The Most Important Real Estate Definitions

I have gathered the most important real estate definitions and terms for you to browse through any time you need to. If there are other real estate language that you are not familiar with and would like to understand just let me know.

Adjustable-rate mortgage (ARM): A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Adverse Possession: A method of acquiring title to real property through the continued possession of the property under certain condition for the statutory period by a person who is other than the owner of record.

Affidavit: A statement or declaration reduced to writing and sworn to or affirmed before a public official who has authority to administer an oath or affirmation.

Agency: A relationship created when one person (the principal) delegates to another (the agent) the right to act on his or her behalf in business transactions.

Amortization: The process of paying off a debt in installments over a given period of time without a final balloon payment.

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.

Appreciation: an increase in property value.

Arbitration: a legal method of resolving a dispute without going to court.

As-is Condition: the purchase or sale of a property in its existing condition without repairs.

Balloon Payment: the final lump sum payment due at the end of a balloon mortgage.

Broker: a licensed individual or firm that charges a fee to serve as the mediator between the buyer and seller. Mortgage brokers are individuals in the business of arranging funding or negotiating contracts for a client, but who does not loan the money. A real estate broker is someone who helps find a house.

California Land Title Association (CLTA): A statewide association of title insurers and underwritten title companies. The association adopts standard title policy forms.

Chain of Title: A chronological list of recorded instruments tracing title to land, from the original owner to the present owner.

Clear Title: Title to property, which is free from liens, defects of other encumbrances.

Closing: the final step in property purchase where the title is transferred from the seller to the buyer. Closing occurs at a meeting between the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property. Also known as settlement.

Cloud On The Title: any condition which affects the clear title to real property.

Community Property: Property acquired during a marriage by either a husband or wife, or both, which is not separate property. (California is a community state)

Comparables (comps): An abbreviation for comparable properties used for comparative purposes in the appraisal process.

Contingency: Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.

Construction loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Contingency: a clause in a purchase contract outlining conditions that must be fulfilled before the contract is executed. Both, buyer or seller may include contingencies in a contract, but both parties must accept the contingency.

Deed of trust: Some states, like California, do not record mortgages. Instead, they record a deed of trust, which is essentially the same thing.

Earnest money deposit: A deposit made by the potential homebuyer to show that he or she is serious about buying the house.

Easement: A limited right or interest in land of another that entitles the holder of the right to some use, privilege or benefit over the land.

Escrow: The process in which a disinterested third party holds money and documents for delivery to the respective parties in a transaction on performance of established conditions.

Exclusive listing: A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.

Federal Housing Administration (FHA): A division of the Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans by private lenders.

Fixed Rate Loan: A loan on which the same rate of interest is charged for the life of the loan.

Joint Tenancy: A means of ownership in which two or more persons own equal shares in real property. Upon the death of one tenant, his/her share passes to the remaining tenant(s) until title is vested in the last survivor.

Legal Description: A description by which property can be definitely located by reference to surveys or recorded maps. Sometimes referred to simply as the legal.

Lien: A recorded document, which claims an interest in real property as security for a debt owed. Such liability may be created by contract, such as a deed of trust, or by a court judgment.

Lis Pendens: Legal notices that a lawsuit is pending. Also called a notice of action.

Loan to Value (LTV) Ratio: a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Market Value: the amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.

Mortgage: a lien on the property that secures the Promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.

Mortgage Broker: a firm that originates and processes loans for a number of lenders.

Quitclaim Deed: A deed relinquishing all interest, title or claim in a property by a grantor. Accomplished without representing that such title is valid, nor containing any warranty or covenants of title.

Real Estate Settlement Procedures Act (RESPA): A federal statute requiring disclosure of certain costs in the sale of residential, improved property, which is to be financed by a federally insured lender.

Reconveyance: The conveyance to the landowner of the title, held by a trustee under a deed of trust, when the performance of the debt is satisfied.

Tax Lien: A statutory lien imposed against real property for nonpayment of taxes.

Title Company: a company that specializes in examining and insuring titles to real estate.

Title Insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.

Truth-in-Lending: a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan

Uniform Settlement Statement: The standard HUD Form 1 required to be given to the borrower, lender and seller at, or prior to, settlement.

Warranty Deed: a legal document that includes the guarantee the seller is the true owner of the property, has the right to sell the property and there is no claims against the property.