Glossary of Real Estate Terms
signed by both parties to be binding.
Amortization – The payment of a financial obligation on an
Amortized Loan – is a loan that is completely paid off,
interest and principal rather than interest-only, by a series of
regular payments that are equal or nearly equal.
Annual Percentage Rate (A.P.R.) – The total amount of the
finance charge – including interest, points and all loan fees
(i.e. escrow, processing, etc.) – calculated as a percentage
of the borrowed amount and expressed as a yearly rate.
Application Fee – This is a fee that may be charged
by the lender to cover the costs of processing your
Appraisal – The professional examination of property
for the purpose of estimating its current market value.
Appreciation – The increase in value of a property due to
Appurtenance – That which “runs with the land”;
anything incident to or attached to the land that is part of
Assessed Value – The value placed upon a property for
property tax purposes.
Assignment – The transfer over to another the whole of any
property, real or personal, in possession or in action, or any
right or estate therein. aSSIGNee is the person receiving
the right or property. aSSIGNor is the owner of the right or
property, which is being transferred to another.
Assignor – is the owner of the right or property, which is
being transferred to another.
Assumption of a Mortgage – a buyer’s agreement to
assume the liability under an existing note that is secured
by a mortgage or deed of trust. The mortgage or deed of
trust. The lender must approve the buyer in order to release
the original borrower (typically the seller) from liability. Not all
loans or loan terms are “assumable”.
property by considering net income and a percentage of
reasonable return on the investment. The conversion of
income into value.
Capitalization Rate – any rate used to capitalize income.
Chain of Title – a history of all of the documents transferring
title to a parcel of real estate, beginning when it originally
came from the government to a private owner, through the
latest document transferring title.
Chattel – an item of personal property.
Chattel Real – a personal property right in real estate, such
as a lease.
Closing – The same as Close of escrow or Coe. The final
procedure in a real estate transaction. This is the day the
new owner can take possession of the house and actually
Closing Service Network – a network of experienced
real estate attorneys who provide efficient, reliable and
responsive representation for homebuyers and sellers.
Closing Statement – (huD-1 STaTemeNT) The financial
disclosure statement prepared by the escrow holder
(attorney, broker, escrow company, or lender) that
accounts for all of the funds received and expected at
closing, including deposits for taxes, hazard insurance and
Cloud on Title – any condition that affects the clear title
of real property.
Commission – an amount paid by the seller to the listing
and selling agent for handling the real estate transaction.
Community Property – Property acquired by husband
and wife during marriage, when not acquired as separate
Comparative Analysis – a method of appraisal in which
selling prices of similar properties are used as the
basis for arriving at the value estimate (a.k.a. the market
in a deed for the performance or non-performance of
Curable Depreciation – Items of physical deterioration and
functional obsolescence that can be repaired or replaced
by a prudent property owner.
Debt Ratio – The comparison of a buyer’s housing costs to
conveys title of real property.
Deferred Payment – a payment under which the total
balance of principal and an amount for finance charge is
put off until the future. This balance is paid by means of
installments over a long period.
Depreciation – as used in appraisal, loss in value due to
any cause. as used in taxation, a capital cost recovery out
Disclosure – To make known or public. By law, a seller
of real property must disclose facts that affect the value
or desirability of the property. unless exempt, the seller
completes and signs specific disclosure forms, including
the real estate Transfer Disclosure Statement, to disclose
those material facts.
Disclosed Dual Agent – when an agent shows properties
that are listed with Coldwell Banker, or if Coldwell Banker is
representing more than one buyer on a particular property,
the Coldwell Banker agent then becomes a disclosed dual.
The agent will not be able to disclose confidential information
to either party, such as price, terms or motivation to sell or
buy. The dual agent must treat all parties fairly, act in good
faith and disclose all appropriate property facts.
Discount Points – a negotiable fee paid to the lender to
secure financing to the buyer. Discount points are interest
charges paid up-front to reduce the interest rate on the
loan over the life or a portion of the term.
Documentary Transfer Tax – a method of taxing real
property transfers. State law requires that a tax be paid
prior to recording a deed.
Federal National Mortgage Association (FNMA) –
Popularly known as “Fannie Mae”, a privately owned
corporation formed by the congress to support the
secondary mortgage market. It purchases and sells
residential mortgages insured by 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 he or she wishes,
including leaving by will or inheritance.
Fiduciary – a person holding a position of trust; agents,
trustees, attorneys, etc.
Finance Charge – The total cost that a borrower must
pay (directly or indirectly) to obtain credit according to
regulation Z, the set of rules governing consumer lending
issued by the federal reserve Board.
