Glossary of Real Estate terms

A
 
Abstract of Judgment – The summary of a court judgment that creates a lien against a property when filed of record with the county clerk.
 
ABR® – The Accredited Buyer Representative (ABR®) designation is the benchmark of excellence in buyer representation. This coveted designation is awarded to real estate practitioners by the Real Estate BUYER’S AGENT Council (REBAC) of the National Association of REALTORS® who meet the specified educational and practical experience criteria. 
 
Acceptance – The seller’s written approval of a buyer’s offer agreement to enter into a contract and be bound by the terms of the offer.
 
Adjustable Rate Mortgage (ARM) – stands for Adjustable Rate Mortgage, also referred to as a Variable Rate Mortgage. A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index. The interest rate adjusts periodically to reflect changes in financial market conditions. Payments are adjusted up or down on monthly or annual basis as the interest rate changes. The loans general have an upper and lower cap to protect both borrower and the lender.
 
Agency – The law of Agency is concerned with any “principal”-“agent” relationship. It is t he relationship of trust that exists between sellers and buyers and their agents. The agency is formed through a written contract.
 
ALC – The Accredited Land Consultant (ALC) is awarded by the REALTORS® Land Institute to members who have completed a comprehensive program of education and service to the Institute. As land professionals, ALC’s know current market values. They work diligently to secure the best sale or purchase price for their clients. ALC’s assist buyers and sellers in such areas as finance, leasing and land management. Accredited Land Consultants are the recognized Land REALTOR® experts.
 
Amenity – A feature of real property that enhances its use or appearance. It generally increases the owner’s satisfaction of ownership. Swimming pools, health-club facilities, party rooms, bike paths, community centers, boat ramps, riding stables, barns, playing fields, views, etc. can all constitute amenities.
 
Amortization – The process of paying the principal on a loan and the interest that accrues in regularly scheduled installments.
 
Amortization Schedule – A m athematical tables that lenders use to calculate a borrower’s monthly payment. It represents a timetable for repayment of a loan. An amortization schedule shows the amount of each payment applied to interest and principal and the remaining balance after each payment is made.
 
Amortize – The Latin term to kill or die inferring that a loan is repaid a loan with regular payments that cover both principal and interest.
 
Annual Percentage Rate (APR) – stands for Annual Percentage Rate. It is the actual cost of the loan including any loan points or origination fees, which constitute prepaid interest. It reflects the true cost or interest rate of the loan. If points or origination fees are involved the APR is always higher than the stated interest rate.
 
Application Fee – The fee that a lender charges to process a loan application.
 
Appraisal – An opinion of the value, issued by a licensed appraiser, of a property at a given point in time. The Texas Real Estate Commission is the regulatory agency that licenses state certified appraisers in Texas.
 
Appraised Report – A detailed written report on the value of a property based on three approaches to value: (1) direct sales – recent sales of comparable properties in the area, (2) income approach – a reflection of the value based on the income that the property could generate if leased; and, (3) the cost approach – the replacement cost of replacing the property and reproducing its improvements.
 
Appraiser – A person qualified by education, training, and certified by a regulatory authority to estimate the value of real property.
 
Appreciation – An increase in the value of a property due to changes in market conditions.
 
Assessed Value – A tax assessor’s determination of the value of a property in order to calculate ad valorem property taxes. In Texas counties generally have a Central Appraisal District (CAD) that is required to value properties at 100% of market value every three years. Although the CAD is supposed to assess properties at 100% of property value they generally contrast with certified appraiser’s appraised value.
 
Assessment – The estimated value of a piece of property for ad valorem tax purposes.
 
Assessment Rolls – A public record of the assessed value of property and the respective taxing jurisdictions the property is located in.
 
Assessor – A public official who establishes the value of a property for taxation purposes.
 
Asset – Items of monetary value such as cash, real estate, stocks, securities, and other investments.
 
Assumable Loan – A loan that allows it to be transferred to another borrower.
 
Assumption Clause – A provision that allows a buyer to assume responsibility for the loan.
 
Assumption Fee – A fee paid to the lender that allows a buyer to take responsibility for the mortgage from a seller.
 
B
 
Balance Sheet – A statement that shows the assets, liabilities and net worth of an individual as of a specific date.
 
Balloon Loan – A loan in which monthly payments are not large enough to amortize or repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.
 
Balloon Payment – The final lump sum payment due at the end of a balloon loan.
 
Bankrupt – A person, firm, or legal entity that is financially unable to pay debts when due.
 
Bankruptcy – A proceeding in a federal court in which an insolvent debtor, who is financially unable to pay debts, can seek relief from payment or restructuring of payment of certain obligations. There are several types of bankruptcy under the Federal Bankruptcy Code, Chapter 7, Chapter 11 and Chapter 13. In most cases, the debtor must surrender control of assets to a court-appointed trustee.
 
Bill Of Sale – A written document that transfers ownership to personal property.
 
Biweekly Payment Loan – A loan that requires payments every two weeks helping to repay the loan over a shorter term or amortization period. The faster amortization results in interest savings from faster principal reduction.
 
Bona Fide – A legal term that refers to actions or persons that are honest in good faith without deceit or fraud.
 
Breach of Contract – A failure to perform provisions of a contract without a valid legal excuse.
 
Break Even Point – The point at which the owner’s rental income matches total operating expenses.
 
Bridge Loan – A short term or interim loan for individuals that need more time to secure permanent financing.
 
Broker – A person who is normally licensed by the State to sell real estate for a fee. The broker can only represent one party to a transaction, buyer or tenant, seller or lessor in negotiating a real estate transaction.
 
Building Code – A comprehensive set of laws, i.e. the International Building Code 2000 that controls local regulations that specify minimum structural requirements for design, construction, remodeling and materials used in the construction of improvements. Building codes are based on safety and health standards.
 
Building Inspector – A city or county employee who enforces the building code and ensures that work is constructed to designated code or standards.
 
Building Setback Lines – Restrictions or regulatory guidelines that limit how close an owner can build to the street, utility easements or adjacent property lines.
 
Building Moratorium – A regulatory halt by a governmental entity on construction to slow the rate of development. Many times cities or counties can impose building moratoriums to allow utility infrastructures to catch up with development demand.
 
Building Restrictions – Regulations or restrictions that can be implemented by a Building Code (see above), zoning or by deed restrictions for a property designating the type of construction and use of the property required.
 
