A summary of all legal instruments affecting title to a property from the original source of the title to the present. If the buyer's lawyer examines the abstract and writes a report of the title's condition, it is called an abstract and lawyer's opinion.

Accelerated cost recovery system (ACRS)

An alternative method of calculating depreciation in which more depreciation is taken in earlier years and less in later years.

Acceleration clause

A clause in the mortgage that allows the lender to demand immediate payment of the loan balance if the borrower breaks the terms of the note or mortgage.

Accession

Acquiring additions to real estate as a result of adding a fixture or of accretion.

Accretion

The addition of land through natural forces.

Accrued expense

An expense that has occurred but not been paid.

Acknowledgment

A voluntary statement before a notary or officer of the court by a person who signed a document that indicates that the signature is genuine and made by the signer's free will.

Acquisition debt

An income tax term used to describe money borrowed to purchase, construct, or improve a residence.

Acre

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

Actual cash value

A method of settling an insurance claim in which depreciation is subtracted from the original cost of the property.

Actual notice

Information a person has gained by actually reading, hearing, or seeing.

Actual number of days in the month method

A variation of the statutory month method for prorating expenses at closing. It takes into account the actual number of days in the month of closing.

Actual number of days in the year method

A method of proration using the actual number of days in the proration period.

Adjustable-rate mortgage (ARM)

A mortgage in which the interest rate changes at predetermined intervals according to a predetermined financial market index. There are usually ceilings (caps) that limit the amount the rate can change every year and over the life of the loan.

Adjusted cost basis

The original cost of an asset plus capital improvements less certain deductions. Used to determine the amount of gain or loss realized when the asset is sold.

Administrative law judge

Judges who operate under HUD in resolving discrimination complaints.

Ad valorem tax

A Latin term meaning according to value. It is a real estate tax based on the value of the property.

Adverse possession

A method of acquiring title to real property by using the property without the owner's consent and following statutory requirements.

Agency

The relationship between an agent and a principal.

Agency by estoppel

An agency created when a third person relies on the statements of the principal regarding a purported agent.

Agency by necessity

An agency created because of an emergency situation.

Agency coupled with an interest

A agency in which the agent is given an estate or interest in the property by the principal.

Agent

The party who acts on behalf of a principal.

Air rights

Rights a property owner has in the space above the surface of the property.

Alienation clause

The clause in a mortgage that allows the lender to make the entire loan balance due if title to the property is transferred. Also referred to as a due-on-sale clause.

Allodial system

A legal system that recognizes private ownership of land.

Alluvion

New deposits of land as the result of accretion.

Americans with Disabilities Act (ADA)

A law that requires that property that is open to the public includes features that facilitate access to the building. The ADA is designed to eliminate discrimination against individuals with disabilities by providing equal access to jobs, public accommodations, government services, public transportation, and telecommunications.

Amortization

Systematic repayment of a debt through periodic installments. Loans can be fully amortized (the entire balance is extinguished), partially amortized (only part of the balance is paid) or negatively amortized (the balance increases).

Annual percentage rate (APR)

A term used in the Truth-in-Lending Act to represent the true yearly cost of a loan. The APR is a yearly rate and includes the loan's interest rate plus other loan fees.

Anticipation

A principle of value used in appraisal. The value of property may increase or decrease based on some future event that is expected to occur.

Antitrust laws

Laws designed to protect free competition.

Appraisal

The process of estimating and supporting an opinion of value.

Appraisal Foundation

A private nonprofit group that establishes uniform appraisal standards.

Appraisal Qualifications Board

A board of The Appraisal Foundation. Sets minimum criteria for state-certified appraisers and endorses uniform examinations for certification.

Appreciation

The increase in a property's value over a period of time, which can be caused by inflation or by the characteristics of the property.

Appurtenant easements

Easement rights belonging to properties that are adjacent to one another and pass with the property to new owners. Include water rights and rights-of-way.

ARELLO

The Association of Real Estate License Law Officials. A federation of real estate law officials to assist each other in the administration and enforcement of license laws.

As is

A contract clause indicating the seller will not fix any problems with the property.

Assemblage

The process of merging adjoining lots together. It is used to take advantage of the principle of value called plottage.

Assessed value

A value put on real and personal property by a taxing authority as a basis to calculate the amount of real estate tax.

Assignment

Transferring contract rights or obligations. In a lease situation, transferring all of the remaining terms of the lease to someone else.

Associate broker

A license category. A person holding this type of license has passed the requirements for a broker license but is employed by another broker.

Attachment

The process of changing personal property to real property.

Attorney-at-law

A person licensed by the state to practice law.

Attorney-in-fact

A person appointed to act for another under a power of attorney.

Avulsion

The sudden removal of land by natural forces.

Back-end qualifying ratio

A ratio used by a lender to qualify a loan applicant. It compares the applicant's gross income with the proposed PITI and long-term debt.

Balloon loan

A loan in which the payments do not fully amortize the loan balance. The remaining loan balance is included in the last payment, called a balloon payment.

Bargain and sale deed

A deed that may come with or without guarantees. The only guarantee usually associated with this deed is a guarantee against encumbrances for the period the grantor held title.

Base lines

East-west lines that intersect with principal meridians. Used in the rectangular survey system.

Basis

The original cost of the property plus capital improvements less accrued depreciation. Used for accounting and income tax purposes.

Benchmark

Reference point used in metes-and-bounds descriptions.

Beneficiary

The party in a trust who benefits from the assets of the trust. Also, the party receiving personal property under a will.

Bequest

The disposition of personal property under a will.

Bilateral contract

A type of contract in which both parties promise to act.

Bill of sale

Transfers title to personal property in a transaction.

Binder

A short version of a contract that includes all of the essential contract terms.

Biweekly loan

A loan in which a payment is made every two weeks. Under this arrangement a borrower pays less interest and pays the loan off sooner than under a standard loan arrangement with monthly payments.

Blanket loan

A loan that covers more than one property and contains a partial release clause that releases the lien on individual properties as the loan is paid.

Blind ad

Advertising that does not include the broker's name or the name of the real estate company. State licensing laws usually prohibit blind ads.

Blockbusting

Inducing owners to sell or rent based on representations that persons of a particular race, religion, national origin, etc., are moving into the area.

Blue-sky laws

Laws passed to protect the public from fraudulent investment schemes.

Boot

Additional cash or nonqualifying property received as part of a like-kind exchange. Boot is taxable to the recipient.

Borrower

A person who receives a loan (also known as the mortgagor).

Boundary lines

Used in metes-and-bounds descriptions. They define the boundaries of a property.

Broker

One who acts as an intermediary on behalf of others for a fee.

Brokerage

Bringing parties together for the purchase, rent, or exchange of real estate.

Broker license

A type of real estate license category that allows the licensee to operate a real estate office.

Broker/sales associate agreement

A written agreement between a broker and his or her sales agents.

Budget loan

A loan arrangement in which a portion of the property's real estate taxes and insurance is collected by the lender as part of the loan payment.

Building codes

Enacted by local governments under their police powers to protect the public from inferior construction practices.

