Real Estate Terms
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A
ACRE:
An imperial measure for land. Equals 43,560 square feet; 4,047 square meters; or
0.047 hectares.
ADDENDUM:
An addition to a document that forms part of it. Similar to a Schedule to an
Agreement of Purchase and Sale. May be used to add specific and detailed
information material to the contract or upon which contractual terms are based.
ADJUSTABLE RATE MORTGAGE (ARM):
Also known as a Variable Rate Mortgage, a loan secured against land which has an
interest rate that changes according to some outside index -- such as the
federal prime rate or the interest rate paid on government bonds -- over the
term of the mortgage. The change in interest rate will result in a change in the
periodic payments due under the mortgage.
AMORTIZATION:
The preparation of a payment plan for a loan, which allows for equal payments to
be made to the creditor at consistent intervals over the life of the loan (the
amortization period). Each payment covers interest accrued over the interval
period with the remainder of the payment being applied to reduce the principal
owed. If every payment is made on time and in full over the amortization period,
the loan will be completely repaid at the end of the amortization period.
APPLICATION FEE:
The fees the lender charges the applicant. May include costs of a property
appraisal and a credit report on the applicant. May be payable by applicant even
if loan is not approved.
APPRAISAL:
An estimation of the value of a property on a certain date given by a qualified
person, usually after an inspection of the property.
ASSESSED VALUE:
The value assigned to a given property by the municipality for the purpose of
establishing realty taxes payable by the owner of the property.
B
BALLOON (LOAN) MORTGAGE:
A loan which is repaid by a series of small, periodic payments until a given
date, when either the balance comes due in a single, large payment or the amount
of the payments rises significantly.
BALLOON PAYMENT:
The single, large payment, which pays out the balance due on a balloon mortgage.
BETTERMENT:
The improvement of real estate that results in a rise in market value. Also, a
legal concept of civil law: when a court award, judgment or order in favor of an
injured party places that party in a better position than he would have been had
his original injury never taken place.
BINDER:
1. A written commitment from an insurance company to insure a property or a
certain risk; or
2. A preliminary agreement to purchase a property accompanied by a forfeitable
deposit which is lost if the purchaser does not complete the purchase of the
property.
BLANKET MORTGAGE:
Where one loan is secured against more than one parcel of land.
BLUEPRINT:
Construction plans, containing great detail about the particular building.
BORROWER (MORTGAGOR):
The person or company that receives money from a lender (often a bank, credit
union or trust company) in exchange for a written promise to pay and a
registered lien on property.
BREACH (OF CONTRACT):
A failure to meet one's obligations, whether under a contract or otherwise. A
breach of contract allows the innocent party to enforce the contract, rescind
the contract or sue for damages.
BROKER:
An intermediary who brings parties together for specific purposes. A mortgage
broker brings borrowers together with lenders; a real estate broker brings
purchasers together with vendors. Often charges a percentage of the contract
price as a fee. Specific training required to become a Real Estate Broker, a
professional designation.
BUILDING CODE:
Set of regulations established by a municipality to govern the standards of
construction in that municipality.
BUILDING PERMIT:
A document obtained from the local government, allowing for the construction of
a structure in accordance with the terms of the permit.
BUILDING RESTRICTIONS:
Limiting rules, which may appear in building codes or in title documents, which
control the size, placement, materials, design or location of new construction.
BUYER'S BROKER:
A real estate broker who contracts to represent the interests of a person
wishing to purchase a home. (see also "selling agent, "Purchaser's
agent").
BUYER'S MARKET:
A condition of the real estate market where there are more properties for sale
than people interested in buying them. Buyer's have more choice and less
competition for the available properties, resulting in lower price.
C
CAP:
A limit. In variable rate mortgages, a limit as to how high periodic payments
may go or how much the interest may change within a given time period or over
the life of the mortgage.
CAPITAL ASSET:
A property to which certain tax rules (capital gains and capital losses) apply.
CAPITAL GAIN:
increase in value of a capital property (a property other than a principal
residence) upon which tax is payable, either upon disposition of the property or
the deemed disposition of the property under tax rules.
CASH FLOW:
Description of the net income from a property after all expenses of holding and
carrying the property are paid.
CASH RESERVE:
An amount of money that the purchaser of a property still has after the
transaction closes. Some lenders require a certain level of cash reserve (equal
to two payments) before granting a mortgage.
CERTIFICATE OF OCCUPANCY:
Document issued by the local municipality indicating that a new dwelling is
suitable for occupation. Generally confirms that the dwelling complies with
local building, safety and health by-laws.
CERTIFIED HOME INSPECTOR:
A person who has met the requirements to be "certified" to inspect the
physical condition of homes. Qualification requirements may vary from one
jurisdiction to the next.
