Real Estate Terminology

Addendum. Something added. A list or other material added to a document, letter, real estate contract or escrow instructions.

Annual Percentage Rate. The yearly interest percentage rate of a loan, as expressed by the actual rate of interest paid. The APR is disclosed as a requirement of the federal truth in lending statues.

Additional Deposit. A buyer of real property will generally give a small deposit with an offer and a secondary deposit after the offer is accepted.

Adjusted Sales Price. An appraisal term used when a comparable property's sale price is adjusted to reflect the value of the subject property. The adjustment is made based on the differences between the subject property and comparable property in time of sale, terms of sale, location and physical characteristics.

Aesthetic Value. The value of a property attributable to the beauty of the improvements or surroundings.

A-Frame. The type of construction usually found in resort areas. The exterior framing of the building is shaped like the letter A.

Agent. One who is authorized to act for or represent another (Principal), usually in business matters. Authority may be expressed or implied.

Amortization. Payment of a debt in equal periodic installments of principal and interest.

Amortization Schedule. A schedule showing each payment of a loan to be amortized and breaking down the payment into the amount applied to principal and the amount applied to interest. There are many good online web resources for calculating mortgage amortization schedules based upon a loan amount, interest rate and term of the loan.

Appraisal Methods. Generally there are three major methods of appraisal: the Cost Approach, Income Approach and Market Value (comparables) Approach.

Appraisal Report. A written report by an appraiser containing an opinion as to the value for a property and the reasoning leading to the opinion. The factual data supporting the opinion, such as comparables, appraisal formulas and qualification for the appraiser.

Arterial Highway. Any major highway or thoroughfare.

"As Is Condition". Premises accepted by buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.

Asking Price. The price at which the seller is offering the property for sale. The eventual price may be lower after negotiating with the buyer.

Assessed Value. The value placed upon property for property tax purposes by the tax accessor.

Backup Offer. A secondary offer to buy property, used in case the first or primary offer fails. A Backup Offer is particularly useful when the primary offer contains difficult contingencies.

Balance. In appraisal terms, the value of real property is best sustained when supply and demand forces are equal.

Balloon. The final payment of a balloon note.

Balloon Note. A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon payment" is due at maturity.

Base Line. A survey line used in the government survey to establish township lines. The base lines runs East and West through a principal meridian line running North and South.

Bearer. One holding commercial paper.

Bearer Instruments. Checks, notes, drafts, bonds, etc., payable to whomever has possession of the instruments.

Breach of Contract. Failure to perform a contract, in whole or part, without legal excuse.

Bridge Financing. A form of interim loan, generally made between a short term loan and a permanent (long term) loan, when the borrower needs to have more time before taking the long term financing. Many times used when a Buyer purchases a new home and still needs to complete the sale of an existing home.

Buffer Strip. A parcel of land separating two other parcels or areas, such as a strip of land between an industrial and residential area.

Cap or Cap Rate. The maximum amount which can be charged by a lender. Most commonly used in Adjustable Rate Mortgages where the CAP rate specifies the maximum rate which the lender may charge over the life of the loan.

Cash Equivalency Analysis. An appraisal method by which the price of comparable properties selling at different financing terms are adjusted to find market value. The theory being that the less advantageous terms to the seller, the higher the sale price with cash being more advantageous than credit.

Caveat Emptor. A Latin phrase meaning "Let the Buyer Beware".

CC and R. Covenants, Conditions and Restrictions. A term used to describe the restrictive limitations which may be placed on properties especially prevalent in condominium and town home communities.

Chain of Title. The chronological order of conveyance of a parcel of land from the original owner to the present owner.

Chains and Links. In real estate surveying, a chain is 66' long or 100 links, each link being 7.92 inches.

Cinder Block. A building block composed of ash and cement. The cinder block does not have the weight or strength of concrete block, one of the preferred methods of construction in Florida.

Closing. In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale or loan is completed.

Closing Costs. Indirect costs incurred as a result of a real estate sales transaction such as title, appraisal and loan fees and, in some states, real estate transfer taxes.

Cloud on Title. An invalid encumbrance on real property which, if valid, would affect the ownership rights of the owner.

Conventional Loan. A loan not secured by a government insured agency such as FHA. or VA.

Defective Title. Title to real property which lacks some of the elements necessary to transfer good title.

