Real Estate Terms

GLOSSARY OF REAL ESTATE TERMS

Abstract of Title - A summary of al1 of the recorded instruments and proceedings

which affect the title to property, arranged in the order in which they were

recorded.

Accretion - The addition of land through processes of nature, as by water or wind.

Accrued Interest - Accrue; to grow; to be added to. Accrued interest is interest

that has been earned but not due and payable.

Acknowledgment - A formal declaration before a duly authorized officer by a

person who has executed an instrument that such execution is the person’s act

and deed.

Acquisition - An act or process by which a person procures property.

Acre - A measure of land equaling 43,560 square feet.

Action for Specific Performance - A court action to compel a defaulting principal

to comply with the provisions of a contract.

Adjacent - Lying near to but not necessarily in actual contact with.

Adjoining - Contiguous; attaching, in actual contact with.

Administrator - A person appointed by court to administer the estate of a

deceased person who left no will; i.e., who died intestate.

Ad Valorem - According to valuation.

Adverse Possession - A means of acquiring title where an occupant has been in

actual, open, notorious, exclusive, and continuous occupancy of property under a

claim of right for the required statutory period.

Affidavit - A statement or declaration reduced to writing, and sworn to or

affirmed before some officer who is authorized to administer an oath or

Affirmation.

Affirm - To confirm, to ratify, to verify.

Agency - That relationship between principal and agent which arises out of a

contract either expressed or implied, written or oral, wherein an agent is

Employed by a person to do certain acts on the person’s behalf in dealing with a

third party.

Agent - One who undertakes to transact some business or to manage some affair

for another by authority of the latter.

Agreement of Sale - A written agreement between seller and purchaser in which

the purchaser agrees to buy certain real estate and the seller agrees to sell upon

terms and conditions set forth therein.

Air Rights - Rights in real property to use the space above the surface of the land.

Alienation - A transferring of property to another; the transfer of property and

possession of lands, or other things, from one person to another.

Alienation Clause - Allows lender to require the balance of a loan to be paid in full

if the collateral is sold (also known as a “due on sale” clause).

Amortization - A gradual paying off of a debt by periodic installments.

Apportionment - Adjustment of the income, expenses or carrying charges of real

estate usually computed to the date of closing of title so that the seller pays all

expenses to that date. The buyer assumes all expenses commencing the date the

deed is conveyed to the buyer.

Appraisal - An estimate of a property’s value by an appraiser who is usually

presumed to be expert in his work.

Appraisal by Income Capitalization Approach - An estimate of value by

capitalization of productivity and income.

Appraisal by Sale Comparison Approach - Comparability with the sale prices of

other similar properties.

Appraisal by Cost Approach - Adding together all parts of a property separately

appraised to form a whole: e.g., value of the land considered as vacant added to

the cost of reproduction of the

building, less depreciation.

Appurtenance - Something which is outside the property itself but belongs to the

land and adds to its greater enjoyment such as a right-of-way or a barn or a

dwelling.

Assessed Valuation - A valuation placed upon property by a public officer or a

board, as a basis for taxation.

Assessment - A charge against real estate made by a unit of government to cover

a proportionate cost of an improvement such as a street or sewer.

Assessor - An official who has the responsibility of determining assessed values.

Assignee - The person to whom an agreement or contract is assigned.

Assignment - The method or manner by which a right or contract is transferred

from one person to another.

Assignor - A party who assigns or transfers an agreement or contract to another.

Assumption of Mortgage - The taking of title to property by a grantee, wherein

the grantee assumes liability for payment of an existing note or bond secured by a

mortgage against a property and

becomes personally liable for the payment of such mortgage debt.

Avulsion - A sudden and perceptible loss or addition to land by the action of

water, or a sudden change in the bed or course of a stream.

B

Balloon Mortgage Payment - A large payment during the term of a mortgage,

often at the end.

Beneficiary - The person who receives or is to receive the benefits resulting from

certain acts.

Bequeath - To give or hand down by will; to leave by will.

Bequest - That which is given by the terms of a will.

Bill of Sale - A written instrument given to pass title of personal property from

vendor to vendee.

Binder - An agreement to cover the down payment for the purchase of real estate

as evidence of good faith on the part of the purchaser.

Blanket Mortgage - A mortgage covering more than one property. A blanket

mortgage is often used for subdivision financing.

Blockbusting - The practice of inducing homeowners in a particular neighborhood

to sell their homes quickly, often at below market prices, by creating the fear that

the entry of a minority group or groups into the neighborhood will cause a

precipitous decline in property values.