CLEAR TITLE:
Ownership of land which is marketable and free of competing claims, liens,
mortgages or other encumbrances.
CLOSING:
The culmination of any transaction in which the interested parties (or their
representatives) meet to exchange documents, funds, and property and, if
necessary, to register the transfer of title.
CLOSING COSTS:
Moneys expended by a party in completing a transaction, over and above the
purchase price, including: legal fees, taxes, mortgage application charges,
interest adjustments, registration fees, appraisal fees, etc.
CLOSING DATE:
Also known a Completion Date. The date set in the Agreement of Purchase and Sale
upon which the transaction is to be completed, the purchase price paid and the
transfer of title registered.
CLOSING STATEMENT:
Also known as HUD-1 statement. A
document which sets out the financial agreement between the parties, the costs
each must pay, and all other similar information regarding a transaction (may be
joint or separate for each party).
CLOUD (ON TITLE):
Any unresolved claim against ownership of all or part of a property, affecting
the owner's title to the property and marketability of that title.
COMMERCIAL PROPERTY:
As opposed to residential or industrial property. Property zoned, designed or
intended for use retail, office, or similar users.
COMMISSION:
Payment to a salesperson (a listing real estate agent or broker) for her efforts
in marketing and selling a property, usually expressed as a percentage of the
purchase price.
COMMISSION SPLIT:
The division of the payment made to the listing agent between that agent and her
broker, or between the listing agent and agent representing the Purchaser (the
selling agent).
COMMITMENT:
A promise, usually in writing, to provide a mortgage or other loan. May also be
used in insurance field. Sets out details of mortgage, insurance. Often referred
to as Commitment Letter or Binder.
COMMON AREAS:
Portions of the property and buildings owned by a condominium corporation or
planned unit development (PUD) homeowners' association, or a cooperative
development's association that are available for the use of all unit owners.
Also used in rental properties to refer to those facilities for the use of all
tenants.
CONDOMINIUM:
A development where individuals own dwelling units but share common areas with
the other unit owners of the complex. The maintenance of the common areas etc.
is taken care of by the Condominium Corporation in which every unit owner owns a
share and has voting rights. The Condominium Corporation is created by the
registration of a Declaration and by-laws on title to the property and all
individual units.
CONDOMINIUM OWNERS ASSOCIATION:
An organization made up of unit owners in a condominium development established
to govern relations between the owners and to administer the rules, by-laws and
covenants of the condominium
CONFORMING:
Complying with the requirements of a certain statute, by-law or organization.
CONSIDERATION:
The value, asset, service, information etc. which is offered to another party in
a contract in exchange for that party's agreeing to enter the contract. A
contract is not binding if each party does not offer at least some consideration
to the other party(ies).
CONSTRUCTION LOAN:
A structured, short-term loan to a builder or developer to allow for the
development of land. Funds are advanced at certain stages of the development
project to pay for specific expenses, fees or costs.
CONTINGENCY:
An event which may (or may not) happen in the future, a condition that must be
fulfilled before a contract becomes firm and binding.
CONTRACT:
A legally binding agreement (oral or written) between two or more persons
regarding an exchange of some sort. A legally binding contract must include
consideration passing between the parties, an intention on the part of all
parties to be bound to the contract, a meeting of the minds of the parties as to
the contents of the contract, and an element of clarity such that the terms of
the contract may be interpreted, understood and enforced by a court.
CONVENTIONAL LOAN:
1. A loan or mortgage to which the normal rules of such transactions apply
without the inclusion of a government program (i.e. VA or FHA insurance).
2. A loan or mortgage with a fixed interest rate, fixed payments and a fixed
term.
COUNTEROFFER:
An answer to an offer. If a prospective Purchaser presents an offer to purchase
a property to the owner of the property, that owner may accept the offer as it
stands, reject it outright or respond with a "counteroffer" which
changes certain terms of the original offer. Making a counteroffer, at law,
entails rejection of the original offer. The Purchaser may then counteroffer
back, making changes to the owner's counteroffer. Sometimes, the process of
counter offering is referred to as "signing back" the offer.
CUL-DE-SAC:
French term for a "dead-end street. A Street which meets another street at
one end but is closed at the other, such that little traffic will travel down it
and the property owners enjoy excellent privacy.
D
DEBT:
1. An obligation to another person.
2. That obligation which is created by borrowing.
3. The total of all financial obligations of a person or corporation.
DEED:
The instrument by which title to property is conveyed from one person to
another.
DEED RESTRICTION:
A clause in a deed, which limits the use of the property in certain respects.
DEFAULT:
Failure. In mortgages, the failure to make payments in full, on time or at all
or to live up to any other obligations placed on the borrower by the loan
agreement.