Buydown Account – An account in which funds are held so that they can be applied as part of the monthly loan payment as each payment comes due during the period that an interest rate buydown plan is in effect. For example, if a seller agrees to help reduce a buyer’s monthly payment during the first year of a loan, the seller may put money in a buydown account which is then paid to the lender each month to reduce the buyer’s monthly payment. This is more commonly done through a buydown paid directly to the lender at closing.
 
Buydown – A temporary buydown gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buydown is paid the same way but reduces the interest rate over the entire life of a home loan.
 
Buyer Broker – A real estate broker who exclusively represents the buyer’s interests in a transaction. (See ABR ®)
 
C
 
Call Option – Also referred to as a Due on Sale Clause. A provision in a loan agreement that gives the lender the right to accelerate the debt, and require for payment in full of the loan immediately, at the end of a specified period or for specified reason.
 
Cap – A limit or cap on the amount the interest rate or monthly payment can increase or decrease in an adjustable-rate mortgage (ARM).
 
Capital – Money used to create income.
 
Capital Expenditure – The cost of making an improvement to a property. Capital expenditures are depreciated over their useful life on commercial or investment properties.
 
Capital Gain – The calculation of the profits from the sale of real estate or investments. You generally have to determine whether the capital gain is long term or short term capital gain as the Internal Revenue Service taxes the gain at different rates.
 
Cap Rate- Refers to the capitalization rate generated by income producing properties. It is a measurement of the asset’s performance reflected by the percentage rate of return estimated from the net income of a piece of property. Many people also call an overall rate, a cap rate. To calculate the overall rate or cap rate on a property you use the following formula: Rate = Income (Net Operating Income) divided by Value (Market value or asking price).
 
Cash Available For Closing – Borrower funds available to cover down payment and closing costs. If lending guidelines require the borrower to have cash reserves at the time the loan closes or that the down payment come from certain sources, borrower’s cash available for closing does not include cash reserves or money from other sources.
 
Cash Flow Basis – This calculation shows when your monthly payment savings exceed your estimated closing costs and discount points. It does not consider the tax impact or differences in principal balance reduction between your current loan and the refinance suggestions. You can use the Amortization Schedule Calculator to compare principal reduction.
 
Cash-Out Refinance – The refinancing of an existing loan in which the money received from the new loan is greater than the amount due on the old loan. The borrower generally can use the extra funds in any manner they desire.
 
Cashier’s Check – A check that the bank draws directly on itself versus the depositor’s account.
 
CBD – Central Business District –Generally the area of a city where most businesses are centrally located. Many cities CBD are their downtown districts.
 
CCIM – A Certified Commercial Investment Member (CCIM) designation is awarded by the CCIM Institute. A CCIM is a recognized expert in the disciplines of commercial and investment real estate. Only 6 percent of the estimated 125,000 commercial real estate practitioners nationwide hold the CCIM designation, which reflects not only the caliber of the program, but also why it is one of the most coveted and respected designations in the industry. The CCIM membership network mirrors the increasingly changing nature of the industry and includes brokers, leasing professionals, investment counselors, asset managers, appraisers, corporate real estate executives, property managers, developers, institutional investors, commercial lenders, attorneys, bankers and other allied professionals. Through this business network and through enhanced communication with the CCIM electronic network, CCIMs successfully complete approximately 156,000 transactions annually, representing more than $400 billion.
 
Ceiling – The maximum interest rate a loan can attain after the variable rate is adjusted on an adjustable rate mortgage (ARM).
 
Certificate Of Eligibility – A document issued by the Department of Veteran’s Affairs (VA) certifying a veteran’s eligibility for the VA loan program.
 
Certificate of Occupancy (CO) – An official document from a regulatory authority that states that a home or other building has met all building codes and is suitable for habitation or occupancy.
 
Certificate Of Reasonable Value (CRV) – A document issued by the Department of Veterans Affairs (VA), based on an appraisal, that establishes the maximum value or loan amount for a VA loan.
 
Chain Of Title – The official record, or history of all documents that details the ownership history of a piece of property.
 
Cistern – A storage tank used to collect and store rainwater.
 
Clear Title – A property that is free of liens or encumbrances or disputed legal questions.
 
Closing – The final occurrence in a real estate transaction signaling the conclusion or consummation of a transaction. In real estate, a closing occurs when documents such as a deed to the property, promissory note for any loans and related security instruments necessary to the sale or loan transaction are executed and recorded of record with the county clerk office.
 
Closing Cost Item – A fee or amount that a homebuyer must pay at closing for a particular service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney’s fees. Many closing cost items are included as numbered items on the HUD-1 settlement statement.
 
Closing Costs – Expenses incidental to the sale of real estate.
 
Closing Statement- The Real Estate Settlement Procedures Act, RESPA, requires an accurate and truthful accounting of funds given by/to buyer and seller at the time of closing.
 
Cloud On Title – An outstanding claim or lien that adversely affects the title to real estate. Clouds on title generally cannot be removed except by a deed without warranty, release, or some action of a court.
 
Coinsurance Clause – A sharing of insurance risk between the insurer and the insured stipulated in the owner’s policy of insurance. In Texas, homeowners must keep their properties insured at 80% of the estimated replacement cost of the property improvements in order to receive full compensation in the event of a loss.
 
Commercial- An area that is zoned or designated in deed restrictions for business or commercial use.
 
Commission – The fee, generally a negotiable percentage of the sales price of a property that is paid to the real estate agents at closing.
 
Commitment Letter – A formal promise by a lender stating to make a loan with specific terms for repayment.
 
Common Area Assessments – Also referred to as Common Area Maintenance (CAM) charges. These are payments required of individual unit owners in a condominium or planned development district to maintain, repair, improve or operate common areas established for the benefit of all owners or tenants of the property. CAM charges help the owner offset the cost of operating the property thereby improving the cash flow or return on investment.
 
Common Areas – Those portions of a building, land, and amenities owned by a planned development district (PDD), subdivision or condominium project’s property owners’ association.
 
Community Property – A classification peculiar to some states, including Texas. The law specifies that property acquired during a marriage is presumed to be owned jointly by the husband and wife unless otherwise statement or documented.
 
