A to Z: Real Estate Defined

Real Estate can sometimes feel like a world of its own with its very own language. Maybe you’re new to buying and selling or maybe it’s been a while since you’ve visited the “Real Estate World” Either way here is a run down of commonly used words.



Abstract of Title: Summary listing of documents registered in the local land registry office that affect ownership.

Acquisition: The process of taking title to or ownership of something.

Adjustable Rate Mortgage (ARM): Also known as Variable Rate Mortgage, a loan secured against land which has an interest rate that changes according to some outside index such as Federal Prime Rate. The change in interest will result in a change in the payments due.

Amortization: The killing off of an existing debt by regular partial payments i.e. a payment plan.

Appraisal: An estimate of the value of property from an analysis of facts about the property; an opinion of value.


Balloon Mortgage: A loan which is repaid by a series of small, periodic payments until a given date at which point the balance is due in a single large payment or the periodic payment amount rises significantly.

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.

Bridge Financing: Also known as a “swing loan”, a loan used to fill a gap in financing, often between the purchase of a new home and the sale of the old one. If the purchase closes before the sale, the homeowner needs to borrow enough money to pay for the new house for the period of time before the equity in his old house comes available as a result of the completion of the sale.


CC&R’S: Short form for “covenants, conditions, and restrictions”, which are the rules of general application governing the relations between landowners in a specific subdivision, development, condominium development or cooperative housing facility. May be registered on title.

Certificate of Occupancy (C.O.): 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.

Certificate of Title: A written opinion of the quality of a person’s ownership of property, issued by a lawyer or a title insurance company after a search of the title records has been conducted. May contain qualifications to the certification regarding defects found or potential defects not investigated.

Closing: The process of completing a real estate transaction. Deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as 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 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).

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.

Concessions: Sacrifices made by a party to convince another party to enter a contract.

Conditional Offer: An offer to purchase a property which is contingent on the fulfillment of certain conditions before it becomes firm and binding. Also known as “Conditional Sales Contract”.

Conventional Loan: 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). Also, a loan or mortgage with a fixed interest rate, fixed payments, and a fixed term.

Convey: To transfer title to (or any other interest in) a property to someone else.


Deed: A written document by which title to real estate is conveyed from one party to another.

Deed Restriction: A clause in a deed which limits the use of the property in certain respects.

Default: Failure to perform a promised task or to pay an obligation when due.

Depreciation: The lessening of the value of a property over time. Or a tax adjustment accounting for the reduction in value of an asset (a building or a piece of machinery) over time.

Down Payment: The amount of money provided by the Purchaser toward the total price of the property (not including legal fees or other acquisition costs). In general, down payment plus mortgage equals purchase price.


Earnest Monies: 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 the purchase price. May be forfeited if Purchaser fails to complete the 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 the dominant position (enjoys the benefit of the easement) and one property to be in a servient position (is subject to the right).

Eminent Domain: The right of a body of government (often a state) to expropriate private property, while paying appropriate compensation to the owner.

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.

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”.

Escrow: Technically, this term strictly refers to a deed delivered to a third person to be held by him until the fulfillment or performance of some act or condition by the grantee. In the title industry, it means the depositing with an impartial third party (typically an escrow agent or title company) of anything pertaining to a real estate transaction including money and documents of all kinds. The money and documents are to be disbursed and delivered to the rightful parties by the escrow agent or title company when all conditions of the transaction have been met.


Fannie Mae: The U.S.’s largest supplier of mortgages to home buyers and owners, a corporation established by Congress. The Federal National Mortgage Association (FNMA).

Federal Housing Administration (FHA): Division of the Department of Housing and Urban Development, sets standards for the underwriting of private mortgages. Also insures residential mortgages made by private lenders.

Fee Simple: The highest degree of ownership that a person can have in real estate. An interest in real estate that gives the owner unqualified ownership and full power of disposition.


General Warranty: A warranty provision in a deed or mortgage or other real estate instrument containing all of the common law items of warranty. Also known as a full warranty.

Gross Income: A person’s earnings from all sources in a given period before expenses are deducted.


Historic District: A classification (whether under zoning, heritage or other authority) of a specific area of a community in which the buildings and improvements have a historical value or significance which may not be reflected in their market value. Designation as such a district may also involve strict rules regarding the way the buildings and properties are dealt with.

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 his/her use.

Home Inspection: 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 Owner Association (HOA): A cooperative effort by property owners in a given neighborhood aimed at improving quality of life, providing a unified political voice or combatting identified ills.

