Real Estate Glossary

Below is a real estate glossary of terms to help familiarize you with the jargon of the real estate industry.

Absolute Net

Lease that requires the tenant to pay all costs (including rent) associated with the operation, repair and maintenance of the building. This includes real estate taxes, utilities, repair and maintenance. Also referred to as net-net-net (NNN) or triple net.

Abstract of judgment, law

The summary of a court judgment that creates a lien against a property when filed with the county recorder.

Accelerated cost recovery system

A tax calculation that provides greater depreciation in the early years of ownership of real estate or personal property.

Accelerated depreciation

A bookkeeping method that depreciates property faster in the early years of ownership.

Acceleration clause

A provision that gives a lender the right to collect the balance of a loan if a borrower misses a payment.


The seller’s written approval of a buyer’s offer.


Any means by which a person can enter property.


The degree to which a building or site allows access to people with disabilities.


The gradual addition to the shore or bank of a waterway by deposits of sand or silt.


A written declaration affirming that a person acted voluntarily.


A measurement of land equal to 43,560 square feet.

Acre foot

The volume of material needed to cover an acre of land one foot deep.

Active solar system

A system that utilizes electric pumps or fans to transfer solar energy for storage or direct use.

Actual age

The number of years a structure has been standing.

Add-on interest

The interest a borrower pays on the principal for the duration of the loan.


An addition or change to a contract.

Additional principal payment

Extra money included in the monthly payment to help reduce the principal and shorten the term of the loan.

Additional Rent

Money due under a lease in addition to base rent, such as operating expense increases.

Adjustable-rate mortgage (ARM)

A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.

Adjusted cost basis

The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it is sold.

Adjustment period

The amount of time between interest rate adjustments in an adjustable-rate mortgage.


A person given authority to manage and distribute the estate of someone who died without leaving a will.

Administrator’s deed

A legal document that an administrator of an estate uses to transfer property.

Adverse possession

The acquisition of title to property through possession without the owner’s consent for a certain period of time.

Adverse use

The acquisition of title to property through possession without the owner’s consent for a certain period of time.


The relationship of trust that exists between sellers and buyers and their agents. The agency is formed through a written contract.

Agency closing

The process by which a lender uses a title company or other firm as an agent to complete a loan.


A person licensed by the state to conduct real estate transactions.

Agreed boundary

A compromise boundary to which property owners agree in order to resolve a dispute.

Agreement of sale

A document the buyer initiates and the seller approves that details the price and terms of the transaction.

Alienation clause

A provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.

Alkaline soil

Soil that contains a higher concentration of mineral salt than natural acid.


A lane behind a row of buildings or between two rows of buildings.


Budgets offered by builders of new homes for the purchase of carpeting and fixtures.

Alternative mortgage

Any home loan that does not conform to a standard fixed-rate mortgage.

Aluminum-clad windows

Wooden windows with aluminum covering the exterior.


Parks, swimming pools, health club facilities, party rooms, bike paths, community centers and other enticements offered by builders of planned developments.

American Society of Home Inspectors

The American Society of Home Inspectors is a professional association of independent home inspectors. Phone: (800) 743-2744.

Americans with Disabilities Act

A law passed in 1990 that outlaws discrimination against a person with a disability in housing, public accommodations, employment, government services, transportation and telecommunications.


The process of paying the principal and interest on a loan through regularly scheduled installments.

Amortization tables

Mathematical tables that lenders use to calculate a borrower’s monthly payment.

Annual mortgagor statement

A yearly statement to borrowers that details the remaining principal and amounts paid for taxes and interest.

Annual Percentage Rate (APR)

The cost of the loan expressed as a yearly rate on the balance of the loan.


The payment of a fixed sum to an investor at regular intervals.

Anticipatory breach

A communication that informs a party that the obligations of the original contract will not be fulfilled.


A document that details a potential borrower’s income, debt and other obligations to determine credit worthiness.

Application fee

The fee that a lender charges to process a loan application.


An opinion of the value of a property at a given point in time.

Appraisal fee

The fee that an appraiser charges to estimate the market value of the property.

Appraisal report

A detailed written report on the value of a property based on recent sales of comparable sites in the area.

Appraised value

An opinion of the current market value of a property.


An increase in the value of a home or other property.


A method of resolving a dispute in which a third party renders a decision.


Tenant or buyer accepts the property in its present condition, with no understanding that landlord will improve it first.

As-is condition

The purchase or sale of a property in its existing condition.


A fire-resistant mineral used for insulation and home products that has been found to pose a health hazard.

Asking price

A seller’s initial price for a property.

Assessed value

A tax assessor’s determination of the value of a home in order to calculate a tax base.


The estimated value of a piece of real estate or a levy placed on property in addition to taxes.

Assessment rolls

A list of taxable property compiled by the assessor.


Items of value which include cash, real estate, securities and investments.


A transfer to another party of property or rights to said property (transfers of title). Examples: leases, mortgages, and deeds of trust. With the permission of the landlord, the tenant gets out of the lease by transferring all interest and obligation in the leased property to another property.


A person who transfers rights and interests of a property.

Assumable mortgage

A mortgage that can be transferred to another borrower.

Assumption clause

A provision that allows a buyer to take responsibility for the mortgage from a seller.

Assumption fee

A fee the lender charges to process new records for a buyer who assumes an existing loan.

Attorneys’ Fees

Attorneys to be paid by one or both parties in case of litigation.

Aviation easement

An easement over private property near an airport that limits the height of structures and trees.

Awning windows

Single-sash windows that tilt outward and up.


Back title letter

A letter that a title insurance company gives to an attorney who then examines the title for insurance purposes.

Backup offer

A secondary bid for a property that the seller will accept if the first offer fails.

Balance sheet

A statement that shows the assets, liabilities and net worth of an individual.

Balloon loan

A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.


A proceeding in which an insolvent debtor can obtain relief from payment of certain obligations. Bankruptcies remain on a credit record for seven years and can severely limit a person’s ability to borrow.

Bargain sale

The sale of a piece of property for less than market value.

Base Building

The existing condition of a building prior to tenant improvements.

Baseboard electric heat

Heating units installed in the floor that can be controlled by a central thermostat.

Basis Point

A basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points.

Bed Tax

A fee collected by the city, also called transit tax. Exceptions to the payment of this tax are persons who stay at the motel for more than 30 days, state employees and some city and county employees. This is paid quarterly and is a good check on the reported gross income. Keep in mind the exceptions. The bed tax totals will not always match the reported gross income, however, should be close. The owners must approve your looking at the bed tax roll before the clerk will show them to you.

Before-tax income

Total income before taxes are deducted.


The lender who makes a loan, also called a mortgagee. The person borrowing money is the mortgagor.


Personal property given to a person through a will.


An improvement that increases a property’s value as opposed to repairs that maintain the value.

Bidding war

Offers from multiple buyers for a piece of property. Agents also sometimes compete to list a house for sale.

Bilateral contract

A contract in which the parties involved give mutual promises. Also called “reciprocal” contracts.

Bill of sale

A document that transfers ownership of personal property.


A report issued by a title insurance company that details the condition of a home’s title and provides guidelines for a title insurance policy.

Biweekly mortgage

A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.

Blanket insurance policy

A policy that covers more than one person or piece of property.

Blanket mortgage

A mortgage that covers more than one property owned by the same borrower.

Blighted area

A neighborhood that has deteriorated.

Blind nailing

Nails driven into a wall and concealed with putty.

Blue sky laws

Regulations on the sale of securities to prevent consumers from investing in fraudulent or high-risk companies without being informed of the risks.

Blue-ribbon condition

A house maintained close to its original condition. Also called mint condition.

Board of Equalization

A state board charged with ensuring that local property taxes are assessed in a uniform manner.


Form language used in deeds, mortgages and other documents. Details can be added by individual parties.

Bona fide

A legal term that refers to actions or persons that are honest and in good faith.


An agreement that insures one party against loss by acts or defaults of another party.

Book value

The value of a property as a capital asset based on its cost plus any additions, minus depreciation.


A section of a city that has authority over local matters.


The dividing line between two adjacent properties.

Braced framing

A construction method in two-story homes in which the frame is reinforced with posts and braces.

Breach of contract

The failure to perform provisions of a contract without a legal excuse.

Breach of covenant

The failure to obey a legal agreement.

Breach of warranty

A seller’s inability to pass clear title to a buyer.

Break-even point

The point in which the owner’s rental income matches expenses and debt.

Bridge loan

A short-term loan for borrowers who need more time to find permanent financing.


A person licensed by the state to deal in real estate.


The act of bringing together two or more parties in exchange for a fee or commission.

Broom clean

The ideal condition of a building when it is turned over to an owner or tenant.