Building Owners and Managers Association (BOMA)

An association of owners and managers of primarily office buildings.

Building permit

Issued by local governments' building inspectors to allow construction of new buildings or alteration of existing structures.

Bundle of legal rights

A concept of land ownership under which an owner holds all legal rights (i.e., possession, enjoyment, disposition, etc.) to the land.

Buydown

A loan arrangement in which the lender is paid an interest subsidy in exchange for a reduced loan rate in the first years of the loan.

Capital gain (loss)

The profit (or loss) from the sale or exchange of an asset. It is computed as the difference between an asset's adjusted basis and the net selling price.

Capitalization rate

The rate of return or yield from a property that is expected by an investor. The rate is used in the income approach to estimating value and is determined by dividing a property's net income by its sales price.

Carryover provision

A clause in a listing agreement that provides that the broker may be entitled to a commission after the listing contract has expired.

Cash flow

The dollars remaining from income after all expenses have been paid. Cash flow can be either positive or negative.

Caveat emptor

A Latin phrase meaning let the buyer beware. Under this concept buyers make purchases at their own risk.

Certificate of eligibility

Issued by the VA to qualified veterans and includes the maximum loan amount guarantee for the veteran, which is set by the VA based on eligibility period and prior use.

Certificate of occupancy

A certificate of occupancy must be issued before a building can be legally occupied. It is issued only after the building is inspected to make sure it complies with building codes.

Certificate of reasonable value (CRV)

Sets the maximum VA loan amount for a property after it is appraised by a VA appraiser and the appraisal is reviewed by the VA.

Certificate of sale

Given to the winner at a foreclosure sale. It entitles the winner to a deed after the redemption period is over.

Certificate of title

A document signed by a lawyer or title examiner that states that the seller has marketable title on a property. Unlike a title insurance policy, it does not provide protection against title defects not found in the public records.

Chain of title

A chronological history of all the conveyances of a property. Includes who purchased and sold the property and the dates. This information is obtained from the public records.

Change

A principle of value used in appraisal. States that real estate conditions, both physical and economic, do not remain constant, thus affecting the value of real estate.

Chattel

Another name for personal property.

Closing

The consummation of a real estate transaction. Includes delivery of the deed, signing of forms, and disbursement of funds to complete the transaction.

Closing agent

The party that schedules and coordinates the closing process. Usually a representative of a title company or lender or the lawyer for the buyer or seller.

Closing statement

A document used for detailing the financial information (funds received and paid) in a closing.

Cloud on title

Anything that impairs the marketability of a title. Clouds include liens, easements, and deed restrictions on the title.

Codicil

An amendment or addition to a will.

Coinsurance clause

A clause in the insurance policy whereby the owner may take on some of the risk if the house is insured for less than a certain percentage (usually 80 percent) of the replacement cost stated in the policy.

Collateral

Property pledged as security for a debt.

Color of title

A claim to title that is defective.

Commercial banks

Banks that are either federally or state chartered and that make mortgage, construction, and home improvement loans.

Commercial easement

The right given to utility companies to go onto the land to maintain their equipment. A type of easement in gross.

Commercial property

Property used for businesses, such as stores and office buildings.

Commingling

Mixing the broker's personal or operating money with the client's, usually by placing both in the same account. This is illegal under real estate licensing laws.

Commitment fee

A fee paid by a potential borrower to the lender for the lender's promise to lend money at a specified rate within a certain time period.

Commitment to insure

A binder issued by an insurance company stating its intention to grant a policy to an applicant.

Common elements

In condominiums, the parts of the property used by all residents of the condominium building.

Common law

A body of laws based on custom and usage.

Community Bank Reinvestment Act

A law passed to ensure that banks meet the lending needs in the communities where they are located and to prevent redlining.

Community property

Property acquired by a husband and wife after marriage. Property acquired prior to the marriage or obtained by gift or inheritance while they are married is owned separately.

Comparable property

Comparable properties are recently sold properties that are similar to the subject property. Used in the sales comparison approach to estimating value.

Competent parties

Parties who have legal capacity.

Competition

A principle of value used in appraisal. States that if substantial profits are being made competition will be attracted. The increased competition may reduce profit and property value.

Competitive market analysis (CMA)

A simplified version of the sales comparison approach used by brokers to help sellers set a likely selling price for property.

Conciliation agreement

The successful result of mediation between the parties in a discrimination complaint.

Condemnation

The legal process for taking of title to property under the government power of eminent domain.

Condominium

A form of property ownership in which each occupant of a multiunit building owns his or her dwelling unit separately and an undivided interest with other owners in the property's common elements (lobbies, hallways, etc.).

Condominium bylaws

Rules passed by the condominium owners' association that are used to administer the property.

Condominium owners' association

An association of all the owners in a condominium. They may elect a Board of Directors to oversee the administration and management of the condominium.

Conforming loans

Loans that follow the established guidelines of the secondary mortgage market.

Conformity

A principle of value used in appraisal. States that the value of property is maximized if it conforms to the surrounding land use.

Consideration

Anything of value given by parties to a contract.

Construction loan

A loan that provides funds for real estate projects. The lender usually disburses the money as work is completed (called draws).

Constructive eviction

Occurs when a tenant is forced to leave because the property becomes uninhabitable.

Constructive notice

Information that has been made public. The law presumes a person knows all information made available to the public.

Contingency

A provision in a contract requiring certain acts to be done before the contract is binding.

Contract

An agreement among competent parties to do or not to do some legal act(s) and supported by legal considerations.

Contribution

A principle of value used in appraisal. States that an improvement's value is equal to the value added to the property.

Conventional life estate

A life estate created by the acts of the parties rather than by statute.

Conventional loan

A loan that is not insured or guaranteed by a government agency. The lender assumes the full risk of default in a conventional loan.

Cooperatives

A form of property ownership in which a corporation owns the building and the tenants purchase shares in the corporation that give them a right to occupy a unit in the building.

Corporation

An artificial entity created by a corporate charter and run by a board of directors. A corporation can hold title to real estate.

Correction lines

Used in the rectangular survey method to compensate for the convergence of range lines due to the curvature of the earth.

Cost

In appraisal, the total in dollars of the value of the land and constructing the improvements on the property.

Cost approach

An approach to estimating the value of property through the concept of substitution. The value of the subject property is found by (1) estimating the cost of construction, (2) subtracting depreciation and (3) adding the land value.

Covenants

Guarantees given in deeds by the grantor. Covenants include seisin, encumbrances, further assurance, quiet enjoyment, and warranty forever.

Credit report

A report issued by a service bureau detailing an individual's credit history.

Credit unions

Associations that maintain savings accounts for their members while providing primarily home improvement and home equity real estate loans.

Curable depreciation

Depreciation that is worth fixing. That is, the cost of fixing does not exceed the value of the property.

Curtesy

The husband's legal life estate in his wife's property.

Datum

Used to measure elevations. While cities may have several datums, the most commonly used is the USGS datum, which is based on sea level in New York Harbor.