Housing and Urban Development (HUD): Federal Agency charged with the duty of overseeing a number of enactments relating to housing in America.


Improved Land: Also known as “developed land”. Opposite of “raw or vacant land”.

Improvements: Things added to vacant land with the view to increasing its usefulness and value, such as buildings, parking areas, drainage works, etc.

Indemnify: To take responsibility for the losses and damages suffered by another person.


Joint Tenants: Two or more persons who hold title to real estate jointly, with equal rights to share in its enjoyment during their respective lives with the provision that upon the death of a joint tenant, his share in the property passes to the surviving tenants, and so on, until the full title is vested in the last survivor. A joint tenant cannot legally sell or encumber his interest without the consent of all of the other joint tenants.

Jumbo Loan: A loan for more money than the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation will fund under its mandate.

Junk Fees: Slang term for extra fees charged by a lender on a mortgage loan.



Land Lease: A rental agreement for the use of land but not the improvements thereon.

Lease: An agreement granting the use or occupancy of land or building during a specified period in exchange for rent.

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.

Lender’s Title Insurance: A policy of Title Insurance which covers the interest of a lender on a mortgage registered on title to a property.

Lien: A legal claim against property for moneys owed.

Loan Estimate: A three-page Loan Estimate must be provided to the consumers no later than three business days after they submit a loan application for most mortgages. The Loan Estimate provides information about key features, costs, and risks of the mortgage loan for which the consumer is applying.


Market Value: An average between 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: An older way of describing land in registered instruments. Starting at a recognizable point (the meeting of two roads, the corner of a lot), the description then describes the boundaries of the land by indicating distances and directions for each boundary (i.e. “South 100 feet” or “South 73 degrees, five minutes west for a distance of 100 feet”), returning at the end of the description to the beginning point.

Mill: 10 percent of a penny. In many jurisdictions, property tax assessments are based on a mill rate.

Monthly Total Expenses: The total when monthly housing expense is added to monthly debt service.


Owner’s Title Insurance: A title insurance policy which covers the owner of the property from title defects and other flaws which were not apparent at the time of the purchase.


Parcel: Another word for a piece of land.

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.

Power of Attorney: A legal instrument authorizing one to act as another’s agent or attorney.

Prime Rate: The best rate charged on loans, usually saved for the best clients of the lenders. May also be set by a national institution as a benchmark or index for other lenders.

Principal Balance: The amount of money borrowed or still owed on a loan, without including interest.


Qualified Buyer: A purchaser who has been pre-approved for financing.

Quite 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.


Radon: A radioactive gas which may cause health problems for occupants of some buildings.

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.

Re-Issue Rate: A reduction in the fee for title insurance on a property which was previously title insured.

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 First Refusal: The ability to make an offer for a property before the owner puts it up for sale on the open market.


Scarcity: The idea that price is driven by the availability of the product. If there is not enough product to meet demand (the product is scarce), the price of the product will rise.

Settlement Sheet: The information sheet which sets out the allocation of funds on closing.

Severalty: Ownership of land by an individual.

Special Assessment: The levying of an additional tax on a property for a specific purpose (i.e. to apportion the cost of infrastructure upgrades among area landowners).

Survey: A pictorial depiction of land and the improvements on it. Shows boundary lines (with measurements and bearings), buildings, sheds, easements, etc.


Tenant in Common: A person who owns property with one or more others, where each owns a stated portion of the property and is free to deal with his portion as he wishes.

Title: The legal term for one’s ownership interest in land.

Triple-Net Lease (NNN): A rental agreement which requires the tenant to pay all operating costs of the building.


Underwriter: A person who reviews and evaluates an application for a loan or insurance policy.


VA Loan: A loan on below-market terms guaranteed by the Department of Veterans Affairs, given to former members of the armed forces.

Variance: An indulgence granted by a local zoning commission or authority to allow a non-conforming use of a property to continue. The zoning bylaw or ordinance is actually amended as it pertains to the particular property.

Vesting: To become the property of someone through action of law. How ownership of title is taken.


Water Table: The natural accumulation of water either above or below ground, often used for well purposes. May also refer to the distance from the surface of the land to the location of the water.

Warranty Deed: A deed containing one or more title covenants.




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



Real Estate Dictionary. 2016. http://www.titlecorockies.com/ToolsResources/RealEstateDictionary/tabid/401/Default.aspx
Real Estate Glossary. http://www.homeclosing101.org/news-and-advice/real-estate-glossary/

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