A vintage row house constructed of red sandstone.

Buffer strip

A parcel of land that separates two or more properties.


A lease transaction where the landlord builds the improvements to the tenant’s specifications, with the tenant sharing the improvement cost as part of the rent.

Builder upgrades

Extra house features or better finishing materials that a builder offers.

Building and loan association

An organization that raises money to helps its members purchase real estate or construct a building.

Building code

A comprehensive set of laws that controls the construction or remodeling of a home or other structure.

Building inspector

A city or county employee who enforces the building code and ensures that work is correctly performed.

Building line or setback

Guidelines that limit how close an owner can build to the street or an adjacent property.

Building moratorium

A halt on home construction to slow the rate of development.

Building paper

A thick, water-resistant paper that serves as insulation.

Building permit

A permit issued by a local government agency that allows the construction of home or renovation of a house.

Building restrictions

Regulations that limit the manner in which property can be used.


Appliances or other items that are framed into a home or permanently attached.

Bundle of rights

The various interests or rights an owner has in a property.


A small one-story house or cottage.

Buy-down mortgage

A home loan in which the lender receives a premium as an inducement to reduce the interest rate during the early years of the mortgage.

Buyer broker

A real estate broker who exclusively represents the buyer’s interests in a transaction and whose commission is paid by the buyer rather than the seller.

Buyer’s market

A slow real estate market in which buyers have the advantage.

Buyer’s remorse

An emotion felt by first-time homebuyers after signing a sales contract or closing the purchase of a house.


The rules and regulations that a homeowners association or corporation adopts to govern activities.



Call option

A clause in a loan agreement that allows a lender to ask for the balance at any time.

Cancellation clause

A clause that details the conditions under which each party may terminate the agreement.


A projecting structure supported on one end, such as a balcony.


A limit on the amount the interest rate or monthly payment can increase in an adjustable-rate mortgage.

Cap rate

A wood-frame or shingled house with a steep roof and several windows projecting from the second floor.

Cape Cod style

A wood-frame or shingled house with a steep roof and several windows projecting from the second floor.


Money used to create income, such as funds invested in rental property.

Capital expenditure

The cost of making improvements on a property.

Capital gains

Profits an investor makes from the sale of real estate or investments.

Capital gains tax

A tax placed on the profits from the sale of real estate or investments.

Capital improvement

Any improvement that extends the life or increases the value of a piece of property.


A mathematical formula that investors use to compute the value of a property based on net income.


A group of real estate agents who tour a house that has been recently listed for sale.

Cash flow

The amount of cash a rental property investor receives after deducting operating expenses and loan payments from gross income.

Cash Return

The net profit on a property after expenses and debt service have been deducted.

Cash-on-Cash Return (C on C)

An investment return ratio derived by dividing cash return by cash invested.

Cash-out refinance

The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the extra funds in any manner.

Cashier’s check

A check the bank draws on itself rather than on a depositor’s account.


A formal notice, that asks a court to suspend action until the party which filed the challenge can be heard.

Caveat emptor

A legal principle derived from Latin than means “let the buyer beware.”

Certificate of Deposit (CD)

A document which shows that the bearer has a specified amount of money on deposit with a bank, stock-brokerage firm or other financial institution.

Certificate of deposit index

An index based on the interest rates on six-month CDs. It is used to determine the interest rate for some adjustable-rate mortgages.

Certificate of eligibility

A document issued by the Veterans Administration that verifies the eligibility of a veteran for a loan program.

Certificate of occupancy

A document which states that a home or other building has met all building codes and is suitable for habitation.

Certificate of sale

A document issued at a judicial sale, which entitles the buyer to receive a deed after court confirmation of the purchase of the property.

Certificate of title

A written opinion on the status of a piece of property based on an examination of the public record.

Chain of title

The official record that details the ownership history of a piece of property.

Change frequency

The adjustment schedule on an adjustable-rate mortgage.

Change order

A modification of the construction contract to authorize a change in the work, an adjustment in the amount of the contract or a change in the contract time. The owner, architect and contractor must sign the change.

Chattel mortgage

A lien on personal property used as collateral for a loan.

Chimney back

The back wall or lining of a fireplace or furnace chimney.

Classified property tax

A tax that varies in rate depending on the use of the property.

Clear title

A property that does not have liens, defects or other legal encumbrances.


The final procedure in which documents are signed and recorded, and the property is transferred.

Closing costs

Expenses incidental to the sale of real estate, including loan, title and appraisal fees.

Closing statement

A document which details the final financial settlement between a buyer and seller and the costs paid by each party.

Cloud on title

An invalid encumbrance on real property.

Cluster development

A method of squeezing more homes into less space.


Individual housing units that are clustered around a common building where residents share cooking and other activities.


Coverage that involves the use of two or more insurers.


A person who signs a promissory note with the borrower and assumes responsibility for the loan.


A second party who signs a promissory note and takes responsibility for the debt.


A change to a will that adds or subtracts provisions or clarifies portions of the document.


Additional security that a borrower supplies to obtain a loan.


The series of steps a lender takes to bring a delinquent mortgage up to date.

Commencement Date

Date lease begins.

Commercial bank

A financial institution that provides a broad range of services, from checking and savings accounts to business loans and credit cards.

Commercial property

An area that is zoned for businesses.


The mixing of money held in trust with other funds.


The negotiable percentage of the sales price of a home that is paid to the agents of the buyer and seller.

Commission on a Listing Agreement

Listing agreements should state the precise commissions you will receive for all services performed, and specify when each commission is to be paid.


A promise by a lender to make a loan with specific terms for a specified period.

Commitment fee

The fee a lender charges for promising to make a loan.

Common law

A body of laws based on custom, usage and rulings by courts in various jurisdictions.

Common-area assessments

Fees paid by the owners of a condominium project or planned-unit development to maintain, repair, improve or operate common areas.

Common-interest development

A project composed of individually owned units that share usage and financial responsibility for common areas.

Community property

Property accumulated through the joint efforts of husband and wife. It is a classification of property peculiar to certain states.

Community Reinvestment Act

A federal law that encourages financial institutions to loan money in the neighborhoods where minority depositors live.


Properties used as comparisons to determine the value of a certain property.

Comparative market analysis

An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.


A term for a buyer who is legally fit to enter into a sales contract.

Compound interest

The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.


The process the government uses to take private property for public use without the consent of the owner.

Conditional commitment

A promise by a lender to make a loan if the borrower meets certain conditions.


Individual units in a building or development in which owners hold title to the interior space while common areas such as parking lots, community rooms and recreational areas are owned by all the residents.

Condominium conversion

The change in title from a single owner of an entire project or building to multiple owners of individual units.

Consent judgment

A binding written agreement between two parties to have a judgment entered and recorded.


A court-appointed guardian.


Anything that is legal, has value and induces a person to enter into a contract.

Construction budget

The funding that an owner arranges for the construction of a project.

Construction documents

Drawings and specifications from an architect that provide detailed requirements for the construction of a project.

Construction loan

Short-term loans a lender makes for the construction of homes and buildings. The lender disburses the funds in stages.

Construction to permanent loan

The conversion of a construction loan to a longer-term traditional mortgage after construction has been completed.

Consumer Credit Counseling Service (CCCS)

A nationwide, nonprofit organization that helps consumers get out of debt and improve their credit profile. National headquarters: 8701 Georgia Avenue., Suite 507, Silver Springs, MD 20910. Phone: (800) 388-2227.

Contemporary style

A design that features streamlined shapes, large unadorned windows and industrial materials.

Contiguous lots

Pieces of property that are adjoined.


A condition specified in a purchase contract, such as a satisfactory home inspection.

Contingency listing

A property listing with a special condition attached.

Contingent fee

A fee that must be paid if a certain event occurs.


An agreement between two or more parties that creates or modifies an existing relationship.

Contract for deed

A contract in which the seller agrees to defer all or part of the purchase price for a specified period of time.

Contract of Sale

The contract in which the seller agrees to convey ownership of the property and the buyer agrees to pay for it. The intentions of both buyer and seller must be definite, clear, and in writing. The sale contract also usually sets up the procedures by which the actual conveyance of ownership will be accomplished.

Contract to purchase

A contract the buyer initiates which details the purchase price and conditions of the transaction and is accepted by the seller. Also known as an agreement of sale.


The individual who contracts for the construction of a home or project.

Contractual lien

A voluntary obligation such as a mortgage or trust deed.

Controlled growth

Any restrictions imposed on the amount or type of new development in an area.

Conventional loan

A long-term loan a lender makes for the purchase of a home.

Convertible adjustable-rate mortgage

A mortgage which starts as an adjustable-rate loan, but allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.


The transfer of title of property.

