Real Estsate Glossary

Abstract - A history of all transactions shown in the public records affecting a particular tract of land.

Adjustable Rate Mortgage (ARM) - Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. The extent and number of these adjustments are agreed to when you apply for the loan.

Adverse Possession - The possession, by one person, of land belonging to another in a manner deemed adverse to the interest of the owner. In most states, by operation of law, title to the land becomes vested in such person after a fixed number of years if the owner fails to assert his or her rights.

Affidavit - A written statement made under oath before a notary public or other judicial officer.

Agreement - A legally binding contract made between two or more persons.

Amortization - Payment to reduce the principal of a debt in regular, periodic installments.

Appraisal - A report from an independent third party detailing the estimated value of real estate.

ARM (Adjustable Rate Mortgage)- A mortgage in which the interest rate fluctuates as the prevailing rate moves up or down. There are usually maximums as to the frequency and amount of fluctuation.

Assessment - The valuation of real estate for purpose of taxes or special improvement charges.

Assignment - (1) The act of transferring an interest, such as a loan secured by a mortgage, from one person to another. (2) The instrument or paper by which one person transfers such ownership to another.

Attorney Review Clause - A clause required to be in Contracts prepared by a real estate broker in New Jersey which allows for a three day period during which lawyers for the buyer and the seller can review the Contract and reject it for any reason or no reason at all. The lawyers can also recommend changes that may be acceptable to allow for the reinstatement of the Contract.

Attorney's Opinion - A statement by an attorney as to the validity of a title, arrived at after investigation of the history of the title as recorded in the public records.

Back Title - Information, including Deeds and Title searches related to the property involved.

Balloon Note - A form of promissory note that calls for the reduced payment of principal and interest at regular intervals followed by a substantial final payment.

Bargain and Sale Deed with covenant against Grantor’s Acts - A Deed conveying real estate which warrants that the seller has done nothing to harm or cloud the title.

Binder - A preliminary report as to the condition of a title and a commitment to issue a title insurance policy in a certain manner when certain conditions are met.

Broker - A duly licensed person or firm who, with the intent of receiving compensation, facilitates a real property transaction for another party.

Certificate of Title - A certificate issued by a title examiner stating the condition of a title.

Chain of Title - The successive ownerships or transfers in the history of title to a tract of land.

Claim - An adverse right or interest asserted by one party against another. Claims may arise from unpaid debts or taxes, as well as from hidden title defects such as fraud, forgery, missing heirs, etc.

Clear Title - Real property ownership free of liens, defects, encumbrances or claims.

Closing - Also called "settlement." A meeting of all parties involved in a property transaction during which the transaction is finalized.

Cloud on Title - An irregularity, possible claim or encumbrance that, if valid, would adversely affect or impair the rights of the owner.

Commitment - A document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued. Also called "binder."

"Comps” (comparables) - A list of the sale prices of similar houses in the area of the property being sold used by sellers to determine the offering price of property they are trying to sell.

Condominium - A form of ownership in which buyers own a unit of housing in a multi-unit complex and shares financial responsibility for common areas.

Conventional Mortgage - A mortgage securing a loan made by private investors without government participation. Also a mortgage for which the loan-to-value ratio is within an acceptable range for a particular lending institution.

Conveyance - The transfer of title to property from one person to another.

Covenant - A formal agreement or contract between two parties in which one party gives the other certain promises and assurances, such as covenants of warranty in a warranty deed.

Cooperative (Co-op) - Buyers purchase stock in a cooperative corporation that owns the structure entitling them to live in a specific unit therein.

Dedication - The setting aside of certain land by the owner and declaring it to be for public use. Examples: streets, sidewalks and parks.

Deed - A written legal document which is signed, executed and delivered in which the owner of real estate conveys some right, title or interest in it to another person.

Deed Restriction - A provision in a deed controlling or limiting the use or occupancy of the land.

Defect - A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.

Deposit - Payment of a portion of the purchase price of real estate normally held by a third party until the closing of title.

Depreciation - Loss in value occasioned by ordinary wear and tear, destructive action, or functional or economic obsolescence.

Devise - A gift of real estate made by a will.

Dominant Estate - The property which benefits by a right-of-way easement which exists across another's adjoining piece of land.

Earnest Money - A deposit of funds by the purchaser of a piece of real estate as evidence of good faith.

Easement - A right to use all or part of the land owned by another for a specific purpose. E.g. to install and maintain sewer or utility lines.

Eminent Domain - The right of a government to take privately owned property for public purposes under condemnation proceedings subject to payment of its fair market value.

Encroachment - Any building, improvement or structure located on one property that intrudes upon the property of another.