Debt-to-income ratio

A ratio used by lenders to qualify borrowers. It is used to calculate the percentage of gross income allowed for the monthly PITI payment.

Declaration

A document that legally establishes a condominium. Also known as a master deed or enabling declaration.

Deductible

The amount an insured has to pay before the insurance company is liable.

Deductions

Expenses that taxpayers are allowed to include on their income tax returns to reduce their taxable income.

Deed

A written instrument that transfers title to real property from one owner (the grantor) to another (the grantee).

Deed in lieu of foreclosure

A type of nonjudicial foreclosure in which the lender accepts title to the property from the borrower in exchange for ending the debt.

Deed of trust

An agreement among three parties for the purpose of securing a real estate loan. Parties to the trust are the trustor (the borrower), the trustee (usually a title company or bank) and a beneficiary (the mortgagee). Used in many states in place of a mortgage.

Deed restriction

A clause in a deed that limits the owner's use of the property.

Defeasance clause

Stipulates that the mortgage lien is void when the loan is repaid.

Defeasible fee estate

An estate in which the holder has a fee simple title to the property that will end on the occurrence or nonoccurrence of some event.

Deficiency judgment

A judgment against a debtor's personal assets if the sale of real estate is not sufficient to satisfy the loan.

Delivery and acceptance

The time at which title to real estate passes, when a deed is delivered to and accepted by the grantee.

Demographics

Refers to characteristics of a population, such as age and economic status.

Department of Housing and Urban Development (HUD)

One of the duties of this federal agency is to administer the FHA loan programs. Primarily responsible for enforcing the Fair Housing Law of 1968.

Department of Veterans Affairs

A federal agency also known as the VA. One of its functions is to administer the guaranteed loan program for loans made to qualified veterans by approved lenders.

Depreciable basis

The total monetary value of an asset that is used to calculate depreciation.

Depreciation

(1) In appraisal, a loss of property value due to any cause. Depreciation is used in the cost approach to estimating value. (2) For tax purposes, a deduction that allows the cost of assets used in business or as investment property to be recovered over a period of time. Noninvestment property (such as principal residences) cannot be depreciated. The rules for calculating tax-deductible depreciation are established by the IRS.

Descent

Rules used by state law to determine how title to property will pass if the owner died leaving no will.

Designated agent

A licensed person authorized by a broker to act as the agent for a specific principal in a real estate transaction.

Devise

The disposition of real property under a will.

Devisee

The party receiving real property under a will.

Discount point

Interest points charged by a lender to raise the yield on a loan. One point is equal to 1 percent of the loan amount.

Discount rate

The interest rate charged other banks by the Fed for loans. By adjusting the discount rate the Fed can control interest rates and the flow of money in the economy.

Disintermediation

The rapid outflow of funds from savings institutions.

Dominant tenement

A tract of land that benefits from an easement appurtenant right.

Dower

The wife's legal life estate in her husband's property.

Downzoning

A change in zoning from higher-density to lower-density use. Often used to prevent overloading of public services in an area.

Dual agency

Representing both parties in the same transaction.

Earnest money

A deposit given by the potential buyer of real estate after a purchase contract is signed to demonstrate the buyer's good-faith intention to purchase the property. The money is held by a third party (usually the seller's broker) until closing.

Easement

The right to use another's land.

Easement by necessity

An easement right granted by law when there is no access to a person's land.

Easement by prescription

Acquiring an easement right by using the property without the owner's consent for the period of time stated by law.

Easement in gross

An easement right given to a person or corporation to enter someone's land for a specific purpose.

Economic obsolescence

Loss of value caused by variables external to the property. May result from economic, social or environmental forces such as zoning changes, etc. One of the three types of depreciation calculated in the cost approach to estimating value. The property owner has little or no control over these forces; therefore, this type of depreciation is always considered incurable.

Effective gross income

Used in the income approach to estimating value. Effective gross income is found by subtracting an allowance for vacancies and uncollected rent from potential gross income.

Emblements

Annual crops on a property that are raised by the owner.

Eminent domain

The government power to take private land for the public good. Compensation must be given to the owner of the property.

Employee

A working relationship between a broker and his or her sales agents in which the broker has control over how agents perform their duties. The broker can withhold for taxes and Social Security and offer benefits such as pensions, health insurance, and profit sharing.

Enabling legislation

Laws passed by some states giving local governments the authority to establish local laws.

Encroachment

Illegal physical intrusion on another's land.

Encumbrance

A charge, claim, or liability on the property.

Endorsement

A rider added to an insurance policy that changes the coverage.

Equal Credit Opportunity Act

Protects borrowers from discrimination when applying for loans. A lender can deny a borrower credit based only on valid business reasons.

Equalizer

Adjusts property assessments so that they are equitable throughout a state.

Equitable redemption

A borrower's right to redeem property before a foreclosure sale.

Equity

A property's value minus any loans against it.

Erosion

The gradual loss of land through natural causes.

Errors and omissions insurance

A type of coverage that protects brokers from loss due to errors, mistakes, and negligence.

Escheat

The government power to acquire land from owners who die without a will and leave no heirs.

Escrow

Placing something (e.g., money, documents, or property) with a third party to be delivered to a designated person when certain conditions, such as the closing of a transaction, are fulfilled.

Escrow account

An account maintained with a lender to hold money to pay real estate taxes and insurance. Also used by brokers to hold buyers' earnest money that comes into brokers' possession during real estate transactions.

Escrow closing

A closing procedure in which an appointed agent handles all of the closing details rather than having them handled in a face-to-face meeting of buyer and seller.

Estate for years

A leasehold estate that continues for a definite period of time. This is the most common type of leasehold estate and usually requires no notice to terminate.

Estate in land

The degree, extent, quantity, and nature of interest a person has in real property.

Eviction

The process of removing a tenant from the premises if a lease agreement is breached. Implemented by filing a suit for possession after giving sufficient notice to the tenant. The removal of a tenant by the landlord because the tenant breached a condition of the lease.

Evidence of title

Proof of ownership of property. Usually a certificate of title, an abstract of title with lawyer's opinion, title insurance, or a Torrens registration certificate.

Exclusive-agency listing

A type of listing in which the seller hires a single broker. If the seller sells the property himself or herself, however, a commission is not owed the broker.

Exclusive-right-to-sell listing

A type of listing in which the seller hires a single broker. In this type of listing a commission is owed the broker no matter who sells the property.

Executed contract

A contract in which the parties have performed all of the provisions.

Executor

A male named in a will as the person to oversee the administration of a will's provisions.

Executrix

A female named in a will as the person to oversee the administration of a will's provisions.

Expressed agency

An agency created by words (either oral or written).

Fair Credit Reporting Act

A law passed to regulate the action of credit bureaus and consumer credit information. It protects consumers from the reporting and use of inaccurate or obsolete credit information. A lender who rejects a loan request because of adverse credit bureau information must inform the borrower of the source of the information.

Fair Housing Act

A federal law that prohibits discrimination in the sale and rental of housing based on race, color, religion, gender, handicap, familial status, and national origin.