Conveyance tax

A tax imposed on the transfer of real property.

Cooperating broker

A real estate broker who finds a buyer for a property that another broker has listed.

Cooperative corporation

A business trust that holds the title to a cooperative residential building and grants occupancy rights to shareholders in the corporation.

Cooperative mortgages

Any loans related to a cooperative residential project.

Cooperative project

A project in which a corporation holds title and sells shares representing individual units to buyers who then receive a proprietary lease as their title.

Corner influence

The effect on the value of a property because it is situated on a corner or near a corner.

Corporate relocation

An arrangement by which employers pay to transfer and move employees.

Correct Zoning (in a lease)

Specifies that the zoning allows the tenant’s use.

Corrective work

Necessary or desired repairs to remedy problems uncovered by a home or specialized inspection.

Cost-plus contract

A construction contract that determines the builder’s profit based on a percentage of the cost of labor and materials.


A small, one-story house.


A response to an offer.


A legal assurance or promise in a deed or other document, or implied by the law.

Covenants, conditions and restrictions (CC&Rs)

Rules and regulations for a development, such as acceptable landscaping or improvements that can be made to individual units.

CPI and Market Rent Escalation (in a lease)

Consumer Price Index or other basis for how additional rent will be calculated.

Craftsman style

An architectural style that evolved as part of the Arts and Craft movement near the turn of the century.

Creative financing

Innovative home-financing arrangements that help sell a property.


The money a lender extends to a buyer for a commitment to repay the loan within a certain time frame.

Credit Card Discounts

Visa, MasterCard, etc., have a fee they charge for handling and billing. This fee can run from 1 to 3%. This is a direct expense to the operation of the motel. Most agents forget this item and leave it off the P & L.

Credit history

A record of an individual’s current and past debt payments.

Credit life insurance

Insurance that pays off a mortgage in the event of the borrower’s death.

Credit rating

The degree of credit worthiness assigned to a person based on credit history and financial status.

Credit report

A credit bureau report that shows a loan applicant’s history of payments made on previous debts. Several companies issue credit reports, but the three largest are Trans Union Corp., Equifax and Experian (formerly TRW ).

Credit repository

Large companies that gather financial and credit information from various sources about individuals who have applied for credit.

Credit union

Nonprofit cooperative organizations that provide banking and financial services, including mortgages, home improvement loans and home equity loans, to their members.


An individual or institution to whom a debt is owed.

Curable defect

A deficiency in a property that is easy or inexpensive to fix, such as chipping paint.

Curb appeal

The first impression of a house as seen from the street.

Custom builder

A builder who constructs a home or building based on plans created by the owner.

Custom home

A structure designed by an architect hired by the owner.



Damage & Destruction (in a lease)

Spells out the landlord’s and tenant’s right to terminate lease in case of fire, flood or other disaster.


A movable plate in a fireplace that allows smoke and fumes to travel up the chimney’s flue.

Days on the market

The period of time a property is listed for sale until it is sold or taken off the market


Any amount one person owes to another.

Debt Coverage Ratio

The ratio between the net income of an investment and the amount of debt service of the investment: expressed as (NOI / DS = DCR).

Debt Service

The periodic payments of interest and/or principal on a property’s indebtedness.


The legal document that transfers ownership of a piece of property.

Deed of trust

A document that gives a lender the right to foreclose on a piece of property if the borrower defaults on the loan.

Deep-seal floor drain

A drain used to dispose of water from the basement floor to a sewer line.


The failure to fulfill a duty or promise or discharge an obligation, such as making monthly mortgage payments.

Deferred maintenance

Any repair or maintenance of a piece of property that has been postponed, resulting in a decline in property value.

Delinquent mortgage

A mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings.

Density test

An analysis of soil to determine if the surface can support the foundation of a house.


Money given by the buyer with an offer to purchase property. Also called earnest money.


The decline in value of a piece of property.


A project in which the owner contracts directly with an individual or company to perform design and construction.


Unlike architects, designers are limited to drawing blueprints.

Digital images

Images that are incorporated into house listings to give potential buyers a view of the property.

Dimension plans

Plans which show the layout of a house but are less detailed than full blueprints.

Disability insurance

An insurance policy which covers an individual’s ability to produce income.


A statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint.

Discount points

Fees that a borrower pays at the time the lender makes the loan. A point equals 1 percent of the total loan amount.

Distressed property

Property that is in poor physical or financial condition.

Document needs list

A list of documents a lender requires when a potential submits a loan application.. The required documents range from paycheck stubs to credit card statements.

Domed ceiling

A hemispherical ceiling that projects upward without support.


A person’s primary or permanent home.

Down payment

The amount of money a buyer agrees to give the seller when a sales agreement is signed. Complete financing is later secured with a lender.


A payment made to subcontractors or suppliers from a construction loan.

Dropped ceiling

A flat ceiling built lower than the original ceiling.

Dual agency

A relationship in which a real estate agent or broker represents both parties in a transaction.

Due-on-sale clause

Standard language in a mortgage which states that the loan must be paid when a house is sold.


A structure that consists of two separate family units.

Dutch colonial style

A design that features a barn-like gambrel roof, a ground-level front porch, and dormers.



Early occupancy

The condition in which buyers can occupy the property before the sale is completed.

Earnest money

Money a buyer gives with an offer to purchase a property. Also called a deposit.

Earthquake insurance

A policy that provides coverage against damage to a home from an earthquake.


A right given to a third party to use a portion of the property for certain purposes, such as power lines or water mains.

Effective age

The age of a structure estimated by its condition rather than its actual age.

Effective gross income

Additional income that a lender considers when assessing the loan application of a potential borrower.

Effective Rental Income

Potential rental income minus vacancy and credit losses.

Electric service panel

A panel that transfers power from the utility line into a house to be distributed through fuses or circuit breakers.

Eminent domain

The government’s right to condemn private land for public use, such as the routing of a public highway.

Employer-assisted housing

Programs which help employees purchase homes through special plans developed with lenders.

Empty nesters

Potential buyers who have raised their families and want to move into a smaller home.


Fences or other structures that extend into the property of another owner.


A claim or lien on a property which complicates the title process.

End loan

The conversion from a construction loan to permanent financing a condominium buyer secures after all units in a project have been completed.


A person who signs over ownership of property to another party.

English Tudor style

An architectural design that features stone or brick exterior walls and exposed beams.

Environmental impact statement

A government-mandated evaluation of all aspects and effects a development will have on the environment of a proposed site.

Environmentally friendly home construction

A method of construction that utilizes recycled materials.

Equal Credit Opportunity Act.

A federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant’s sex, marital status, race, religion, national origin or age. The law also prohibits a creditor from refusing to grant credit because the applicant receives public assistance.


Equifax Credit Information Services, Inc., is one of the “Big Three” credit-reporting bureaus that operate nationwide. Address: P.O. Box 740249, Atlanta, GA 30374.


A determination of the value of a property after existing liens are deducted.

Equivalent Level Rate (ELR)

Flat rate per square foot that will equal the same total present value as a proposed lease’s variable cash flows.

Errors and omissions insurance

A policy that pays for any mistakes a builder or architect makes in a project.


A clause in a lease providing for an increased rental rate at a future time.


A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met.. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

Escrow account

An account that a lender or mortgage servicer establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.

Escrow agent

A neutral third party who ensures that all conditions of a real estate transaction are met.

Escrow analysis

A lender’s periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower’s monthly mortgage payment to pay for expenses such as property taxes and insurance.

Escrow closing

Escrow closes when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer.

Escrow company

Firms that act as neutral third parties to ensure that all conditions that the buyer, seller and lender establish in a real estate transaction are met.

Escrow payment

Firms that act as neutral third parties to ensure that all conditions that the buyer, seller and lender establish in a real estate transaction are met.


Funds that a mortgage servicer withdraws from a borrower’s escrow account to pay property taxes and insurance.

Estimated Gross Costs of Buying

Total principal and interest payments over the number of years that you plan to own your home.

Estimated Increase in Equity

A specified property value increased by a selected rate of appreciation for a specific number of years.

Estimated Net costs of Buying

The estimated gross costs of buying minus estimated tax savings and the estimated increase in equity.

Estimated Tax Savings

The amount of tax a renter would save instead of owning a home based on property taxes and interest paid.

Estimated Total Costs of Renting

The total current rental payments for the same number of years you would plan to own a home increased by a yearly rental increase adjustment.

Estimated Total Savings

The amount of tax a renter would save instead of owning a home based on property taxes and interest paid.

Estoppel Certificate

Prevents individuals from asserting facts different from those contained in the document. Tenant and landlord both sign the document to confirm the facts pertaining to the lease.


A legal procedure to remove a tenant for reasons including failure to pay rent.