Encumbrance - Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden or charge upon the property.

Equity - The market value of real property minus the amount of existing liens.

Escrow - A method of closing a real estate transaction in which all required documents and funds are placed with a third party for processing and disbursement.

Exception - A provision in a title insurance binder or policy that excludes liability for a specific title defect or an outstanding lien or encumbrance.

Execute - To sign a legal instrument. A deed is said to be executed when it is signed, sealed, witnessed and delivered.

Fannie Mae (FNMA) - Federal National Mortgage Association. A private corporation dealing in the purchase of first mortgages.

Fee Simple Deed - The highest degree of ownership that a person can have in real estate, which gives the owner unqualified ownership and full power of disposition.

FHA (Federal Housing Administration) - A federal agency that insures first mortgages, enabling lenders to lend a very high percentage of the sale price. This agency is part of HUD (Housing and urban development)

Fixed Rate Mortgage - A mortgage having a rate of interest that remains the same for the life of the mortgage.

Fixtures - Personal property that is attached to real property and is legally treated as real property while attached. Examples: medicine cabinets, window blinds and chandeliers.

“Fizbo” - A property being sold by the owner without the assistance of a real estate agent (FSBO).

Foreclosure - A legal proceeding in which real estate secured by a mortgage or deed of trust is sold to satisfy the underlying debt.

Forgery - The fraudulent signing of another's name to an instrument such as a deed, mortgage or check.

Freddie Mac (FHLMC) - Federal Home Loan Mortgage Corporation. A federal agency that purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System.

Ginnie Mae (GNMA) - Government National Mortgage Association. A federal association working with the FHA that offers special assistance in obtaining mortgages and purchases mortgages in the secondary market.

Good Faith Estimate - An estimate of all closing costs including pre-paid and escrow items and lenders fees that must be given to the borrower by the lender within three days after a loan application is submitted.

Grant - To bestow or confer, with or without compensation, a gift such as land or money by one having control or authority over the gift.

Grantee - One to whom a grant is made.

Grantor - One who makes a grant.

Homeowners Insurance - Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also may include coverage such as personal liability and theft away from home.

HUD (Department of Housing and Urban Development) - The federal department responsible for the major housing programs in the United States.

HUD-1 (RESPA) - An important legal document signed at closing which identifies all of the charges involved in a real estate transaction. Also referred to as a Settlement Statement.

Joint Tenancy - An undivided interest in property taken by two or more persons. On the death of a joint tenant, his/her interest in the property passes to the surviving joint tenants rather than to the heirs of the deceased.

Judgment - The determination of a court regarding the rights of parties in an action. A judgment against a property owner can create a lien on all of that owner's land within the State.

Junior Mortgage - A mortgage lower in lien priority than another.

Leasehold - The right to possession and use of land for a fixed period of time. The lease is the agreement that creates the right.

Lessee - A tenant holding a leasehold.

Lessor - A landlord; one who gives a leasehold to a lessee.

License - Permission to go upon or use the land of another, the permission being a personal privilege and not constituting an interest in the land.

Lien - A monetary charge imposed on a property, usually arising from some debt or obligation.

Life Estate - An interest in real estate held for the duration of the life of the named person.

Listing Agreement - The contract a seller signs with a real estate agent indicating, among other things, the amount of the commission the seller will pay the agent, its expiration date and protection period.

Liquidated Damages - A definite amount of damages which is often a predetermined estimate of actual damages, set forth in a Contract to be paid by the party breaching the Contract.

Lis Pendens - A legal notice informing everyone of a claimed interest or litigation claiming an interest in real estate.

Loan Policy - A title insurance policy insuring a mortgagee against loss caused by the invalidity of a lien, or loss of priority of the mortgage or deed of trust. Also called "mortgage policy."

Lot - Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision.

Market Value - The average of the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing but not compelled to sell, would accept.

Metes and Bounds - A land description in which boundaries are described by courses, directions, distances and monuments.

Mortgage - A loan obtained to purchase real estate which acts as a legal claim on the home or property that secures the promise to pay the debt.

Mortgage Insurance - Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price.

Mortgagee - The party lending the money and holding the mortgage. A secured creditor of the borrower.

Mortgagor - A person who borrows money secured by property he/she owns.

Multiple Listing - The pooling in a central bureau of listings of properties for sale. These listings are held individually by members of a group of real estate brokers, with the agreement that any member of the group may sell the properties and, in the case of a sale, the commission will be divided between the broker making the sale and the broker who filed the listing.

Negative Amortization - A condition created when loan payments are less than the interest due on the loan which results in the amount of the debt increasing over time.

Note - A written promise to pay a sum of money, usually at a specified interest rate, at a stated time to a named payee. Also called "promissory note."