Fannie Mae

Formally known as the Federal National Mortgage Association (FNMA). Operates in the secondary mortgage market. It handles FHA, VA, and conventional loans and is the largest mortgage purchaser.

Federal Agricultural Mortgage Corporation

A federal agency that establishes a secondary mortgage market for farm real estate loans.

Federal Deposit Insurance Corporation (FDIC)

A government agency that manages two insurance funds used to insure deposits in both commercial banks and savings banks or thrifts.

Federal Home Loan Mortgage Corporation (FHLMC)

A government agency that works closely with thrifts to provide a secondary market for their loans. Also known as "Freddie Mac."

Federal Housing Administration (FHA)

The FHA is a division of the Department of Housing and Urban Development (HUD). The FHA's principal role is to insure residential mortgage loans made by private lenders.

Federal Reserve System

Called the Fed, it was established by Congress in 1913 to help maintain a sound credit and economic environment and counteract inflation and deflation trends. The Fed regulates money supply and interest rates.

Fee simple absolute

The highest form of ownership recognized by the law. Another name for fee simple estate.

Fee simple defeasible

An estate that is subject to some condition to determine when it will begin or end. Also referred to as determinable, conditional, or qualified fee.

Fee subject to condition precedent

An estate that takes effect when a specified condition is performed. The estate ends when the condition is no longer met.

Fee subject to condition subsequent

An estate that includes a prohibited use of the property.

Feudal system

A system of ownership in which the land was controlled by the king, usually associated with England.

FHA loan

A loan made by an approved lender and insured by the Federal Housing Administration.

Fiduciary relationship

A relationship that involves great trust and confidence.

Fifteen-year loan

A fully amortized loan with a 15-year term. Reducing the loan term from 30 to 15 years saves the borrower interest with only a moderate increase in the payment amount.

Final walkthrough

The final inspection of property by a buyer shortly before closing.

Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)

A federal law passed as a result of the troubles experienced by the savings and loan industry. The act included amendments intended to improve the competency of appraisers.

First mortgage

A real estate loan that has priority over any subsequent mortgages.

Fixed interest rate

An interest rate that does not change during the loan term.

Fixed rate mortgage

A loan in which the interest rate does not change.

Fixity

An economic characteristic of real estate that refers to the fact that investments in real estate are for the long term.

Fixture

An item that was once personal property but has been attached to the real estate and become real property.

Foreclosure

The process of liquidating a borrower's assets to satisfy a debt.

Fractional section

Sections that are undersized (less than 260 acres). Used in the rectangular survey method for describing real estate.

Fraud

The intentional misstatement of a fact to induce someone to take a particular action.

Freehold estate

An ownership interest in real estate for an indeterminable length of time.

Friendly foreclosure

The mortgagor in default conveys title to the lender to avoid a record of foreclosure. Also called deed in lieu of foreclosure.

Front-end qualifying ratio

A ratio used by a lender to qualify a loan applicant. It compares a loan applicant's gross income with the proposed PITI.

Front foot

A unit of linear measurement (in feet) of the side of a property that faces the street.

Fruits of industry

Items such as crops that are on but not part of the real estate.

Fruits of nature

Items such as bushes and trees that are on and part of the real estate.

Full replacement coverage

A method of settling an insurance claim in which no depreciation is subtracted from the cost of replacing the property.

Functional obsolescence

Loss of value caused by outdated features in the property, such as outdated bathroom fixtures. Functional obsolescence may be either curable or incurable. One of the three types of depreciation calculated in the cost approach to estimating value.

Further assurance

A guarantee in a deed by which the grantor promises to perform any reasonable acts necessary to correct defects in the title being given.

Gap

A defect in the chain of title that raises doubt as to the ownership of a parcel of real estate.

General agent

Represents the principal in a related range of activities.

General lien

A lien that applies to all of a person's property.

General partnership

A partnership in which all of the partners are general partners and have unlimited liability and the right to manage the partnership.

General warranty deed

A type of deed that provides the greatest protection to the grantee because the grantor provides various covenants (guarantees) that the title being given is good.

Good-faith estimate

An estimate required by RESPA and provided to the buyer by the lender stating the expected closing costs the buyer will incur.

Government lots

Lots that are smaller than full quarter sections. Used in the rectangular survey system of describing real estate.

Government National Mortgage Association (GNMA)

A wholly owned government corporation that provides a secondary market for VA and FHA loans. Also known as "Ginnie Mae."

Graduated lease

Allows for rent changes at set future dates. Also called a variable lease.

Graduated payment mortgage (GPM)

A loan program that has smaller loan payments in the early years of the loan and larger payments in later years. Designed for buyers who do not have sufficient income to qualify for larger loans but have good income potential.

Grant deed

Grantors provide assurance only that there were no encumbrances on the property while they held title. Similar to a special warranty deed.

Grantee

The party who receives an ownership interest in property.

Granting clause

States the grantor's intention to transfer title and the type of ownership interest conveyed. Also called words of conveyance.

Grantor

The party who gives an ownership interest in property.

Gross income multiplier (GIM)

A shortened method of estimating the value of income-producing property. The multiplier is found by dividing the selling price by gross annual income of comparable properties. The GIM is used to find the value of the subject property by multiplying the gross annual income of the subject property by the multiplier.

Gross lease

A lease agreement in which the tenant pays a fixed amount of rent and the owner pays all of the expenses of the building. This is the most common type of lease arrangement.

Gross rent multiplier (GRM)

A shortened method of estimating the value of income-producing rental property. The multiplier is found by dividing the selling price by the residential gross monthly rent of comparable properties. The GRM is used to find the value of the subject property by multiplying the gross monthly rent of the subject property by the multiplier. Usually used for single-family rental property.

Ground lease

A long-term lease of land (50 years or more) that usually requires that the tenant construct a building.

Guide meridians

In the rectangular survey method of describing real estate, every fourth range line is a guide meridian and is used in conjunction with correction lines to compensate for the curvature of the earth.

Habendum clause

A clause in a deed that defines or limits the estate being granted.

Heirs

Persons legally eligible to receive property of a decedent.

Highest and best use

The one legal use that provides a property with its greatest value. A principle of value used in appraisal.

Holdover tenancy

Occurs when a tenant remains on the property after the right to possess it has expired.

Holographic will

A will created in the testator's own handwriting and not witnessed.

Home equity loan

A loan based on a homeowner's equity in his or her property, usually an adjustable rate, second (junior) mortgage. The interest is usually deductible for income tax purposes.

Home Mortgage Disclosure Act

A law passed to prevent real estate lenders from redlining. Lenders must make annual disclosures showing areas where loans are being made.

Homeowner's policy

A package of several types of insurance coverage available to homeowners.

Homeowners' association dues

Fees imposed by a condominium or homeowners' association for maintenance of the common areas.

Home rule powers

Provisions in the constitutions of some states that give local governments the power to regulate real estate to protect the public health and safety.

Homestead exemption

A legal life estate that protects a portion of the value of an owner's principal residence from unsecured creditors. Rules are set by state law.

