Balloon Payment
The final installment paid at the end of the term of a note; used only when preceding installments were not sufficient to pay off the note in full.

Bill of Sale
An instrument used to transfer personal property

Blanket Mortgage (Trust Deed)
A single mortgage or trust deed which covers more than one piece of real estate

Bond
An insurance agreement by which one party is insured against loss or default by a third party. In the construction business a performance bond ensures the interested party that the contractor will complete the project. A bond can also be a method of financing debt by a government or corporation which is interest-bearing and has priority over stock in terms of security.

Breach
Violation of an obligation in a contract

Binder or "Offer to Purchase"
A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Broker, Real Estate
An agent licensed by the state to carry on the business of operating in real estate. He usually receives a commission for his services of bringing together buyers and sellers, owners and tenants, in exchange agreements.

Building Code
A set of stringent laws that control the construction of buildings, design, materials and other similar factors

Building Line or Setback
Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Built-Ins
Items that are not movable, such a stoves, ovens, microwave ovens, dishwashers.

Buyers Market
A market condition which occurs in real estate where more homes are for sale than there are interested buyers

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Capital Gains
A term used for income tax purposes which represents the gain realized from the sale of an asset less the purchase price and deductible expense.

Capitalization
An appraising term used in determining value by considering net operating income and a percentage of reasonable return on investment.

Cash Flow
The owner's spendable income after operating expenses and debt service is deducted

Chain Of Title
A history of conveyances and encumbrances affecting the title as far back as records are available

Client
One who employs another's services, as in an attorney, real estate agent, insurance agent, etc.

Closing
In the sale of real estate it is the final moment when all documents are executed and recorded and the sale is complete. Also a general selling term where a sales person is attempting to sell something and the buyer agrees to purchase

Certificate of Title
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Closing Costs
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day.

Closing Statement
A list of the final accounting of all monies of both buyer and seller prepared by an escrow agent which notes all costs each must pay at the completion of a real estate transaction.

Cloud (On Title)
An outstanding claim or encumbrance which adversely affects the marketability of title.

Commission
Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price- often 5 to 7 percent on houses, 10 percent on land.

Common Area
That area owned in common by owners of condominiums and planned site development homes within a subdivision.

Community Property
Both real and personal property accumulated by a husband and wife after marriage through joint efforts of both living together.

Condemnation
A declaration by governing powers that a structure is unfit for use.

Conditional Sales Contract
A contract for the sale of property where the buyer has possession and use, but the seller retains title until the conditions of the contract have been fulfilled. Also known as a land contract.

Co-Op Housing
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Condominium
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi- unit project.

Consideration
Anything of value given to induce someone into entering into a contract.

Construction Loan
The short-term financing of improvements on real estate. Once the improvements are completed a 'take out' loan for a longer term is usually issued.

Contingency
A condition upon which a valid contract is dependent. For example; the sale of a house is contingent upon the buyer obtaining adequate financing.

Contract
An agreement between two or more parties, written or oral, to do or not to do certain things.

Conveyance
The transfer of the title to land from one to another.

Contractor
In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Conventional Mortgage
A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)

Counter Offer
An offer in response to an offer. 'A' offers to buy 'B's' house for $20,000 which is listed for $22,000. 'B' counter offers 'A's' offer by stating that he will sell the house to 'A" for $21,000. The $21,000 is the counter offer.

Covenants
Agreements written into deeds and other instruments stating performance or non-performance of certain acts or noting certain uses or non-uses of property.

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Deed
A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.)

Default
Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.

Depreciation
Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Documentary Stamps
A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.

Down Payment
The amount of money to be paid by the purchaser to the seller upon the closing. The agreement of sale will refer to the down payment amount. Downpayment is the difference between the sales price and maximum mortgage amount.

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Earnest Money
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the downpayment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Easement Rights
A right- of- way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right- of- way across private property is a common example.

Economic Obsolescence
Loss of useful life and desirability of a property through economic forces, such as change in zoning, changes in traffic flow, etc., rather than deterioration.

Encroachment
An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance
A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

Escalation Clause
A clause in a lease providing for an increased rent at a future time due to increased costs to lessor, as in cost of living index, tax increases, etc.

Escheat
The reverting of property to the state in the absence of heirs.

Estate
The ownership interest of a person in real property. Is also used to refer to a deceased person's property. And often used to describe a large home with spacious grounds

Equity
The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.

Escrow
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.

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Fair Market Value
That price a property will bring given that both buyer and seller are fully aware of market conditions and comparable properties.

Foreclosure
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.

Fee Simple
Ownership of title to property without any limitation, which can be sold, left at will, or inherited.

