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Suzanne Larkin
(310) 720-4033
suzanne@suzannelarkin.com

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Glossary of Terms

The following is an alphabetical list of terms commonly used in real estate transactions, along with a brief definition of each:


A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S |

T | U | V | W | X | Y | Z


Absentee Owner
An owner of a property who lives elsewhere, leaving tenants in control and occupation of the property.

Accrued Interest
Interest earned but not yet paid.

Acre
A measure of land equal to 43,560 square feet, 4,840 square yards, 4,047 square meters, 160 square rods or 0.4047 hectares.

Agency
Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the principal.Agency involving real property should be in writing, such as listing, trust, powers of attorney, etc.

Agent
The person who appoints an agent is called the principal. An agent can enter into binding agreements on the principal's behalf and may even create liability for the principal if the agent causes harm while carrying out his or her duties. A person authorized to act for and under the direction of another person when dealing with third parties.

Amortization
Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments.Number of fixed payments or the period of time required to reduce a debt to zero when payments are made regularly.

Annual Percentage Rate (APR)
The yearly interest percentage of a loan, as expressed by the actual rate of interest paid.The APR is disclosed and a requirement of Federal Truth in Lending Statutes.

Appraisal
An opinion of value based on factual analysis.Legally, an estimation of value by two discriminated persons of suitable qualifications.For mortgage lending purposes it is a process whereby the (lending) value of the property is determined. The lending value may or may not match the purchase price of the home. An appraisal done for mortgage lending purposes is carried out for the benefit of the lender or the mortgage insurer.

Assumption of Mortgage
Agreement by a buyer to assume the liability under an existing note secured by a mortgage or Deed of Trust.The lender usually must approve the new debtor in order to release the existing debtor (usually the seller) for liability.

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Balloon Note
A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.

Beneficiary
(1) One for whose benefit a trust is created. (2) In states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary.

Borrower
One who borrows funds, with the express or implied intention of repaying the loan in full, or giving the equivalent.

Breach of Contract
Failure to perform a contract, in whole or part, without legal excuse.

Broker, Real Estate
One who is licensed by the state to carry on the business of dealing in real estate.A broker may receive a commission for his/her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.

Building Permit
A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.

Buy Down
A fixed rate loan where the interest rate and payment are reduced for a specific period of time by paying the interest up front to subsidize the lower payment.

Buyer's Agent
A person or firm representing the buyer. A Buyer's Agent's primary allegiance is to the buyer. The buyer is the Buyer Agent's client.

Buyer's Broker
A licensee who has declared to represent only the buyer in a transaction.Some brokers conduct their business by representing buyers only.

Buyer's Market
Market conditions that favor buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.

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Cal-Vet Loans
Real estate loans available to Armed Forces Veterans from California, at low interest rates.

Chain of Title
The chronological order of conveyances of a parcel of land, from the original owner to the present owner.

Chattel
Moveable items of property which are neither land nor permanently attached to land or a building, either directly or vicariously through attachment to real property. The opposite of chattel is real property which includes lands or buildings. All property which is not real property is said to be chattel. "Personal property" is another word used to describe a chattel.

Clear Title
Real property against which there are no liens, especially involuntary liens (mortgages).

Closing
In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.

Closing Costs
Expenses incidental to a sale of real estate, such as loan fees, appraisal fees, etc.

Closing Date
In most cases, the date on which the sale of the property becomes final and the new owner takes possession.

Closing Statement
The statement which lists the financial settlement between buyer and seller, and the costs each must pay.

Cloud on Title
An invalid encumbrance on real property, which, if valid, would affect the right of the owner.For example: (A) sells lot 1, tract 1, to (B).The deed is mistakenly drawn to read Lot 2, tract 1.A cloud is created on lot 2 by the recording of the erroneous deed.The cloud may be removed by quitclaim deed, or if necessary, buy court action.

Competitive Market Analysis (CMA)
Document, usually prepared by a real estate agent in report form, that will give an estimated sales price for a given property based on current market conditions.

Condominium (Condo)
Housing consisting of a complex of dwelling units (as an apartment house) in which each unit is individually owned

Consideration
Anything which is legally, of value, and induces one to enter into a contract.

Contingency
A condition which must be satisfied before a contract is legally binding.