DEPOSIT:
1. The money paid up-front by a purchaser as security for her completing the
transaction. Also known as "good faith money" or "earnest
money".
2. An instrument, which is not registered on title but placed in the records for
a given piece of land for information purposes.
DISCHARGE:
1. A document registered to remove a mortgage from title to a property.
2. To payout out a debt.
3. To meet one's obligations.
DISCLOSURE:
Sometimes known as "Vendor's Disclosure", a legal requirement in some
jurisdictions in which the Vendor of a property must provide a written statement
to a prospective purchaser setting out defects in the property known to the
Vendor.
DISCLOSURE STATEMENT:
A document issued by a lender to a borrower in which the lender sets out the
terms and conditions of the loan. Often required under legislation.
DISCOUNT:
A sum of money held back from a mortgage advance as prepaid interest.
DISCOUNT POINT:
See point. Each point is equal to 1% of the principal.
DUPLEX:
A building, which houses two separate dwelling units.
E
EARNEST MONEY DEPOSIT:
A sum of money paid by a potential purchaser as proof of her intention to
complete the purchase transaction. Held in trust, usually by the Listing Agent,
and credited to Purchaser off purchase price. May be forfeited if Purchaser
fails to complete transaction.
EASEMENT:
The right of the owner of one parcel of land to use all or part of the land of
another for a specific purpose. Runs with the land. Requires one property to be
in dominant position (enjoys the benefit of the easement) and one property to be
in servient position (is subject to the right).
EMPTY NESTERS:
Middle-aged or older couples whose children have grown up and "left the
nest" to live on their own. Often looking to sell a larger house and buy a
smaller one.
ENCROACHMENT:
The intrusion across the property line and into one property of an improvement
to a neighboring property. May result in a claim for adverse possession if the
encroachment is unchallenged for a long period of time.
ENCUMBRANCE:
Any right, interest or other claim against land, which is registered on title
and affects the owner's ability to sell the property.
EQUITY:
The difference, in dollars, between the market value of a property and the
principal owing on debts secured against the property. The amount of money the
owner will be able to keep from a sale transaction once the mortgages are paid
out. Also known as "owner's interest".
EQUITY LOAN:
A loan to a homeowner secured against the equity the owner enjoys in the
property.
ESCROW:
A state wherein consideration, benefits, legal rights, money, documents or other
valuables are transferred to another party in advance of that party's legal
entitlement to them, on the basis that the legal entitlement will arise at a
given point in the future. A form of trust.
ESCROW ACCOUNT:
A form of trust account in which advance payments are held on behalf of the
payor until the contract allows their use by the payee or a third party.
ESCROW CLOSING:
The completion of a transaction whereby documents, consideration etc. are held
in trust (either by the parties and their representatives or by an independent
third party) pending the completion of certain conditions, at which time the
items held in escrow are released and the transaction is completed.
ESTATE:
1. The nature and extent of a person's interest in real property.
2. The term used to described the collection of assets of a deceased person.
EVICTION:
The forced removal of a tenant from occupation of a property. Also known as
"Actual eviction.
EXTENSION:
The postponement of the completion date of an Agreement, agreed to by the
parties to the Agreement.
F
FINANCE CHARGE:
The total cost, in dollars, of a loan or mortgage over its life, including
appraisal/application/commitment fees, financing insurance, interest paid over
the life of the loan.
FINANCING:
The manner in which a proposed purchaser intends to make up the difference
between cash on hand and the purchase price.
FIRM OFFER:
An offer to purchase delivered to the potential Vendor by a potential Purchaser
who will not negotiate any changes to the offer.
FIRM PRICE:
An indication in a real estate advertisement that the price asked for the
property is not open for negotiation.
FIRST MORTGAGE:
A mortgage that, when registered, is first in line on the property, giving the
lender superior right to the proceeds of the sale of the property over other,
later claimants.
FIXED RATE MORTGAGE (FRM):
A loan registered on title to the property against which it is secured which
charges an interest rate that does not change over the term of the mortgage.
FIXTURE:
An item, which is attached to and forms part of the buildings or land itself and
are, therefore, included in the sale or property unless specifically excluded in
the contract.
FLOOD INSURANCE:
A policy of insurance that specifically covers damage due to floodwaters,
required in designated flood areas.
FORECLOSURE:
An enforcement process in which the lender under a defaulted mortgage takes
title to the property for the purposes of selling it to recoup moneys owed under
the mortgage.
FREE AND CLEAR:
A description of title to property, which is unencumbered and subject to no
competing claims.
FRONTAGE:
The measurement of a property's boundary that runs along the side of a
particular feature (street, lake, ocean, river, etc.).
