Real Estate Dictionary
A
Abstract of Title
A condensed history or summary of all transactions affecting a particular tract of land.
Access
The legal right to enter and leave a tract of land from a public way. Can include the right to enter and leave over the land of another.
Acre
A measure of land equal to 43,560 square feet.
Addendum
Something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, etc., to modify the original. (See Amendment)
Adjustable Rate Mortgage (ARM)
A residential mortgage loan under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. The extent and number of these adjustments are agreed to at the inception of the loan.
Adjustments
Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment.
Administrator
A person appointed by a probate court to settle the affairs of an individual dying without a will. The term is “administratrix” if such a person is a woman. Also see “Personal Representative.”
Adverse Possession
A claim made against the land of another by virtue of open and notorious possession of said land by the claimant.
Affidavit
A sworn statement in writing.
Agency
Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter. Agency involving real estate should be in writing, such as listings, buyer/broker agreements, power of attorney, etc.
Agent
A person or company that has the power to act on behalf of another or to transact business for another, for example a title agent under contract with XYZ Title is an agent solely for the purpose of issuing policies of title insurance and other title insurance products.
Air Rights
The right to ownership of everything above the physical surface of the land.
ALTA
American Land Title Association, a national association of title insurance companies, abstractors and attorneys specializing in real property law. Its headquarters are in Washington, D.C.
Amendment
A change either to correct an error or to alter a part of an agreement without affecting the essential intent
Annual Percentage Rate (APR)
An expression of the percentage relationship of the total finance charges to the total amount to be financed as required under the federal Truth-in-Lending Act.
Appraisal
A written opinion from an independent third party detailing the estimated value of real estate.
As-Is
Words in a contract intended to signify that no guarantees, whatsoever, are given regarding the subject and that it is being purchased exactly as it is found.
Asking or List Price
The price placed on a property for sale.
Assessment
The imposition of a tax, charge or levy, usually according to established rates.
Assessor
A public official who evaluates property for the purpose of taxation.
Assignee
One to whom a transfer of interest is made. For example, the assignee of a mortgage or contract.
Assignor
One who makes an assignment. For example, the assignor of a mortgage or contract.
Attachment
Legal seizure of property to force payment of a debt.
Attorney in Fact
One who holds a power of attorney from another, allowing him or her to execute legal documents such as deeds, mortgages, etc., on behalf of the grantor of the power.
B
Balloon Mortgage or Note
A mortgage or note that is amortized over a specific period of years, but requires a lump-sum payment in full at an earlier date.
Bankruptcy
A federal court proceeding in which debtors may be relieved of liability for their debts after surrender of their nonexempt assets to a court-appointed trustee.
Beneficiary (of a Trust)
The recipient of benefits from a trust.
BINSR
Buyer’s Inspection Notice and Seller’s Response”, is a form used for negotiation of repairs on residential real estate in Arizona.
Broker
A Real Estate Broker is an intermediary between a Buyer and Seller in a transaction. Often, there are two Brokers in a Real Estate transaction; one who represents the Seller, and one who represents the Buyer. More often than not, the salespersons with whom the Buyer and Seller interact directly (Buyer’s Agent and Listing Agent respectively) are not the actual Brokers, but agents of the Broker.
Bureau of Land Management (BLM)
The branch of government in charge of surveying and managing public land.
Buyer
The person(s) or entity purchasing Real Property.
Buyer’s Agent
Real Estate Agent who represents the Buyer in a Real Estate transaction.
C
CC&R’s
Covenants, Conditions and Restrictions. Also see “Conditions and Restrictions.”
Chain of Title
The history of all of the documents that have transferred title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Clear Title
Ownership that is free of liens, defects, or other legal encumbrances.
Client
The Principal in a Real Estate transaction (Buyer or Seller) to whom an agent owes a fiduciary obligation.
Close of Escrow or COE
The process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property.
Closing Costs
Costs due a Buyer or Seller at the Close of Escrow in association with a Real Estate transaction.