Financial Statement – a statement in writing often required
of a borrower of money from a bank, stating fully all of the
borrower’s assets, liabilities and net worth.
Fixed Expenses – The regular recurring costs or charges
required in the holding of a property, such as taxes and fire
Fixed Rate Mortgage – a conventional loan with the same
interest rate for the life of the loan.
Fixture – Personal property that is attached to real property
and is legally treated as real property when its attached-
such as light fixtures and window treatments.
Fully Indexed Rate – The maximum interest rate on an
arm that can be reached at the first adjustment.
Functional Obsolescence – a loss of value due to out-of-
date, old-fashioned or poorly designed equipment; a type
will be gifted to the buyer, and that said amount is not to
Government National Mortgage (GNMA) – Known as
“Ginnie Mae”, a governmental part of the secondary market
that deals primarily with recycling Va and fha mortgages,
particularly those that are highly leveraged.
Involuntary Lien – a lien imposed against property by
operation of law without the consent of the owner, such as
a tax lien, judgment lien or mechanic’s lien.
by two or more persons. upon the death of any owner,
the survivors take the descendant’s interest in the property.
Jumbo Loan – mortgage loan that exceeds the loan amount
acceptable for sale in the secondary market. Jumbos
are packaged and sold differently to investors, and have
separate underwriting guidelines.
debt or charge. It can be voluntary such as a mortgage or
involuntary such as for back taxes.
List-To-Sale Ratio – The ratio between the price at
which a property is listed and the amount for what it is
Loan Commitment – a written promise to make a loan for
a specified amount on specific terms.
Loan Origination Fee – a fee charged by the lender
for evaluating, preparing, and submitting a proposed
Loan-To-Value (LTV) Ratio – The amount of the loan as a
percentage of the property’s appraised value. an 80% loan,
for example, is determined by subtracting a 20% down
payment from the property’s appraised value.
Lock-In – The fixing of an interest rate or points at a certain
level during the loan application process. It is typically fixed
for a specified amount of time, such as 20-30 days or
some other period of time determined by the lender.
Margin – The number of percentage points the lender
adds to the index to calculate the arm interest rate at each
adjustment. for example, an index rate of 8% plus a margin
of 2.5% could result in a home loan rate of 10.5%. The
fixed margin over the index covers the lender’s operating
expenses and profit margin.
Market Value – The current value of real estate that a buyer
is willing to pay and a seller is willing to accept.
PITI – The term for a mortgage payment that includes principal (P), interest (I), taxes (T), and insurance (I).
Planned Unit Development (PUD) – a zoning designation for property developed at the same or slightly higher density than conventional development, often with improvements clustered between open or common areas.
Point(s) – an amount equal to one percent of the principal loan amount. for example, two points equal 2% of the amount
Power of Sale Clause – a clause in a trust deed that gives the trustee the right to sell borrower’s property publicly, without court procedure, if the borrower defaults on the loan.
Prepaid Interest – Interest paid before accrued.
Prepayment Penalty – a fee charged to a borrower who pays a loan in full before the stated due date.
Private Mortgage Insurance (PMI) – Insurance written by private companies to protect a lender against loss if the borrower defaults on a mortgage. PmI is often required on mortgage loans with less than 20% down payment.
Promissory Note – a written contract containing a promise to pay a definite amount of money at a definite future time. The evidence of a debt.
Prorate – To divide proportionally to time or use.
Purchase Agreement – a written document in which the purchaser agrees to buy a certain real estate and the seller agrees to sell under stated terms and conditions. may also be called a sales contract, earnest money contract, or agreement for sales.
Quitclaim Deed – a deed used to transfer any interest in real property that the grantor may have. It contains no warranties of any kind.
Rate Cap – The rate cap defines rate limits, either from one adjustment period to the next or over the life of the loan.
Rate Gap – The difference between the current rate and the rate to which it could adjust on an arm.
Sellers’ Agent – agent acts solely on the sellers’ behalf.
agent has full fiduciary responsibilities that include
reasonable care, undivided loyalty, confidentiality, and
full disclosure. This means the agent places the sellers’
interest above all else.
Settlement – See “Closing.”
Subordination Clause – a clause in a junior lien permitting
retention of priority for prior liens or it may be used in a first
deed of trust permitting it to be subordinated to subsequent
liens as, for example, the liens of construction loans.
Survey – This may be required by the title company to
insure that the house is properly situated on the property.
of the land.