Comparables (comps) – An abbreviation used in the real estate industry for “comparable” properties. Comparable can either be properties previously sold or those current on the market. More weight is given to properties recently sold. Comparables help the appraiser determine the market value of the subject property under the direct sales comparison approach to value.
 
Condemnation – The legal process the government uses to take private property for public use without the consent of the owner. Generally the condemning entity must prove the property is being taken for public health, welfare or safety purposes through the exercise of the right of eminent domain.
 
Condominium – A real estate project in which individual units hold title to the interior space while the common areas are jointly owned in common by all owners based on a percentage of their ownership. The difference between a condominium and a townhouse is that there is no established lot that conveys with the sale of a condominium. A townhouse would convey with an individual lot.
 
Condominium Hotel – A new trend in development combining a hotel with a condominium project to allow condominium owners use of hotel and concierge staff.
 
Conforming Loan – A home loan with a maximum loan amount of $252,700 that is eligible for purchase by the Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac).
 
Conservation Easement – A conservation easement is a legal agreement a property owner makes to restrict his property as to the type, amount and location of development that may take place on the property. The conservation easement’s restrictions are normally tailored to the particular property and to the interests of the individual landowner. The creation of a conservation easement can have substantial tax benefits to the property owner creating the easement.
 
Construction loan – A short-term or interim loan for financing the cost of construction. The lender makes payments or draws to the builder at periodic intervals as the work progresses and the property is inspected to assure that it is being constructed in accordance with local building standards.
 
Contingency – A condition stipulated in a contract that must be satisfied before the contract is legally binding, i.e. a home inspection, a contingency for the sale of another property, etc.
 
Contract – A signed written agreement between two or more parties to perform some action. In Texas, the Statute of Frauds, requires real estate contracts to be in writing.
 
Conventional Loan – A loan that is not insured or guaranteed by the federal government.
 
Convertible ARM – An adjustable rate mortgage (ARM) that can be converted to a fixed rate loan under specified conditions.
 
Co-Signer – An individual who signs a promissory note as a Maker along with the borrower. The borrower and the co-maker are generally jointly and severally responsible for the repayment of the loan.
 
Covenant – A promise in a legal document that requires or prevents certain uses of the property, i.e. a set of restrictive covenants in a deed specifically identifying the property is restricted to site built construction only, thereby implying manufactured homes would not be allowed.
 
CRB – The Certified Real Estate Brokerage Manager awarded by the Council of Real Estate Brokerage Managers is one of the most respected and relevant designations offered in real estate business management.  Through the Council’s leading-edge education and resources, members are among the most efficient, effective and profitable managers in the country.
 
Credit – The money a lender submits to a borrower in exchange for an agreement to repay the loan on specified terms.
 
Credit History – An evaluation of an individual’s current and past credit history for debt repayment.
 
Credit Life Insurance – A specific type of insurance policy that pays off a loan if the borrowers.
 
Creditor – The individual or entity to which the money is owed.
 
Credit Rating – A history of the borrower’s present and past credit history. Credit scores analyze a borrower’s credit history considering numerous factors such as: late payments, the amount of time credit has been established, the amount of credit used versus the amount of credit available, length of time at present residence, employment history, and negative credit information such as bankruptcies, charge-offs, collections, etc.
 
Credit Report – A detailed account of the credit, employment and residence history of an individual or company used by a prospective lender to help determine creditworthiness.
 
Credit Repository (credit bureau) – A large company or organization that gathers financial and credit information from various sources.
 
Credit Scoring – Credit scores are numerical values that rank individuals or companies according to their credit history. See “FICO Score”
 
D
 
Days on the Market- The number of days a property is on the market. Typically a field shown on a listing displayed from a multiple listing service.
 
Debt – Theamount owed buy on party to another.
 
Deed – The legal document that conveys title to a property and transfers ownership. There are multiple forms of deeds: General Warranty Deed, Special Warranty Deed, and a Deed without Warranty. Consumers are wise to engage an attorney to review documents to a real estate transaction.
 
Deed-In-Lieu of Foreclosure – A deed given by the Borrower to the Lender when the Borrower is in default under the terms of the loan. This is a way for the Borrower to avoid foreclosure.
 
Deed Of Trust – When a borrower signs a promissory note, the enforceable contract, they execute a legal document that transfers or hypothecates title into a Trustee. The transfer to the trustee secures repayment of the loan for the lender.
 
Default – The failure to make loan payments on a timely basis or to comply with other requirements of a loan such as keeping the property insured or physically maintained in a usable condition.
 
Delinquency – The failure to make loan payments when due according to the promissory note.
 
Deposit – Deposits are often called Earnest Money. It is a sum of money given to bind the sale of real estate.
 
Depreciation – The decline in the value of a property. The decline can either be physical (wear and tear), functional (changes in design), or economic (caused by forces outside the property such as a decline in the value of the neighborhood).
 
Discount Points – Amounts of prepaid interest paid to the lender at origination to lower the interest rate on the face of the note while increasing the lenders overall yield. One point is equal to one percent of the loan amount.
 
Down Payment – The amount of the purchase price that the buyer pays does not finance.
 
Draw – A payment made to a subcontractor under an interim construction loan.
 
Dual Agency – A relationship in which a real estate agent or broker represents both parties in a transaction. In Texas, dual agency is illegal. The Texas Real Estate Commission promulgates a Notice of Brokerage Services outlining the broker or agent’s responsibility to each party to a transaction.
 
Due-On-Sale Provision – A provision in a note that allows the lender to demand repayment in full if the borrower sells the property.
 
Duplex – A residential structure that consists of two separate single-family living units.
 
E
 
Earnest Money – A deposit made by the potential Buyer to show that they are serious about purchasing a property. When the Buyer makes a contract subject to financing or other contingent provisions the earnest money is normally refundable when the Buyer’s conditions are not met.
 
Easement – An easement is a right-of-way given to persons or legal entities other than the owner to access to or over a property. Easements may be created in favor of a public entity such as a municipality for a utility easement. An easement may also be created in favor of a neighboring property to access to or cross the property to make repairs and improvements. It is recorded on the deed, and survives any sale of the property.
 
Effective Age – An appraiser’s estimate of the remaining economic life of a building.
 
Egress – The right to leave a tract of land. This term is often used in connection with access.
 
Eminent domain – The right of a government, municipal, or quasi-public body to acquire private property for public use. It is acquired through a court action called Condemnation in which the court determines the use is a public use for health, welfare or safety reasons and decides the price or compensation to be paid to the owner.
 