Closing Disclosure
The five-page Closing Disclosure, also referred to as CD, must be provided to the consumer three business days before they close on the loan. The Closing Disclosure details all of the costs associated with the mortgage transaction.
Closing Statement
A summation, in the form of a balance sheet, made at a closing showing the amounts of debits and credits to which each party to a real estate transaction is entitled.
Clouded Title
An irregularity, possible claim or encumbrance that, if valid, would adversely affect or impair the title.
CLUE Report
Comprehensive Loss Underwriting Exchange details past insurance claims against a property.
CMA
Comparable Market Analysis utilized by Real Estate Agents to derive an opinion of a property’s current market value. (Not an Appraisal)
Commission
The fee charged for services performed, usually based on a percentage of the price of the items sold (such as the fee a real estate agent earns on the sale of a house).
Comparables or Comps
An abbreviation for “comparable properties,” which are used as a comparison in determining the current value of a property that is being appraised.
Conditions and Restrictions
Limitations placed on the use and enjoyment of land. It can also include penalties for failure to comply. These are commonly found on condominiums and planned unit developments.
Condominium
A system of individual fee ownership of units in a multiunit structure, combined with joint ownership of common areas of the structure and land.
Contingency
A condition that must be met before a contract is legally binding.
Contract
Also known as a Purchase Agreement, the legal instrument which states the terms of the agreement to buy/sell between the Buyer and Seller.
Contract Date
The date upon which a Purchase Agreement is fully executed by all parties.
Conventional Loan
Financing vehicle that is not insured or guaranteed by a government agency, and adheres to Fannie Mae (Federal National Mortgage Association) guidelines, with a maximum loan amount of $417,000 in Arizona.
Conveyance
The transfer of title to real property from one person to another.
Counter Offer
A written response that alters one or more terms of an offer to purchase.
Cure Notice
Written notice from one party to another during the escrow period of a breach of contract. The breaching party is granted, according to the standard terms of the AAR Purchase Agreement, 3 days to correct the breach before the non-breaching party is permitted to unilaterally cancel the transaction and pursue additional recourse.
Customer
Principal in a Real Estate transaction to whom an Agent (Broker) owes no fiduciary obligation (either represented by another Broker or unrepresented).
D
Deed
A written document by which the ownership of land is transferred from one person to another.
Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the trustor (borrower), in favor of the beneficiary (lender) and re-conveyed (satisfied) upon payment in full. Also known as a mortgage.
Depreciation
A decline in the value of a house due to changing market conditions or a method of allocating the cost of a tangible asset over its useful life.
Discount Point(s)
Lending fee(s) which may be charged to borrowers with lower credit scores, or at the borrower’s discretion to buy down the interest rate. One point is typically equivalent to one percent of the total loan amount.
DOM
Days On Market for a listed property.
Down payment
Buyer's payment to the sellers at time of closing for that percentage of the purchase price required by the buyer's mortgage loan.
Dual Agency
The representation of both principals (Buyer and Seller) in a transaction by a single Broker.
Due-on-Sale Clause
Provision in a mortgage or deed of trust which requires loan to be paid in full if property is sold or transferred.
E
Earnest Money / Deposit
Good Faith funds, typically deposited with 3rd party title company (or broker’s trust account) upon contractual agreement between Buyer and Seller.
Easement
A right to the use of or access to, land owned by another…Sometimes a Utility Company or a Neighbor.
Egress
The right to leave a tract of land.
Eminent Domain
The power of the state to take private property for public use upon payment of just compensation.
Encroachment
Any building, improvement or structure (such as a wall, fence or driveway) located on one property that intrudes upon the property of another.
Encumbrance
Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden or charge upon the property.
Equity
A homeowner’s financial stake in a property (determined by subtracting existing liens and loans from the current market value.
Escrow
The process in which title is transferred from the Seller to the Buyer in a Real Estate transaction via neutral third party in accordance with the terms of the Purchase Agreement (Contract).
Escrow account
The trust account established under the provisions of the license law for the purpose of holding funds on behalf of the principal or some other person until the consummation or termination of a transaction.
