Real Estate Glossary
This glossary was created by a team of real estate professionals. It contains terms regarding real estate buying and selling, home finance, home improvement, as well as legal terms. For your convenience, the glossary is searchable alphabetically.
A year using the actual number of days in each month for a total of 365 days in
a year (366 days in a leap year).
California Real Estate Inspection Association
Also known as CREIA. A trade organization of home inspectors whose members must
meet the group's education and performance requirements. Call (800) 388-8443 for
list of CREIA-certified inspectors in your area.
The maximum allowable increase, for either payment or interest rate, for a specified
amount of time on an adjustable rate mortgage
The profit on the sale of a capital asset, such as stock or real estate. If you
sell your primary residence, you can exclude $250,000 in profit from capital gains
tax. A couple can exclude $500,000
The estimation of the value of income producing property by dividing the annual
net income by the capitalization rate
The rate of expected return on investment property. A ratio of income to value
Receiving money back when refinancing your present mortgage.
Covenants, conditions & restrictions.
see Consumer Credit Counseling Service
The maximum allowable interest rate over the life of the loan of an adjustable
An official count of the number of people living in a certain area, such as a
district, city, county, state, or nation. The United States Constitution requires
the federal government to perform a national census every ten years. The census
includes information about the respondents' sex, age, family, and social and economic
Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed
loans for homes, business, and mobile homes. Certificates of eligibility may be
obtained by sending DD-214 (Separation Paper) to the local VA office with VA form
1880 (request for Certificate of Eligibility).
chain of title
A history of conveyances and encumbrances of a property from some starting point,
whereby the present owner derives title.
The illegal practice of directing people to, or away from, certain areas or neighborhoods
because of minority status; Steering. See Fair Housing.
A nonrefundable fee charged by a landlord when a tenant moves in. The fee covers
the cost of cleaning the rented premises after you move out, even if you leave
the place spotless. Cleaning fees are illegal in some states and specifically
allowed in others, but most state laws are silent on the issue. Landlords in every
state are allowed to use the security deposit to clean a unit that is truly dirty.
A land title that doesn't have any liens (including a mortgage) against it.
The conclusion of the sales transaction when the seller transfers title to the
buyer in exchange for consideration.
Costs the buyer must pay at the time of the closing in addition to the down payment
which may include points, title charges, credit report fee, document preparation
fee, mortgage insurance premium, inspections, appraisals, prepayments for property
taxes, deed recording fee, and homeowners insurance. Closing costs can vary considerably
from one financial institution to another
A detailed written summary of the financial settlement of a real estate transaction,
showing all charges and credits made, and all cash received and paid out
cloud on title
A claim or encumbrance that may effect title to land
See cooperative housing or cooperative sale
Two or more tenants who rent the same property under the same lease or rental
agreement. Each co-tenant is 100% responsible for carrying out the rental agreement,
which includes paying the entire rent if the other tenant skips town and paying
for damage caused by the other tenant
Something of value deposited with a lender as a pledge to secure repayment of
The illegal practice of combining or mixing clients' funds with the agent's own
The compensation paid to a licensed real estate broker or by the broker to the
salesman for services rendered. Usually a percentage of the selling price of the
Community Reinvestment Act
The federal law which requires federally regulated lenders to describe the geographical
market area they serve. Deposits from that area are to be reinvested in that area
Properties which are similar to a particular property and are used to compare
and establish a value for that property.
Interest which is computed on the principal and any unpaid accumulated interest.
Contrast with simple interest.
The act of taking private property for public use, through due process under the
right of eminent domain, with compensation to the owner.
A form of real estate, usually a dwelling with individual ownership of separate
portions of the building plus shared ownership of the common areas
The price or subject matter, which induces a contract; may be in money, commodity,
exchange, or a transfer of personal effort
The provision of housing that is so substandard that, for all intents and purposes,
a landlord has evicted the tenant. For example, the landlord may refuse to provide
light, heat, water or other essential services, destroy part of the premises or
refuse to clean up an environmental health hazard, such as lead paint dust. Because
the premises are unlivable, the tenant has the right to move out and stop paying
rent without incurring legal liability for breaking the lease. Usually, the tenant
must first bring the problem to the landlord's attention and allow a reasonable
amount of time for the landlord to make repairs.
Consumer Credit Counseling Service (CCCS)
A national non-profit agency that, at no cost, helps debtors plan budgets and
repay their debts. One major criticism of CCCS is that each office is primarily
funded by voluntary donations from the creditors that receive payments from debtors
repaying their debts through that office. The goal of CCCS is to insure that consumers
repay the debts that they owe. CCCS may arrange easy payment plans that increase
the chances for repayment, but harm a consumer's credit in the process. Agreeing
to a payment plan and following it to the letter may not stop creditors from reporting
delinquent repayment information to credit bureaus for each month the payment
falls short of the previous minimum amount
A provision in a contract stating that some or all of the terms of the contract
will be altered or voided by the occurrence of a specific event. A common example
is a Buyer who enters into the purchase of another home before his current home
is sold. The Buyer will usually ask for the Seller to make the sale contingent
upon the sale of the Buyer's current home. If the Seller receives another offer
for the property, the first Buyer must either agree to buy the home without any
contingency, or step aside and let someone else purchase the home.
