Glossary
Real estate terms, explained without the jargon
The A-to-Z reference from Francisco's existing site, lightly edited for plain language — from addendum and amortization to warranty and will. General information — ask Francisco how a term applies to your situation.
101 of 101 terms shown
A
11 terms- Addendum
- An attachment to a contract that modifies the terms and conditions of the original contract.
- Adjustable-rate mortgage (ARM)
- A mortgage with an interest rate that changes over time in line with movements of an index. ARMs are also known as variable-rate mortgages (VRMs).
- Adjustment period
- The length of time between interest-rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, meaning the rate can change once a year.
- Affidavit
- A sworn statement in writing.
- Amortization
- Repayment of a loan in equal installments of principal and interest, rather than interest-only payments.
- Annual percentage rate (APR)
- The total finance charge — interest, loan fees, points — expressed as a percentage of the loan amount.
- Appraisal
- A valuation of property, usually performed by an authorized, licensed appraiser.
- Asking price
- The price a seller lists at — set by the seller, informed by a complete market analysis.
- Assessment
- The imposition of a tax, charge, or levy, usually according to established rates.
- Assessor
- A public official who evaluates property for the purpose of taxation.
- Assumption of mortgage
- A buyer's agreement to assume the liability under an existing note secured by a mortgage or deed of trust. It must be approved by the lender.
B
3 terms- Balloon payment
- A lump-sum principal payment due at the end of some mortgages or other long-term loans.
- Binder
- Sometimes referred to as an offer to purchase or an earnest-money deposit request: the acknowledgment of a deposit and a written agreement to enter into a contract for the sale of real estate.
- Buying power
- The amount you can realistically spend on a home, based on your funds and what a lender will finance.
C
13 terms- Cap
- The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
- CC&Rs (Covenants, Conditions and Restrictions)
- A recorded document that controls the use, requirements, and restrictions of a property, including shared community areas.
- Certificate of Reasonable Value (CRV)
- A document that establishes the maximum value and loan amount for a VA-guaranteed mortgage.
- Certified Residential Broker (CRB)
- To be certified, a broker must be a member of the National Association of Realtors, have five years of experience as a licensed broker, and have completed five required Residential Division courses.
- Chain of title
- The past series of transactions and documents affecting the title to a particular parcel of land.
- Close of escrow
- The finish line: the loan is funded, the deed is recorded, and the buyer takes possession of the house.
- Closing costs
- The costs both sides settle through escrow — recurring costs that continue after closing (such as prorated taxes and insurance) and non-recurring, one-time costs (such as title insurance and the appraisal report). Your lender or escrow officer quotes specifics.
- Closing statement
- The financial disclosure statement that accounts for all funds received and expected at closing, including deposits for taxes, hazard insurance, and mortgage insurance.
- Condominium
- A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces — walls, floors, ceilings — serve as its boundaries.
- Contingency
- A condition that must be satisfied before a contract is binding. For example, a purchase contract may be contingent upon the buyer obtaining financing.
- Conversion clause
- A provision in some ARMs that enables buyers to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing rate for fixed-rate mortgages, and the conversion usually costs extra.
- Conveyance
- An instrument by which title is transferred — a deed. Also the act of transferring title.
- Cooperative
- A form of multiple ownership in which a corporation or business trust holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.
D
2 terms- Deed
- A written document by which the ownership of land is transferred from one person to another.
- Due-on-sale clause
- An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.
E
4 terms- Earnest money
- The portion of the down payment delivered to the seller or escrow officer by the buyer with a written offer, as evidence of good faith.
- Easement
- An interest in land owned by another that entitles its holder to a specific limited use, such as laying a sewer, putting up electric power lines, or crossing a driveway.
- Encumbrance
- A lien, liability, or charge upon a parcel of land.
- Escrow
- A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties' instructions and assuming responsibility for handling all the paperwork and distribution of funds.
F
4 terms- Fannie Mae (Federal National Mortgage Association)
- A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the FHA or guaranteed by the VA, as well as conventional home mortgages.
- Fee simple
- An estate in which the owner has unrestricted power to dispose of the property as they wish, including leaving it by will or inheritance. It is the greatest interest a person can have in real estate.
- FHA loan
- A loan insured by the Federal Housing Administration, the insuring office of the Department of Housing and Urban Development.
- Finance charge
- The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.
G
4 terms- Graduate Realtor Institute (GRI)
- A professional designation granted to a member of the National Association of Realtors who has successfully completed three courses covering law, finance, and principles of real estate.
- Graduated-payment mortgage
- A residential mortgage with monthly payments that start at a low level and increase at predetermined times.
- Grantee
- A person who acquires an interest in land by deed, grant, or other written instrument.
- Grantor
- A person who, by written instrument, transfers an interest in land to another.
H
4 terms- Home inspection report
- A qualified inspector's report on a property's overall condition, usually including an evaluation of both the structure and the mechanical systems.
- Home warranty plan
- Protection against failure of the mechanical systems within the property.
- Homeowners association (HOA)
- An organization of owners in a condominium or planned community that normally takes care of exterior maintenance, manages the property, and administers the CC&Rs. Fees and governing documents vary by association.
- HUD-1
- A settlement (closing) statement required by the U.S. Department of Housing and Urban Development where federally related mortgages are made on residential properties — a balance sheet showing the source and distribution of funds in the purchase and/or mortgage of a home.
I
4 terms- Improvements
- Additions to raw land that tend to increase its value, such as buildings, streets, and sewers.
- Indemnity
- To make payment for a loss.