FULL DISCLOSURE:
The revelation to another party in a contract or legal dispute of all relevant
information in one's possession. An agent acting for both parties in a real
estate purchase must fully disclose this conflict of interest to all parties.
FULL-PRICE OFFER:
A proposal by a purchaser to buy a property at the price and on the terms asked
by the vendor in her property listing.
G
GABLE ROOF:
An angled roof, triangular in shape.
GAMBREL ROOF:
A roof that has two, differently angled slopes on each side of the peak, the
upper slope being flatter while the lower slope is steeper.
GARDEN APARTMENTS:
A description of a kind of apartment unit, which enjoys direct access to a lawn
or other garden-like area.
GENERAL CONTRACTOR:
The central figure in most construction pyramids, the person hired by the owner
to plan and oversee the entire job. Often hires subcontractors who specialize in
the various trades required for the job (i.e. plumbers, electricians, framers,
carpenters, etc.).
GENERAL LIEN:
A registered claim against property, which, instead of attaching just to one
property, attaches to all properties owned by the party against whom the claim
has been made.
GOOD FAITH ESTIMATE:
A written statement of the anticipated costs of completing a loan transaction
which must be provided by a lender to a borrower within 72 hours of the
submission of the loan application.
GRANDFATHER CLAUSE:
A provision in a law that ensures that the law is not retroactive, that it does
not render a previously legal thing illegal. For example, a new zoning by-law
requiring all houses to be at least five feet from the side lot line would not
render illegal a 20-year-old house that stands three feet from the side lot
line. The property would be described as "legal non-conforming".
GROSS AREA:
The total floor space of a building, including unusable space, measured from the
outside walls.
GROSS INCOME:
A person's earnings from all sources in a given period before expenses are
deducted.
H
HANDYMAN'S SPECIAL:
A descriptive term for a property, which requires significant work to bring it
up to normal standards of condition and repair. Often marketed at a lesser
price.
HEIR:
A person who is entitled by law to the property, rights, privileges or position
of another person if that other person dies without a will (intestate).
HIGH RISE:
A descriptive term for any building that has enough floors to make an elevator a
necessity.
HOME EQUITY LINE OF CREDIT:
A special kind of loan (also known as a "revolving loan"), which is
secured against a property and allows the owner to borrow and repay money at her
leisure. Periodic payments of at least accumulated interest are required but the
loan is fully open: may be paid out in whole or in part at any time and, if
there is still money available under the loan ceiling, the borrower may take
more money for her use.
HOME IMPROVEMENT LOAN:
A loan made for the purposes of making improvements to a property.
HOME INSPECTION (REPORT):
The written statement of the results of the inspection of a given property by a
professional home inspector. Will show problems and potential problems with the
property not always visible to an average purchaser (i.e. a deteriorating roof,
an ancient furnace, termites, wood rot, basement seepage). Many purchasers make
their offer to purchase conditional upon obtaining a satisfactory Home
Inspection report.
HOME INSPECTOR:
A person who offers a service of making a physical inspection of homes.
Qualifications may vary.
HOME OWNER ASSOCIATION:
A cooperative effort by property owners in a given neighborhood aimed at
improving quality of life, providing a unified political voice or combating
identified ills.
HOME OWNER'S INSURANCE:
Liability coverage for property owners covering both loss/damage to property or
dwelling and personal liability.
HOMEOWNERS' ASSOCIATION:
The non-profit organization that oversees the common elements in a planned unit
development (PUD) or condominium project.
HOMESTEAD DEED:
A method of protecting some assets from creditors by registering a declaration
on title to the owner's homestead property.
HOUSING AND URBAN DEVELOPMENT (HUD):
Federal Agency charged with the duty of overseeing a number of enactments
relating to housing in America.
I
INCOME PROPERTY:
A property, which is owned or developed specifically to produce income for its
owner.
INDUSTRIAL PROPERTY:
A plot of land used for a factory or other industrial use.
INSPECTION:
A physical examination of a person, document or other thing, such as a home.
INSPECTOR:
Any person charged with the task of making a physical examination of a person,
document or other thing. Could be employed by a government body (i.e. an
electrical inspector, fire inspector) or by a potential purchaser (a home
inspector).
INSURABLE TITLE:
Ownership of land, which a Title Insurance Company is willing to insure.
INSURANCE:
A contract in which one party agrees to compensate another party for any losses
or damages caused by risks identified in the contract in exchange for the
payment of a lump sum or periodic amounts of money to the first party.
INSURANCE BINDER:
Written evidence that insurance is in effect with regard to the property and the
risks set out in the binder. Temporary in nature, the binder assures coverage
until permanent coverage can be arranged.