A legally enforceable agreement to do, or not to do, a particular thing for a
contract for deed
A contract for the sale of real estate where the deed (title) of the property
is transferred only after all the payments have been made. Also known as a land
contract, agreement of sale, conditional sales contract, or installment contract.
Buyers should be wary of this type of contract, since they can lose their entire
investment if the owner declares brankruptcy, before the deed has been transferred
contract for exchange of real estate
A contract for the sale of real estate in which the consideration is paid wholly
or partly in real property instead of cash.
contract of sale
The agreement between the buyer and seller on the purchase price, terms, and conditions
necessary to both parties to convey the title to the buyer
A real estate loan, which is not insured by the FHA or guaranteed by the VA
Written instrument, such as a deed or lease, that evidences transfer of some ownership
interest in real property from one person to another.
1) A form of real estate, usually a dwelling in which residents own shares, but
do not directly own the space they inhabit. Rather, owning a share of the building
entitles the shareholder with the right to inhabit a certain space within the
dwelling, such as an apartment. Shares are usually proportional to the amount
of space in each apartment. (2) A living arrangement in which residents must perform
certain duties or chores to benefit the entire residence, in addition to paying
room and board. A common form of dormitory living
A sale of property in which the buyer is brought to the transaction by a real
estate agent who works for a different real estate broker than the listing agent.
Both brokers/companies have agreed to cooperate in closing the property, and typically,
splitting the commission. Offers of cooperation and compensation are commonly
found in the MLS property listings.
cost approach to value
An estimate of value based on current construction costs, less depreciation, plus
land value. Contrast with the income approach to value and the market data approach
The rejection of an offer to buy or sell that simultaneously makes a different
offer, changing the terms in some way. For example, if a Buyer offers $160,000
for a home, and the Seller replies that he wants $175,000, the Seller has rejected
the Buyer's offer of $160,000 and made a counteroffer to sell at $175,000. The
legal significance of a counteroffer is that it completely voids the original
offer, so that if the Seller decided to sell for $160,000 the next day, the Buyer
would be under no legal obligation to pay that amount for the property
A restriction on the use of real estate that governs its use, such as a requirement
that the property will be used only for residential purposes. Covenants are found
in deeds or in documents that bind everyone who owns land in a particular development.
See Covenants, Conditions & Restrictions.
covenants, conditions & restrictions (CC&Rs)
The restrictions governing the use of real estate, usually enforced by a homeowners'
association and passed on to the new owners of property. For example, CC&Rs
may tell you how big your house can be, how you must landscape your yard or whether
you can have pets. If property is subject to CC&Rs, buyers must be notified
before the sale takes place.
A private, profit-making company that collects and sells information about a person's
credit history. Typical clients include banks, mortgage lenders and credit card
companies that use the information to screen applicants for loans and credit cards.
There are three major credit bureaus, Equifax, Experian and Trans Union, and they
are regulated by the federal Fair Credit Reporting Act
See Credit Report
Insurance a lender offers or requires a borrower to purchase to cover the loan.
If the borrower dies or becomes disabled before paying off the loan, the policy
will pay off the remaining balance. Federal and state consumer protection laws
require the lender to disclose to existing and potential borrowers the terms and
costs of obtaining credit insurance because it can affect the terms of the loan
The maximum amount that you can borrow under a home equity plan
An account of your credit history, prepared by a credit bureau. A credit report
will contain both credit history, such as what you owe to whom and whether you
make the payments on time, as well as personal history, such as your former addresses,
employment record and lawsuits in which you have been involved. An estimated 50%
of all credit reports contain errors, such as accounts that don't belong to you,
an incorrect account status or information reported that is older than seven years
(ten years in the case of a bankruptcy).
In the mortgage lending world, credit scores either make or break you when it
comes to obtaining a home mortgage or getting the best rate you can. There are
three different scores available to a mortgage lender each being generated by
the three different credit agencies. The most popular, known as a Fico score is
from Experian (formally TRW), then there is a Beacon score from Equifax, and finally
a Emperica score from Trans Union. This is the "mortgage scoring" system
used to get a conventional mortgage. Simply, credit scores are numbers calculated
based upon your credit history. The better your credit, the higher your number
or score will be - the worse your credit, the lower the score. The number of inquiries
or times your credit has been pulled in the past 90 days will also lower your
"score". In some instances, lack of credit results in "no score"
on your report requiring you to provide "alternative credit" via your
rental, utility or telephone payment histories. There's plenty you can do to improve
your score if you know how the system works. Just don't expect much help from
your lender--most consider the actual formulas a trade secret and don't want people
angling for an advantage. Congress is currently working on legislation to provide
consumers with access to their credit scores and the formulas used to calculate
these scores. There are some lenders that do not rely on credit scores to the
degree that most do. Some times, credit reports contain inaccuracies that lower
your score, this is when a lender has to use a common sense approach to approving
your loan. In some instances you may have to correct your credit report, wait
for your score to improve, then reapply for the loan. Talk with your mortgage
broker or lender to understand what your options are.
A person or entity (such as a bank) to whom a debt is owed
A dead end street which widens sufficiently at the end to permit an automobile
to make a "U" turn