Escrow Officer or Agent
Professional who oversees the Escrow process.
Estate
A person’s possessions.. the extent of a person’s interest in real property.
Executor
A person appointed by the probate court to carry out the terms of a will. The term is “executrix” if that person is a woman. Also see “Personal Representative.”
F
Fair Market Value
The price a willing buyer and seller agree to in the open market.
Federal Housing Authority or FHA
Financing that is available for the purchase of a primary residence with a max loan amount of $271,050 in Maricopa County. Property and borrower must meet certain eligibility requirements.
Fee Simple Estate
The greatest possible estate in land where the title is held completely and without any limitations or conditions. Sometimes designated simply as “Fee.”
FICOs
Credit scores from the three major reporting bureaus: Experian, Equifax and TransUnion.
Fiduciary
A professional who is entrusted to represent the best interests of another. In a Real Estate transaction, the fiduciary is the Broker (and agent thereof) who represents a principal (Buyer or Seller).
Final Walk through
See Walk Through.
Financing Contingency
Under the standard AAR Purchase Agreement, a transaction is contingent upon the Buyer’s ability to obtain financing. Unless the boilerplate terms of the agreement have been altered, the Buyer is typically entitled to a full return of the earnest funds if denied for a loan (provided the good faith effort described in the Purchase Agreement has been put forth) at any point prior to the Close of Escrow
Fixed Rate Mortgage
A mortgage on which the same rate of interest is charged for the life of the mortgage.
Fixtures
Any item of property so attached to real property that it becomes a part of the real property.
Foreclosure
A bit of a misnomer as properties in AZ are taken back by the bank (or the highest bidder) via Trustee’s Sale for non-payment by the mortgagee (homeowner), a Foreclosure property is one which is now owned by the bank or its assignee.
G
Good Faith Estimate or GFE
is a legally-required estimate of total settlement costs to a Borrower from a Mortgage Lender or Broker.
Graduated Payment Mortgage
A loan in which monthly payments are relatively small in the beginning and gradually increase in dollar amount over the life of the mortgage.
Grantee
A person who acquires an interest in land by deed, grant or other written instrument.
Grantor
A person, who, by a written instrument, transfers to another an interest in land.
Guardian
One appointed by the court to administer the affairs of an individual not capable of administering his or her own affairs.
H
Hardship Letter
A letter required in a Short Sale transaction, that details the nature of the homeowner’s hardship that necessitates a sale of the property for less than the balance owed on the loan(s).
Hazard Insurance
Required by most lenders, indemnifies against property loss due to nature (fire, storm, etc). Additional coverage may be required for properties that fall within designated disaster areas (flood plains, etc).
HELOC
Home Equity Line of Credit
HOA
A Homeowner’s Association is a governing body (managed either professionally or by the homeowners themselves) that may impose additional rules and bylaws over and above local ordinances to preserve the quality of life and integrity of property values for its members. Periodic fees (monthly, quarterly, semi-annually or annually) are typically levied to support the body and maintain common area elements (community pools, guard gates, clubhouse, foliage, etc). Special assessments can be levied for specific projects over and above the standard operating budget.
Home Warranty
Annual coverage policy for the primary mechanical components of a home, often included in the negotiation between Buyer and Seller.
Homeowner’s Insurance
Insurance policy that combines hazard coverage with personal liability protection.
I
Improvements
Those additions to raw land tending to increase value, such as buildings, streets, sewer, etc.
Indemnify
To make payment for a loss or to hold another harmless from loss.
Inspection Period
Sometimes referred to as the Due Diligence Period, the Inspection Period typically extends 10 days (negotiable) from full execution of the Purchase Agreement by both parties. During this period, the Buyer is to perform any/all inspections of the property and decide whether to 1) Accept the premises, 2) Request Repairs or 3) Cancel the transaction, provided that none of these options were overridden in the Purchase Agreement.