Examination of title

An inspection by a title company of public records and other documents to determine the chain of ownership of a property.


The process of clearing trees, removing topsoil and grading land before the foundation is laid.


A sale in which the buyer partly pays for the property with a ‘like kind’ property instead of cash; a ‘like kind’ property is defined by the IRS because of tax implications.

Exclusive listing

A contract that gives an agent the exclusive right to market a property for a specific period of time.


A restriction on the tenant’s right to open a competing retail outlet within a certain area of leased premises.


A person appointed to carry out the instructions in a will. If there is no will, a probate court will appoint an executor.

Expense Stop

Fixed amount in a lease that serves as a limit on the amount for which the tenant is responsible, in the event expenses exceed a pre-stated amount.


Experian, formerly known as TRW Information Systems & Services, is one of the “Big Three” credit-reporting bureaus. Address: 505 City Parkway West, Orange, CA 92868.

Extension Option

Agreed continuation of occupancy under the same conditions as outlined in previous agreements.




The part of a building facing the street or a courtyard.

Fair Credit Billing Act

A federal law that governs credit and charge card billing errors. If a credit or charge card company violates any provision, consumers can sue to recover damages.

Fair Credit Reporting Act.

A federal law passed in 1971 that regulates the activity of credit bureaus. It is designed to prevent inaccurate or obsolete information from staying in a consumer’s credit file and requires credit bureaus to have reasonable procedures for gathering, maintaining and disseminating credit information. The act also requires credit bureaus to show a consumer their credit file if the consumer presents proper identification, although the bureau reserves the right to charge a fee for doing so.

Fair Debt Collection Practices Act.

A federal law passed in 1977 which outlaws debtor harassment and other types of collection practices. The act regulates collection agencies, original creditors who set up a separate office to collect debts, and lawyers hired by the creditor to help collect overdue bills. An original creditor-the company or individual that originally granted the credit-is not covered by the act, but may be covered by similar measures approved by state governments.

Fair Housing Act

Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability.

Fannie Mae

The official name of the Federal National Mortgage Association, it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Farmer’s Home Administration

A U.S. Department of Agriculture agency that provides credit to farmers and rural residents.

Federal Home Loan Mortgage Corporation, law

The Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac. The company buys mortgages from lending institutions, pools them with other loans and then sells shares to investors.

Federal Housing Administration (FHA)

This government agency operates a variety of home-loan programs. Its most popular is the Sec. 203(b), program, which provides low-rate mortgages to buyers who make a down payment as small as 3 percent.

Federal National Mortgage Association

Now officially dubbed Fannie Mae, this federally chartered agency buys mortgages from lending institutions, pools them with other loans and sells shares to investors.

Federal Reserve Board

Now officially dubbed Fannie Mae, this federally chartered agency buys mortgages from lending institutions, pools them with other loans and sells shares to investors.

Federal style

The all-American home architecture style that evolved after the Revolutionary War. Details include bigger windows and a front doorway surrounded by glass and topped with an arched window.

Federal Trade Commission

The government agency responsible for regulating a variety of companies and industries, from credit bureaus and collection agencies to timeshare operators and certain types of creditors. National headquarters: Sixth and Pennsylvania Avenue NW, Washington, D.C. 20580. Phone: (202) 326-2222.

Fee simple

This type of ownership is the maximum interest a person can have in a piece of real estate. It entitles the owner to use the property in any manner they see fit, in accordance with state and local laws.

Fee simple defeasible

The owner of the property holds a fee simple title contingent upon certain conditions.


Furniture, fixtures and equipment. Used as a dollar figure in the bulk sale escrow. Will have a serious tax consequence for both buyer and seller.

FHA loans

Mortgages that are insured by the Federal Housing Administration. The FHA’s 203(b) loan program provides low-rate mortgages to buyers who make a down payment as small as 3 percent. The agency also operates loan plans for investors and purchasers of rural property.

Fiduciary duty

The relationship of trust that buyers and sellers expect from a real estate agent. The term also applies to legal and business relationships.

Field changes

Modifications made on the construction site that do not match blueprints.

Finder’s fee

A fee in any amount that is paid to someone.

Finish grade

A finish that prepares a lot for landscaping.

Firm commitment

A promise made by a lender when it agrees to loan money for the purchase of property.

First mortgage

The primary mortgage on a property that has priority over all other voluntary liens.

Fixed installment

The monthly payment on a home loan.

Fixed time

The specific weeks in a year an owner of a timeshare arrangement has access to accommodations.

Fixed-rate mortgage

A home loan with an interest rate that will remain at a specific rate for the term of the loan. About 75 percent of all home mortgages have fixed rates.


A house that needs refurbishment or remodeling. It usually sells at a below-market price.

Flood insurance

Hazard coverage that is required in designated flood areas.

Flood plain

Flat, flood-prone areas located along waterways.

Floor area ratio

The calculation of the floor area of all homes or buildings in a project. It is used in the planning and development of a site.

For Sale By Owner (FSBO)

The owner acts as the agent to avoid paying a sales commission.


A course of action a lender may pursue to delay foreclosure or legal action against a delinquent borrower.


The legal process reserved by a lender to terminate the borrower’s interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned to the borrower.


The relinquishing of property rights by a delinquent borrower.

Freddie Mac

The common name for the Federal Home Loan Mortgage Corporation, a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Free-market lots

Owners of these types of lots may hire any builder to construct their home.

Fully amortized adjustable-rate mortgage

A mortgage that amortizes, or pays down, the balance of a loan.

Fully-Serviced Lease

Lease in which rent includes coverages of operating expenses and taxes for the building.



Gag rules

A provision in contracts signed by new buyers that prohibits the owners from publicizing complaints about the builder.

General contractor

The person who hires all of the subcontractors and suppliers for a project.

General plan

A government’s long-range land-use plan.

Georgian style

Popular throughout the 18th century, this type of architecture is distinguished by a symmetrical facade, prominent front entrance and quoins-decorative blocks of masonry or wood set in the corners of the house


A cash gift a buyer receives from a relative or other source. Lenders usually require a “gift letter” stating that the money will not have to be repaid.

Good-faith estimate

An estimate from an institutional lender that shows the costs a borrower will incur, including loan-processing charges and inspection fees.

Government National Mortgage Association

Commonly known as Ginnie Mae, this agency buys home loans from lenders, pools them with other loans and sells shares to investors. Ginnie Mae differs from its cousins, Fannie Mae and Freddie Mac, in that it only purchases loans backed by the federal government.

Grace period

A specified amount of time to make a loan payment after its due date without penalty.

Graduated-payment mortgage (GPM)

A mortgage that requires a borrower to make larger monthly payments over the term of the loan. The payment is unusually low for the first few years but gradually rises until year three or five, then remains fixed.

Granny flat

Slang term for a separate unit in a house or above the garage, which in the past may have been occupied by an elderly relative.


A person conveyed an interest in a piece of property.


The person who conveys an interest in a piece of property to another person.

Greek Revival style

A style introduced in the U.S. at the end of the 18th century. Its most prominent feature is a pillar-anchored pediment forming a portico in the front of the house.

Gross income

The total income of a household before taxes or expenses are subtracted.

Gross Income

Cash received from room rental. Can be calculated as follows: number of rooms x ADR x 365 = Gross Income for 100% occupancy for one year. Now x % occupancy will give average gross income for this property. You may have other income to add to this figure, however, do not add restaurant income into this as it is calculated differently

Gross Lease

Lease in which tenant pays fixed rent (the base rent), landlord pays taxes, insurance and all other operating costs. Also called fixed, flat and full-service lease in some markets.

Gross Up

Adjustment made to operating expenses to reflect occupancy levels in a building.

Ground Lease

A lease which keeps the ownership of the land separate from that of the improvements. The landlord leases the land to the tenant, but the tenant owns the improvements.

Ground rent

The amount of money paid for the use of a piece of property when it is a leasehold estate.

Group home

A single-family residence used as a living space for unrelated, developmentally disabled or mentally disabled people.

Growing-equity mortgage

A fixed rate mortgage that increases payments over a specific period of time. The extra funds are applied to the principal.

Guarantee mortgage

A loan guaranteed by a third party, such as a government institution.




Also called a powder room, a half-bath contains a toilet and a sink but no bathtub or shower stall.

Hazard insurance

This provision of homeowners insurance covers damage by fire, wind or other disaster. It is required by all lenders before a loan is approved.


The equivalent of 2.471 acres.

High density

The concentration of housing units in a specific area or on a specific property.


Any building higher than six stories.

Historic preservation

The physical rehabilitation of a historic home or building, and the movement of the same name begun in the 1960s in the U.S. to preserve and protect landmarks and urban neighborhoods.

