Here is a compilation of some of the most common terms and acronyms used by real estate agents in real estate transactions as well as a definition for each term. Never hesitate to ask your Realtor for clarification of any of those keywords.
ABSTRACT OF TITLE
- A summarized history of the title to a specific parcel of real estate property, together with a statement of all liens and encumbrances affecting the property. The abstract of title does not guarantee or assure the validity of the title of the property. It merely discloses items about the property that are available in public records.
- The expression of the intention of a seller to be bound by the terms of the offer.
- A general or specific right of ingress and egress to a particular property
- One who is authorized to represent and to act on behalf of another person (called the principal). A real estate broker is the agent of his client, be it the seller or buyer, to whom he owes a fiduciary obligation. A real estate agent (aka sales person) is the agent of his broker and does not have a direct personal contractual relationship with either the seller or buyer.
AGREEMENT OF SALE
- An agreement between a seller and a buyer for the purchase of a real property.
- Features, both tangible and intangible, which enhance and add to the desirability of any given property for sale.
- The gradual repayment of a debt by means of systematic payments of principal and interest over a set period, where at the end of the period there is a zero balance.
- The process of estimating, fixing, or setting the market value of a home. An appraisal may take the form of a lengthy report, a completed form, a simple letter, or even an oral report.
- An increase in the worth or value of a property due to economic or related causes, which may be either temporary or permanent.
- The non-judicial submission of a dispute to selected third parties for their determination as provided contractually or by law.
- The value of a home as established by the state government for purposes of computing real property taxes.
- The transfer of the right, title and interest in a real property from one person to another. In real estate, there are assignments of mortgages, contracts, agreements of sale, leases, and options, among others.
BREACH OF CONTRACT
- Violation or default of any of the terms or conditions of a (e.g. real estate) contract without legal excuse.
- A real estate broker is a properly licensed person who, for a valuable consideration, serves as an agent between home buyers and sellers to facilitate the sale or lease of a property.
- A written permission granted by the County Building Department and required prior to beginning the construction of a new building or improvements (including fences, fence walls, retaining walls and swimming pools).
BUNDLE OF RIGHTS
- An ownership concept describing all those legal rights attached to ownership of a property, including the right to sell, lease, encumber, use, enjoy, exclude, will, etc.
CERTIFICATE OF REASONABLE VALUE (CRV)
- A certificate issued by the Veterans Administration setting forth a property's current market value estimate, based upon a VA approved appraisal.
CHAIN OF TITLE
- The recorded history of all events which affect the title to a specific parcel of real estate, such as ownership, encumbrances and liens, usually beginning with the original recorded source of the title.
- Title to property that is free from liens, defects or other encumbrances, except those which the buyer has agreed to accept, such as mortgage to be assumed, the ground lease of record, etc.
CLIENT TRUST ACCOUNT
- An account set up by a real estate broker to keep client's monies segregated from the broker's general funds.
- The final stage of a real estate transaction when the seller delivers title to the buyer, in exchange for the purchase price.
- Expenses of the sale which must be paid in addition to the purchase price (in the case of the buyer's expenses), or be deducted from the proceeds of the sale (in the case of the seller's expenses).
- A detailed cash accounting of a real estate transaction prepared by an escrow officer or any other person designated to process the mechanics of the sale, showing all cash that was received, all charges and credits which were made, and all cash that was paid out in the transaction; also called a settlement statement.
CLOUD ON TITLE
- Any document, claim, unreleased lien or encumbrance which many impair or injure the title to property or make the title doubtful because of its apparent or possible validity.
- The compensation paid to a real estate broker (usually by the seller) for services rendered in connection with the sale or exchange of real property.
- Land or improvements designated for the use and benefit of all residents, property owners and tenants.
- Parts of the property which are necessary or convenient to the existence, maintenance and safety of the condominium, or are normally in common use by all of the condominium residents.
- A system of property ownership based on the theory that each spouse has an equal interest in property acquired by the efforts of either spouse during marriage.
- An estate in a real property consisting of an individual interest in an apartment or commercial unit, and an undivided common interest in the common areas such as the land, parking areas, elevators, stairways, and the like.
- An act or forbearance, or the promise offered by one party to induce another to enter into a contract.
- A provision placed in a contract which requires the completion of a certain act or the happening of a particular event before a contract is binding.
- A legal agreement between competent parties who agree to perform or refrain from performing certain acts for a consideration. In real estate, there are many different types of contracts, including listings, contracts of sale, options, mortgages, assignments, leases, deeds, escrow agreements, and loan commitments, among others.