Front Footage
The linear measurement along the front of a parcel. That portion of the parcel which fronts the street or walkway.

Functional Obsolescence
Loss in value due to out-of-date or poorly designed equipment while newer equipment and structures have been invented since its construction.

Fixtures
Items affixed to buildings or land usually in such a way that they cannot be moved without damage to themselves or the property, such as plumbing, electrical fixtures, trees, etc.

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General Warranty Deed
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Grantee
That party in the deed who is the buyer or recipient.

Grantor
That party in the deed who is the seller or giver.

Ground Lease
A lease of vacant land

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Hazard Insurance
Protects against damages caused to property by fire, windstorms, and other common hazards.

Home Owners Association
An association of homeowners within a community formed to improve and maintain the quality of the community. An association formed by the developer of condominiums or planned developments.

HUD
U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.

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Interest
A charge paid for borrowing money. (See mortgage note)

Intestate
A person who dies without making a will.

Involuntary Lien
A lien which attaches to property without the consent of the owner such as tax liens as opposed to voluntary liens (mortgages).

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Joint Tenancy
Joint ownership by two or more persons with right of survivorship. Upon the death of a joint tenant, his interest does not go to his heirs, but to the remaining joint tenants.

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Lease
A contract between the owner of real property, called the lessor, and another person referred to as the lessee, covering all conditions by which the lessee may occupy and use the property.

Lease With Option To Purchase
A lease where the lessee has the option to purchase the leased property. The terms of the purchase option must be set forth in the lease.

Legal Description
The geographical identification of a parcel of land

Lessee
One who contracts to rent property under a specified lease.

Lessor
An owner who contracts into a lease with a tenant (lessee).

Lien
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also special lien.)

Life Estate
An estate in real property for the life of a person

Listing
A contract between owner and broker to sell the owner's property

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Marketable Title
A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Mechanic's Lien
A lien created by statute on a specific property for labor or materials contributed to an improvement on that property.

Mortgage
A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government-insured or loan-guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.

Mortgage Commitment
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance Premium
The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one- half of one percent paid by the mortgagor on a monthly basis.

Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgage (Open-End)
A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than would raise the balance to the original loan figure.

Mortgagee
The lender in a mortgage agreement.

Mortgagor
The borrower in a mortgage agreement.

Multiple Listing
A listing taken by a member of an organization of brokers, whereby all members have an opportunity to find a buyer.

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Negative Amortization
When monthly payments are not enough to cover interests costs, they are added to the principal balance, and you may end up owing more than when you started. This is most likely to occur with ARMs that have payment caps.

Notary Public
One who is authorized by federal or local government to attest authentic signatures and administer oaths.

Note
A written instrument acknowledging a debt and promising payment

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Offer
A presentation to form a contract or agreement.

Origination Fee
Application fee(s) for processing a proposed mortgage.

Option
A right given, for consideration, to purchase or lease property upon stipulated terms within a specific period of time

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Plat
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

P.M.I. (Private Mortgage Insurance)
Insurance which covers a portion of the first mortgage allowing the lender to offer more lenient terms to a borrower.

Points
Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on his loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on HUD or Veterans' Administration guaranteed loans (sellers can pay, however). On a conventional mortgage, points may be paid by either buyer or seller or split between them.

Prepayment
Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.

Prepayment Penalty
A penalty within a note, mortgage, or deed of trust imposing a penalty if the debt is paid in full before the end of its terms.

Principal
The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.

Purchase Agreement
An agreement between buyer and seller denoting price and terms of the sale.

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Real Estate Agent
A licensed person who works under the direction of a broker selling and renting real estate.

Real Estate Broker
A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Realtor
A real estate broker holding membership in a real estate board affiliated with the National Association Of Realtors.

Refinancing
The process of the same mortgagor paying off one loan with the proceeds from another loan.

Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

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Sales Agreement
See agreement of sale.

Seller's Market
More buyers than sellers.

Special Assessments
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

Special Lien
A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.)

Special Warranty Deed
A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.

State Stamps
See documentary stamps

Survey
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

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Tax
As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.

Title
As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.

Title Insurance
Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.

Title Search or Examination
A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.

Trustee
A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See deed of trust.)

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Variable Interest Rate
A fluctuating interest rate which can go up or down depending on the going market rate.

Voluntary Lien
A voluntary lien by the owner such as a mortgage, as opposed to involuntary liens (taxes).

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Waive
To relinquish, or abandon. To forego a right to enforce or require anything.

Wrap-Around Mortgage
A second mortgage which is subordinate to but includes the face value of the first mortgage.

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Zoning Ordinances
The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.