Interest Rate
The cost of borrowing money for a home loan is based on a percentage rate of interest. While most loan programs offer a fixed rate of interest over the life of the loan, some (ARMs) adjust at specified intervals based on the behavior of a particular index. Most 30 year fixed mortgage rates are driven by ten year, five year and one year Treasury Note yields on the open market.
Intestate
Designates the estate or condition of failing to leave a will at death. “To die intestate.”
J
Joint Tenancy
An estate where two or more persons hold real estate jointly for life, the survivors to take the entire interest on the death of one of the joint tenants.
Judgment Lien
A lien on the property of a debtor resulting from the decree of a court.
Jumbo Loan
Financing type that exceeds Fannie Mae conforming loan limits. In AZ, that would be a loan amount in excess of $417,000 presently.
Junior Lien
A lien that is subordinate to a prior lien; ie second mortgages, lines of credit, etc. A junior lien holder is often the fly in the ointment to a successful Short Sale.
L
Lead-Based Paint Disclosure
Federally required disclosure on all properties built prior to 1978, the year lead was outlawed in paint.
Lease
Rental Agreement for temporary housing.
Legal Description
A description of a parcel of land recognized by law, based on surveys identifying the exact boundaries of the property.
Lessee
One who takes land under a lease.
Lessor
One who grants land under a lease.
Lien
A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Lienholder
The financial institution or investor that holds a Deed of Trust.
Life Estate
A grant or reservation of the right of use, occupancy and ownership for the life of an individual.
Listing Agent
Real Estate Agent that represents the Seller in a transaction.
Loan
See Mortgage
Loan Estimate
A three-page Loan Estimate (also called LE) must be provided to the consumer no later than three business days after they submit a loan application for most mortgages. The Loan Estimate provides information about key features, costs and risks of the mortgage loan for which the consumer is applying.
Loan Origination Fee
A one-time fee frequently charged by the lender to set up a loan.
Lockbox
Key repository used by Real Estate Agents to alternately permit and gain entry into a property.
LTV
Loan to Value ratio which outlines down payment requirements for a loan program. For example, an 80/20 LTV reflects a loan for 80% of the value (purchase price), and a 20% down payment from the Buyer.
M
Market Value
The current value of your home based on what a purchaser would pay on the open market.
Marketable Title
Real property ownership free of liens, defects, encumbrances or claims.
Mechanic’s Lien
A lien on real estate, securing the payment of debts due to persons provide labor, services or materials incident to the construction of buildings and improvements on the real estate.
Mortgage
Known as Deeds of Trust instead of mortgages, they are recorded in Arizona but essentially interchangeable terms that refer to the legal instrument used to secure the lender’s interest in the property.
Mortgage Banker
A mortgage professional who works for and sells the financing products of a specific bank.
Mortgage Broker
An intermediary who matches borrowers with financial institutions based on needs and terms. The primary difference between a Mortgage Broker and a Mortgage Banker is that a Broker is not necessarily affiliated with any particular institution.
Mortgage Insurance
Insurance protecting against the nonpayment of, or default on, an individual mortgage or loan involved in a residential mortgage transaction. It protects the mortgage lender against loss incurred by a reason of nonpayment or mortgage default.
N
Negotiation
The attempt to reach an accord between Buyer and Seller on the terms of a Real Estate transaction.
Note
A written promise to pay a specified amount under the agreed upon conditions.
O
Offer
The initial proposal (must be in writing to be legally recognized) to purchase Real Property; the starting point of a negotiation between Buyer and Seller.
Owner’s Policy
A policy of title insurance insuring an owner of real estate against loss occasioned by defects in liens against or non-marketability of the owner’s title.
Ownership
The right to possess and use property to the exclusion of others.
P
Patent
A document or grant by which the federal or state government originally transferred title to public land to an individual. The first in a series of transfers by which title comes down to present owners.
Pending
An alternate option for a property that is under contract, a listing entered into Pending status is effectively removed from the market (not soliciting backup offers) while escrow is navigated.