Encroachment – A structure or some portion of it, or a wall or fence, that extends beyond the land of the owner. An encroachment illegally intrudes upon land of an adjoining owner.
 
Encumbrance – Any lien, easement or deed restriction that affects or limits the fee simple title to a property or that may diminish the value of the property.
 
Equal Credit Opportunity Act (ECOA) – A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income, or the exercise of any right under the Consumer Credit Protection Act.
 
Equity – The interest or value an owner has in a property after any loans are subtracted.
 
Escrow – A written agreement between two or more parties providing that certain instruments or property be delivered to a designated person upon the fulfillment or performance of some act or condition. Title companies act as Escrow agents.
 
Escrow (or Impound) Account – A special account that the lender establishes to hold prepayments of property taxes and insurance.
 
Escrow Analysis – Generally an annual examination of escrow accounts to determine if current deposits will provide sufficient funds to pay property taxes and insurance.
 
Eviction – The forced removal, by legal means, of a tenant from the leased premise
 
Executive Suite – Executive suites are shared offices with ancillary services provided by a management firm.
 
Exclusive listing – A contract to sell property whereby the agent is given the exclusive right as an agent to sell the property. The owner retains the right to sell the property, as long as it isn’t through another brokerage firm or agent, without being obligated to pay a real estate fee or commission.
 
Exclusive right to sell – A listing contract in which the owner engages a real estate broker as the exclusive agent for a designated term. The seller is obligated to pay the listing broker a real estate commission or fee when the sale is consummated regardless of whether the owner or the agent sells the property.
 
Expense ratio – A percentage of operating expenses to gross income of a property.
 
Expense stop – A lease term that creates a limit or ceiling (cap) on the dollar amount one party in the lease, typically the landlord, will pay in an expense category. The cap or ceiling is determined by adding a percentage or dollar amount to the base year costs.
 
F
 
Fair Credit Reporting Act – A federal consumer protection law passed in 1971 that regulates the activity of credit bureaus. The law was created to prevent inaccurate or obsolete information from staying in a consumer’s credit file. It requires credit bureaus to have reasonable procedures for collecting, maintaining and disseminating credit information. The law also requires the credit bureau to provide a consumer with their credit file if the consumer presents proper identification.
 
Fair Housing Act-The Fair Housing Act prohibits a broad range of practices that discriminate against individuals on the basis of race, color, religion, sex, national origin, familial status, and disability . The Act does not pre-empt local zoning laws. However, the Act applies to municipalities and other local government entities and prohibits them from making zoning or land use decisions or implementing land use policies that exclude or otherwise discriminate against protected persons, including individuals with disabilities.
 
Federal National Mortgage Association (FNMA – Fannie Mae) – A congressionally chartered corporation, which is a New York Stock Exchange Company, with private stockholders that purchases residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages. Popularly known as Fannie Mae.
 
Federal Housing Administration (FHA) – An agency of the U.S. Department of Housing and Urban Development created in 1934 in order to make mortgages more affordable for consumers and investments more desirable for lenders. FHA-approved lenders may obtain insurance on loans that meet FHA standards.
 
Federal Trade Commission (FTC) – 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.
 
Fee Simple – The largest possible estate or absolute right of ownership of real property held without time limitation and is freely transferable and inheritable.
 
Feng Shui – An ancient Chinese belief or practice of arranging elements to achieve the greatest harmony and balance of a property. The physical characteristics and positioning of the property is designed to affect the fortunes of the owner.
 
Fiduciary – A relationship founded on trust or confidence placed by one person in the integrity and fidelity of another.  A fiduciary must always act in complete fairness and may not ever place his interests above those of his client.
 
Footprint – The layout or shape and configuration of an improvement such as a building.
 
FHA Home Loan – A home loan that is insured by the Federal Housing Administration (FHA).
 
FICO Score – A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring. It is a method of determining the likelihood that credit users will pay their bills. A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable.
 
First Lien – A loan that is the primary lien against a property.
 
Fixed Rate Loan – A loan with an interest rate that stays the same (fixed) over the life of the loan. Monthly payments for a fixed rate mortgage will not change unless there is an adjustment to any escrow payment being made for the collection of property taxes and insurance.
 
Fixture – Personal property or improvements that becomes real property when attached in a permanent manner to real estate. The right of the tenant to remove fixtures may be given by stipulation in the lease or by separate written agreement between the parties.
 
Flat Fee – A set fee charged by a broker instead of a percentage based commission.
 
Flood Check – A survey conducted to determine the flood elevation that can be certified as to whether a property is in a flood zone.
 
Flood Insurance – Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
 
Flood Way – The channel of a watercourse and that inner portion of the flood plain where flood depths and velocities are generally higher than those experienced in the flood fringe. It is the portion of the floodplain that normally is the most hazardous. The Federal Emergency Management Agency restricts development in federally defined Flood Ways.
 
Flood Zone – A strip of normally dry land alongside a stream, river, or lake that is covered by water during a flood. The Federal Emergency Management Agency defines both 100 and 500-year federal flood plains.
 
Floor Area Ratio – The calculation of the floor area of all residences or buildings in a project. It is used in the planning and development or zoning of a site.
 
Footcandle- A measurement of light level or unit of illumination equivalent to the light intensity made by one candle at a distance of one foot. Footcandles are generally used as a measure of light received
 
Foreclosure – A court action initiated by a lien holder for the purpose of having the court order the debtor’s real estate sold to pay for a debt or an outstanding loan. This normally involves a forced sale of the property at public auction with the proceeds of the sale being applied to the loan or debt.
 
Forfeiture – The loss of money, property, rights, or privileges due to a breach of legal obligation.
 
Freddie Mac (Federal Home Loan Mortgage Corporation) – A stockholder owned company that is publicly traded chartered by the federal government within the Department of Housing and Urban Development (HUD), to purchase mortgages and related securities, and then issues securities and bonds in financial markets backed by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae is regulated by the Office of Federal Housing Enterprise Oversight (OFHEO) in the United States Department of Housing and Urban Development.
 
G
 
Gift – 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 of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application. It provides estimates of all costs associated with obtaining and closing a mortgage loan.
 
Graduated Lease – A lease that provides for specific increases or decreases in rent at definite times during the term of the lease.
 