Tenancy in Common – a type of joint ownership
of property by two or more persons with no right
Title – The rights of ownership recognized and protected
by law. a combination of all elements that constitute the
highest legal right to own, possess, use, control, enjoy,
transfer, and dispose of real estate. a title spells out who
has the right of ownership of a property.
Title Company – The company that issues Title Insurance
and employs the escrow officer.
Title Insurance Policy – a clear title has no liens or claims
against it. This policy protects the purchaser, mortgagee,
or other party against defects or losses associated with
Townhouse – architectural term for a two or more story unit
with no units above or below, but with one or more shared
walls. ownership may be in the form of condominium,
planned unit development or stock cooperative.
Trustee – The third person that holds legal title to property
for a special purpose without being the actual owner.
a trustee is one of the parties to every trust deed.
than the smallest installment payment. a lump sum principal
payment due at the end of some mortgages or other long-
Beneficiary – The inheritor of a trust. The lender on a note
and trust deed transaction.
Beneficiary Statement – Statement of a lender, giving the
remaining principal balance and other information regarding
the loan. usually obtained when an owner wishes to sell
Binder – written evidence of insurance which covers a
limited time; to be replaced later with a permanent policy.
Bundle of Rights – The law designates the rights that
accompany ownership to real property as the bundle of
rights. The right to own, possess, use, enjoy, encumber,
dispose of, and exclude those who do not share ownership
of real property.
Buydown – a permanent buydown is prepaid interest that
brings the note rate down to a lower permanent rate. a
temporary buydown is prepaid interest that lowers the note
rate temporarily on the loan, allowing the buyer to more
readily qualify and increase payments as income grows.
Buyer Agent – agent acts solely on the buyer’s behalf.
The agent has full fiduciary responsibilities, which include
reasonable care, individual loyalty, confidentiality and
full disclosure. This means the agent places the buyer’s
of the lender.
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.
Capital Gain – The gain received on the sale of real or
personal property, other than property sold as stock-in-trade.
Compound Interest – Interest paid on original principal
and on the accrued and unpaid interest, which
Concierge Service – The Coldwell Banker Concierge®
Service is a resource to help buyers and sellers find the
service providers need before, during and after the sale or
purchase of a home.
Condition – a stipulation or qualification in the deed
which, if violated or not performed, defeats the deed and
places the title back in the hands of the original grantor.
Condominium – a form of real estate ownership in which
the owner receives exclusive title to a particular unit and
shares ownership in certain common areas with other unit
owners. The unit itself is generally a separately owned
space whose interior surface (walls, floors and ceiling)
serves as its boundaries.
Consideration – anything of value given to induce another
to enter into a contract including money, service or a
promise. This is essential to a valid contract.
Contingency – a condition that must be satisfied before
a contract is binding. for example, a sales agreement or
offer may be contingent upon the buyer obtaining financing.
Contingency Removal – must be signed by the buyer to
remove any contingency and create a binding contract.
Contract – a deliberate agreement, based upon legal
consideration, between two or more parties who have legal
capacity, to perform a legal act. a binding promise.
Conventional Loan – a loan that is not underwritten by a
Conveyance – 1) The transfer of a title. 2) The document,
such as a deed, by which the title is officially transferred.
Co-Op – (Co-operative housing) a form of multiple
ownership in which a corporation or business trust entity
(made up of the occupants) holds title to a property and
grants occupancy rights to shareholders by means of
proprietary leases or similar arrangements. as such, no
real property is owned by the individuals, only shares in the
corporation allocated to particular apartments.
Earnest Money – The portion of the down payment
delivered to the seller or escrow agent by the purchaser
with a written offer as evidence of good faith.
Easement – a right to use all or part of the land owned
Effective Age – age of a structure as estimated by its
condition rather than actual age. Takes into account
rehabilitation and maintenance.
Egress – as applied to an easement, a way out or exit.
Encumbrance – anything that affects or limits the ownership
of real property, such as mortgages, liens, easements, or
restrictions of any kind.
Equity – The difference between what is owed and the
amount for which the property could be sold.
Escrow – The temporary holding by a third neutral party of
deposited money pending completion of agreed terms in
the sales contract. This third party acts as stakeholder for
both parties’ instructions and assuming responsibility for
the handling of all paperwork and distribution of funds.
Escrow Fees – The fee that the title company (the third
party) charges for doing the paper work involved.
Estate – The ownership interest of a person in real property;
also used to refer to the property left by a deceased person.
Exclusive Agency Listing – a written instrument giving
one agent the “authorization to sell” property for a specified
time, but reserving the right to collect a commission if the
property is sold by anyone during the term of the listing.
Executed – a contract that has been fully performed.
