Real Estate Terminology...O to Z

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When buying or selling your home it is important to learn some real estate terminology to ensure you understand the process you are going through and the the details of the commitment you are making.

Our real estate dictionary will help you understand a wide variety of terms and meanings.

Again, even though we are providing you with this real estate dictionary, it is important to caution you that local laws, as well as custom and use in various areas or regions of the country, may modify or completely change the meanings of certain terms we've defined.

This glossary of common real estate terminology is designed to assist you in better understanding the language of real estate. Consult a professional in your area to ensure the correct usage in your area.

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.

Origination - The process of originating mortgages. Solicitation may be from individual borrowers, builders, or brokers.

Origination fee - A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

Originator - A person who solicits builder, brokers, and others to obtain applications for mortgage loans. origination is the process by which the mortgage lender brings into being a mortgage secured by real property.

PITI (principal, interest, taxes, and insurance) - The principal and interest payment on most loans is fixed for the term of the loan; the tax and insurance portion may be adjusted to reflect changes in takes or insurance costs. Note: In cases where the buyer puts down less than 20% of the Sales Price, Mortgage Insurance may be required as part of the Total Monthly Payment (PITI).

Plans and specifications - Architectural and engineering drawings and specifications for construction of a building or project, including a description of materials to be used and the manner in which they are to be applied.

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

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.

Portable Mortgage - A mortgage that can be moved from one home to another. Instead of repaying your mortgage when you move and taking out a new one on the new home, you transfer the old mortgage to the new property.

Preclosing - A transaction preceding the formal closing, often used to settle outstanding issues (survey, pest inspection, hazard insurance, flood insurance (if required), with the formal closing shortly thereafter.

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.

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.

Principal balance - The outstanding balance of a loan.

Private mortgage insurance (PMI) - Insurance written by a private company protecting the mortgage lender against loss by a mortgage default. Purchase Agreement - (See agreement of sale).

Quitclaim Deed - A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See deed.)


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 or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Reconveyance - The transfer of land from one person to the immediately preceding owner. It is used when the performance of debt is satisfied under the terms of a deed of trust.

Redemption Period - That period of time in those states where it is allowed in which a foreclosed mortgagor has to buy back his property by paying principal amount and interest and fees.

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

Release of lien - An instrument discharging secured property from a lien.

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.)

Right of survivorship - In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

Right-of-way - A privilege operating as an easement upon land, whereby a land owner, by grant or agreement, gives another the right to pass over land. Also knows as easement.

Sale-leaseback - A technique in which a seller deeds property to a buyer for a consideration and the buyer simultaneously leases the property back to the seller, usually on a long-term basis.

Sales Agreement - See agreement of sale.

Sales Contract - Another name for a sales agreement, purchase agreement, etc. Not to be confused with a land contract, which is a conditional sales contract.

Satisfaction of mortgage - The record able instrument given by the lender to evidence payment in full of the mortgage debt. Sometimes knows as a release deed.

Secondary financing - Financing real estate with a loan, or loans, subordinate to a first mortgage or first trust deed.

Secondary mortgage market - The market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are just originated, and packaged for delivery to the secondary market.

Servicing - The duties of the mortgage lender as a loan correspondent as specified in the servicing agreement for which a fee is received. Consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency loan follow-up and loan analysis.

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.

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.

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.

Takeout commitment - A promise to make a loan at a future specified time. It is commonly used to designate a higher cost, shorter term, backup commitment as a support for construction financing until a suitable permanent loan can be secured.

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. Tax Lien - A claim against property for the amount of its due and unpaid taxes.

Tenancy - A holding of real estate under any kind of right of title. Tenancy At Will - A holding of real estate that can be terminated at the will of either the lessor or the lessee, usually with notice.

Tenancy by entirety - The joint ownership of property by a husband and wife where both are viewed as one person under common law that provides for the right of survivorship.

Tenancy in common - In law, the type of tenancy or estate created when real or personal property is granted, devised or bequeathed to two or more persons, in the absence of expressed words creating a joint tenancy. There is no right of survivorship.

Term - The period of time between the commencement date an termination date of a note, mortgage, legal document, or the contract.

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.)

Underwriting - The analysis and matching of risk to an appropriate rate and term. Unencumbered property - A property the title to which is free and clear. Usury - Charging more for the use of money than allowed by law.




Variable rate mortgage - A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the note.

Warehousing - The holding of a mortgage on a short term basis pending either a sale to an investor or other long term financing.

Warranty deed - A deed in which the grantor or seller warrants or guarantees that good title is being conveyed, as opposed to a quitclaim deed that contains no representation or warrant as to the quality of title being conveyed.




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

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