Housing and Community Development Act

A 1974 amendment to the 1968 Fair Housing Act that added gender as a protected class.

HUD-1

A standard settlement form required by RESPA. Also known as the Uniform Settlement Statement.

Hypothecation

Pledging property as security for a loan without giving up possession.

Immobility

A physical characteristic of real estate, meaning that land cannot be moved.

Implied contract

An agreement created by the actions of the parties.

Impound account

An account maintained by the lender that holds money collected from the borrower for the payment of real estate taxes and insurance. Also called an escrow or a reserve account.

Improvement

Addition to a property that is created artificially rather than by nature.

Income approach

An approach to estimating the value of property by finding the net income and applying it with the capitalization rate. The value of the subject property is estimated by (1) finding the annual potential gross income, (2) subtracting a vacancy rate to find the effective gross income, (3) subtracting operating expenses to find the net income, (4) finding the capitalization rate and (5) applying the capitalization rate to the subject property.

Increasing and diminishing returns

The relationship between the cost of improvements and the value they add to the property. Improvements may initially add substantial value (increasing return) but will reach a point where they add less value (diminishing return). A principle of value used in appraisal.

Incurable depreciation

When present, the cost of fixing the property will be more than the increase in value or the corrections are not physically possible. Used in appraisal.

Independent contractor

A working relationship between a broker and his or her sales agents in which the broker can control what the agent will do but not how it will be done. The broker cannot withhold for taxes or Social Security or provide benefits.

Indestructibility

A physical characteristic of real estate meaning that land cannot be destroyed.

Index lease

A lease agreement in which the rent changes are based on some common economic index.

Industrial property

Property used in industry, such as factories.

Installment sale method

A method of selling real estate in which the gain on the sale is received from the buyer over several years and recognized as a taxable gain over the same period.

Installment sales contract

A sales contract in which the buyer takes possession of the property but the seller retains title until the loan is paid.

Institute of Real Estate Management (IREM)

The largest property management organization. It is affiliated with the National Association of REALTORS®.

Instrument

A legal document such as a contract, deed, or note.

Insured loans

A loan insured by FHA or a private mortgage insurance company that protects the lender against default.

Intangible property

Personal property represented by a document but that cannot be detected by the senses. Stock certificates are a representation of intangible property.

Interim financing

A short-term loan often used to finance real estate construction.

Interstate Land Sales Full Disclosure Act

A federal law that regulates the sale of real estate across state lines (in interstate commerce) under certain conditions.

Inter vivos trust

A living trust created by an owner during his or her lifetime.

Intestate

Having died without making a will.

Inverse condemnation

Forcing the state to buy an owner's property if government action has forced loss of value or inability to use the property.

Involuntary alienation

Transferring title to real estate without the will and consent of the owner.

Involuntary lien

A lien that is created by law, either by statute or by a court.

Joint tenancy

Ownership by two or more people who own an undivided interest with right of survivorship. Four unities are required to create a joint tenancy: time, title, interest, and possession.

Joint venture

A business entity created for a single project, usually intended to last a limited period of time.

Judgment

A decree issued by the court at the conclusion of a lawsuit. After recording in the county records, it usually becomes a general lien on the defendant's property.

Judicial foreclosure

Foreclosure procedures that use the courts. These procedures include judicial sale and strict foreclosure.

Judicial sale

A type of judicial foreclosure in which the lender uses the acceleration clause in the mortgage and then files a suit to have the property sold and the loan paid.

Junior mortgage

A loan that is subordinate to a prior mortgage.

Laches

Loss of legal rights because of failure to assert them on a timely basis.

Land

Includes the earth's surface, below to the center, above to infinity, and all natural things attached.

Land contract

The seller accepts a down payment and finances the rest of the purchase price. Title to the property remains with the seller until the loan is repaid. Also called an installment sales contract and contract for deed.

Landlocked

Property that does not have access to a public road to enter or leave the land. This situation may create an easement by necessity.

Land trust

A trust in which real estate is the only asset.

Latent defects

Hidden defects in property.

Lease option

Gives the tenant the right to renew the lease if proper notice is given.

Lease purchase

An arrangement in which the tenant leases property for a period of time with the intention of purchasing it.

Lease with option to buy

Allows the tenant to purchase property within a specified time period, usually with pre-agreed terms.

Legal description

A precise method of describing a parcel of real estate. A description on documents used in the transfer of title to real estate that is acceptable to the courts.

Legal life estates

Life estate created by statute rather than by the actions of the parties. There are three common types: curtesy, dower, and homestead.

Lessee

The tenant in a lease arrangement.

Lessor

The landlord/property owner in a lease arrangement.

Leverage

The use of borrowed money to purchase investments.

Liability coverage

Protection against claims by others for injuries caused by an owner's negligence.

License

A personal privilege to enter another's land for a specific purpose.

Lien

A charge or claim against the property for a debt or obligation of the property owner.

Lienee

The party whose property is subject to a lien.

Lienor

The party holding the lien right.

Life estate

A noninheritable freehold estate based on the life (or lives) of named individuals.

Life insurance companies

A source of money for large industrial and commercial real estate projects. Deal with intermediaries rather than individual borrowers.

Life tenant

The party who owns a life estate in the property.

Like-kind property

As defined by the tax code (Section 1031), personal property that can be exchanged for other personal property or real estate that can be exchanged for other real estate.

Limited liability company

Incorporates the tax and liability advantages of corporations and limited partnerships.

Limited partnership

A type of partnership that includes at least one general partner and one or more limited partners. The limited partners cannot manage the business, and their liability is limited to the amount of their investment.

Liquidity

The speed at which an investment can be converted into cash.

Lis pendens

A notice in the public records of a lawsuit involving a particular property that may result in a claim against the property.

Listing contract

An agreement between an owner and a licensed broker in which the broker is employed to sell the real estate within a given time in return for a commission, to be paid by the owner.

Littoral rights

The rights of an owner with property bordering large bodies of water, such as the ocean.

Loan assumption

Occurs when someone other than the original borrower becomes primarily liable for the loan.

Loan commitment

A commitment by a lender to make a loan on a property for a stated amount within a certain period of time. Given to loan applicants when their credit has been approved by the lender.

Loan-to-value ratio

The relationship between the amount of a loan and the appraised value of a property. The ratio is expressed as a percentage of the appraised value.

Lot-and-block system

A method of describing real estate that references a parcel of land by lot and block numbers within a subdivision. Also called recorded plat.

Management agreement

A contract by which a property owner employs a property manager.

Management plan

A document developed by a property manager that outlines the owner's objectives and how the manager intends to meet them.

Marketable title

Title that is free from major defects that would deter potential buyers of the property.

Market price

The actual sales price of a property, usually different from the market value.

Market segmentation

Dividing real estate markets into submarkets.

Market value

The most probable price a property should bring if payment is made in cash and the buyer and seller are unrelated, well informed, and acting without pressure.

Mechanic's lien

A claim against real property by suppliers of goods and services to the real estate.

Member of the Appraisal Institute (MAI)

The highest designation awarded by the Appraisal Institute.

