interest subdivision homeowners- association for maintenance and reserves.

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

ASSIGNMENT OF RENTS.
	A provision in a deed of trust (or mortgage) under which the beneficiary may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the beneficiary.

ASSIGNMENT.
	A transfer to another of any property in possession or in action, or of any estate or right therein. A transfer by a person of that person’s rights under a contract.

BALLOON PAYMENT.
	An installment payment on a promissory note -usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note.

BASIS.
	(1) Cost Basis. The dollar amount assigned to property at the time of acquisition under provisions of the Internal Revenue Code for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of the property. (2) Adjusted Cost Basis. The cost basis after the application of certain additions for improvements, etc., and deductions for depreciation, etc.

BINDER.
	An agreement to consider a down payment for the purchase of real estate as evidence of good faith on the part of the purchaser. Also, a notation of coverage on an insurance policy, issued by an agent, and given to the insured prior to issuing of the policy.

BUYER’S MARKET.
	The condition which exists when a buyer is in a more commanding position as to price and terms because real property offered for sale is in plentiful supply in relation to demand.

CAL-VET PROGRAM.
	A program administered by the State Department of Veterans Affairs for the direct financing of farm and home purchases by eligible California veterans of the armed forces.

CAPITAL GAIN.
	At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.

CAPITALIZATION RATE.
	The rate of interest which is considered a reasonable return on the investment, and used in the process of determining value based upon net income. It may also be described as the yield rate that is necessary to attract the money of the average investor to a particular kind of investment. In the case of land improvements which depreciate, to this yield rate is added a factor to take into consideration the annual amortization factor necessary to recapture the initial investment in improvements. This amortization factor can be determined in various ways. (1) straight-line depreciation method, (2) Inwood Tables and (3) Hoskold Tables. (To explore this subject in greater depth, the student should refer to current real estate appraisal texts.)

CAPITALIZATION.
	In appraising, determining value of property by considering net income and percentage of reasonable return on the investment. The value of an income property is determined by dividing annual net income by the Capitalization Rate.

CC&Rs.
	Covenants, conditions and restrictions. The basic rules establishing the rights and obligations of owners (and their successors in interest) of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized or the purpose of operating and maintaining property commonly owned by the individual owners.

CHAIN OF TITLE.
	A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.

CLOSING COSTS.
	Charges paid at settlement to obtain a mortgage loan and transfer real estate title, usually in addition to the price of the home. Be sure your sales contract clearly states who-buyer or seller-will pay closing costs and what they will be.

CLOSING DAY.
	The date on which the title to the property passes from the seller to the buyer and/or the date on which the borrower signs the mortgage loan agreement.

CLOSING STATEMENT.
	An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real estate transaction.

CLOSING.
	(l) Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds. (2) Condition in description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.

CLOUD ON TITLE.
	A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or a quiet title legal action.

COMMON INTEREST SUBDIVISION.
	Subdivided lands which include a separate interest in real property combined with an interest in common with other owners. The interest in common may be through membership in an association. Examples are condominiums and stock cooperatives.

COMMUNITY PROPERTY.
	Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.

COMPARABLE SALES.
	Sales which have similar characteristics as the subject property and are used for analysis in the appraisal process. Commonly called.comparables., they are recent selling prices of properties similarly situated in a similar market.

COMPARISON APPROACH.
	A real estate comparison method which compares a given property with similar or comparable surrounding properties; also called market comparison.

CONDOMINIUM.
	An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan. The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.

CONVENTIONAL MORTGAGE.
	A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.

DEED.
	Written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).

DEFAULT.
	Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform any act.

DEFERRED MAINTENANCE.
	Existing but unfulfilled requirements for repairs and rehabilitation. Postponed or delayed maintenance causing decline in a building’s physical condition.

DEPRECIATION.
	Loss of value of property brought about by age, physical deterioration or functional or economic obsolescence. The term is also used in accounting to identify the amount of the decrease in value of an asset that is allowed in computing the value of the property for tax purposes.

DISCOUNT POINTS.
	The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. This amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the note would pay the original lender for it under market conditions. A point equals one percent of the loan.

DUAL AGENCY.
	An agency relationship in which the agent acts concurrently for both of the principals in a transaction.

DUE ON SALE CLAUSE.
	An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.

EARNEST MONEY.
	A sum paid by a potential buyer to demonstrate that the buyer is serious about buying. If a contract is executed, the earnest money is credited toward the purchase price at closing. Make sure you know the terms of your contract.