Bona Fide - In good faith, without fraud.

Bond - The evidence of a personal debt which is secured by a mortgage or other

lien on real estate.

Building Code - Regulations established by state or local governments stating fully

the structural requirements for building.

Building Line - A line fixed at a certain distance from the front and/or sides of a

lot, beyond which no building can project.

Building Loan Agreement - An agreement whereby the lender advances money to

an owner primarily in the erection of buildings. Such funds are commonly

advanced in installments as the structure is completed.

Building Permit - Written governmental permission for the construction,

renovation or substantial repair of a building.

C

Cancellation Clause - A provision in a lease or other contract which confers upon

one or more of all of the parties to the lease the right to terminate the party’s or

parties’ obligations thereunder upon the occurrence of the condition or

contingency set forth in the said clause.

Capital Appreciation - The appreciation accruing to the benefit of the capital

improvement to real estate.

Capital Asset - Any asset of a permanent nature used for the production of

income.

Capital Gain - Income that results from the sale of an asset not in the usual course

of business. (Capital gains may be taxed at a lower rate than ordinary income.)

Capital Improvement - Any structure erected as a permanent improvement to

real estate, usually extending the useful life and value of a property. (The

replacement of a roof would be considered a capital improvement.)

Capital Loss - A loss from the sale of an asset not in the usual course of business.

Caveat Emptor - Let the buyer beware. The buyer must examine the goods or

property and buy at the buyer’s own risk.

Cease and Desist List - Upon the establishment of a cease and desist zone by the

Secretary, a list of homeowners who have filed owner’s statements expressing

their wish not to be solicited by real estate brokers or salespersons. Soliciting of

listed homeowners by licensees is prohibited. Violators of such prohibition are

subject to licensure suspension or revocation.

Cease and Desist Zone - A rule adopted by the Secretary of State which prohibits

the direct solicitation of homeowners whose names and addresses appear on a

cease and desist list maintained by the Secretary. Such rule may be adopted upon

the Secretary’s determination that some homeowners within a defined

Geographic area have been subject to intense and repeated solicitation by real

estate brokers and salespersons.

Certificate of Occupancy (CO) - A document issued by a governmental authority

that a building is ready and fit for occupancy.

Chain of Title - A history of conveyances and incumbrances affecting a title from

the time the original patent was granted, or as far back as records are available.

Chattel - Personal property, such as household goods.

Client - The one by whom a broker is employed.

Closing Date - The date upon which the property is conveyed by the seller to the

buyer.

Cloud on the Title - An outstanding claim or incumbrance which, if valid, would

affect or impair the owner’s title.

Collateral - Additional security pledged for the payment of an obligation.

Color of Title - That which appears to be good title, but which is not title in fact.

Commingling - To mingle or mix, for example, a client’s funds in the broker’s

personal or general account.

Commission - A sum due a real estate broker for services in that capacity.

Commitment - A pledge or a promise or affirmation agreement.

Completion Bond - A bond used to guarantee that a proposed subdivision

development will be completed.

Condemnation - Taking private property for public use, with fair compensation to

the owner; exercising the right of eminent domain.

Conditional Sales Contract - A contract for the sale of property stating that

delivery is to be made to the buyer, title to remain vested in the seller until the

conditions of the contract have been fulfilled.

Consideration - Anything given to induce another to enter into a contract such as

money or personal services.

Constructive Notice - Information or knowledge of a fact imputed by law to a

person because the person could have discovered the fact by proper diligence

and inquiry (e.g. via public records).

Contingency - A provision in a contract that requires the occurrence of a specific

event before the contract can be completed.

Contract - An agreement between competent parties to do or not to do certain

things which is legally enforceable, whereby each party acquires a right.

Conversion - Change from one character or use to another.

Conveyance - The transfer of the title of land from one to another. The means or

medium by which title of real estate is transferred.

Covenants - Agreements written into deeds and other instruments promising

performance or nonperformance of certain acts, or stipulating certain uses or

nonuses of the property.

Cul-de-sac - A blind alley: a street with only one outlet.

Current Value - The value usually sought to be estimated in an appraisal.

D

Damages - The indemnity recoverable by a person who has sustained an injury,

either to his/her person, property, or relative rights, through the act or default of

another.

Debit - The amount charged as due or owing.

Debt Capital - Money borrowed for a particular business purpose.

Debt Service - Annual amount to be paid by a debtor on an obligation to repay

borrowed money.

Decedent - One who is dead.

Decree - Order issued by one in authority; an edict or law; a judicial decision.