Documentary Tax Stamps. Stamps, similar to postage stamps affixed to a deed showing the amount of tax paid.

Down Payment. Cash portion of the payment paid from the Buyer's funds as opposed to the portion which is financed.

Eminent Domain. A governmental body with right to acquire property for public use by condemnation and the payment of just compensation.

Encroachment. Generally, construction onto the property of another, as of a wall, fence, building. etc.

Encumbrance. A claim, lien, charge, or liability attached to and binding real property.

Exclusive Agency Listing.. A listing or agreement protecting the listing broker's commission against the sale of the property by another agent but not against the sale by the principal.

Federal Discount Rate. The interest rate charged to member banks borrowing from the federal reserve board.

Fee Simple. An estate under which the owner is entitled to unrestricted powers to dispose of the property and which can be left by will or inheritance.

Mortgagee. A lender who holds a mortgage on a specific property as security for the money loaned to the borrower.

Mortgage Insurance Premiums. Fees paid by FHA borrowers to obtain a loan.

Mortgagor. A borrower who gives a mortgage on property in order to obtain a loan from a lender.

Negative Amortization. A financing arrangement where monthly mortgage payments are less that that required to pay both interest and principal. The unpaid balance is added to the loan balance.

Non-Conforming Use. Continuing land use that is not in compliance with zoning ordinances.

Open-end Clause. A provision in a mortgage allowing the borrower to increase the loan amount as long as the total debt does not exceed the original mortgage loan amount, with the lender often reserving the right to adjust the interest rate to current market rates.

Offeree. One who receives an offer or the seller in a real estate transaction.

Offeror. One who makes an offer to purchase or a buyer in a real estate transaction.

Opinion of Title. A formal statement by an attorney regarding the status of a title after examination of the chain of title.

Option. A unilateral contract in which the buyer has the option to purchase real property at a specified price during a designated period based on sufficient consideration.

Prepayment Clause. A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.

Prima Facie Evidence. Requiring no further proof or acceptable on the face value.

Primary Mortgage Market. A source for the purchase of a mortgage loan by a borrower.

Prepayment Clause. A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.

Prima Facie Evidence. Requiring no further proof or acceptable on the face value.

Primary Mortgage Market. A source for the purchase of a mortgage loan by a borrower.

Procuring Cause. The party primarily responsible for effecting an executed sales contract, irregardless of who actually writes the contract.

Planned Unit Development. A mixed land use with high population density.

Prepayment Clause. A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.

Prima Facie Evidence. Requiring no further proof or acceptable on the face value.

Primary Mortgage Market. A source for the purchase of a mortgage loan by a borrower.

Plat Map. A tract of land subdivided into lots showing required or planned amenities.

Range Lines. The surveyed north-south lines running every six miles east and west of the sub-meridian.

Red Lining. The outlining of a map of certain "high risk" areas for real estate loan purposes. This means lenders will not extend credit in these areas for real property loans, regardless of the qualifications of the applicant. Some state have passed laws against this practice. The use of a red pen or pencil for the outline gave rise to the term.

Regulation Z. Federal Reserve regulation issued under the Truth-in-Lending Law, which required that the credit purchaser be advised in writing of all costs connected with the credit portion of the purchase.

Reinforced Concrete. Concrete strengthened by reinforcing by the addition of steel bars, mesh, and other materials.

Reinstatement. Payment of a note, mortgage, deed of trust, etc., to bring it from default to good standing. A secondary meaning is the restoration of a previously-used entitlement to a veteran to enable the veteran to purchase property under the VA program which is also known as a "Restoration of Eligibility".

Release. An instrument releasing property from the lien of a mortgage, judgment, etc. When a trust deed is used, the instrument is called a re-conveyance. In some areas, a "discharge" is used instead of a "release".

RESPA. The Real Estate Settlement Procedures Act (RESPA) was a law enacted on June 20, 1975 requiring the disclosure of certain costs in the sale of a one to four family residential property unit which is financed by a federally insured lender.

Short Sales. "Short sales" are sales where the proceeds from the sale of a home are insufficient to payoff all leins and the outstanding mortgage balance. This situation normally occurs when an owner is unable to meet their current financial obligations and the property would otherwise be going into foreclosure. For an owner in need of short term cash, there are financial institutions which offer cheap online cash advances such as the site at Cash Advances.