Historic structure

A home or building listed in the National Register of Historic Places and certified as historic by the U.S. Secretary of the Interior.

Home equity line of credit

A form of revolving credit in which your home serves as collateral.

Home equity conversion mortgage

Loans made to older owners who want to convert equity into money. Because borrowers are qualified on the basis of the value of their home, e, the loan is not the same as a home equity loan. Also known as reverse mortgages.

Home equity loan

A loan that allows owners to borrow against the equity in their homes.

Home inspection

An examination of a home’s construction, condition and internal systems by an inspector or contractor prior to purchase.

Home rule

The power of a local government to adopt its own land-use regulations.

Home warranty

A type of insurance that covers repairs to certain parts of a house and some fixtures.

Homeowners’ association

A group that governs a modern subdivision or planned community. An association collects monthly fees from all owners to pay for maintenance of common areas, handle legal and safety issues, and enforce the covenants, conditions and restrictions set by the developer.

Homeowners’ insurance

This insurance includes hazard coverage for any damages that may affect the value of a house, in addition to personal liability and theft coverage.

Homeowners’ warranty

Special insurance policies that cover certain home repairs for a specified amount of time.


A document that protects some of a home’s equity from lawsuits.

Hours of Operation (in a lease)

States the hours of business a tenant must maintain.

Housing discrimination

The illegal practice of denying an individual or group the right to buy or rent a home based on race, color, religion, national origin, sex, disability or family status.

Housing expense ratio

The percentage of gross monthly income devoted to housing costs.

HUD-1 Uniform Settlement Statement

A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.



Impact fees

Fees collected from developers of new homes to pay for schools, parks and other facilities.

Implied warranty of habitability

Court cases which determined that all new homes are assumed to be fit for human habitation and meet all building codes.


A portion of the monthly mortgage payment that is placed in an account and used to pay for hazard insurance, property taxes and private mortgage insurance.

In-file credit report

Computer-generated reports drawn from credit repositories that are generally regarded as objective histories.

Income property

Property that is not occupied by the owner but is used to generate income.

Incurable defect

A defect in a property that cannot be fixed, such as an adjacent hazardous waste site, or that would cost too much to repair relative to the value of the property.


Financial tables used by lenders to calculate interest rates on adjustable mortgages and on Treasury bills.

Individual Retirement Account

Tax-deferred savings accounts that allow people to accrue retirement funds.

Infill development

Any significant new construction in an established area.

Infill housing

Home construction in established areas.


This event occurs when there is more money available than there are goods and services to be purchased. Mortgage rates, which are determined by the marketplace and the actions of the Federal Reserve Board and Wall Street, are sensitive to inflation fears.


The roads, schools, parks, utilities, bridges and communications systems in a community.

Initial interest rate

The original interest rate on an adjustable mortgage.

Inspection report

An examination of a home’s exterior, foundation, framing, plumbing, electrical system, heating, air conditioning, fireplace, kitchen, bathroom, roofing and interior.

Installment contract

A purchase agreement in which the buyer does not receive title to the property until all installments are paid.


Materials including cellulose, glass fiber, rock wool, polystyrene, urethane foam and vermiculite that slow heat loss.

Insurable title

Title to property that a company agrees to insure against defects and disputes.


Owners and buyers can purchase various types of insurance: hazard, private mortgage and earthquake. The policies guarantee compensation for specific losses.

Insurance binder

A temporary insurance arrangement usually put in force until a permanent policy can be obtained.


The fee borrowers pay to obtain a loan. It is calculated based on a percentage of the total loan.

Interest accrual rate

The rate at which interest accrues on a mortgage.

Interest rate

The sum, expressed as a percentage, charged for a loan. Interest payments on most home loans are tax-deductible.

Interest rate buy-down plans

For cash-short buyers, some sellers are willing to advance funds from the sale of the home to buy down the interest rate and reduce the buyer’s monthly obligation.

Interest rate caps

A limit on the amount that can be charged to the monthly payment of an adjustable-rate mortgage during an adjustment period.

Interest rate ceiling

The highest interest a lender can charge for an adjustable-rate mortgage.

Interest-only loan

The interest-only loan pays only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment.

Investment property

Real estate that generates income, such as an apartment building or a rental house.

Investment Related Savings

The estimated total savings of buying invested at a rate of 8% for the number of years that a borrower would plan to own a home.

Investment Return

What an investor yields on the investment in dollars as a percent.



Joint liability

The responsibility of two or more people to fulfill the terms of a home loan or debt.

Joint tenancy

Ownership by two or more people that gives equal shares of a piece of property. Rights pass to the surviving owner or owners.


The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person’s property.

Judicial foreclosure

A procedure to handle foreclosure proceedings as civil matters.

Jumbo mortgage

Loans that exceed limits set by Fannie Mae and Freddie Mac. The current limit is $300,700.

Junior mortgage

A loan that subordinates to the primary loan.



Kit home

A structure that contains prefabricated components and is put together by a contractor.

Knob-and-tube wiring

An old-fashioned wiring system that has been replaced by fuses and circuit breakers.



Landscape architect

A professional who holds a degree in landscape architecture, which involves training in horticulture, landscape design and planning.

Landscape contractor

A professional who carries out the plans of a landscape architect or a landscape designer.

Late charge

A fee a lender imposes on a borrower when the borrower does not make a payment on time.

Late payment

A payment a lender receives after the due date has passed.

Latent defect

An invisible problem in a piece of property such as bad wiring, termite damage or lead paint.


A metallic chemical element present in older dwellings, primarily in the form of lead-based paint and lead plumbing. Exposure to lead has been found to be a health risk.


A binding agreement that contains the terms and conditions of a renter’s occupancy.

Lease Buyout

Agreement from landlord to take care of the tenant’s lease obligations in other premises.

Lease option

A lease that contains the right to purchase the property for a specific price within a certain time frame.

Leasehold estate

An arrangement in which the borrower does not own a specific piece of property but possesses a long-term lease.

Legal blemish

Blemishes on a piece of property, such as a zoning violation or fraudulent title claim.

Legal description

A specific way of identifying and locating a piece of real estate that is acceptable to a court.


A bank, savings institution or mortgage company that offers home loans.

Letter of intent

A formal statement that the buyer intends to purchase the property for a certain price on a certain date.

Level of Control on a Listing Agreement

The form used when specifying the level of control of the listing in its title and language.


The use of a small amount of cash–a 5 percent or 10 percent down payment–to buy a piece of property.


A borrower’s debts and financial obligations.

Liability insurance

A policy that protects owners against any claims of negligence, personal injury or property damage.


A claim laid by one person or company on the property of another as security for money owed.

Life cap

A limit on the amount that a loan rate can move during the term of the mortgage. For example, the rate on an adjustable-rate mortgage that begins at 5 percent and has a lifetime cap of 6 percentage points cannot rise above 11 percent, even if rates on fixed-rate mortgages soar to 20 percent.

Life-cycle cost analysis

An analysis of a building project’s expected operating, maintenance and replacement costs, calculated by an architect.

Limited partnership

Real estate syndicates and other investment groups use this type of ownership. A general partner makes the group’s investment decisions, oversees the investment and is principally liable for any losses.

Liquid assets

Cash and all other assets that can be converted to cash relatively quickly. Liquid assets can include money in savings and checking accounts, money-market accounts, and most certificates of deposit.

Liquidated damages

When a real estate deal goes awry, one party often is entitled to liquidated damages, a sum of money set out in the purchase contract in that event.


A piece of property placed on the market by a listing agent.

Listing inventories

The known number of houses for sale within a given market.

Live-in partnership

An arrangement in which two unrelated people purchase a home.

Live-work space

An officially designated dwelling in which the occupant conducts a home-based business or enterprise.

Loan -to-value ratio

A technical measure used by lenders to assess the relationship of the loan amount to the value of the property

Loan application

The first step toward submitting a home loan requires the borrower to itemize basic financial information.

Loan application fee

A fee charged by lenders to for making a loan application.

Loan commitment

A promise by a lender or other financial institution to make or insure a loan for a specified amount and on specific terms.

Loan Constant

A loan amortization number representing the ratio between a loan amount and the equal periodic payments that will retire the loan.

Loan officer

An official representative of a lending institution who is empowered to act on behalf of the lender within certain limits.

Loan origination fee

Most lenders charge borrowers an origination fee–or points–for processing a loan. A point is 1 percent of the total loan amount.

Loan processing fee

A fee charged by some lenders for gathering information to enable the lender to process the loan.

Loan term

The amount of a time set by the lender for a buyer to pay a mortgage. Most conventional loans have 30-year or 15-year terms.