Dedication - A grant and appropriation of land by its owner for some public use,

accepted for such use, by an authorized public official on behalf of the public.

Deed - An instrument in writing duly executed and delivered, that conveys title to

real property.

Deed Restriction - An imposed restriction in a deed for the purpose of limiting the

use of the land such as:

1. A restriction against the sale of liquor thereon.

2. A restriction as to the size, type, value or placement of improvements that may

be erected thereon.

Default - Failure to fulfill a duty or promise, or to discharge an obligation;

omission or failure to perform any acts.

Defeasance Clause - The clause in a mortgage that permits the mortgagor to

redeem his or her property upon the payment of the obligations to the

mortgagee.

Deficiency Judgment - A judgment given when the security for a loan does not

entirely satisfy the debt upon its default.

Delivery - The transfer of the possession of a thing from one person to another.

Demand Note - A note which is payable on demand of the holder.

Demising Clause - A clause found in a lease whereby the landlord (lessor) leases

and the tenant (leasee) takes the property.

Depreciation - Loss of value in real property brought about by age, physical

deterioration, or functional or economic obsolescence.

Descent - When an owner of real estate dies intestate, the owner’s

property descends, by operation of law, to the owner’s distributees.

Devise - A gift of real estate by will or last testament.

Devisee - One who receives a bequest of real estate made by will.

Devisor - One who bequeaths real estate by will.

Dispossess Proceedings - Summary process by a landlord to oust

a tenant and regain possession of the premises for nonpayment of rent

or other breach of conditions of the lease or occupancy.

Documentary Evidence - Evidence in the form of written or

printed papers.

Dual Agency - Representing both principals (seller and buyer) to

a transaction.

Duress - Unlawful constraint exercised upon a person whereby

the person is forced to do some act against the person’s will.

E

Earnest Money - Down payment made by a purchaser of real

estate as evidence of good faith.

Easement - A right that may be exercised by the public or

individuals on, over or through the lands of others.

Economic Life - The period over which a property will yield the

investor a return on the investment.

Economic Obsolescence - Lessened desirability or useful life

arising from economic forces, such as changes in optimum land use,

legislative enactments which restrict or impair property rights, and

changes in supply-demand ratios.

Ejectment - A form of action to regain possession of real

property, with damages for the unlawful retention; used when there is

no relationship of landlord and tenant.

Eminent Domain - A right of the government to acquire property

for necessary public use by condemnation; the owner must be fairly

compensated.

Encroachment - A building, part of a building, or obstruction

which intrudes upon or invades a highway or sidewalk or trespasses

upon the property of another.

Encumbrance - Any right to or interest in the land interfering

with its use or transfer, or subjecting it to an obligation. (Also Incumbrance)

Endorsement - An act of signing one’s name on the back of a check or note, with

or without further qualifications.

Equity - The interest or value which the owner has in real estate over and above

the liens against it.

Equity Loan - Junior loan based on a percentage of the equity.

Equity of Redemption - A right of the owner to reclaim property before it is sold

through foreclosure proceedings, by the payment of the debt, interest and costs.

Erosion - The wearing away of land through processes of nature, as by water and

winds.

Escheat - The reversion to the State of property in event the owner thereof

abandons it or dies, without leaving a will and has no distributees to whom the

property may pass by lawful descent.

Escrow - A written agreement between two or more parties providing that certain

instruments or property be placed with a third party to be delivered to a

designated person upon the fulfillment or performance of some act or condition.

(See Rule 175.1)

Estate - The degree, quantity, nature and extent of interest which a person has in

real property.

Estate in Reversion - The residue of an estate left for the grantor, to commence in

possession after the termination of some particular estate granted by the grantor.

Estate at Will - The occupation of lands and tenements by a tenant for an

indefinite period, terminable by one or both parties at will.

Estoppel Certificate - An instrument executed by the mortgagor setting forth the

present status and the balance due on the mortgage as of the date of the

execution of the certificate.

Eviction - A legal proceeding by a lessor landlord to recover possession of real

property.

Eviction, Actual - Where one is either by force or by process of law, actually put

out of possession.

Eviction, Constructive - Any disturbance of the tenant’s possession of the leased

premises by the landlord whereby the premises are rendered unfit or unsuitable

for the purpose for which they were leased.

Exclusive Agency - An agreement of employment of a broker to the exclusion of

all other brokers; if sale is made by any other broker during term of employment,

broker holding exclusive agency is entitled to commissions in addition to the

commissions payable to the broker who effected the transaction.