Graduated Payment Loan – A loan that requires a borrower to make lower monthly payments over the first few years of the loan but gradually increases until third to fifth year when the payment remains fixed.
 
Grantee – The person that receives title or interest to the real property being conveyed by grant or other instrument.
 
Grantor – The person who conveys or transfer their interest and title to the real property by a written instrument.
 
Greenbelt – A park, open space or other natural setting in a community.
 
Gross Lease – A lease of property whereby the lessor is to pay all property expenses incurred through ownership.
 
Gross Monthly Income – Normal annual income including overtime that is regular or guaranteed. The before taxes income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
 
Gross Rent Multiplier(GRM) – The ratio that is used to estimate the value of income producing properties.  The GRM provides a rough estimate of property value. Two pieces of financial information are required to calculate the Gross Rent Multiplier for a property, the sales price and the total gross potential rental income.  The formula is GRM = Sales Price / Gross Potential Rent. It can be calculated on a monthly or annual basis. The major drawback of the GRM is that is doesn’t take into account vacancy or operating expenses.
 
Ground Fault Interrupter (GFI) – Electrical circuit breakers that detect leakage of electrical current to the ground and prevent accidental shock. Normally required when an electrical plug is within three feet of a sink or plumbing fixture.
 
Ground Lease- A lease of the land only. The land is generally leased for a relatively long period of time to a tenant that constructs a building on the property. This type of lease separates ownership of the land from ownership of buildings and improvements constructed on the land.
 
Ground Rent – Rent paid for the use of vacant land when title to a property is held as a leasehold estate rather than as a fee simple estate. If the property is improved, the ground rent is the paid on the portion attributable to the land only.
 
H
 
Homeowner’s Insurance (Hazard Insurance) – Insurance coverage that compensates for physical damage to a property. A homeowner’s policy typically combines personal liability insurance and property hazard insurance coverage for a dwelling and its contents. It also has endorsements that can offer replacement coverage for personal property as well as physical improvements.
 
Home Equity Line Of Credit (HELOC) – A loan that provides a property owner with the ability to borrow funds at the time and in the amount that they need. There is a maximum credit limit for which a borrower has qualified. The repayment of the loan is secured by the equity in the borrower’s residence. The interest is usually tax-deductible. These types of loans are often used for home improvements, and debt consolidation.
 
Home Inspection – A thorough inspection that evaluates the structural and mechanical condition of a property. Most residential real estate contracts require a satisfactory home inspection as a contingency by the purchaser in order to make the potential homebuyer aware of any repairs that may be needed.
 
Homeowners’ Association – A nonprofit association that manages the common areas of a modern subdivision or planned community. The association collects fees, either monthly or annually, 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. Sometimes referred to as a Property Owners Association (POA). They are very common in rural subdivisions outside of incorporated areas.
 
Home Rule – The power of a local government to adopt its own land-use regulations.
 
Homeowner’s Warranty (HOW) – A type of insurance that covers repairs to specifically identified mechanical equipment, such as air conditioners, hot water heaters, dishwashers etc., and improvements, such as a roof, etc. on a residence for a specific period of time. These warranties can be supplied by the homebuilder or by a warranty company.
 
HUD Median Income – Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).
 
HUD-1 Settlement Statement – A closing statement or settlement sheet that outlines all closing costs on a real estate transaction in accordance with the Real Estate Settlement Procedures Act (RESPA). The blank form for the statement is published by the Department of Housing and Urban Development (HUD).
 
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. If you have been trying to buy or rent a home or apartment and you believe your rights have been violated, you can file a fair housing complaint with: the Office of Fair Housing and Equal Opportunity, Department of Housing and Urban Development, Room 5204, 451 Seventh St. SW, Washington, DC 20410-2000, (800) 669-9777.
 
I
 
Impact Fees – Impact Fee means a fee, charge or assessment for water facilities, a fee for wastewater facilities, or both, as appropriately imposed on new development by a utility provider in order to fund or recoup the costs of capital improvements or facilities expansions necessitated by and attributable to such new development. Impact Fees do not include the dedication or rights-of-way or easements for such facilities, the construction of water or wastewater improvements and other infrastructure within the development to serve the development unless such water or wastewater improvement is listed on the impact fee capital improvements plan, the dedication of park land or open space, any site-specific facility, or any other work, dedication or improvement that is not a water or wastewater facility listed on the impact fee capital improvements plan.
 
Income Property – Real estate developed or improved to produce income.
 
Index – The specific interest rate series to which the interest rate on an ARM is tied such as the average interest rate or yield on Treasury bills. Most lenders provide caps that limit how much the interest rate or loan payments may increase or decrease.
 
Infield Development – Any new construction in a previously developed or established area.
 
Inflation – An increase in the amount of money or credit available in relation to the amount of goods or services available for purchase. Interest rates, which are determined by the marketplace and which are responsive to actions of the Federal Reserve Board are sensitive to inflation.
 
Infrastructure – The utilities, schools, roads, parks, cable and telephone communication systems and other community improvements in a development or city.
 
Installment Loan – Borrowed money that is repaid in equal payments known as installments.
 
Insurance – A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
 
Insurance Binder – A temporary insurance policy put in force until a permanent policy can be obtained.
 
Insured Mortgage – A mortgage protected by federal, i.e. FHA, or private mortgage insurance, i.e. PMI. The insurer must pay the lender the lesser of the loss incurred or the insured amount in the event of default.
 
Interest Payment – The portion of a monthly payment that goes to interest accrued based on an amortization schedule.
 
Interest Rate – The cost of borrowing money, expressed as an annual percentage.
 
Interest Rate Buy down Plan – A temporary buy down gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buy down is paid the same way but reduces the interest rate over the entire life of a home loan.
 
Internal Rate of Return (IRR) – The discount rate at which the present value of the future cash flows of an investment equals the cost of the investment. The discount rate with a net present value of 0.
 
Investment Property- A classification of real estate used to generate income and a return on equity as an investment, e.g. a rental house, apartment complex, hotel, office building etc.
 
J
 
Joint Tenancy – A form of co-ownership that gives each owner equal undivided interest and rights in the property, including the right of survivorship, meaning that the property transfers to the surviving owner or owners.
 
Judgment – A decision by a court of law that a person, or a debtor, must replay a debt to a creditor in a specified amount may be placed against the debtor’s property.
 