Loan-To-Value Ratio (LTV)

The ratio between an investment’s value and its financing, loan/price = LTV, expressed as a percent. The higher the LTV Ratio, the higher the risk.


When interest rates are volatile, many borrowers want to “lock in” an interest rate and many lenders will oblige, setting a limit on the amount of time the lock-in is in effect.


A living space not partitioned into rooms or a small space built above a larger room.

Log cabin

Homes constructed of rough-hewn timbers and a standard housing form in the early European settlement of the U.S.

Low density

A low concentration of housing units in a specific area.

Low-ball offer

An offer made to a seller that is substantially below market value. The longer a property stays on the market, the more likely there are to be such offers.

Low-documentation loan

A mortgage that requires only minimal verification of income and assets.

Low-down-payment loan

A home loan that requires the borrower to make only a small down payment before obtaining the financing needed to purchase a house.



Maintenance & Emergency Repairs (in a lease)

Defines major and minor repairs and states who pays for what.

Maintenance fee

The monthly assessment members of a homeowners’ association pay for the repair and maintenance of common areas.

Managed-competition lots

Lots in which buyers choose between one of several builders.

Manufactured housing

Prefabricated homes that can range from simple trailers to larger dwellings.


The brick or stone work on a building.

Master Lease

A lease controlling subsequent leases.

Master-planned community

A suburban plan that includes homes and commercial, work, educational and community facilities.

Maximum financing

A loan amount within 5 percent of the highest loan-to-value ratio allowed for a property.

Mechanic’s lien

Subcontractors or suppliers sometimes will file an encumbrance, or mechanic’s lien, against a property to seek payment.

Mechanical systems

A home’s plumbing, wiring, heating and cooling systems.

Median price

The price of the house that falls in the middle of the total number of homes for sale in that area.


A dispute-resolution process in which a neutral party works to resolve contract differences.

Merged credit report

A report that draws information from the Big Three credit-reporting companies: Equifax, Experian and TransUnion Corp.

Metes and bounds

A time-honored land surveying method of describing land in terms of shape and boundary dimensions.

Mint condition

Mint condition, or blue-ribbon condition, refers to a house that looks as close to new as possible.

Mixed-income housing

A neighborhood that contains houses of widely varying prices.

Mixed-use development

A project that combines several different functions, such as residential space above a commercial establishment or an entire development combining commercial, residential and public accommodations.


A change in any of the terms of the loan agreement.

Modified Gross

Typically, it is similar to full service; however, operating expenses, taxes and insurance are included in the tenant’s rent; utilities, specifically electricity, and interior janitor service are not included. The covered expenses are controlled by either a base year or an expense stop.

Money market account

Accounts that work like money market funds and allow individual investors to participate in certain managed investments and withdraw funds under most conditions.

Money market funds

A mutual fund that pools the resources of individuals to invest in certain managed investments.


A legal document specifying a certain amount of money to purchase a home at a certain interest rate, and using the property as collateral.

Mortgage acceleration clause

A clause which allows a lender to demand that the entire balance of the loan be repaid in a lump sum under certain circumstances. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage banker

A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.

Mortgage broker

A company that matches lenders with prospective borrowers who meet the lender’s criteria. The mortgage broker does not make the loan, but receives payment from the lender for services.

Mortgage insurance

Required by lenders in some loans to protect them from a possible default. All conventional loans with less than a 20 percent down payments require private mortgage insurance, or PMI.

Mortgage life insurance

A special type of insurance that will pay off a mortgage if the borrower dies before the debt is retired.

Mortgage-interest deduction

The tax write-off that the Internal Revenue Service allows most owners to claim for the annual interest payments they make on their real estate loans.

Mortgage lender

A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.


The person who borrows money to purchase a house. The lender is called the mortgagee.

Motivated buyer

Any buyer with a strong incentive to make a purchase.

Motivated seller

Any seller with a strong incentive to make a deal.

Move-in condition

A house that is ready for a new occupant.

Move-up buyer

Any buyer with a strong incentive to make a purchase.

Moving Expenses

Agreement in a lease from the landlord to help tenant with the cost of relocation.

Multidwelling property

A property that contains individual units for several households but carries only one mortgage.

Multifamily mortgage

A mortgage on a multifamily dwelling with more than four families, typically an apartment building.

Multiple listing service (MLS)

The service combines the listings for all available homes in an area, except For-Sale-By-Owner (FSBO) properties, in one directory or database.

Multiple offers

Multiple purchase offers occur in hot markets or hot neighborhoods.

Municipal housing inspector

Inspectors employed by cities or counties to check all construction sites and verify that contractors are meeting building codes.



Needs-based pricing

A seller’s asking price that is based on factors such as the required funds to pay off the mortgage, the cost of remodeling or the purchase of another house.

Negative amortization

The situation occurs when a borrower’s monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller. Most fixed-rate loans are not subject to negative amortization, but many adjustable-rate mortgages are susceptible.

Negative-slope driveway

A driveway that drops from street level to the garage.

Neo-traditional planning

Planning of a community that favors the return of new-home development with such traditional features as grid-street patterns, prominent front porches, backyard garages, multi-use buildings and housing clustered near commercial service areas.

Net cash flow

Investment property that generates income after expenses such as principal, interest, taxes and insurance are subtracted.

Net Lease

Lease in which tenant pays base plus some portion of the operating expenses of the property.

Net Operating Income (NOI)

Gross Income minus operating expenses. NOI is the investor’s dollar yield, or return, on a property before debt service.

Net Rentable Area

Specific square footage for which rent can be charged. (Same as Rentable Area)

Net worth

The worth of a person or company based on the difference between total assets and liabilities.

New Urbanism

A community design philosophy that favors the return of new-home development with such traditional features as prominent front porches, backyard garages, multi-use buildings and housing clustered near commercial service areas.

No cash-out refinance

The amount of the new mortgage covers the remaining balance of the first loan, closing costs, any liens and cash no more than 1 percent of the principal on the new loan.

No-competition lots

A lot in which the buyer’s home will be constructed by a particular builder.

No-documentation loan

A loan application that does not require verification of income but typically is granted in cases of large down payments.

Non-assumption clause

A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.

Non-liquid asset

An asset such as a house that is not easily turned into cash.

Non-recurring closing costs

Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a home inspection.


The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

Note rate

The interest rate specified in a mortgage note.

Notice of default

A lender’s initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed.



Occupancy Cost

Charge to tenant, pursuant to its lease, such as rent, operating expense increases, parking charges, moving expenses, remodeling costs, etc.

Offer to Purchase

A commitment on the part of the buyer to enter into a contract of sale. Acceptance of the offer does not create a contract until a copy of the accepted offer is transmitted to the offeror or his agent.

Online real estate listings

Properties listed for sale on the Internet.

Open house

A marketing tool in which a listing agent opens a house for view.

Open listing

A property given to a number of brokers to market at the same time.

Open space

Undeveloped land or common areas in a planned community reserved for parks, walking paths or other natural uses.

Operating Expenses

The necessary costs of maintaining an income property, including taxes, insurance, management fees, repairs, etc. This does not include debt service on the property.


A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy.

Options (in a lease)

A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy.

Oral agreement

Contractual arrangements that are not in writing and are usually not legally binding.

Original principal balance

The amount of principal owed on a loan before a borrower makes any payments.

Origination fee

A fee charged by most lenders–also called points–for processing a loan. A point is 1 percent of the total loan amount.

Owner financing

A transaction in which the seller of a property agrees to finance all or part of the purchase.




An officially described piece of land.

Parking strip

The strip of grass between the sidewalk and the street in front of a house.


There are several partnership options for unmarried individuals to buy a piece of property, such as live-in partnerships (in which both buyers share the residence) or a shared-equity partnership (in which one buyer lives in the home and the other is an investor in the property).

Passive loss

A tax term that refers to any loss from a passive activity, such as the ownership but not the operation of a piece of rental real estate.

Patent defect

A visible deficiency in a piece of property, such as a cracked basement slab or a sagging porch.

Payment cap

A legal limit on the amount a monthly payment can increase on an adjustable-rate mortgage.

Per-diem interest

Interest charged or accrued daily.

Percentage Lease (used in retail only)

Rent structured as an amount based on a percentage of the retailer’s sales generated at the leased site, with or without a base rent. Common area maintenance (CAM) charges are paid in addition to the base rent and any percentage rent.

Personal property

Any moveable property in a house such as furniture or appliances.

Pest-control inspection

A common pest-control inspection is a termite inspection, which is required in some states, such as California.

PITI (Principal, Interest, Taxes, Insurance)

When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower’s actual monthly mortgage-related expenses.

Planned communities

The concept began in the 19th century and describes any town or neighborhood built with certain guidelines and goals.