- The transfer of title to real property by means of a written instrument such as a deed or an assignment of lease.
- A form of concurrent property ownership in which two or more persons own an undivided interest in the same property.
- A new offer made as a reply to an offer received ; this has the effect of rejecting the original offer, which cannot thereafter be accepted unless revived by the buyer's repeating it.
COVENANTS AND CONDITIONS
- Covenants are promises contained in contracts, the breach of which would entitle a person to damages. Conditions, on the other hand, are contingencies, qualifications or occurrences upon which an estate or property right would be gained or lost.
CUSTOMER TRUST FUND (CTF)
- An impound account maintained for the purpose of setting up a reserve to pay certain periodic obligations such as real property taxes, insurance premiums, lease rent, and maintenance fees.
- A written instrument by which a property owner ("grantor") transfers to a buyer ("grantee") an ownership in real property.
DEED OF TRUST
- A legal document in which title to a property is transferred to a third party trustee as security for an obligation owed by the trustor (borrower) to the beneficiary (lender).
- Failure to fulfill a duty or promise or failure to perform any obligation or required act. The most common occurrence of default on the part of a buyer is non-payment of money.
- Money offered by a prospective home buyer as an indication of good faith in entering into a contract to purchase.
- A loss in value due to any cause; any condition which adversely affects the value of an improvement.
- A statement denying legal responsibility.
- An added loan fee charged by a lender to make the yield on a lower-than-market interest VA or FHA loan competitive with higher interest conventional loans.
- An escrow set up to handle the concurrent sale of one property and purchase of another property by same party.
- Representing both principals (buyer and seller) to a transaction.
- A house structure that provides accommodations for two families by having separate entrances, kitchens, bedrooms, lanais, living rooms and bathrooms. A two-family dwelling.
- A property interest which one person has in land owned by another entitling the holder of the interest to limited use or enjoyment of the other's land.
- An unauthorized intrusion of a fixture or one's real property wholly or partly upon another's property.
- Any claim, lien, charge or liability attached to and binding upon real property which may lessen the value of the property but will not necessarily prevent transfer of title.
- The process by which money and/or documents are held by a third person (aka "stakeholder") until the satisfaction of the terms and conditions of the escrow instructions.
- A written listing agreement giving one real estate agent the right to sell property for a specified time, but reserving to the owner the right to sell the property himself without payment of any commission.
FAIR MARKET VALUE
- The highest monetary price which a property would bring, if offered for sale for a reasonable period of time in a competitive market, to a seller who is willing but not compelled to sell, from a buyer, willing but not compelled to buy.
FEDERAL HOUSING ADMINISTRATION (FHA)
- The FHA was set up in 1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home financing system by insurance of housing mortgages and credit, and to exert a stabilizing influence on the mortgage market.
- The largest estate one can possess in real property. A fee simple estate is the least limited interest and the most complete and absolute ownership in land: it is of indefinite duration, freely transferable and inheritable.
- A fee paid to someone for producing a buyer to purchase or a seller to list property; also called a referral fee.
- An article which was once personal property but has been so affixed to the real estate and has become real property (e.g. stoves, bookcases, plumbing, etc.).
- A legal procedure whereby property used as security for debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document.
FREE AND CLEAR TITLE
- Title to real property which is absolute and unencumbered by any liens, mortgages, clouds or other encumbrances.
HOLD HARMLESS CLAUSE
- A clause inserted in a real estate contract whereby one party agrees to indemnify and protect the other party from any injuries or lawsuits arising out of the particular transaction.
- A non-profit association of homeowners organized pursuant to a declaration of restrictions or protective covenants for a subdivision, a PUD, or a condominium.
- A trust account established to set aside funds for future needs.
- Valuable additions made to a property, amounting to more than repairs, costing labor and capital and intended to enhance the value of the property. Improvements of land would include grading, sidewalks, sewers, streets, utilities, etc. Improvements on land would include buildings, fences, etc.
- Property purchased primarily for the income to be derived plus certain tax benefits, such as accelerated depreciation. Income property can be commercial, industrial or residential.
- A visit to and review of the premises of a real property. A prudent home purchaser always inspects the premises before closing.
- A form of property ownership by two or more persons in which the joint tenants have one and the same interest.
- A method of foreclosing upon real property by means of a court supervised sale. After an appraisal, the court determines an upset price below which no bids to purchase will be accepted.
- A person who has a valid license. A real estate licensee can be a real estate salesperson or a broker, active or inactive, an individual, a corporation, or a partnership.