- Index
- A measure of interest-rate changes used to determine changes in an ARM's interest rate over the term of the loan.
- Ingress
- The right to enter a tract of land. Often used interchangeably with access.
J
2 terms- Joint tenancy
- An equal, undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.
- Judgment
- A decree of a court. In practice, the lien or charge upon the lands of a debtor resulting from the court's award of money to a creditor.
L
6 terms- Lender's policy
- A form of title insurance policy that insures the validity, enforceability, and priority of a lender's lien. This form does not provide protection for the owner.
- Lien
- A legal hold or claim on a property as security for a debt or charge.
- Listing agreement
- The contract between a seller and broker covering terms, marketing, and the details of the sale.
- Loan commitment
- A written promise to make a loan for a specified amount on specific terms.
- Loan-to-value ratio
- The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.
- Lot
- A part of a subdivision or block having fixed boundaries ascertainable by reference to a plat or survey.
M
6 terms- Margin
- The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
- Market analysis (CMA)
- A broker-prepared review of your property based on data from properties sold in the area with the same features and amenities, used to ground the asking price.
- Mechanic's lien
- A lien allowed by statute to contractors, laborers, and material suppliers on buildings or other structures upon which work has been performed or materials supplied.
- Metes and bounds
- A description of land by courses and distances.
- MLS (Multiple Listing Service)
- The shared database of homes for sale that your Realtor gives you access to when searching.
- Mortgage life insurance
- A type of term life insurance often bought by mortgagors, with coverage that decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the debt is automatically covered by the insurance proceeds.
N
2 terms- Negative amortization
- Occurs when monthly payments fail to cover the interest cost. The uncovered interest is added to the unpaid balance, which means that even after several payments you could owe more than you did at the beginning of the loan. It can occur when an ARM's payment cap keeps monthly payments from covering the interest.
- Note
- The instrument evidencing the indebtedness secured by a security instrument such as a mortgage.
O
4 terms- Offer
- Your written proposal to buy — price, terms, and timelines. You decide the number; your broker assists with tools, experience, and suggestions.
- Open house
- Scheduled days and times when a listed home is open for buyers to walk through without individual appointments.
- Origination fee
- A fee or charge for the work involved in evaluating, preparing, and submitting a proposed mortgage loan. The fee is limited to 1% for FHA and VA loans.
- Ownership
- The right to possess and use property to the exclusion of others.
P
9 terms- PITI
- Principal, interest, taxes, and insurance.
- Planned Unit Development (PUD)
- A zoning designation for property developed with improvements sometimes clustered between open, common areas. Uses may be residential, commercial, or industrial.
- Point
- An amount equal to 1% of the principal amount of the loan note. Lenders assess loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.
- Power of attorney
- An instrument authorizing another person to act on one's behalf as an agent or attorney.
- Power of sale
- A clause in a will, mortgage, deed of trust, or trust agreement authorizing the sale or transfer of land in accordance with the terms of the clause.
- Prepayment penalty
- A fee charged to a mortgagor who pays a loan before it is due. This is not allowed for FHA or VA loans.
- Private mortgage insurance (PMI)
- Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.
- Proof of funds
- Documentation showing you have the cash to complete a purchase — expected with cash offers.
- Purchase contract
- A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, sales agreement, or earnest-money contract.
R
5 terms- Real estate broker
- An intermediary — an agent who represents a buyer or a seller in a real estate sale or purchase.
- Real property
- Land, together with fixtures, improvements, and appurtenances.
- Realtor
- A real estate broker or associate who is an active member of a local real estate board affiliated with the National Association of Realtors.
- Regulation Z
- The set of rules governing consumer lending, issued by the Board of Governors of the Federal Reserve in accordance with the Consumer Protection Act.
- Right of way
- The right one has to pass across the land of another. An easement.
S
3 terms- Setback lines
- The lines that delineate the required distances for locating structures in relation to the perimeter of the property.
- Staging
- Preparing and presenting a home — cleaning, arranging, adjusting light, space, wall colors, and furniture — for its best possible presentation to buyers.
- Survey
- The process of measuring land to determine its size, location, and physical description, and the resulting drawing or map.
T
7 terms- Tenancy in common
- A type of joint ownership of property by two or more persons with no right of survivorship.
- Time is of the essence
- Contract language meaning deadlines are binding — failure to comply with specified times could result in breach of contract.
- Title
- The evidence of the right a person has to the ownership and possession of land. Commonly considered a history of rights.
- Title insurance policy
- A written contract of title insurance that protects the buyer, the mortgagee, or another party against covered title losses. Lender and owner policies protect different interests.
- Tract
- A particular parcel of land.
- Trust
- A property right held by one party as fiduciary for the benefit of another.
- Trustee
- A person holding property in a trust as a fiduciary for the benefit of another.
V
6 terms- VA loan
- A loan partially guaranteed by the Veterans Administration and made by a private lender.
- Variable-rate mortgage
- A loan in which the interest rate fluctuates with the cost of funds or some other index.
- Vendor
- A seller of real property under a land contract.
- Vest
- To pass to a person an immediate right or interest.
- Vestee
- A non-legal term used by title insurers to indicate the owner of legal property in a policy or report.
- Viewing
- A scheduled visit to a property you're interested in, arranged through your Realtor with the seller's agent.
W
2 terms- Warranty
- A promise by the grantor of real property that they are the owner and will be responsible to the buyer if the title is other than as represented.
- Will
- A written document providing for the distribution of property owned by a person after their death.
See the terms in context
A term still unclear?
Definitions are general information. Call Francisco and ask what a term means for your specific purchase or sale.