Glossary of Real Estate Terms

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Addendum – an addition to the contract that must be

signed by both parties to be binding.

– The payment of a financial obligation on an

installment basis.

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

loan application.

– The professional examination of property

for the purpose of estimating its current market value.

Appreciation – The increase in value of a property due to

any cause.

– That which “runs with the land”;

anything incident to or attached to the land that is part of

the property.

Assessed Value
– The value placed upon a property for

property tax purposes.

– 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.

– 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”.


Capitalization – In appraising, determining value of

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.

– an item of personal property.

Chattel Real
– a personal property right in real estate, such

as a lease.

– 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

owns it.

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

mortgage insurance.

Cloud on Title
– any condition that affects the clear title

of real property.

– 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

Data approach).


Covenant – a clause in a contract; an agreement contained

in a deed for the performance or non-performance of

certain acts.

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

gross or net effective income.

– a document which, when properly executed,

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.

– as used in appraisal, loss in value due to

any cause. as used in taxation, a capital cost recovery out

of income.

– 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.

– 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.

– 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

of depreciation.

Gift Letter
– a letter from a relative stating that an amount

will be gifted to the buyer, and that said amount is not to

be repaid.

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.

Joint Tenancy
– an equal, undivided ownership of property

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.

– a legal hold or claim on a property as security for a

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

actually sold.

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

mortgage loan.

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.

– 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.

– 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.

– 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.

– This may be required by the title company to

insure that the house is properly situated on the property.

– all rights in land that pass with a conveyance

of the land.

Tenancy in Common
– a type of joint ownership

of property by two or more persons with no right

of survivorship.

– 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

the title.

– 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.

– 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.


Attorney in Fact – a person holding power of attorney

from another.

Balloon Payment
– any payment on a note that is greater

than the smallest installment payment. a lump sum principal

payment due at the end of some mortgages or other long-
term loans.

– 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

or refinance.

– 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.

– 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

interest above all else.

Called Loan
– a loan that is due and payable at the demand

of the lender.

– 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

has accumulated.

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.

– 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.

– 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.

– 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.

– 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.

– 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

government agency.

– 1) The transfer of a title. 2) The document,

such as a deed, by which the title is officially transferred.

– (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.

– a right to use all or part of the land owned

by another.

Effective Age
– age of a structure as estimated by its

condition rather than actual age. Takes into account

rehabilitation and maintenance.

– as applied to an easement, a way out or exit.

– anything that affects or limits the ownership

of real property, such as mortgages, liens, easements, or

restrictions of any kind.

– The difference between what is owed and the

amount for which the property could be sold.

– 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.

– 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.

– 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.


Grant Deed – Customary document used to transfer title to

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

the guarantor.

Hazard Insurance – Insurance protection for the borrower

and lender against property loss due to fire, wind or

natural hazards.

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

mechanical systems.

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

of improvement.

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

specific property.

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

selling broker.

Negative Amortization
– monthly payments fail to cover

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

several payments.

Offset Statement
– Statement of owner setting forth the

present status of title and all liens against the property.

– 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.

– receives an option.

– 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.

– The securing of a new loan either to pay off

an existing lien or mortgage on the property, or to access

your equity.

– 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.

– 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

the loan.

– Charging interest in excess of the maximum rate

as set by law.

VA Loan
– a loan made by a private lender that is partially

guaranteed by the Veterans administration.

Vesting – Conveying ownership.

Waiver – The intentional or voluntary relinquishment of a

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.”

– Laws passed