- A charge or claim which one person (lienor) has upon a property of another (lienee) as security for a debt or obligation. Liens can be created by agreement of the parties (mortgage lien) or by operation of law (tax lien).
- A written employment agreement between a property owner and a broker authorizing the broker and its agents to find a buyer or a tenant for a certain real property.
- Good or clear title reasonably free from risk of litigation over possible defects; also referred to as merchantable title. Marketable title need not, however, be perfect title.
- The highest price which a property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which the property is adapted.
- A statutory lien created in favor of materialmen and mechanics to secure payment for materials supplied and services rendered in the improvement, repair or maintenance of real property.
MULTIPLE LISTING SERVICE (MLS)
- An organization created by Realtors to facilitate the sharing of listings among member brokers and real estate agents.
NATIONAL ASSOCIATION OF REALTORS (NAR)
- Formerly known as the National Association of Real Estate Boards (NAREB), it is the largest and most prestigious real estate organization in the USA.
NOTICE OF DEFAULT (NOD)
- A notice to a defaulting party that there has been a default, usually providing a grace period in which to resolve the default.
- A type of depreciation of property.
- The common real estate practice of showing a listed home to the public during established hours, frequently on Saturday and Sunday afternoons.
- A listing given to any number of brokers. The first broker who secures a buyer ready, willing and able to purchase at the terms of the listing is the one who earns the commission.
- The finance fee charged by a lender for placing a mortgage, which covers initial c osts such as preparation of documents and credit, inspection and appraisal fees.
- Things which are tangible and moveable; property which is not classified as real property.
POWER OF ATTORNEY
- A written instrument authorizing a person (the attorney-in-fact) to act as the agent on behalf of another to the extent indicated in the instrument.
- All land including buildings, structures, fixtures, fences, and improvements erected upon or affixed to the same; excluding, however, growing crops.
- A registered title which may only be used by an active real estate broker who is a member of the state and local real estate board affiliated with the National Association of Realtors. The use of the name REALTOR and the distinctive seal in advertising is strictly governed by the rules and regulations of the National Association or Realtors.
- The discharge or relinquishment of a right, claim or privilege. Releases involving real property transactions should be acknowledged and recorded.
- Limitations on the use of a property. Private restrictions are created by means of restrictive covenants written into real property instruments, such as deeds and leases.
- A private agreement, usually contained in a deed, which restricts the use and occupancy of a real property.
RIGHT OF SURVIVORSHIP
- The distinctive characteristic of a joint tenancy by which the surviving joint tenant(s) succeeds to all right, title and interest of the deceased joint tenant without the need for probate proceedings.
- The right or privilege, acquired through accepted usage or by contract, to pass over a designated portion of the property of another.
RUNNING WITH THE LAND
- Rights or covenants which bind or benefit successive owners of a property are said to "run with the land," such as restrictive building covenants in a recorded deed which would affect all future owners of the property.
- Sole ownership of real property.
- The right of survivorship is that special feature of a joint tenancy whereby all title, right and interest of a decedent joint tenant in certain property passes to the surviving joint tenants by operation of law, free from claims of heirs and creditors of the deceased.
TENANCY FOR YEARS
- A less-than-freehold estate in which the property is leased for a definite, fixed period of time.
TENANCY IN COMMON
- A form of concurrent ownership of property between two or more persons, in which each has an undivided interest in the whole property; frequently found when the parties acquire title by descent or by will.
TENANCY IN SEVERALTY
- Ownership of property vested in one person alone, and not held jointly with another; also called Several Tenancy or Sole Tenancy.
- A comprehensive contract of indemnity under which the title company agrees to reimburse the insured for any loss if title is not as represented in the policy.
- An examination of the public records of a property to determine what, if any, defects there are in the chain of title.
- A type of home normally with two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor.
- A piece of property, used in the government survey system of land description, which is 6 miles square, and contains 36 sections, each 1 mile square; and consists of 23,040 acres.
- Articles of personal property annexed to leased premises by the tenant, as a necessary part of the tenant's trade or business.
- A real property security device (also called a deed of trust) very similar to a mortgage, except that there are three parties, the trustor, the trustee, and the beneficiary (the lender).
TRUST FUND ACCOUNT
- An account set up by a broker at a bank or other recognized depository, into which the broker deposits all funds entrusted to him by his principal or others.
- A guaranty by the seller, covering the title as well as the physical condition of the property.
- A deed in which the grantor fully warrants good clear title to the premises. Also called a general warranty deed.
- The regulation of structures and uses of property within designated districts or zones. Zoning regulates and affects such things as use of the land, types of structure permitted, building heights, setbacks, and density (the ratio of land area to improvement area).