Metes and bounds

One of the common methods of describing real estate. The description starts at a point of beginning (POB) and describes the circumference of the property, ending at the POB.

Mill

An amount equal to one tenth of a cent ($.001). Sometimes used to express a real estate tax rate.

Misrepresentation

A false statement or concealment of a material fact.

Modification

The economic characteristic of real estate meaning that a change in one property affects the value of neighboring properties, either favorably or unfavorably.

Monuments

Monuments are fixed objects used in the metes-and-bounds method of describing real estate.

Mortgage

A contract between a borrower and a lender that provides security for the loan by creating a lien on the property.

Mortgage banking company

Originates loans and packages them to investors, who may use their own money or money borrowed from other lenders. They also service loans.

Mortgage bond financing

The process of selling tax-exempt bonds by municipalities to raise money for low-rate loans to first-time home buyers.

Mortgage broker

One who arranges a loan between a lender (mortgagee) and borrower (mortgagor) for a fee.

Mortgagee

The lender or obligee, who receives a pledge from a borrower to repay a loan.

Mortgage insurance premium

An insurance fee paid by the borrower either to the FHA or to a private mortgage insurer to protect the lender against default.

Mortgagor

The borrower or obligor, who gives the lender a pledge to repay a loan.

Multiple listing

A method of sharing listing information among brokers.

Multiple-listing service (MLS)

An organization composed of member brokers who agree to share their listing information with the intention of more quickly finding buyers for a property.

Mutual savings banks

Similar to savings banks, they use most of their funds for residential real estate loans.

National Association of REALTORS®

A professional organization for the real estate industry.

National Flood Insurance Program (NFIP)

A program administered by a division of the Federal Emergency Management Agency (FEMA) that helps provide coverage to homeowners for losses due to flooding.

Negative amortization

A loan arrangement in which the loan balance increases with each payment rather than decreasing because the payment amount is not sufficient to cover the interest.

Negotiable instrument

A written promise or order to pay a specific amount of money. The instrument may be transferred to someone else by endorsing the document. A mortgage note and checks are examples of negotiable instruments.

Net income

Gross income less operating expenses. Also called net operating income.

Net lease

A lease arrangement in which the tenant pays a fixed amount of rent plus some or all of the building's expenses.

Net listing

A listing in which a specified amount is due the seller and the broker's commission is any amount above that. This type of listing is illegal in some states because of the potential for fraud by the broker.

Nonconforming loan

A mortgage not eligible for sale and delivery to either FNMA or FHLMC for various reasons, including the loan amount, loan characteristics, or underwriting guidelines.

Nonconforming use

A property's use that existed prior to the current zoning laws and is not in compliance with those laws.

Nonhomogeneity

An economic characteristic of real estate meaning that no two parcels of land are exactly alike.

Nonjudicial foreclosure

Foreclosure procedures used by lenders that do not involve the courts. Common types are power of sale clauses and deeds in lieu of foreclosure.

Note

A written promise to pay a sum of money at a stated rate during a specific term.

Novation

Substituting a new contract for an old one.

Nuncupative will

A will created orally by a person near death.

Obsolescence

Loss of value owing to being outmoded or less useful.

Occupancy permit

Issued by a local government body to establish that a property is suitable for habitation because it meets local safety and health standards.

Office of the Comptroller of the Currency (OCC)

A government office responsible for monitoring and regulating the nationally chartered banking industry.

Office of Thrift Supervision (OTS)

An agency that is part of the Department of the Treasury and responsible for monitoring and regulating thrifts.

Oil and gas lease

A lease under which a property owner receives rent from a company for allowing it to drill for oil and gas on the property.

Open-end loan

A loan arrangement whereby the mortgagor may borrow additional money up to the original amount of the loan using the same property as collateral.

Open listing

Listing in which the seller employs any number of brokers at the same time but owes a commission only to the broker who sells the property.

Ordinary life estate

An estate based on the tenant's life.

Package mortgage

A loan arrangement used to finance both real and personal property in a real estate transaction.

Parol evidence rule

Oral evidence will not be allowed to contradict a written contract.

Partition

The right of parties in a tenancy in common or joint tenancy to have the courts force the dissolution of the tenancies.

Partnership

An agreement between two or more persons to conduct a business. A partnership can be either limited or general.

Party wall

A wall built on the line separating two properties. Because the wall is built partly on each property, each owner has an easement on the adjoining owner's land that is covered by the wall.

Pension funds

These funds invest in packages of real estate loans, primarily from mortgage bankers and brokers.

Percentage lease

A lease arrangement in which the rent is determined by a percentage of the tenant's gross income.

Perfecting title

The process of removing defects on the title.

Perils

Hazards or risks that may be protected against with insurance policies.

Periodic estate

A leasehold estate that continues for an indefinite period of time. Also called an estate from period to period.

Personal property

All property that is not classified as real property. The primary characteristic of personal property is mobility.

Physical deterioration

Loss of value caused by wear and tear on the building, such as a leaking roof or peeling paint. Physical deterioration may be either curable or incurable. One of the three types of depreciation calculated in the cost approach to estimating value.

PITI

An acronym describing principal (P), interest (I), taxes (T) and insurance (I), the most common components of a mortgage payment.

Planned unit development (PUD)

Mixed-use developments of several acres that set aside areas for residences; commercial property; and public areas such as schools, parks, etc.

Plat

A property map recorded in plat books in the public records.

Plat of survey method

Also called recorded plat and lot-block-tract, this is one of the methods used to describe real estate. Divides land into blocks, lots, and tracts.

Plottage

Combining lots to increase the value of the new larger lot over the sum of values of the smaller ones. A principle of value used in appraisal.

Point of beginning

In the metes-and-bounds method of describing real estate, the description begins and ends at the point of beginning.

Points

Points are interest, usually payable at closing. A point is 1 percent of the loan amount.

Police powers

Government powers that give the state and local governments the authority to pass laws to protect the public health and safety.

Portfolio lenders

Lenders who hold loans they originate rather than selling them to investors.

Power of attorney

A written instrument authorizing one person (called the attorney-in-fact) to act as an agent for another person.

Property management agreement

A document that establishes the working relationship between a building owner and a property manager. A contract between the parties that establishes an agency in which the manager is the agent and the owner is the principal.

Prepaid expense

An expense that has been paid but not yet incurred.

Prepayment clause

A mortgage clause that determines the borrower's rights and duties if the loan is prepaid.

Price

In appraisal, what a property actually sells for.

Price-fixing

An illegal practice (violation of the antitrust laws) in which brokers conspire to establish a standard commission rate.

Principal meridians

Lines running north and south and intersected by base lines. Used in the rectangular survey system of describing real estate.

Prior appropriation

Ownership and use of water are controlled by the state, and property owners must apply to the state to appropriate (divert) water.

Private conduits

Organizations that often purchase and pool nonstandardized loans for selling in the secondary market.

Private mortgage insurance (PMI)

Insurance written by a private company that protects a mortgage lender against loss if a borrower defaults. The insurance is usually used when the loan-to-value ratio exceeds 80 percent. PMI insures the top 20 percent to 25 percent of the loan, and borrowers are charged a fee at closing as well as an annual fee.