EASEMENTS.
	Rights of way granted to persons or companies authorizing access to or over the owner's land. For example, utility companies may have easement rights to install pipes or wire on or over your land.

ENCROACHMENT.
	An unlawful intrusion onto another’s adjacent property by improvements to real property, e.g. a swimming pool built across a property line.

ENCUMBRANCE.
	Anything which affects or limits the fee simple title to or value of property, e.g., mortgages or easements.

EQUITY.
	The value in excess of all indebtedness against the property.

ESCROW.
	A system or document of transfer in which a deed, bond or fund is delivered to a third party to hold until all conditions in a contract are fulfilled.

EXCLUSIVE AGENCY LISTING.
	A listing agreement employing a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent.

EXCLUSIVE RIGHT TO SELL LISTING.
	A listing agreement employing a broker to act as agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold during the duration of the listing through another broker or by the owner without the services of an agent.

FANNIE MAE
	An acronymic nickname for Federal National Mortgage Association (FNMA), or Fannie Mae. A quasi-public agency converted into a private corporation whose primary function is to buy and sell FHA and VA mortgages in the secondary market.

FEDERAL HOME LOAN MORTGAGE CORPORATION.
	Aka Freddie Mac. An independent stock company which creates a secondary market in conventional residential loans and in FHA and VA loans by purchasing mortgages.

FEDERAL HOUSING ADMINISTRATION.
	(FHA) An agency of the federal government that insures private mortgage loans for financing of new and existing homes and home repairs.

FHA
	(Federal Housing Administration): This federal agency established by Congress in 1934, insures mortgage loans made by FHA-approved lenders on homes that meet FHA standards in order to make mortgages more desirable investments for lenders.

FIXTURES.
	Appurtenances attached to the land or improvements, which usually cannot be removed without agreement as they become real property; examples. plumbing fixtures, store fixtures built into the property, etc.

HUD.
	The Department of Housing and Urban Development, which is responsible for the implementation and administration of U.S. government housing and urban development programs.

IMPOUNDS.
	A trust type account established by lenders for the accumulation of borrowers funds to meet periodic payment of taxes, FHA mortgage insurance premiums, and/or future insurance policy premiums, required to protect their security. Impounds are usually collected with the note payment. The combined principal, interest, taxes and insurance payment is commonly termed a PITI payment.

INTEREST ONLY LOAN.
	A straight, non-amortizing loan in which the lender receives only interest during the term of the loan and principal is repaid in a lump sum at maturity.

INTEREST
	The cost paid by a borrower for use of money borrowed to purchase a home.

JOINT TENANCY.
	Undivided ownership of a property interest by two or more persons each of whom has a right to an equal share in the interest and a right of survivorship, i.e., the right to share equally with other surviving joint tenants in the interest of a deceased joint tenant.

LEVEL-PAYMENT MORTGAGE.
	A loan on real estate that is paid off by making a series of equal (or nearly equal) regular payments. Part of the payment is usually interest on the loan and part of it reduces the amount of the unpaid principal balance of the loan. Also sometimes called an amortized mortgage or installment mortgage.

MORTGAGE COMMITMENT.
	A formal written communication by a lender agreeing to make a mortgage on specific property, specifying the loan's amount, length of time and conditions.

MORTGAGE/DEED OF TRUST.
	Pledge of property as security for the payment of debt.

MORTGAGEE.
	The lender who has agreed to lend money to the mortgagor.

MORTGAGOR.
	The homeowner (borrower), who has agreed to repay a mortgage loan to the mortgagee.

NEGATIVE AMORTIZATION.
	Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.

PAYMENT CAP.
	With regard to an adjustable rate mortgage, this limits the amount of increase in the borrower’s monthly principal and interest at the payment adjustment date, if the principal and interest increase called for by the interest rate increase exceeds the payment cap percentage. This limitation is often at the borrower’s option and may result in negative amortization.

POINTS.
	A point is a charge of one percent of the mortgage value. Points are a one-time charge assessment by the lender to increase the interest yield from the mortgage loan to a position competitive with the interest yield from other types of investment. Points are usually paid by the buyer or seller or split between them. Points may be required by the lender, but these system arrangements vary from state to state, so check into practices in your area.

PRINCIPAL.
	This term is used to mean the employer of an agent; or the amount of money borrowed, or the amount of the loan. Also, one of the main parties in a real estate transaction, such as a buyer, borrower, seller, lessor.