Owner's Policy - A policy of title insurance insuring an owner of real estate against loss occasioned by defects in, liens against or un -marketability of the owner's title.

Party Wall - A Wall erected on the line between two different properties for the use of both properties.

Payoff - The payment in full of an existing loan.

Perc Test (Percolation Test) - Determines whether the soil has sufficient water seepage for the installation and use of a septic tank.

PMI (Private Mortgage Insurance) - Extra insurance that lenders require from most home buyers who obtain loans that are more than 80 percent of their new home’s value. The premium is paid by the borrower and included in the monthly mortgage payments.

Point - Also called "commission points" or "discount points." One percent of the amount of the loan = one point.

Premium - The amount payable for an insurance policy.

Prescriptive Easement - A right to use another's property that is not inconsistent with the owner's rights and that is acquired by an open, notorious, adverse and continuous use for the statutory period, for example 20 years.

Principal - A sum of money owed as a debt on which interest is payable or a person who empowers another to act as his representative or agent.

Promissory Note - A written promise to pay a sum of money, usually at a specified interest rate, at a stated time to a named payee. Also called "note."

Purchase Money Mortgage - A mortgage given by a purchaser to a seller on the subject property to secure payment of a part of the purchase price.

Quit Claim Deed - A deed that does not imply that the grantor holds title, but that surrenders and gives to the grantee any interest or rights that the grantor may have in the property.

Real Estate - Land and anything permanently affixed to the land, such as building, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items that would be personal property if not attached.

Real Estate Agent - A person licensed to negotiate and arrange real estate sales on behalf of a real estate broker.

Realtor - Registered trade name for real estate agents or brokers who are members of the National Association of Realtors.

Realty Transfer Fee - A tax imposed by the State of New Jersey on the sale of real estate located in the State.

Recording - The noting in the county clerk’s office of the details of a legal document affecting the title to real estate. When such an instrument is properly recorded, it is considered to be a matter of public record and all subsequent purchasers are deemed to have constructive knowledge of that information.

Reinsurance - A contractual relationship between two insurance companies under which one insurer assumes a portion of the risk of the insurance policy written by the other.

Refinance - to pay off one or more loans by obtaining another.

Release - To relieve from debt or security or abandon a right, such as the release of a mortgage lien from a part or all of the land mortgaged.

RESPA - An important legal document signed at closing which identifies all of the charges involved in a real estate transaction. Also referred to as a Settlement Statement.

Restrictions - Limitations on the use of property imposed or created by deeds or other documents in the chain of title. A restriction, for example, may prohibit the construction of a commercial structure on the property.

Right of First Refusal - a right given by the owner of property giving another person a chance to buy the property if the owner decides to sell it and has a legitimate offer which that person can match.

Riparian Rights - The rights of owners of lands bordering water which relate to the water and its use.

Sale Agreement - A contract entered into between a buyer and seller, setting forth the terms and conditions of a sale of real estate.

Search - A careful examination of the public records in an effort to find all recorded instruments relating to a particular chain of title.

Second Mortgage - A mortgage ranking in priority immediately below a first mortgage.

Settlement Statement - An important legal document signed at closing which identifies all of the charges involved in a real estate transaction.

Servient Estate - The land across which the easement which benefits an adjoining piece of land runs.

Special Assessment - A tax against real property made by a unit of government to cover the proportionate cost of an improvement such as a street, sidewalk or sewer.

Subordination - The act or process by which a person's rights are ranked below the rights of others. For example, a second mortgagee's rights are subordinate to those of the first mortgagee.

Surety - A person who agrees to be responsible for a debt or obligation of another and the pledge or agreement by which a person undertakes responsibility for the debt or obligation of another.

Survey - The measurement of the boundaries of a parcel of land, its area aid, sometimes, its topography.

Tenancy in Common - An undivided ownership in real estate held by two or more persons. On the death of one of the owner’s, his/her interest passes to the heirs of the deceased.

Title - A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate which are recognized and protected by the law.

Title Defect - Any claim or right outstanding in a chain of title that is adverse to the claim of ownership.

Title Insurance Policy - A contract of title insurance under which the insurer agrees to indemnify the insured against loss arising from claims against the insured’s interest.

Underwriter - An insurance company that issues insurance policies to the public or to another insurer.

Veterans Administration (VA) Loans - Housing loans to veterans of the armed services by lenders that are guaranteed by the Veterans Administration, enabling veterans to buy a residence with little or no down payment.

Waiver - The voluntary and intentional relinquishment of a known right, claim or privilege.

Zoning - Laws passed by local governments regulating the size, type, structure, nature and use of land or buildings.