Probate

The legal process of determining a will's validity, paying the debts of the estate, and distributing the estate's remaining assets.

Procuring cause

The broker whose actions resulted in completion of the sales transaction.

Progression

The idea that the value of a poorer property will increase if it is near a better quality property. A principle of value used in appraisal.

Promissory note

A contract agreement between a borrower and a lender whereby the borrower commits to pay the lender the loan amount following specific terms. The note is a negotiable instrument, allowing the lender to sell the note to investors.

Proprietary lease

A lease given by the corporation that owns a cooperative apartment building to the shareholder, giving the shareholder the right as a tenant to one of the units in the building.

Prorated expenses

Expenses shared between the buyer and seller.

Puffing

Statements of opinion and exaggeration by the broker.

Pur autre vie

A type of life estate based on the life of someone other than the life tenant. Means for the life of another.

Purchase-money mortgage

A loan given by the seller to finance part of the purchase price. Also called a take-back mortgage.

Pyramiding

Obtaining additional investment property by borrowing on the equity of existing investments.

Quiet enjoyment

A guarantee in a deed that the title being given is good against third parties.

Quiet title lawsuit

Used to clear up defects or uncertainty in a title.

Quitclaim deed

A deed that conveys whatever interest, if any, is held by the grantor and does not provide the grantee with any guarantees.

Range lines

Lines that run north and south and are measured from the principal meridian. Used in the rectangular survey system of describing real estate.

Ranges

Strips of land running north and south and measured from the principal meridian. Used in the rectangular survey system of describing real estate.

Raw land

Land that has no improvements. Also called unimproved land.

Real estate

Land plus any artificial things permanently attached.

Real estate assistant

An individual who assists a broker or salesperson in the real estate business. Assistants may be licensed or unlicensed

Real Estate Investment Trust (REIT)

Allows small investors to participate in real estate investments. Investors transfer title to real estate to a trustee, who manages the property for the benefit and profit of the investors. Funds from the issuance of investment trust certificates to investors are used to purchase real estate investments for the benefit of the investors.

Real Estate Mortgage Investment Conduit (REMIC)

Issues investor securities backed by mortgage loan pools.

Real Estate Settlement Procedures Act (RESPA)

The primary purpose of this federal law is to ensure that the parties in a residential real estate transaction are informed of settlement costs. The law's requirements include good-faith estimate of closing costs, use of HUD's settlement statement, providing a HUD information booklet, and prohibiting kickbacks.

Real property

All components of real estate plus the legal rights and interests associated with its ownership.

REALTOR®

A registered trademark of the NAR that can be used only by its members.

Recapture clause

Allows a lessor to take back the premises if a minimum sales amount is not met. Used in percentage leases.

Reciprocal agreements (reciprocity)

Agreements between states that make it easier for brokers to obtain licenses in other states.

Recovery fund

An account operated by the state used to pay uncollectible judgments against licensees.

Rectangular survey system

Established by Congress as a method of describing real estate. Established a grid of intersecting lines to describe the location of a property. Also known as the government survey system.

Redemption

The rights of an owner whose property is sold (or is being sold) to satisfy a lien against the real estate to recover the property. Redemption rights are commonly given when property is being sold to satisfy mortgage loans and real estate taxes.

Redlining

Refusing to make loans or issue insurance policies in certain areas, based on the presence of a protected class.

Regression

The idea that the value of a better property will decrease if it is near a poorer quality property. A principle of value used in appraisal.

Regulation Z

Federal regulation issued by the Fed to implement the Truth-in-Lending Act.

Release deed

A deed given by a trustee when a loan is repaid. Also called a trustee's deed of reconveyance.

Reliction

The gradual subsiding of water leaving additional land.

Remainder interest

A third party who has a future ownership interest in property.

Renouncing the will

A spouse's election to receive the benefits of the estate that are allowed under state law rather than those given by the will.

Replacement cost

Estimates the current cost of constructing similar or equivalent improvements. Used in the cost approach to estimating value.

Reproduction cost

Estimates the current cost of constructing duplicates of the property improvements. Reproduction creates an exact replica, while replacement cost creates similar improvements. Used in the cost approach to estimating value.

Reserve requirement

The portion of a bank's deposits that may not be loaned. By adjusting the reserve requirement, the Fed can control interest rates and the flow of money in the economy.

Residential property

Property used for housing. Includes single-family housing, condos, cooperatives, and apartment buildings.

Reverse annuity mortgage

A loan designed for elderly people with little or no debt on their houses. The lender pays the borrower a fixed amount of money each month based on the equity in the property and the owner's life expectancy. The loan is repaid when the owner dies, sells the house, or moves out of the house.

Reversion interest

Under this arrangement property "reverts," returns, to the original owner.

Right of first refusal

In a lease arrangement, allows the tenant the opportunity to buy the property if the owner receives a purchase offer. In a cooperative or condominium, the corporation or condominium board can require the shareholders to offer their shares, or unit, to the corporation or board before selling them to others.

Right of survivorship

When tenants in a joint tenancy die, their ownership share goes to the surviving joint tenants.

Riparian rights

Rights pertaining to land bordering flowing water, such as streams or rivers.

Run with the land

Easement rights that are passed on to successive owners of the property.

Sale and leaseback

An arrangement whereby an owner sells property and then leases it back from the purchaser. Often used with commercial and industrial property.

Sales comparison approach

An approach to estimating the value of property by comparing the subject property with various similar (comparable) properties. The value of the subject property is found by (1) locating at least three comparable properties, (2) making adjustments for differences between the comparables and the subject property and (3) reconciling the adjusted sales price of the comparables.

Salesperson license

An entry level real estate license category. A person holding a salesperson license must be employed by a broker to perform selling activities.

Satisfaction of mortgage

A document issued by a lender verifying that a loan has been repaid.

Savings banks

Also called thrifts. Lenders that have traditionally been an important source of loans for residential property. Their role has greatly diminished in recent years.

Scarcity

An economic characteristic of real estate that refers to the finite amount of land.

S corporation

A special form of corporation that is taxed like a partnership but has limited liability.

Secondary mortgage market

A market where existing mortgages are bought and sold. Mortgages are originated in the primary mortgage market.

Section 1031

The section of the IRS code that authorizes the deferment of tax on a gain through an exchange of like-kind property.

Sections

A land measure of one square mile or 640 acres used in the rectangular survey method of describing real estate.

Seisin

A guarantee in a deed that the grantor has the power and authority to convey title.

Seller disclosure statement

A listing by a seller of any property defects.

Senior Residential Appraiser (SRA)

A designation awarded by the Appraisal Institute to residential appraisers.

Servient tenement

A tract of land over which an appurtenant easement right runs.

Severalty

The same as sole owner.

Severance

The process of changing real property to personal property.

Situs

The economic characteristic of real estate that refers to people's preference for some areas over others.

Special agent

A representative of the principal in a specific transaction.

Special assessment

A special real estate tax for improvements that benefit the property.