Personal Property
Affects of a homeowner that are not considered Real Property, and therefore, do not transfer upon sale unless specified in the Purchase Agreement. Basic rule of thumb for Arizona holds that anything that requires a tool to remove from the home is considered a fixture of the house, and conveys unless excluded. Notably, refrigerators and washers/dryers are personal property in AZ.
PITI
Principal, Interest, Taxes and Insurance of which a monthly mortgage payment is comprised.
Plat
Also called “plat map.” A map dividing a parcel of land into lots, as in a subdivision.
PMI
Private Mortgage Insurance which is required on loans with down payments less than 20% of the purchase price.
Points
A one-time special fee or extra charge paid to a lender in order to secure a loan. It is typically a percentage of the mortgage amount.
Policy Owner
The insured on a title insurance policy.
Power of Attorney
An instrument in writing by which one person, the principal, authorizes another, the attorney in fact, to act in the specific actions described in the instrument.
Pre-Payment Penalty
A clause in a mortgage or loan contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty can be based on percentage of the remaining mortgage balance or some other calculation as described in the clause.
Preliminary Title Report
Report that lists conditions of obtaining title insurance and any exceptions to the policy’s coverage.
Primary Residence
Where you hang your hat, for financing and tax purposes.
Principle
The amount of money borrowed or the amount of the loan that has not yet been repaid to the lender.
Promissory Note
A written promise to repay a specified amount over a specified period of time.
Property Taxes
Taxes levied annually and paid semi-annually in conjunction with the ownership of Real Property in AZ. Total tax liability is determined by multiplying a property’s assessed value (10% of True Market Value, as determined by the County Assessor’s Office) by a municipality’s current tax rate.
Prorate
To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a proration of real property taxes or fire insurance premiums.
Purchase Agreement
See Contract
Q
Quiet Title
An action in a proper court to remove record defects or possible claims of other parties named in the action.
Quitclaim Deed
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed contains no covenants or warranties.
R
Real Estate Agent
A person licensed to transact in the sale of Real Property.
Real Property
Land and anything permanently affixed thereto — including buildings, fences, trees, and minerals.
REALTOR®
Real Estate Agent who is an active member of the National Association of Realtors. All Realtors are Real Estate Agents, but not all Real Estate Agents are necessarily Realtors.
Recording
The recordation of the warranty deed (conveying title from Seller to Buyer) at the county recorder’s office signifies the official Close of Escrow in Arizona.
Renter’s Insurance
Otherwise known as Content Insurance, this type of coverage protects personal affects.
REO
Real Estate Owned AKA Foreclosure or Bank-Owned Property.
RESPA
Real Estate Settlement Procedures Act that established consumer protections in a Real Estate transaction, including measures to ensure proper disclosure of estimated settlement fees, and prohibitions on kickbacks from service providers that may increase total settlement costs.
Reverse or Reverse Annuity Mortgage
A mortgage for which the borrower pledges home equity in return for regular (monthly) payments, rather than a lump sum distribution of loan proceeds. Repayment is usually not required until the home is sold or the borrower’s estate is settled, provided the borrower continues to live in the home and keeps current all taxes and insurance. Also see “Home Equity Conversion Mortgage.”
Right of Way
See Easement
Riparian Rights
System for allocating water rights in adjoining lakes or rivers.
S
Sales Contract (Purchase Agreement)
The legal document contractually binding the terms of Buyer’s and Seller’s agreement to sell/purchase real estate, usually completed by the real estate agent and signed by both parties.
Second Mortgage
A second loan on real estate that already has a mortgage. It is subordinate to the first mortgage.
Security
The property that will be given or pledged as collateral for a loan.
Seller
The person(s) or entity selling Real Property.
Set Back Lines
Those lines which delineate the required distances for the location of structures in relation to the perimeter of the property.
Short Sale
A real estate transaction in which the sales price is insufficient to pay the loans(s) encumbering the property, in addition to the costs of sale, and the seller is unable to pay the difference. The approval of the seller’s lender(s) is required for the sale to proceed.
