RE Glossary: A-I

3 pages: A - I, I - R, R - Z

Abandonment: Occurs when someone voluntarily surrenders or relinquishes possession of real property without vesting this interest in any other person.

Acceptance: An offeree's consent to enter into a contract and be bound by the terms of the offer.

Access: General or specific right of ingress or egress to a particular property.

Addendum: Additional material attached to and made part of a document.

Adjustable-rate mortgage (ARM): A mortgage that permits the lender to adjust its interest rate periodically on the basis of changes in a specified index.

Administrator: A person appointed by a probate court to administer the estate of a person who died intestate.

Advertising: The public promotion of one's products and services.

Agency: A relationship created when one person, the principal, delegates to another, the agent, the right to act on his/her behalf in business transactions and to excuse some degree of disaction while so acting.

Agent: One who is authorized to represent and to act on behalf of another person (called the principal).

Agreement of sale: A contract between buyer and seller covering the sale of specific real property.

Amenity: A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Amortization: The gradual repayment of a mortgage loan by installments.

Amortization schedule: A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.

Amortize: To repay a mortgage with regular payments that cover both principal and interest.

Annual percentage rate (APR): The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

Annuity: An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Application: A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.

Appraisal: A written analysis of the estimated value of a property prepared by a qualified appraiser.

Appraised value: An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appraiser: A person qualified by education, training, and experience to estimate the value of real property and personal property.

Appreciation: An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Assessed value: The valuation placed on property by a public tax assessor for purposes of taxation.

Assessment: The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessor: A public official who establishes the value of a property for taxation purposes.

Asset: Anything of monetary value that is owed by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assignment: The transfer of a mortgage from one person to another.

Assumable mortgage: A mortgage that can be taken over ("assumed") by the buyer when a home is sold.

Assumption: The transfer of the seller's existing mortgage to the buyer. See assumable mortgage.

Attorney-in-fact: One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

Balance sheet: A financial statement the shows assets, liabilities, and net worth as of a specific date. created when one person, the principal, delegates to another, the agent, the right to act on his/her behalf in business transactions and to excuse some degree of disaction while so acting.

Balloon mortgage: A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.

Balloon payment: The final lump sum payment that is made at the maturity date of a balloon mortgage.

Bankrupt: A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy: A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Before-tax income: Income before taxes are deducted.

Beneficiary: The person designated to receive the income from a trust, estate, or a deed of trust.

Bequeath: To transfer personal property through a will.

Betterment: An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.

Bill of sale: A written document that transfers title to personal property.

Biweekly payment mortgage: A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payments schedule). The 26 (or possibly 27) biweekly payments are each equal to one half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

Blanket insurance policy: A single policy that covers more than one piece of property (or more than one person).

Blind ad: An advertisement that does not include the name, phone number, or address of the person placing the ad.

Bona fide: In good faith, without fraud.

Bond: An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Breach: A violation of any legal obligation.

Breach of contract: Violation of any of the terms or conditions of a contract without legal excuse; default; nonperformance.

Brokerage: The aspect of the real estate business that is concerned with bringing together the parties and completing a real estate transaction.

Broker: A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Budget: A detailed plan of income and expenses expected over a certain period time. A budget can provide guidelines for managing future investments and expenses.

Building code: Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building permit: A written governmental permission for the construction of a new building or other improvement, the demolition or substantial repair of an existing structure, or the installment of factory-built housing.

Cancellation clause: A clause that may be included in a lease granting the Lessor or the Lessee the right to terminate the lease term upon the happening of certain stated events or occurrences by the payment from one party to the other of definite amounts of money as consideration.

Capital: (1)Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth as a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value.

Capital improvement: Any structure or component erected as a permanent improvement to real properly that adds to its value and useful life.

Certificate of deposit: A document written by a bank or other financial institution that is evidence of a deposit, with the issuer's promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of occupancy: A certificate issued by a governmental authority indicating that a building is ready and fit for occupancy and that there are no building code violations.

Certificate of title: A statement provided by an abstract company, title company, or attorney stating with the earliest existing document and ending with the most recent.

Chain of title: The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Chattel: Another name for personal property.

Closing: A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. Also called "settlement".

Closing cost item: A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.

Closing costs: Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors® often provide estimates of closing costs to prospective homebuyers.

Cloud on title: Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Collateral: An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Commission: The fee charged by a broker or agent for negotiating a real estate or loan transaction. A commission is generally a percentage of the price of the property or loan.

Commitment letter: A formal offer by a lender stating the terms under which it agrees to lend money to a home buyer. Also known as a "loan commitment".

Common area assessments: Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common areas: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common law: An unwritten body of law based on general custom in England and used to an extent in the United States.