Judgment Lien – A lien on the property of a debtor resulting from a judgment.
 
Jumbo Loan – Any loan amount in excess of $252,700. Also referred to as a “nonconforming” loan.
 
L
 
Late Charge – A charge made for payments that are overdue after a grace period, usually 15 days.
 
Lease – A contract, usually written, between the owner of the property (lessor) and the tenant (lessee) stating the term and conditions under which the tenant may occupy or use the property. The Statute of Frauds in Texas requires leases for more than one year to be in writing.
 
Leasehold Estate – A tenant’s interest in or right to hold possession of a property under lease.
 
Lease Purchase Agreement – A contract between a Lessor, the owner, and Lessee, the renter, providing that part of the rent can be applied to an agreed purchase price of the property being leased. In Texas, an attorney must prepare these contracts.
 
Legal Description – A property description, acceptable to a court, using a government rectangular survey, metes and bounds, or a subdivision plat map to sufficiently locate and identify a property.
 
Lending Guidelines – Every loan program has different guidelines. Guidelines are generally used to meet minimum requirements of federal or state laws.
 
Liabilities- The debts and financial obligations of the borrower.
 
Liability Insurance – Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
 
Lien – A claim against a property by another party, which utilizes that item as security for repayment of a loan or other claim. A lien affects the ability to transfer ownership .
 
Line Of Credit – An agreement by a lender to extend credit to a borrower up to a certain amount for a specified time without the need for the borrower to file another loan application.
 
Living Unit Equivalent (L.U.E.) – “Living Unit Equivalent (L.U.E.)” means a unit of measure which represents the quantity of water utilized and wastewater generated on an average annual daily basis from a single-family, detached residence of average size and occupancy and which is the standardized measure used for service units.
 
Loan Amount – The amount of money you want to borrow to purchase or refinance a property.
 
Loan Commitment – A lender’s agreement to lend funds on specific repayment terms after certain criteria have been met.
 
Loan Origination – The process by which a lender makes a loan and records a deed of trust against the borrower’s real property as security for repayment of the note, the loan.
 
Loan-To-Value Ratio – The ratio of the total amount borrowed versus the market value or appraised value of the property. If you have an $80,000 1st lien on a home with an appraised value of $100,000, the LTV is 80% ($80,000 / $100,000 = 80%).
 
Lock-In – A written agreement in which the lender guarantees a specified loan program and interest rate and points if a mortgage goes to closing within a set period of time.
 
Lock-In Period – The time period during which the lender has guaranteed an interest rate to a borrower.
 
M
 
Manufactured Home – Homes are homes made or manufactured in a factory and designed to be transported to a site. Manufactured homes can be large or small, and while they are constructed in the same manner as mobile homes. Manufactured homes are not mobile. Mobile homes can be moved from one location to another, while manufactured homes are permanently attached to the site using conventional on-site construction. Prefabricated homes can range from trailers to larger dwellings.
 
Market Value – A definition of market value as stated in the glossary of the most recent edition of the Uniform Standards of Professional Appraisal Practice is “The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and acting in what they consider their best interests; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”
 
Maturity – The date on which the principal balance of a loan becomes due and payable.
 
Mean Price – The average of all homes listed in a community.
 
Median Price – The price of the house that falls in the middle, an equal number above and an equal number below its price, of the total number of homes for sale in that area.
 
Mediation – A dispute-resolution process in which a neutral party works to resolve contract differences. Texas residential earnest money contracts give the parties the right to request mediation in the event of a dispute.
 
Mixed Use Development – A project that combines several different functions, such as residential space, a commercial establishment or an entire development combining commercial, residential and public accommodations.
 
Modification – The act of changing any of the terms of the mortgage.
 
Monthly Principal & Interest (P&I) Payment – Portion of monthly loan payment that covers the principal and interest due on the loan.
 
Monthly Taxes & Insurance (T&I) Payment – Portion of monthly loan payment that funds the escrow or impounds account for taxes and insurance.
 
Mortgage – A legal document that pledges a property to the lender as security for payment of a debt. Mortgages are not used in Texas; the legal instrument is called a Deed of Trust where the debtor hypothecates, held in trust, title to the lender until the loan is paid.
 
Mortgage Banker – A company that originates, sells and services loan exclusively for resale in the secondary mortgage market.
 
Mortgage Broker – An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.
 
Mortgage Insurance – A contract that insures the lender against loss caused by a borrower’s default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency.
 
Mortgage Insurance Premium (MIP) – The amount paid by a borrower for mortgage insurance.
 
Multi-Dwelling Units – Properties that provide separate housing units for more than one family.
 
Multiple Listing Service MLS – The service generally provided by a local Board of REALTORS ®. It combines the listings for all available properties, listed with members of the Board of REALTOR ® in a specific area, in one database.
 
Multiple Offers – Multiple purchase offers can occur in any real estate market. They are more common when properties are in a hot market, or the offering is very unique.
 
N
 
Negative Amortization – An increase in the outstanding balance of a loan resulting when the monthly payment is not large enough to cover the interest due. The amount of the shortfall accrues to the unpaid balance of the loan thereby creating the term “negative” amortization.
 
Net Income – The income that remains for an investment property after the gross potential rental income has been adjusted for vacancy and credit losses, and operating expenses for running the property. If the loan payment is subtracted from the Net Income the result is Cash Flow Before Taxes.
 
Net Present Value (NPV) – Method of determining whether expected performance of a proposed investment promises to be adequate. Net present value is the difference between the present value of cash flows generated by real estate and the amount of the initial investment. The present value of future cash flows is computed using the cost of capital (minimum desired rate of return, or hurdle rate) as the discount rate.
 
Net Worth – The remaining value of all of a person’s assets, including cash, after subtracting all liabilities.
 
NIMBY (Not in my back yard) – The response sometimes given by neighborhoods and communities to proposed changes or development.
 
No Documentation Loan – A loan application that does not require verification of income.
 
Notary – An official authorized by law to attest and certify certain documents by his or her hand and official seal.
 
Note – A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
 
Note Rate – The interest rate stated on a mortgage note.
 
Notice Of Default – A formal written notice to a borrower that a default has occurred and that legal action may be taken.
 
O
 
Open House – A marketing tool in which a listing agent opens a house for view by the public and/or other agents.
 