SPDS
Seller Property Disclosure Statement which outlines the Seller’s knowledge of the property’s history, and is given to the buyer within 5 days of contract acceptance under the terms of the standard AAR Purchase Agreement.
Special Assessment
A lien assessed against real property by a public authority to pay costs of public improvements, such as sidewalks, sewers and street light, which directly benefits the assesses property.
Sub-Surface Right
The right of ownership to things lying beneath the physical surface of the property.
Subdivision
A tract of land surveyed and divided into lots for purposes of sale.
Survey
The measurement of the boundaries of a parcel of land and its area.
T
Tax Lein
A lien for real property taxes. Attaches only to the property upon which the taxes are due in most jurisdictions. It may be foreclosed for nonpayment.
Tenancy by the Entirety
Ownership by married persons. Each owns the entire estate, with the survivor taking the whole upon the other’s death. An estate or interest in land held by two or more persons, each having equal rights of possession and enjoyment, but without any right of succession by survivorship between the owners.
Tenancy in Common
An estate or interest in land held by two or more persons, each having equal rights of possession and enjoyment, but without any right of succession by survivorship between the owners.
Tenant
Any person occupying real property with the owner’s permission.
Testament
Another term for a will. Commonly referred to as “last will and testament.”
Testate
The state or condition of leaving a will at death. “To die testate.”
Testator
A man who makes or has made a testament or will.
Testatrix
A woman who makes or has made a testament or will.
Three-Day Review Period
For covered transactions under the TILARESPA Integrated Disclosure (TRID) Rule the creditor is generally required to ensure that the consumer (borrower) receives the Closing Disclosure no later than three business days prior to the consummation of the loan.
Title
Ownership of real property, which stands against the right of anyone else to claim the property; the evidence of right which a person has to the ownership and possession of land.
Title Agent
See escrow officer or agent.
Title Commitment
A report issued by a title insurance company or its agent, committing the title insurance company to issue the form of policy designated in the commitment upon compliance with and satisfaction of requirements set forth in the commitment.
Title Insurance
Coverage supplied by a Title Agent that warrants clear title to a property (less any listed exceptions of the policy). Separate policies are available to protect the interests of homeowners and lenders.
Title Search
An examination of public records, laws and court decisions to disclose the current facts regarding ownership of real estate.
Trust
A property right held by one as a fiduciary for the benefit of another.
Trustee
Third party to whom a property is entrusted for the protection of a beneficiary.
Trustee’s Sale
Sale of a property under the terms of a Deed of Trust as a remedy for default in Arizona. …Otherwise known as Foreclosure.
U
Underwriting
The process used to determine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage.
V
VA Loans
Housing loans to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans Administration, enabling veterans to buy a residence with little or no down payment.
Vacant
Terminology used to describe an undeveloped lot or an unoccupied home.
Variable Rate Mortgage
A loan in which the interest rate fluctuates with the cost of funds or some other index.
Vest
To pass to a person an immediate right or interest. Title may be said to vest in Joe Smith.
Vesting
Manner in which title to a property is taken. Standard options include Sole and Separate Property Joint Tenancy, Tenants In Common, Community Property and Community Property with Right of Survivorship. As there are potential legal and tax ramifications to the option selected, seeking the advice of an attorney and/or CPA is recommended.
W
Walk Through
Depending on the terms of the contract of sale or based on local custom, a walk-through or pre-settlement inspection may be scheduled prior to settlement or closing of the transaction. The primary purpose of this type of inspection is to make certain the property is in the agreed-upon condition, repairs (if any) from the home inspection are complete, and to confirm that nothing has gone wrong with the property since the buyer’s last viewing.
Warranty
A limited promise by the grantor of real property that he or she is the owner and will be responsible to the buyer if title is other than as represented.
Warranty Deed
A deed in which the grantor warrants or guarantees that good title is being conveyed.
Will
A written document providing for the distribution of property owned by a person after his or her death.
Z
Zoning
The right of a municipality to regulate and determine the compatible character and use of property.