Comparables: An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Condemnation: The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through the exercise of the right of eminent domain.

Condominium: A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Consideration: An act or the promise there of, which is offered by one party to induce another to enter into a contract; that which is given in exchange for something from another.

Construction loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builders at periodic intervals as the work progress.

Consumer reporting agency (or bureau): An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Contingency: A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contract: An oral or written agreement to do or not to do a certain thing.

Conventional mortgage: A mortgage that is not insured or guaranteed by the federal government.

Cooperative (co-op): A type of multiple ownership in which the residents, of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Corporate relocation: Arrangements under which an employer moves and employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expending its office capacity.

Covenant: A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.

Credit: An agreement in which a borrower receives something of value in exchange for a promise to repay the lender as a later date.

Credit history: A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Creditor: A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Damages: The compensation recoverable by a person who has sustained and injury, either to his or her person or property, through the act or default of another.

Debt: An amount owed to another.

Deed: The legal document conveying title to a property.

Deed of trust: The document used in some states instead of a mortgage; title is conveyed to a trustee.

Default: Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

Delinquency: Failure to make mortgage or rent payments when the mortgage or rent payments are due.

Deposit: A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.

Depreciation: A decline in the value of property; the opposite of appreciation.


Down payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with the mortgage.

Dual agency: Representing both principals to a real estate transaction.

Due-on-sale provision: A provision in a mortgage that allows the

lender to demand a provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

Earnest money deposit: A deposit made by the potential buyer to show that he or she is serious about buying the house.

Easement: A right of way giving persons other than the owner access to or over a property.

Effective age: An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Effective gross income: Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant proceedings.

Eminent domain: The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

Encroachment: An improvement that intrudes illegally on another's property.

Encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Equal credit opportunity act (ECOA): A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity: A homeowner's financial in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.

Escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they became due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Eviction: The lawful expulsion of an occupant from real property.

Examination of title: The report on the title of a property from the public records or an abstract of the title.

Exclusive listing: A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.

Executor: A person named in a will to administer an estate. The court will appoint and administrator if no executor is named. "Executrix" is the feminine form.

Egress: A way to exit from a property; the opposite of ingress.

Fair credit reporting act: A consumer protection agency that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair market value: The highest price that a buyer, willing but not compelled to buy would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Federal housing administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Fee simple: The greatest possible interest a person can have in real estate.

Fee simple estate: An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA mortgage: A mortgage that is insured by the Federal Housing Administration (FHA), also known as a government mortgage.

Fiduciary: A relationship which implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another.

Finder's fee: A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.

Firm commitment: A lender's agreement to make a loan to specific borrower on a specific properly.

First mortgage: A mortgage that is the primary lien against a properly.

Fixed installment: The monthly payment due on a mortgage loan. The fixed installment includes payment of both principal and interest.

Fixed-rate mortgage (FRM): A mortgage in which the interest rate does not change during the entire term of the loan.


Fixture: Personal property that becomes real property when attached in a permanent manner to real estate.

Flood insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Foreclosure: The legal process by which a borrower in default under mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Forfeiture: The loss of money, property, rights, or privileges due to a breach of legal obligation.

Forgery: The illegal act of counterfeiting documents or making a false signature, alteration, or falsification.

Fraud: Any form of deceit, trickery, breach of confidence, or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another.

Government mortgage: A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS).

Grace period: An agreed-upon time after an obligation is part due during which a party can perform without being considered in default.

Grantee: The person to whom an interest in real property is conveyed.

Grantor: The person conveying an interest in real property.

Ground rent: The amount of money that is paid for the use of land when title to a property is held as a leasehold estate rather than as a fee simple estate.

Group home: A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.

Habitable: Being in a condition that is fit to live in.

Hazard insurance: Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.

Home equity line of credit: A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.

Home inspection: A through inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency of the borrower's equity in a property.

Homeowners' association: A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.

Homeowner's insurance: An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

Homeowner's warranty (HOW): A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

Housing expense ratio: The percentage of gross monthly income that goes toward paying housing expenses.

HUD-1 statement: A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet".

Implied warranty of habitability: A legal doctrine that imposes a duty on the landlord to make the leased premises habitable and ready for occupancy and to continue to maintain them in a state of repair throughout the entire term of the lease.

Income property: Real estate developed or improved to produce income.

Independent contractor: One 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 how he/she performs the act.

Index: A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps that are associated with the mortgage.

Inflation: An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Ingress: A way to enter a property; the opposite of egress.

Installment: The regular periodic payment that a borrower agrees to make to a lender.

Installment loan: Borrowed money that is repaid in equal payments, known as installments. A furniture loan is often paid for as an installment loan.