INTEREST:
1. A person's legal right to an asset or property.
2. The cost of borrowing money, charged as a percentage of the outstanding
amount owed.
INTEREST PAYMENT:
The portion of each periodic payment on a loan, expressed in dollars, which is
allocated toward accrued interest.
INTEREST RATE ADJUSTMENT PERIOD:
The length of time between changes in interest rate on an Adjustable or Variable
Rate Mortgage.
INTEREST RATE BUY DOWN PLAN:
A method of reducing the effective interest charged to a borrower. A third party
(often a vendor) deposits a lump sum into an account, portions of which are then
used to reduce the amount required from the borrower for each periodic payment
over a set period of time.
INTEREST RATE CAP:
A clause in an Adjustable or Variable Rate Mortgage which limits the change in
the interest rate charged. May limit change within a single adjustment period or
over the life of the mortgage.
INTEREST RATE CEILING:
The highest rate of interest chargeable under a Variable or Adjustable Rate
Mortgage as set out in the mortgage contract.
INTEREST RATE FLOOR:
The lowest rate of interest chargeable under a Variable or Adjustable Rate
Mortgage as set out in the mortgage contract.
L
LANDLOCKED:
A term describing a property that does not border on any public road.
LANDLORD:
Also known as "lessor". The owner of a property who allows other
persons to occupy a property in exchange for periodic payments of rent.
LATENT DEFECTS:
Problems with a property or building which are not visible to the casual
observer but which may surface later. A vendor must disclose to a purchaser any
serious latent defects of which he has knowledge.
LEASE:
A written agreement to rent a property or part of a property from the owner.
Sets out premises rented ("demised premises"), amount to be paid,
payment period, and other rights and obligations of the landlord and tenant.
LEASE WITH OPTION TO PURCHASE:
A rental contract, which allows the tenant to purchase the property during the
period of the lease. Payments under the lease may be credited (in whole or in
part) against the purchase price.
LEGAL DESCRIPTION:
A description of a piece of real estate that is drafted according to legal
requirements and which clearly and adequately establishes the identity of the
property so described. Found in most instruments for registration on title to
land.
LEGAL NAME:
Usually a person's full name as given at birth, may be changed by filing the
proper forms and paying the appropriate fee.
LENDER:
Any individual or company, which provides money to third parties in return for
periodic payments of interest and principal over time.
LIEN:
A legal claim against property for moneys owed.
LIST:
To place a property up for sale in the public forum, to add it to the list of
properties for sale.
LISTING BROKER (AGENT):
The real estate professional who acts for the vendor in marketing a property for
sale. As opposed to Selling Broker (Agent) -- the agent representing the
purchaser.
LISTING:
The agreement that allows a real estate professional to market a property or the
actual notice of the property's availability and features.
LOAN:
A transfer of money or other
property from one party to another upon the expectation that the money or other
property will be returned (often with additional payments as well).
LOAN APPLICATION:
The form completed by a potential borrower which provides information the
prospective lender requires to assess the borrower's suitability for a loan.
LOAN APPLICATION FEE:
The charge paid by the borrower for the honor of requesting a loan and of having
the lender consider the request.
LOG CABIN:
A dwelling made of unfinished logs, rough in texture, old-fashioned, rustic.
LOT:
A measured section of land, often a particular parcel of land on a registered
plan.
LOT LINE:
The legal perimeter of a parcel of property, often shown on a survey of the
property.
M
MAINTENANCE FEE:
Charge to a unit holder in a condominium or cooperative complex for that
person's share of costs of keeping the common-use portions of the complex in a
good state of repair.
MANUFACTURED HOUSING:
Known as "pre-fab" housing, any dwelling that is assembled out of
components (i.e. walls, floors, roof) constructed off-site and then brought to
the building lot.
MOBILE HOME:
A dwelling that sits on wheels and may be moved, often under its own power.
MOBILE HOME PARK:
An area specifically designed to allow for permanent or semi-permanent
stationing of mobile homes.
MORTGAGE:
A loan, which is secured against property (i.e. registered on title as a claim
or encumbrance on the property). Often used to purchase the property itself.
MORTGAGE BROKER:
A middleman who serves to bring borrowers together with lenders. Offers the
service of doing the shopping for the borrower while often collecting a fee from
the chosen lender rather than from the borrower.
MULTIFAMILY HOUSING:
Similar to multi-dwelling units, a building which features two or more family
dwellings within the same structure. May require special zoning.
MULTIPLE LISTING SERVICE (MLS):
A service created and run by real estate professionals which gathers all of the
property listings into a single place so that purchasers may review all
available properties from one source. The MLS also deals with commission
splitting and other relations between brokers and agents.
N
NATIONAL ASSOCIATION OF REALTORS (NAR):
Organization of Realtors.