(See Rule 175. 24)

Exclusive Right to Sell - An agreement of employment by a broker under which

the exclusive right to sell for a specified period is granted to the broker; if a sale

during the term of the agreement is made by the owner or by any other broker,

the broker holding such exclusive right to sell is nevertheless entitled to

compensation.

(See Rule 175.24)

Executor - A male person or a corporate entity or any other type of organization

named or designed in a will to carry out its provisions as to the disposition of the

estate of a deceased person.

Executrix - A woman appointed to perform the same duties as an executor.

Extension Agreement - An agreement which extends the life of a mortgage to a

later date.

F

Fee; Fee Simple; Fee Absolute - Absolute ownership of real property; a person

has this type of estate where the person is entitled to the entire property with

unconditional power of disposition during the person’s life and descending to the

person’s heirs or distributees.

Fiduciary - A person who on behalf of or for the benefit of another transacts

business or handles money or property not the person’s own; such relationship

implies great confidence and trust.

Fixtures - Personal property so attached to the land or improvements as to

become part of the real property.

Foreclosure - A procedure whereby property pledged as security for a debt is sold

to pay the debt in the event of default in payments or terms.

Freehold - An interest in real estate, not less than an estate for life.

(Use of this term discontinued Sept. 1, 1967.)

G

Grace Period - Additional time allowed to perform an act or make a payment

before a default occurs.

Graduated Leases - A lease which provides for a graduated change at stated

intervals in the amount of the rent to be paid; used largely in long-term leases.

Grant - A technical term used in deeds of conveyance of lands to indicate a

transfer.

Grantee - The party to whom the title to real property is conveyed.

Grantor - The person who conveys real estate by deed; the seller.

Gross Income - Total income from property before any expenses are deducted.

Gross Lease - A lease of property whereby the lessor is to meet all property

charges regularly incurred through ownership.

Ground Rent - Earnings of improved property credited to earning of the ground

itself after allowance made for earnings of improvements.

Group Boycott - An agreement between members of a trade to exclude other

members from fair participation in the trade.

H

Habendum Clause - The “to have and to hold” clause which defines or limits the

quantity of the estate granted in the premises of the deed.

Holdover Tenant - A tenant who remains in possession of leased property after

the expiration of the lease term.

I

Incompetent - A person who is unable to manage his/her own affairs by reason of

insanity, imbecility or feeblemindedness.

In Rem - A proceeding against the realty directly; as distinguished from a

proceeding against a person. (Used in taking land for nonpayment of taxes, etc.)

Installments - Parts of the same debt, payable at successive periods as agreed;

payments made to reduce a mortgage.

Instrument - A written legal document; created to effect the rights of the parties.

Interest Rate - The percentage of a sum of money charged for its use.

Intestate - A person who dies having made no will, or leaves one which is

defective in form, in which case the person’s estate descends to the person’s

distributees in the manner prescribed by law.

Involuntary Lien - A lien imposed against property without consent of the owner,

e.g., taxes, special assessments.

Irrevocable - Incapable of being recalled or revoked; unchangeable; unalterable.

J

Joint Tenancy - Ownership of realty by two or more persons, each of whom has

an undivided interest with the “right of survivorship.”

Judgment - A formal decision issued by a court concerning the respective rights

and claims of the parties to an act or suit.

Junior Mortgage - A mortgage second in lien to a previous mortgage.

L

Laches - Delay or negligence in asserting one’s legal rights.

Landlord - One who rents property to another.

Lease - A contract whereby, for a consideration, usually termed rent, one who is

entitled to the possession of real property transfers such rights to another for life,

for a term of years, or at will.

Leasehold - The interest or estate which a lessee of real estate has therein by

Virtue of the lessee’s lease.

Lessee - A person to whom property is rented under a lease.

Lessor - One who rents property to another under a lease.

Lien - A legal right or claim upon a specific property which attaches to the

property until a debt is satisfied.

Life Estate - The conveyance of title to property for the duration

of the life of the grantee.

Life Tenant - The holder of a life estate.

Lis Pendens - A legal document, filed in the office of the county clerk giving notice

that an auction or proceeding is pending in the courts affecting the title to the

property. (Not applicable in commission disputes.)

Listing - An employment contract between principal and agent, authorizing the

agent to perform services for the principal involving the latter’s property.

Littoral Rights - The right of a property owner whose land borders on a body of

water, such as a lake, ocean or sea, to reasonable use and enjoyment of the shore

and water the property borders on.

M

Mandatory - Requiring strict conformity or obedience.