Planned-unit development

Residents own the home and the land, and share the use and financial responsibility for common areas.


Fees charged by lenders at the time a loan is originated. A point is equal to 1 percent of the total loan amount.

Portfolio lender

A lender who makes loans with its own funds and keeps the loans on the company’s books-in other words, inside the institution’s “portfolio”-rather than selling the loan on the secondary market.


When a buyer signs the papers and receives the keys to the house, the buyer officially takes possession.

Potential Rental Income

The total of all rents under the terms of each lease, assuming the property is 100% occupied

Power of attorney

A document that authorizes an individual to act on behalf of someone else.

Pre-approval letter

A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.

Pre-sold home

Homes that are sold before they are built.

Prepaid expenses

The costs for taxes, insurance and assessments paid before the due date.

Prepaid interest

Interest paid before it is due. For example, at the close of a real estate transaction borrowers usually pay for the interest on their loan that falls between the closing period and the first monthly payment.

Prepayment penalty

Lenders can impose a penalty on a borrower who pays a loan off before its expected end date.


Many lenders will prequalify a borrower who is shopping for a loan by completing a preliminary assessment of the buyer’s ability to pay for a home.

Price range

The range of how much a buyer is willing to pay for a home.


The amount of money that the borrower owes on a mortgage.

Principle of conformity

The idea that a house will more likely appreciate in value if its size, age, condition and style are similar to, or conform to, other houses in the neighborhood.

Principle of progression

An appraisal term which states that real estate of lower value is enhanced by the proximity of higher-end properties.

Principle of regression

An appraisal term which states that the value of higher-end real estate can be brought down by the proximity of too many lower-end properties.

Private mortgage insurance (PMI)

A special type of loan insurance that many lenders require borrowers to purchase if the borrower’s down payment is less than 20 percent of the home’s purchase price.

Probate sale

A real estate sale triggered by the death of the owner, with proceeds to be divided among heirs or creditors.

Proceeds of Condemnation

Specifies who recovers the value of tenant improvements if an eminent domain action occurs.

Procurement of Supplies / Services

Requires the tenant to purchase services of supplies from landlord or the landlord’s visitors.

Procuring Cause

Setting into motion an UNBROKEN series of events that leads to a completed transaction. Usually means that you introduced the eventual buyer or tenant to the seller or landlord. You will NOT be the procuring cause if: the buyer knew about the property before you showed it and you do not play an instrumental role in the transaction; the chain of events leading to the closing of the transaction is broken by a ‘good faith’ break so that you can’t demonstrate that your efforts brought the buyer and seller together. (‘Good faith’ means that the buyer and seller have not conspired illegally to exclude you from the transaction.)

Production home

Homes that are mass-produced by one builder in a project.


A written summation by an architect of a project’s design objectives, constraints and criteria.

Project budget

A fiscal outline that includes the construction budget and all costs for land, furniture, equipment, financing, professional services, contingencies and owner-furnished goods and services.

Property line

The official dividing line between properties.

Property report

A disclosure issued by the state when a time-share project is located or sold.

Property tax

Property taxes are calculated at about 1.5 percent of the current market value.

Property tax deduction

The U.S. tax code allows homeowners to deduct the amount they have paid in property taxes.

Property value

The value of a piece of property is based on the price a buyer will pay at a certain time.

Proposal to Lease

A response to a request for proposal, stating the landlord’s position on the various terms and requirements of the prospective tenant.


Agreed-upon percentages of certain expenses associated with a piece of property that must be paid by the buyer or the seller at the time of closing.

Punch list

Buyers compile a punch list during the final walk-through detailing items to be fixed before closing.

Purchase agreement

A document which details the purchase price and conditions of the transaction.

Purchase-money mortgage

A mortgage that a borrower obtains to acquire a property.



Qualifying ratios

Lenders compute qualifying ratios to determine how much a potential buyer can borrow.

Queen Anne style

A Victorian-era style that originated in San Francisco.

Quit-claim deed

A document that releases a party from any interest in a piece of real estate.

A construction term that refers to the resistance of to heat loss. The higher the R-value, the slower the rate of heat loss.


Device that holds your suitcase, can be a folding type or may be attached to the wall.

Rammed-earth construction

An alternative building process in which dirt is compacted into large structural frames to create walls.

Ranch style

Modern ranch-style homes, popularized in the 1950s, were championed by such architectural giants as Frank Lloyd Wright.

Rate lock

When interest rates are volatile, many borrowers want to “lock in” an interest rate and many lenders will oblige, setting a limit on the amount of time the guaranteed interest rate is in effect.

Rate-improvement mortgage

A loan with a clause that entitles a borrower to a one-time cut in the interest rate without going through refinancing.

Real estate

Land and anything permanently affixed to it, including buildings, fences and other items attached to the structure.

Real estate agent

A real estate agent has a state license to represent a buyer or a seller in a real estate transaction in exchange for a commission. Most agents work for real estate brokers.

Real estate attorney

A lawyers who specializes in real estate transactions.

Real estate broker

A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission. Most brokers also have agents working for them, and are entitled to a portion of their commissions.

Real estate investment trusts (REITs)

The trusts are publicly traded companies that own, develop and operate commercial properties.

Real Estate Settlement Procedures Act (RESPA)

A federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business.

Real property

Land and any permanent fixtures on it, including buildings, trees and minerals.


A designation for an agent or broker who is a member of the National Association of Real Estate Brokers.


A designation for an agent or broker who is a member of the National Association of Realtors.


The cancellation of a contract by law or consent by the parties involved.


When a borrower completely pays off the mortgage, the property is reconveyed to them from the lender.


A public official responsible for keeping the records of all real estate transactions.


The filing of a specific document to the appropriate government entity.

Recording fee

A fee charged by real estate agents for conveying the sale of a piece of property into the public record.


The practice by a bank or insurance company to deny credit or insurance to people based on ethnic background or neighborhood.


The process of replacing an older loan with a new mortgage that has better terms.

Regulation Z

The federal code issued under the Truth-in-Lending Act which requires that a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.

Rehabilitation mortgage

A mortgage that provides for the costs of repairing and improving a resale home or building.

Remaining term

The original loan term minus the number of payments made.

Repayment plan

When a borrower falls behind in mortgage payments, many lenders will negotiate a repayment plan rather than go to court.

Replacement reserve fund

Money that is set aside from homeowners’ assessments to replace common property, such as furniture in a planned development’s community room.


When a house is repossessed, it is taken back by the lender holding the mortgage.

Resale value

The future value of a piece of property that can be affected by many factors, including the surrounding neighborhood, school scores, and economic and housing market conditions.

Restructured loan

A mortgage in which new terms are negotiated.

Return on Equity (ROE)

An investment return ratio derived by dividing cash return, or net profit, by equity

Return on investment

The amount of profit a property generates.

Reverse mortgage

A special type of loan available to equity-rich, older owners. Repayment is not necessary until the borrower sells the property or moves into a retirement community.

Right of First Offer

Right which gives the tenant the first option of buying or leasing occupied property if the owner decides to sell or lease.

Right to recission

A provision in the federal Truth-in-Lending Act that allows borrowers to cancel certain kinds of loans within three days of signing.

Rural Housing Service

A U.S. Department of Agriculture program that provides financing to farmers and certain borrowers to purchase rural property when other funds are not available.




A transaction in which the buyer leases back the property to the seller for a specified period of time.

Sales contract

A contract signed by the buyer and seller that details the terms of a home purchase.

Saltbox style

A design that dates to colonial times and takes its name from the shape of saltboxes.

Schematic designs

Renderings of floor plans and the exterior of a house.

Second mortgage

Another loan placed upon a piece of property.

Secondary mortgage market

A market of packaged home loans that are resold as securities to investors. Major players are Fannie Mae and Freddie Mac.

Secured loan

Any loan backed by collateral.


A piece of property designated as collateral.

Seller broker

A seller broker represents the interest of the seller.

Seller carry-back

An agreement in which the seller provides financing for a home purchase.

Seller take-back

An agreement in which the seller provides financing for a home purchase.

Seller’s market

A hot real estate market in which sellers have the advantage and multiple offers are common.

Semi-custom home

The buyer of a semi-custom home is free to make some design changes but not to the home’s structural plan.


A firm that collects mortgage payments and manages borrowers’ escrow accounts.


The minimum distance a house or buildings must be from the lot line.

Settlement statement

A document that details who has paid what to whom.

Shared-appreciation mortgage

A loan that allows a lender or other party to share in the borrower’s profits when the home is sold.

Shared-equity transaction

A transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner.

Shingle style

An alternative style of Victorian homes that evolved in the late 19th century to simplify the complexity of the traditional Victorian house.