NET INCOME:
The amount of money left over after all costs and expenses have been paid.
NEW ENGLAND COLONIAL:
A two and a half story, early-American house which is generally symmetrical in
shape with a shingle-covered gable roof, often made of clapboard siding.
NEW ENGLAND FARMHOUSE:
Another simple, symmetrical, early-American house, often with a steeply inclined
roof and white siding.
NO MONEY DOWN:
Slang description of real estate purchase strategies, which allow the purchaser
to obtain title to a property while paying little or no money of her own.
NON-CONFORMING USE:
The occupation and use of a property in a fashion, which is contrary to the
zoning regulations for the property. A Legal Non-conforming Use is one where the
non-conforming use predates the zoning by-law such that, as long as it is
continued, it is legal.
NORMAL WEAR AND TEAR:
Damage to the condition of an asset which results from use and the passage of
time.
NOTARIZE:
To confirm the signature of another in one's official capacity as a notary
public.
NOTARY PUBLIC:
A designation authorized by law and administered by the government, allowing a
designated person to verify and certify signatures and copies of documents.
NOTE:
A written instrument of indebtedness, promising to pay a certain person a
particular sum of money upon stated terms.
NOTICE TO QUIT:
A notice from a landlord to a tenant ordering the tenant to leave the property.
O
OCCUPANCY PERMIT:
Issued by local building departments, permission to enter and occupy a newly
built or renovated dwelling after an inspection has established that there are
not potential threats to the safety of occupants.
OFFER:
To make available, to express a willingness (whether in writing or orally), in
the case of real estate, to inform another party of your willingness to sell or
buy a specific property on terms set out in your offer. An offer, once made, may
be accepted at any time before it is rescinded. Once accepted, the offer and
acceptance generally form a binding contract.
OFFER TO PURCHASE:
A written expression of a person's willingness to purchase a certain property on
terms expressed in the offer.
OPEN HOUSE:
An advertised period of time in which a property which is for sale is available
for inspection by prospective purchasers.
OWNER OCCUPIED:
Any property where the owner resides in all or part of the property.
P
PARCEL:
Another word for a piece of land.
PAYMENT PENALTY:
Also known as "prepayment penalty" or "early payment
penalty", the fee paid by a borrower when she pays out some or all of the
principal of a loan at a time when such a payment is not allowed under the terms
of the loan.
PERC TEST (PERCOLATION):
A method of determining the ability of the soil of a property to absorb liquids,
used in construction projects and for septic systems.
PERFORMANCE:
Meeting one's obligations under a contract or agreement.
PERMIT:
The government body's written permission to do something, which is regulated by
that body.
PLOT PLAN:
A survey-like diagram of a property showing current or planned improvements and
uses of the land.
POSSESSION:
The state of occupying, controlling, using property to the exclusion of all
others, exhibiting one's right or title to property.
POWER OF ATTORNEY:
A document, signed by the donor in front of witnesses, authorizing another
person to act on the donor's behalf and to bind the donor to those actions.
PRE-APPROVED MORTGAGE:
A commitment from a lender to provide a mortgage loan on stated terms to a
borrower before the borrower has found a property to buy. The pre-approved
mortgage allows the borrower to make a firm, cash offer on the property of
choice.
PREFABRICATED:
Descriptive term for a building that is put together on site from components
(walls, floors, roof, etc.) built off-site (in a factory, for example).
PREPAID EXPENSES:
Payments made on account of costs and disbursements that are not yet incurred,
may be placed in an escrow account.
PREPAID INTEREST:
Charges for interest that are paid in advance of their accrual (i.e. point
charges, etc.).
PREPAYMENT:
Payment of all or part of the principal of a mortgage or loan before it comes
due.
PREPAYMENT CLAUSE:
A term in a mortgage that establishes the rules regarding extra payments toward
principal.
PREPAYMENT PENALTY:
A fee charged to a borrower for paying out all or part of the principal of the
mortgage or loan before it comes due.
PRE-QUALIFICATION:
The act of going through the mortgage application process before the borrower is
ready to borrow, to establish how much money the borrower could obtain under a
loan.
PRINCIPAL AND INTEREST PAYMENT (P&I):
A blended, periodic payment that is enough to pay off accumulated interest and a
portion of the principal.
PRINCIPAL BALANCE:
The outstanding amount owing on a mortgage without including accumulated
interest.
PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI):
The four parts of many periodic loan payments.
PRIVATE MORTGAGE INSURANCE (PMI):
A policy of insurance issued by a non-governmental entity, which protects a
lender against the default of the borrower.
PROPERTY:
1. The rights of ownership in lands or goods.
2. Land.
PROPERTY TAX:
Also known as "realty tax", the tax levied on ownership of property.