Option – A legal agreement in which a buyer puts down money for the right to purchase a piece of real estate within a set time period at a set price but does not have an obligation to buy.
 
Origination Fee – A fee paid to a lender for processing a loan application for making a loan. The origination fee is stated in the form of points. One point is 1% of the loan amount (e.g., $1,000 on a $100,000 loan).
 
Owner Financing – The seller provides all or part of the financing instead of a conventional lender.
 
P
 
Passive Activity – An activity involving the conduct of a trade or business in which the owner does materially (actively participate in the management) participate and any rental activity. Rental activity is not passive if the owner participates in the day-to-day management and oversight of the property.
 
Passive Losses – A tax term, defined by the Internal Revenue Service that refers to any loss from a passive activity.
 
Percolation – A test used by the environmental health department to determine the ability of soil to house a septic system.
 
Personal Property – Any property that is not real property or that is not permanently affixed to land. Mirrors hanging on a hook, furniture, and a lawnmower are all examples of personal property.
 
Piggyback – A combination of two loans. Example: A loan is made for 90% of the home price. 80% of the purchase price is supplied by a 1st mortgage and 10% by a 2nd mortgage. The 2nd mortgage is piggybacked on the 1st.
 
PITI (Principal, Interest, Taxes, Insurance) – After a buyer secures a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower’s actual monthly loan-related expenses.
 
Planned Unit Development (PUD) – A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial. The common property is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.
 
PMI – Stands for Private Mortgage Insurance. PMI is an insurance policy the borrower buys to protect the lender from non-payment of the loan. PMI policies are required under federal law for any loans that is below 20% of the sales price of single-family residential property.
 
Points (Loan Discount Points) – Points are prepaid interest charged by lenders on loans in order to increase their yield while keeping the payments lower. One point is one percent, 1%, of the loan amount.
 
Power Of Attorney – A legal document authorizing one person to legally act on another’s behalf. A power of attorney can grant limited or total authority. The power of attorney must be filed in the official records of the county where it is to be used. The title company generally must talk with the person that granted the power of attorney on the day that the documents are executed to ensure that the power of attorney is still in force.
 
Pre-Paid Items (Prepaids) – Items required by lender to be paid at closing. Prorated property taxes, homeowner’s insurance and pre-paid interest are an example of prepaid items.
 
Pre-Paid Interest – Interest paid at the beginning of a loan period before it accrues.
 
Prepayment – Any amount paid to in whole or part to satisfy or reduce the principal balance of a loan before the due date.
 
Prepayment Penalty – A fee that may be charged to a borrower who pays off a loan before it is due. Generally, a prepayment penalty is added to a loan in exchange for a discounted rate.
 
Pre-Qualification – A preliminary analysis of a borrower’s ability to afford the purchase of a home. The analysis takes into consideration factors such as income, current debt, available funds, type of loan, the estimated taxes and insurance, and the estimated closing costs. It does not constitute final loan approval.
 
Present Value – The discounted value of a single lump sum payment or stream of payments to be received in the future, taking into consideration a specific interest, the discount rate. Present Value represents a series of future cash flows expressed in today’s dollars.
 
Prime Rate – The interest rate that banks charge on short-term loans to its most creditworthy customers
 
Principal – The amount borrowed or remaining unpaid loan balance. The part of the monthly payment that reduces the remaining balance of a mortgage.
 
Privacy Fence – A structure erected between two pieces of property, usually six feet in height .
 
Private Mortgage Insurance (PMI) – Loan insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults.
 
Processing – The preparation and documentation of a loan application for underwriting.
 
Promissory Note – A written contract between lender and borrower in which the borrower promises to repay a specified amount over a specified period of time under mutually agreed terms.
 
Proration – Agreed-upon percentages, generally based on monthly or annual percentages, of certain income or expenses associated with a piece of property that must be paid by the buyer or the seller at the time of closing.
 
Public Auction – An announced public location to sell property to repay a loan that is in default. In Texas most properties are foreclosed on the courthouse steps.
 
Purchase Price – The total amount paid for a property.
 
Q
 
Qualifying Ratios – Calculations that are used in determining whether a borrower can qualify for a loan. For home loans they consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
 
Quit Claim Deed – A deed that transfers, without warranty of ownership, whatever interest or title a grantor may have at the time the conveyance is made. Many times a title company will not accept a conveyance on a Quit Claim Deed. A Deed Without Warranty can often be substituted instead.
 
R
 
R Value – A measure of insulation. The R-Value is a reflection of the measure of a material’s resistance to the passage of heat. The higher the R value, the more insulating “power” it has.
 
Rate – This is the annual interest rate applied to the outstanding balance of the loans.
 
Rate Reduction Option – A fixed-rate mortgage that includes a provision that gives the borrower an option to reduce the interest rate at a later date without refinancing.
 
Rate Lock – A commitment issued by a lender to a borrower guaranteeing a specified interest rate on a loan if closed within a specified period of time. Also referred to as a lock-in.
 
Real Estate Agent – In Texas, a person licensed by the Texas Real Estate Commission and who, for a commission or a fee, assists buyers or sellers in negotiating a real estate transaction.
 
Real Estate Settlement Procedures Act (RESPA) – A consumer protection law adopted in 1974 and later revised that requires advance disclosure of settlement costs to home buyers and sellers, prohibits certain types of referral and other fees, sets rules for escrow accounts, and requires notice to borrowers when servicing of a home loan is transferred.
 
Real Property – Land and appurtenances (accessories), including anything of a permanent.
 
REALTOR® – A real estate broker or sales associate who holds active membership in a local real estate board that is affiliated with the National Association of REALTORS®. REALTOR® REALTOR® is a registered trademark of the National Association of REALTORS®.
 
Recording – Filing a document in the public records, thereby giving constructive notice to the world of the existence of the document and its contents.
 
Rescission – The act of rescinding or canceling the effect of a document. In some cases borrowers have three business days following a real estate closing to elect to cancel a loan transaction.
 
Recorder – The public official who keeps records of transactions that affect real property in the county the property is located in. Referred to in Texas as a County Clerk.
 
Recording – The original document is recorded in the public records of the county the property is located in. Documents such as a deed, a deed of trust securing a promissory note, a release of lien, or an extension of a mortgage are all examples of documents that can be filed of record.
 