Extended Coverage – a form of title insurance that is
available to homeowners.
FHA Loan – (federal home Loan mortgage Corp.-fhLmC)
Often referred to as “Freddie Mac”, a part of the secondary
market and used to purchase loans from savings and loan
lenders within the federal home Loan Bank Board.
real property; contains two implied warranties.
Grantee – receiver of the title being granted.
Grantor – owner of title being granted; the person who
makes the grant.
Guarantee of Title – a guarantee by an abstract company
or title company that the title is vested as shown on
the guarantee, backed only by the assets or reserves of
and lender against property loss due to fire, wind or
Home Inspection Service – a qualified inspector’s
report on the overall condition of a property. The report
typically includes an evaluation of both the structure and
Home Warranty Plan – Protection against failure of
mechanical systems within the property, and usually
includes plumping, electrical, heating and cooling systems,
and installed appliances.
Homeowner’s Association (HOA) – an organized group of
homeowners whose members help to regulate and enforce
the rules and standards of their respective communities.
Impound Account – an account held by the lender for
payment of taxes, insurance and other periodic debts
against a property. The borrower pays an apportioned
amount with each monthly loan payment and the lender
pays the bills with the accumulated funds.
Indemnify – To secure against hurt, loss or damage; to
make compensation to for hurt, loss or damage.
Index – a measure of interest rate changes used to
determine changes in an arm’s interest rate over the term
of the loan.
Interest Rate – The percentage of a sum of money charged
for its use.
Marketable Title – Title to property that is free of
objectionable encumbrances and liens.
Mechanic’s Lien – a statutory lien on a specific
property for labor or materials contributed to a work
Moratorium – a temporary suspension, as in the payment
of a debt.
Mortgage (Deed of Trust) – a legal document between
the lender and borrower providing security for and
stipulating the terms of repayment of a loan for a
Mortgage Insurance Premium (MIP) – The mortgage
insurance required on fha loans for the life of said loan.
Multiple Listing Service (MLS) – The pooling in a central
bureau of all properties listed for sale. Listings are held
individually by members of a group of real estate brokers,
with the agreement that any member may sell the property
and the commission will be divided between the listing and
the cost of the interest on a loan, which is then added to
the principal balance. as a result, a borrower could owe
more than at the beginning of the loan even after making
Offset Statement – Statement of owner setting forth the
present status of title and all liens against the property.
Option – a right given to a person to buy, sell or lease
property within a stated period and under certain specified
terms. a contract to keep an offer open.
Optionee – receives an option.
Optionor – owns the title who gives an option.
Payment Cap – This cap places an annual limit on the
amount that a monthly payment can increase. This feature
is offered by some arm lenders instead of an annual
interest rate cap.
Ratify – The agreement of both the buyer and seller to the
terms offered in the real estate contract.
Real Estate Agent (Realtor) – a person licensed by the
state who represents a broker in real estate transactions.
Real Property – Land, that which is affixed to the land,
incidental or appurtenant to land and that which is
immovable by law.
Real Estate Transfer Disclosure Statement – This must be
provided by the seller, listing any known defect or problem
with the house. Both agents must reveal anything they
know that might be a problem with the property. See also
Recording Fees – Charged by the County or Town Clerk to
record documents in public records. may be included in
the borrower’s closing costs.
Recurring Costs – expenses that the buyer can expect
again, year after year, such as property taxes, fire insurance,
earthquake insurance, interest.
Refinance – The securing of a new loan either to pay off
an existing lien or mortgage on the property, or to access
Rescind – To cancel a contract from the beginning,
restoring the parties to their original positions. referred to
as an annulment.
Sales Associate (Agent) – a person who for compensation
or expectation of compensation acts for another in a
real estate or related transaction. a real estate license is
required, and individual for a real estate broker.
Sale-Leaseback – a transaction in which at the time of sale
the seller retains occupancy by concurrently agreeing to
lease the property from the purchaser. The seller receives
cash while the buyer is assured a tenant and a fixed return
on the buyer’s investment.
Secondary Mortgage Market – market place for the sale
and purchase of existing trust deeds and mortgages.
Underwriting – These are standards set by the lender
which the borrower must meet in order to qualify for
Usury – Charging interest in excess of the maximum rate
as set by law.
guaranteed by the Veterans administration.
Vesting – Conveying ownership.
known right, essentially a unilateral act.
Wood Destroying Pest And Organism Inspection – an
inspection identifying existing or potential pest, dry rot,
fungus, and other structure-threatening infestation or
conditions. Sometimes referred to as “termite inspection.”