PROSPECT:
1. To investigate land for valuable mineral deposits.
2. A potential buyer.
PUBLIC AUCTION:
A public meeting at which properties are sold to pay defaulted mortgages.
PURCHASE AGREEMENT:
Also known as Purchase Agreement, Agreement of Purchase and Sale, Land Agreement
etc. A legal contract in which one party agrees to buy and another agrees to
sell a property or chattel. Contains terms and conditions of the transaction and
is signed by the parties.
PURCHASER:
The person who buys a property.
PURCHASE PRICE:
The consideration paid for the purchase of a property as set out in the
agreement.
Q
QUADRAPLEX:
A building containing four dwelling units.
QUALIFIED BUYER:
A purchaser who has been pre-approved for financing.
QUIT CLAIM DEED:
A conveyance which releases any interest the conveying party may have in a
property without any warranty as to that party's claim.
R
RADON:
A radioactive gas, which may cause health problems for occupants of some
buildings.
RANCH HOUSE:
A description of a one-story house, developed from the old, western-style homes.
RATE CAP:
A limit of how much an interest rate can change in a variable of adjustable rate
mortgage either in a given period or over the life of the loan.
RATE LOCK-IN:
See "rate commitment". A written agreement, in which the lender
guarantees the borrower a specified interest rate, provided the loan closes
within a set period of time.
READY, WILLING, AND ABLE:
A term of art meaning in a position to complete a contract. In order to enforce
a contract against another party, you must be ready, willing and able to
complete the contract yourself.
REAL ESTATE:
Term for land and all fixtures to land, including buildings and other
improvements.
REAL ESTATE AGENT:
A trained professional involved in the purchase, sale and marketing of real
property. The "listing agent" acts for the vendor, the "selling
agent" for the successful purchaser.
REAL ESTATE BROKER:
A real estate professional who is licensed to run a real estate firm, to hold
trust funds, etc.
REAL ESTATE COMMISSION:
1. The fee paid to the real estate agents after a transaction.
2. An agency that enforces real estate license laws.
REALTOR:
Professional designation for a member of the National Association of REALTORS or
its affiliated local groups. Must be a real estate broker.
RECORDING:
The act of entering title instruments in the public records, thus giving notice
to any interested parties of the existence of the instrument.
RECORDING FEES:
The fees paid to have an instrument recorded in the public record.
REFINANCE:
To replace an existing and perhaps mature mortgage with a new mortgage on the
same property. New mortgage may have different terms than the old one.
RENOVATE:
Similar to remodel, with an emphasis on upgrading the existing property.
RENT:
1. Verb -- to lease premises from the owner or a representative of the owner.
2. Noun -- the periodic payments made by a tenant to the landlord for the right
to occupy the premises.
REPLACEMENT COST:
An insurance term, the total cost of erecting a new home or building which
adequately takes the place of the existing one.
RESERVE FUND:
A pool of money held for use for future contingencies, usually in the management
of a building, condominium corporation or cooperative unit.
RESIDENTIAL PROPERTY:
Real estate that is occupied by the owner.
RESTRICTION:
Any limit or control on the owner's ability to use the property. May be
contained in a deed and be binding on the land and future owners of it.
RIGHT-OF-WAY:
A form of easement, the legal entitlement to pass over a portion of the land of
another.
S
SALE AGREEMENT:
Also known as "Agreement of Purchase and Sale" or "Purchase
Agreement: The contract that sets out the terms and conditions agreed to by the
purchaser and the vendor in the sale of land.
SALE PRICE:
Also known as "purchase price", the amount of money paid by the
purchaser to the vendor for the property under the agreement.
SALES ASSOCIATE:
A real estate professional in the employ of another such real estate
professional.
SALES COMPARISON APPROACH:
Method of estimating value of a property by comparing similar properties that
have been sold recently.
SECOND MORTGAGE:
A mortgage loan, which is registered on title after another mortgage (the first
mortgage) and, therefore, is behind the first mortgage in priority. In the event
of default and sale of the property, the second mortgagee will only be paid if
there are funds left after the payment of the first mortgagee.
SECURITY DEPOSIT:
Money held by the landlord to ensure the tenant meets his obligations under the
lease.
SELLER FINANCING:
Where the seller of a property agrees to payment of part of the purchase price
over time with the debt to the seller registered on title as a mortgage.
SELLER'S MARKET:
Demand is greater than supply, such that the vendor may demand a higher price.
SELLING AGENT:
The real estate professional who brings the eventual purchaser to the property
and the vendor. As opposed to "listing agent".
SETTLEMENT SHEET:
The information sheet, which sets out the allocation of funds on closing.