Refinance Transaction – The process of paying off one loan with the proceeds from a new loan. The new loan typically uses the same collateral as security for the new loan.
 
Regulation Z – The federal regulation prescribed by the Federal Reserve Board 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.
 
Remaining Balance – The unpaid amount of principal outstanding on a loan.
 
Remaining Term – The original amortization period minus the number of payments previously made.
 
Revolving Liability – A person borrows against a predetermined line of credit on a loan or credit card when purchasing goods and services. The borrower makes periodic payments on the amount that is actually borrowed plus any interest that accrues.
 
Right Of First Refusal – The right specified in an agreement, generally recorded of record, between two or more parties to give one party the initial opportunity to purchase or lease a given property before it is offered to others. First right of refusal can also be the right to purchase or lease a property based on the same terms made by another buyer/tenant that were acceptable by the seller.
 
Right Of Ingress or Egress – The right to enter upon and pass through land or premises.
 
Right Of Survivorship – In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
 
 
S
 
Sale-Lease Back – An arrangement in which a buyer purchases a property from the seller using it. The buyer then becomes the owner and leases it back to the original owner, who continues to use the property based on a lease agreement.
 
Second Home – Commonly referred to as a vacation home. Such residences are usually found in areas with substantial recreational or tourist activity.
 
Second Lien – A note secured by a Deed of Trust that has a lien position subordinate to the first lien holder.
 
Secondary Mortgage Market – A structure whereby lenders and investors buy existing mortgages and in doing so provide greater availability of funds for additional mortgage lending by banks, mortgage bankers, and other lenders.
 
Secured Loan – A loan that is backed by collateral, which acts as security for repayment of the loan.
 
Security – The property pledged as collateral for a loan.
 
Seller Broker – A seller broker represents the interest of the seller in a real estate transaction.
 
Seller Financing – An agreement in which the owner of a property provides financing.
 
Servicer – Also referred to as a Loan Servicer. A Servicer is generally an organization that collects the periodic payments from borrowers and manages borrowers’ escrow accounts.
 
Single Family Residence – A residential structure designed to include one dwelling that shares no common ground with neighboring properties.
 
Subdivision – The act ofdividing a tract of land into smaller individual lots for sale. Subdivision of land normally occurs to make a larger tract more marketable.
 
Subordination – The act or process by which an encumbrance is made junior to another encumbrance.
 
Survey – A drawing or map prepared by a registered surveyor showing the precise legal boundaries of a property. Surveys depict the location of improvements, easements, rights-of-way, encroachments, and other physical features of the property
 
Sweat Equity – The owner’s non-cash value contributed to a property in the form of labor or services performed by the owner.
 
T
 
Tap Fee – Most utility companies charge a tap fee for hooking up service to a property.
 
Tax Bracket – An individual’s tax bracket is a reference to the marginal rate that the Internal Revenue Service taxes the last dollar earned.
 
Tax Certificates – A formal document issued by a taxing entity establishing the current status of taxes due or the amount paid by the owner.
 
Tax Lien – A lien placed against a property to secure payment of back taxes.
 
Tax Sale – The public sale or foreclosure of a property by the entity holding the tax lien for nonpayment of taxes.
 
Tax Savings – This is the amount of money you save in income taxes. You save this money because in most cases the interest you pay on your home loan is tax deductible!
 
Tax Shelter – A term often applied to real estate investment and refers to various tax advantages such as interest payment deductions, operating expenses and cost recovery.
 
Term – The term of a loan is the number of years the loan is amortized for.
 
Termite Report – A report that results from an inspection by a professional to determine if the property has termites or other identified pest problems.
 
Title – A legal term referring to an owner’s interest in a piece of property. It may also refer to a formal document that serves as evidence of ownership.
 
Title Company – A company that specializes in examining and insuring titles to real estate.
 
Title Insurance – Insurance that protects the insured party for a specific amount for any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee, or otherwise.
 
Title Search – A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding that would inhibit the transfer of the property to a new owner.
 
Truth-in-Lending – See Regulation Z
 
Two To Four-Family Property – A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.
 
Trustee – An individual who holds or control of property in a fiduciary capacity for the benefit of another.
 
U
 
Underwriting – The analysis of risk by a lender to the determine the appropriate loan amount, terms and conditions, based on the borrower’s creditworthiness and the value of the security.
 
Unsecured Loan – A loan that is not backed by collateral.
 
Usury – A legal term referencing an interest rate that is in excessive of the legally allowable maximum interest rate.
 
V
 
VA Mortgage – A loan that is guaranteed by the Department of Veterans Affairs (VA).
 
Variable Rate – An interest rate that changes periodically in relation to an index. Payments may increase or decrease per the terms of the loan agreement or note.
 
Vested – In law vesting is given to immediately secured property rights. Once a property receives “regulatory” approval of any governmental agency required to use a site it is vested. For instance if a property had to be zoned in order to construct a commercial building on it, it is vested once the zoning is obtained which means being able to take full advantages of the asset. Vested property rights are extremely important in condemnation cases.
 
Veterans Affairs, Department of (VA) – An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
 
W
 
Warehouse – A closing-cost fee representing the lender’s cost of holding a borrower’s loan temporarily prior to being sold on the secondary mortgage market.
 
Wrap Around Mortgage – A junior loan to a buyer with a face value of both the amount it secures and the balance due under the remaining prior loan(s). The lender under the wrap-around makes payment(s) on the prior loan(s) from the payments they collect on the note that is secured by the wrap-around. Most security instruments changed in the 1980’s to present the use of wrap around mortgages.
 
X
 
Xeriscape – a landscape designed with drought-tolerant plants.
 
Y
 
Year Acquired – The date you acquired your existing mortgage, used to determine your remaining balance.
 
Year-End Statement – A report sent to the borrower each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.
 
Z
 
Zero Lot Line – Residences that are built up to or on the property line with little or no yard.
 
Zoning – Laws passed by local governments controlling the use of land. They generally enacted for public health and safety issues and specify the size, type, structure, nature and use of land or buildings.
 
Zoning Variance – a waiver from compliance with provisions in a zoning ordinance may be authorized when it will not be contrary to the public interest and when literal enforcement of the ordinance will result in unnecessary hardship that would be imposed upon the property owner by the strict application of that provision of the ordinance. The granting of variances traditionally is the responsibility of the zoning board of adjustments and appeals.