PRINCIPLE.
	Amount of money borrowed in mortgage loan, excluding interest and other charges.

PROMISSORY NOTE.
	Following a loan commitment from the lender, the borrower signs a note, promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its payment. The evidence of the debt.

PRORATION OF TAXES.
	To divide or prorate the taxes equally or proportionately to time of use, usually between seller and buyer.

PURCHASE MONEY MORTGAGE OR TRUST DEED.
	A trust deed or mortgage given as part or all of the purchase consideration for real property. In some states the purchase money mortgage or trust deed loan can be made by a seller who extends credit to the buyer of property or by a third party lender (typically a financial institution) that makes a loan to the buyer of real property for a portion of the purchase price to be paid for the property. In many states there are legal limitations upon mortgagees and trust deed beneficiaries collecting deficiency judgments against the purchase money borrower after the collateral hypothecated under such security instruments has been sold through the foreclosure process. Generally no deficiency judgment is allowed if the collateral property under the mortgage or trust deed is residential property of four units or less with the debtor occupying the property as a place of residence.

QUITCLAIM DEED.
	A deed to relinquish any interest in property which the grantor may have, without any warranty of title or interest.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA).
	A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.

RECORDING.
	The process of placing a document on file with a designated public official for public notice. This public official is usually a county officer known as the County Recorder who designates the fact that a document has been presented for recording by placing a recording stamp upon it indicating the time of day and the date when it was officially placed on file. Documents filed with the Recorder are considered to be placed on open notice to the general public of that county. Claims against property usually are given a priority on the basis of the time and the date they are recorded with the most preferred claim going to the earliest one recorded and the next claim going to the next earliest one recorded, and so on. This type of notice is called. constructive notice or legal notice.

RIGHT OF SURVIVORSHIP.
	The right of a surviving tenant or tenants to succeed to the entire interest of the deceased tenant; the distinguishing feature of a joint tenancy.

SALES CONTRACT.
	The contract between the buyer and seller. The contract should explain, in detail, exactly what your purchase includes, who is responsible for providing it, what guarantees there are, when you can move in, what the "closing costs" are, and what "outs" parties have in case the contract is not fulfilled or if you cannot get a mortgage commitment at the agreed-upon terms.

SEPARATE PROPERTY.
	Property owned by a married person in his or her own right outside of the community interest including property acquired by the spouse (1) before marriage, (2) by gift or inheritance, (3) from rents and profits on separate property, and (4) with the proceeds from other separate property.

SETTLEMENT EXPENSE.
	This is different from closing costs, but also involves charges that a buyer or seller must pay in closing a deal on a house. Settlement costs include insurance, tax payments, special assessments for improvements to municipal facilities and sales commissions.

SURVEY.
	On-site measurement of lot lines, dimensions and position of house on lot, including determination of possible encroachments or existing easements. A survey is often required by the lender to assure him that a house is actually on the land according to its legal description.

TITLE INSURANCE.
	Insurance to protect a real property owner or lender up to a specified amount against certain types of loss, e.g., defective or unmarketable title.

TITLE REPORT.
	A report which discloses condition of the title, made by a title company preliminary to issuance of title insurance policy.

TITLE SEARCH OF TITLE GUARANTY.
	Detailed review of title records, generally at the local courthouse, to assure that the property is bought from the legal owner and to determine if any liens, special assessments, other claims or outstanding restrictive covenants are on record.

TITLE.
	Evidence(usually in the form of a certificate or "deed") of a person's legal right to the ownership of property.

TRUST DEED.
	Just as with a mortgage this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. However, it differs from the mortgage in a number of important respects. For example, instead of there being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.

TRUSTEE.
	One who holds property in trust for another to secure the performance of an obligation. Third party under a deed of trust.

TRUSTOR.
	One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under terms of a deed of trust.

VA
	(Veterans' Administration). A federal agency which in 1944 established a loan guaranteed program to encourage private lending agencies to give liberal mortgages to honorably-discharged veterans or their widows. Check your local Veterans' Administration office for information.

VARIABLE INTEREST RATE.
	(VlRs or VMRs, Variable Mortgage Rates.) An interest rate in a real estate loan which by the terms of the note varies upward and downward over the term of the loan depending on money market conditions.

WRAP AROUND MORTGAGE.
	A financing device whereby a lender asumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deeds and the additional amount of money borrowed.

ZONING.
	Classification or real property for varying uses. Act of city or county authorities specifying type of use to which property may be put in specific areas.

Return to Top