Special warranty deed

A deed that limits the guarantee given by the grantor to encumbrances acquired while title was held by the grantor. Used by someone acting on behalf of the owner, such as an executor or administrator.

Specific lien

A lien that applies to a specific property.

Specific performance

A suit to force another party to complete the contract terms.

Spot survey

Shows the location and size of buildings on a property.

Starker exchange

A delayed exchange of properties that qualifies as a tax-deferred exchange.

Statute of limitations

The law pertaining to the period of time within which certain actions must be brought to court.

Statutes of frauds

State laws that require that certain contracts must be in writing to be enforceable.

Statutory month method

A method of proration that treats every month as if it had 30 days.

Statutory redemption

The borrower's right to redeem property after the foreclosure sale.

Steering

Channeling home seekers to areas on the basis of their race, color, religion, etc.

Stigmatized property

Property that has been involved with some undesirable event, such as a crime or suicide.

Straight-line method

A method of depreciating an asset in which equal amounts of depreciation are taken annually over the asset's useful life.

Subagents

Parties who assist the agent.

Subject property

The property that is being appraised. Used in appraisal.

Subject-to mortgage

An arrangement in which the buyer assumes the seller's mortgage and makes payments but is not personally liable for the debt.

Sublease

In a sublease the original tenant becomes the lessor and takes on a new tenant (a sublessee). The sublessee makes payments to the original tenant.

Subordination agreement

A written agreement between lienholders to change priority of their respective liens.

Subrogation

Obtaining the legal rights of another party. Used by title insurance companies to defend the insured title against lawsuits from other parties. This clause in the policy prevents the insured from collecting both from the insurance company and from the party causing the loss.

Substantially equivalent laws

State or local government fair housing laws that are similar to the federal fair housing laws.

Subsurface rights

Rights a property owner has in any material below the surface of the land.

Suit for possession

A lawsuit that initiates an action for eviction against the tenant.

Suit to quiet title

A court action to settle a cloud on the property's title.

Supply and demand

In the real estate market property values change as these two forces adjust themselves. As supply increases or demand decreases, values decrease. As supply decreases or demand increases, values increase.

Survey

A measurement and description of land. Surveys usually are required when property is sold or improvements are being made.

Syndication

Usually a limited partnership formed by two or more parties to operate a real estate investment.

Tacking

Combining successive periods of property use.

Tangible property

Property that can be seen and touched, such as a car.

Taxation

A government power by which local governments can raise revenue by taxing real estate.

Tax shelter

An investment intended to lower (or protect) taxable income through tax-deductible expenses.

Tenancy at sufferance

This tenancy occurs when a tenant wrongfully remains on the property after the right to possess has ended.

Tenancy at will

A form of tenancy whereby the tenant possesses the property with the consent of the landlord. The term is for an indefinite period of time and can be canceled without notice.

Tenancy by the entirety

A form of joint tenancy that exists between husband and wife.

Tenancy in common

A form of holding title in which two or more parties have an undivided interest in the property. They can hold unequal shares in the property, and there is no right of survivorship.

Term loan

A loan arrangement in which payments include only interest and the loan balance is due at the end of the loan period. They are usually nonamortizing loans for short terms. Also called a straight loan.

Testamentary trust

A trust created through a will after a property owner's death.

Testate

Having died and left a will.

Testator

A male person who has made a will.

Testatrix

A female person who has made a will.

Time is of the essence

A clause in a contract that stipulates that time limits stated in the contract must be met.

Time-share

Ownership of a specified time interval in a property, usually recreational or resort property.

Title

The legal evidence of ownership rights to real property.

Title insurance

Insures the existence of rights in real estate and pays for losses to the insured because of successful claims to the title by other parties. A policy is issued after a search of the public records. There are lenders' and owners' policies.

Title report

The results of a search of the public records by a title insurance company. The report lists anyone who has an ownership interest in the property being examined.

Title search

A search of the public records to determine past and present facts regarding ownership of the property. Also called title examination.

Torrens system

A system used for both assuring and recording title to real estate. This system is used in only a small number of states. When a property is registered in Torrens, a Torrens certificate establishing title to the owner on the certificate is issued by the registrator of title.

Township lines

Township lines are six miles apart, run east and west and are measured from the base lines. Used in the rectangular survey method of describing real estate.

Townships

Townships are square sections of land that are six miles on a side and contain 36 square miles, or sections. Used in the rectangular survey method of describing real estate.

Trade fixture

A fixture that remains personal property and can be removed by the tenant.

Transactional broker

A licensee who does not act as the agent for either party in a real estate transaction. The broker's function is to assist the parties with the required paperwork and other activities in the transaction but not negotiate on behalf of either party.

Transfer tax

A tax on the transfer of real property that is assessed by state and local law. The seller in the real estate transaction is usually required to pay the tax.

Trust

A three-party arrangement (trustor, trustee, beneficiary) in which title to real estate or other assets is placed with the trustee.

Trust deed

A deed that creates security for a loan by conveying title to a trustee, who holds it as security for the benefit of the lender (the beneficiary). Also called a deed of trust.

Trustee

The party in a trust that holds title to the assets for the benefit of the beneficiary.

Trustor

The party that creates a trust by transferring title to assets to a trustee.

Truth-in-Lending Act

A federal law implemented by Regulation Z that requires that lenders inform borrowers of the true costs of obtaining a loan. Primary disclosures include the finance charge, annual percentage rate, the amount financed, and the total payments. The law also provides certain restrictions when advertising financing terms.

Uniform Residential Appraisal Report (URAR)

The most common appraisal report form used today. Most government agencies use the form.

Uniform Settlement Statement (HUD-1)

A form required by RESPA to be used at closings that details financial information of the transaction.

Uniform Vendor and Purchaser Risk Act

A law that defines which party suffers a loss if property is destroyed before closing a transaction.

Universal agent

An agent who represents a principal in all activities.

Useful life

The length of time an asset will be useful to the owner and can be depreciated. For tax purposes this is defined by the IRS.

Usury laws

Laws passed by states that limit the interest rates lenders can charge borrowers.

Vacancy levels

The percentage of building units that are not occupied.

Variable lease

A lease agreement that allows for changes in the rent. May be an index or graduated lease.

Variance

An exception to the zoning law. Often granted if strict enforcement of the zoning law would force an undue hardship on the property owner.

Vendee lien

A lien that protects a buyer.

Vendor lien

A lien that protects a seller.

Voidable contract

An agreement that can be rejected or disaffirmed by one or both of the parties.

Void contract

An agreement that does not satisfy the required contract elements and has no legal force or effect.

Voluntary alienation

Transferring title to real estate by the will and consent of the owner.

Warranty forever

A guarantee given in a deed that gives assurance that the grantor will pay for expenses to defend the title against claims by third parties.

Waste

Acts that injure a property and reduce its value.

Wraparound loan

A loan arrangement in which an existing loan on a property is assumed by a lender, who then gives the borrower a new, larger loan.

Zoning ordinance

Zoning laws regulate and control the use of land. An example of the government's police powers