Special assessment

When a homeowners’ association needs or wants extra funds, it levies a special assessment upon the owners.

Special deposit account

Rehabilitation mortgages require a special deposit account from which restoration and remodeling funds included in the loan are disbursed to the appropriate contractors as work is completed.


The written requirements for materials, equipment, construction systems and standards.

Speculation home

A home that has been built without a buyer.

Split-level style

A home that is a ranch-style house stacked to fit on a smaller lot and perhaps to accommodate a garage.

Square footage

The number of square feet of livable space in a home or building.

Standard Metropolitan Statistical Area

Areas designated by the U.S. Office of Management and Budget that contain a city of 50,000 or more.

Standard payment calculation

A calculation that is used to determine the monthly payment necessary to repay the balance of a home loan in equal installments.

Starter home

Homes that fall within the lower price range of a typical first-time buyer.

Steel framing

A construction method used by commercial and residential builders.

Step-rate mortgage

A loan that allows a gradual increase in the interest rate during the first few years of the loan.

Straight purchase

A transaction in which the buyer gives a new-home builder a deposit to begin building and the balance when the sale of the house closes.

Straight Sale

A sale in which the owner conveys title to land and existing improvements, subject to the provisions of the sale contract.


When an agent brings a buyer to a property, they in effect act as a subagent to the listing agent.


Specialty construction companies hired by the general contractor to perform certain tasks.


The process in which the owner of a large piece of property divides it into smaller parcels.


Lease under which the lessor is the lessee of a prior lease of the same property. A lease in which the tenant leases all or part of the premises to another tenant. The ‘sublandlord’ (original tenant) does not relieve himself of the obligation to fulfill the terms of the original lease.

Subordinate loan

A second or third mortgage.


A precise measurement of a piece of property by a licensed surveyor.

Sweat equity

The non-cash value put into a piece of property by the owner, such as do-it-yourself home improvements.



Tap fees

Most companies charge a tap fee for hooking up utilities.

Tax deduction

A tax break given by the government. Mortgage interest, loan points and property taxes can be deducted.

Tax lien

An impediment placed against a property, such as back taxes.

Tax sale

The public sale of a property by the government for nonpayment of taxes.

Tax shelter

A term often applied to real estate investment and refers to various tax advantages.

Tear-down condition

A house that requires the entire interior to be rebuilt.

Teaser rate

An low, short-term rate offered on a mortgage to entice the borrower.

Tenancy by the entirety


Tenant Improvements

Specification of improvements tenant must make at tenant’s expense.

Tenants in common

Two or more owners who share interest in a specific property.

Term Beginning

States when the tenant begins to owe rent.

Term Length

Specifies the effective period for the lease.

The 72-hour clause

When a buyer has a house to sell before they can purchase another home, most sellers insist on a 72-hour clause. In the event of a better offer coming in before the contingency is settled, this clause entitles the seller to give the buyer 72 hours to remove the contingency or lose the house.

Third-party origination

In a third-party origination transaction, the lender has another institution originate all or part of a mortgage.


Ownership that involves the acquisition of a specific period of time, or that percentage of interest, in a vacation home or resort.


The actual legal document conferring ownership of a piece of real estate.

Title company

Firms that ensure that the title to a piece of property is clear and provide title insurance.

Title insurance

A policy issued to lenders and buyers to protect any losses because of a dispute over the ownership of a piece of property.

Title risk

Possible impediments to the transfer of a title from one owner to another.

Title search

A check of public title records to ascertain that the seller is the legal owner and that there are no claims or liens against the property.

Total expense ratio

The percentage of monthly debt obligations relative to gross monthly income.


An attached home that is not a condominium.

Tract home

Another term for a production home, a mass-produced house constructed by one builder in a project.

Trade equity

Other real estate or assets a buyer gives to a seller as part of the down payment.

Trading down

A reference to buyers who purchase a home that is less expensive than their current house.

Trading up

A reference to buyers who purchase a home that is more expensive home than their current house.


Trans-Union Corp. is one of the “Big Three” credit-reporting bureaus that operate nationwide. Address: 760 Sproul Road, P.O. Box 390, Springfield, PA 19064-0390. Phone: (312) 408-1400.

Transfer of ownership

Any legal means by which a piece of real estate changes hands.

Transfer tax

An assessment by state or local authorities at the time a piece of property changes hands.

Treasury bills

Securities issued by the Treasury Department that have the full backing of the U.S. government.

Treasury index

An index used to determine interest rate changes for adjustable rate mortgages.

Triple Net (NNN)

Lease which requires tenant to pay property expenses such as taxes, insurance, maintenance, utilities, etc.

Trust account

Special accounts used by brokers and escrow agents to safeguard funds for a buyer or seller.


A legally empowered person who holds or controls a piece of property for another person.

Truth-in-Lending Act

A federal law that protects consumers in a variety of ways. One of its key provisions allows a consumer to cancel a home-improvement loan, second mortgage or other loan if the home was pledged as security (except for a first mortgage or first trust deed) until midnight of the third business day after the contract was signed.


Owner makes property ready for a tenant to begin business by providing all improvements specified but the buyer in advance of the conveyance of ownership.

Two- to four-family property

A piece of property that is owned by one person but provides housing for up to four households.

Two-step mortgage

An adjustable mortgage with two interest rates, one for the first five or seven years of the loan, and the other for the remainder of the loan term.



U.S. Department. of Housing and Urban Development (HUD)

A federal agency that oversees the Federal Housing Administration and a variety of housing and community development programs.


The process that lenders go through to evaluate the risks posed by a particular borrower and to set appropriate conditions for the loan.

Undisclosed heir

A person who claims the right to a piece of property after the death of an owner without a will.

Undisclosed spouse

An unidentified marital partner who can claim the right to a piece of property.

Unrecorded deed

An unrecorded deed transfers ownership from one party to another without being officially recorded.

Unsecured loan

Any loan that is not backed by collateral.


Options than the standard carpeting, lighting, finish carpentry and other amenities offered to all buyers in a new-home project.


The process in which a property is zoned from a lower to a higher use.

Urban sprawl

The unplanned expansion of development over a large area.

Use (in a lease)

Limits the tenant’s uses of the space.


A reference to illegally excessive interest charged on any loan.

Utilities Availability (in a lease)

The landlord guarantees the availability of the necessary utilities.



VA loans

A program that allows most veterans to purchase a house without a down payment.

Vacancy and Credit Losses

Income lost due to vacancies and/or tenants defaulting on lease payments.


What a buyer will pay for a property. Net income or cash return, divided by a capitalization rate. What a buyer will pay for a property. Net income or cash return, divided by a capitalization rate.

Variable interest rate

A loan rate that moves up and down based on factors including changes in the rate paid on bank certificates of deposit or Treasury bills.

Variable rate

An interest rate that changes with fluctuations in such indexes as the U.S. Treasury bill index.

Variable rate mortgage

A loan with an interest rate that hinges on factors such as the rate paid on bank certificates and Treasury bills.

Vaulted ceiling

An elongated half-cylinder that arches above the floor.

Verification of deposit

An elongated half-cylinder that arches above the floor.

Verification of employment

Part of the loan process, in which a lender asks the borrower’s employer for confirmation of the borrower’s position and salary.

Veterans Administration (VA)

The U.S. Department of Veterans Affairs operates a variety of programs to help veterans. One of the key plans it oversees is the VA loan program, which allows most veterans to purchase a house without a down payment.

Victorian style

An architectural style that dates from the mid-19th century.

Voluntary lien

A lien that a homeowner willingly gives to a lender.




A voluntary relinquishing of certain rights or claims.

Waiver of Subrogation (in a lease)

Protects each party from being sued for the recovery of damages by third parties with a claim against the other party.


A buyer’s final inspection of the home to determine if conditions in the purchase agreement have been satisfied.


A legally binding promise to do something in the future.

Wild deed

An improperly recorded deed.


The most basic legal document outlining the disposition of a person’s estate in the event of death.

Work Letter

Specifications for improvements that the landlord must make before the tenant will accept the property. Sometimes includes drawings, pricing and specific approval dates.

Wraparound mortgage

A loan to a buyer for the remaining balance on a seller’s first mortgage and an additional amount requested by the seller. Payments on both loans are made to the lender who holds the wraparound loan.




An individual who cannot write may execute a legal document by affixing an “X” – his or her mark – where the signature normally goes and a witness would write the person’s name beneath the mark and then sign his or her own name.



Yield Rate

A rate of return on an investment expressed as a percentage which is arrived at by taking the annual net income from the property and dividing it by the cost or market value of the property.



Zero-lot lines

Houses built without space between them and with little or no yard.


Regulations that control the use of land within a jurisdiction.

Zoning variance

A one-time modification of existing zoning law.