SEPTIC SYSTEM:
A manner of dealing with sewage of a dwelling, through pipes into a septic tank.
SUBDIVISION:
1. The creation of a number of smaller lots out of one or more large lots for
the purposes of developing each smaller lot and selling them.
2. A newly created urban development.
SUBJECT TO:
An indication that title to a property includes an obligation of some sort, an
easement, right of way, lien, right of claim. Opposite of "together
with".
SURVEY:
A pictorial depiction of land and the improvements on it. Shows boundary lines
(with measurements and bearings), buildings, sheds, easements, etc.
SURVEYOR:
A professional who is trained to map out land and improvements to land
accurately.
SURVIVORSHIP:
The condition of outliving others. Surviving joint tenants have the right to
take title to the land from a deceased joint tenant by right of survivorship.
SWEAT EQUITY:
Slang term for the contribution to the value of a property made by manual labor.
T
TAX:
1. To strain or push to the point of exhaustion.
2. To levy an assessment against, usually by government powers. Unpaid taxes
usually form a special lien on property owned by the taxpayer, ahead of
registered mortgages.
3. The money charged as an assessment.
TENANCY:
The right to use and occupy all or part of a property under a rental agreement.
TENANCY AT SUFFERANCE:
Form of tenancy created when a tenant remains in occupation of the premises
after the end of the lease. The landlord is at liberty to evict the tenant at
any time, subject only to the local tenancy laws.
TENANCY AT WILL:
Form of tenancy created by written agreement in which the landlord may evict the
tenant at any time.
TENANCY IN COMMON:
Ownership of property in which several owners each own a stated portion of the
property (a percentage). Each owner may deal with her portion of the property as
she wishes (giving it away, mortgaging it, selling it, bequeathing it, etc.)
and, upon her death, her share becomes part of her estate.
TENANCY IN SEVERALTY:
Ownership of property by a single person.
TERMITE INSPECTION:
The examination of a building for wood destroying insects.
TIME IS OF THE ESSENCE:
A standard statement in a contract which ensures that all dates and times of day
noted in the contract are important and cannot be ignored by any of the parties
without the consent of the others except in breach of the contract.
TIME-SHARING:
A form of joint ownership of property where numerous owners share title and
enjoy use or occupation of the property according to a specific schedule.
TITLE:
The legal term for one's ownership interest in land.
TITLE COMPANY:
Also known as "title insurance company" or "title insurer".
A corporation, which is in the business of selling policies of insurance
guaranteeing the ownership and quality of title to land.
TITLE DEFECT:
A claim against or competing interest in a property, which affects the title of
the registered owner.
TITLE INSURANCE POLICY:
A form of insurance contract, which guarantees to indemnify an owner or
mortgagee of property for damages suffered as a result of undiscovered title
defects, which arise later.
TITLE SEARCH OR EXAMINATION:
The act of examining in detail the public records relating to ownership of a
parcel of land to ensure that the current owner has clear title, free of any
liens, claims, mortgages or competing and adverse interests. Usually performed
by a lawyer, qualified title searcher, or title insurance company on behalf of a
proposed purchaser or mortgagee.
TOWN HOUSE:
A type of dwelling, which shares at least one common wall with neighboring
dwellings.
TUDOR:
A heavy looking, fortress like style of home in the English style. Stone and
brick construction, may also feature stucco and exposed timbers. Windows feature
stone trim.
U
UNDERWRITER:
A person who reviews and evaluates an application for a loan or insurance
policy.
UNDERWRITING:
The decision as to whether or not to accept a loan or insurance application.
UNDEVELOPED LAND:
Real property that has not been subjected to man's labor to make it more
valuable of profitable. Raw land.
V
VA LOAN:
A loan on below market terms guaranteed by the Department of Veterans Affairs,
given to former members of the armed forces.
VACANT LAND:
Land that may be improved and developed but is not currently in use.
VARIABLE INTEREST RATE:
An interest rate that may change according to change in the index rate. See
adjustable interest rate.
W
WAIVE:
To voluntarily give up a legal right or claim.
WALK-THROUGH INSPECTION:
A physical examination of the property which usually takes place immediately
prior to closing to ensure that no changes have taken place and no new damage
has been done to the property. May also be used to confirm that fixtures and
chattels included in the sale remain on the premises.
WETLANDS:
Lands restricted for development as a result of their proximity to bodies of
water and the fact that they are occasionally or often flooded. May also be
environmentally sensitive.
Z
ZONE:
An area of a municipality to which certain rules, regulations, bylaws or
ordinances apply.
ZONING BYLAW:
A rule passed by the local government which regulates the use of property
according to its location within the municipality, placement of structures on
the property, maximum floor area, minimum lot area, minimum floor-to-lot area
ratios, etc.