Contract                                                                                       
A legally enforceable agreement to do, or not to do, a particular thing for a consideration.

Conventional Mortgage
A mortgage or Deed of Trust not obtained under a government insured program such FHA or VA.

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Deed
Generally, an instrument given to pass fee title of easement to property that has to be recorded with the County Recorder.

Deed of Trust
An Instrument used in many states in place of a mortgage.Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), and reconveyed upon payment in full.

Default
Non-payment of the installments due under the terms of the mortgage(s). Failure to abide by the terms of a mortgage loan agreement.

Department of Housing and Urban Development (HUD)
A United States Federal Agency that focuses on programs regarding housing and renewal of city communities. Oversees the Federal Housing Administration.

Documentary Transfer Tax
A state tax on the sale of real property, based on the sale price.

Dual Agent
A real estate broker or agent who acts as representative for both the seller and the buyer in the same transaction. Both buyer and seller are the agent's clients.

Duplex
A building which houses two separate dwelling units.

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Easement
A right acquired for access to or over, and perhaps use of, another person's land for a specific purpose such as a driveway or public utilities.

Eminent Domain
The right of government to take private property for public use, through court action known as condemnation. The Fifth Amendment to the United States Constitution allows the government to take private property if the taking is for a public use and the owner is "justly compensated" (usually, paid fair market value) for his or her loss. A public use is virtually anything that is sanctioned by a federal or state legislative body, but such uses may include roads, parks, reservoirs, schools, hospitals or other public buildings.

Encumbrance
A register claim for debt against a property, such as a mortgage.

Equity
The market value of real property, less the amount of existing liens.Owner equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.

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

Fannie Mae (Federal National Mortgage Association)
Fannie Mae's operates under a congressional charter that directs it to channel its efforts into increasing the availability and affordability of homeownership for low, moderate, and middle-income Americans. Fannie Mae receives no government funding or backing, and is one of the nation's largest taxpayers as well as one of the most consistently profitable corporations in America. Fannie Mae establishes strict guidelines for mortgage loans it is willing to purchase. As the largest buyer of mortgage loans in the US, these guidelines have become the industry standard for the majority of home loans. Any loan that meets these Fannie Mae guidelines is called a "conforming loan".

Fiduciary
The relationship of trust, honesty and confidence between agent and principal; the faithful relationship owed by an agent to the principal.

Fixed Rate Mortgage
A mortgage with an interest rate and monthly payment that doesn't vary for the term of the loan.

Fixed-Rate Loans
Fixed-rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year or 30-year terms. With a fixed-rate loan, you will have predictable monthly mortgage payments for as long as you have the loan.

Foreclosure
A legal procedure whereby the lender obtains ownership of the property following default by the borrower.

Freddie Mac
The common name for the Federal Home Loan Mortgage Corporation (FHLMC), a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

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Good Faith Estimate
Written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Grantee
A person to whom real estate is conveyed; the buyer.

Grantor
A person conveying real estate by deed; the seller.

Gross Debt Service Ration (GDS)
The percentage of the borrower's gross income that will be used for monthly payments of principal, interest and taxes, heating costs and half of condominium fees.

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Home Equity Loan or Line of Credit ("revolving loan")
A type of loan that is secured against a property and allows the owner to borrow and repay money at his or 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 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.

Homeowner's (Homestead) Tax Exemption
A tax break for home owners offered in certain jurisdictions which sees property tax assessments reduced by a certain percentage as a result of the fact that the taxpayer resides in the property. May require evidence of the status of ownership to be filed periodically with taxing authority.

HUD
See Department of Housing and Urban Development.

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Income Property
A property which is owned or developed specifically to produce income for its owner.

Inside Lot
Term for a property that is not located on a corner at the intersection of two roads.

Institutional Lender
An accredited financial organization (i.e. bank, trust company, credit union, etc.) which offers loans.

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Joint Liability
The responsibility of two or more people to fulfill the terms of a home loan or debt.

Joint Tenancy
Ownership by two or more people that gives equal shares of a piece of property. Rights pass to the surviving owner or owners.

Jumbo Loan
A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac.

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Kit Home
A structure that contains prefabricated components and is put together by a contractor.

Knob-And-Tube Wiring
An old-fashioned wiring system that has been replaced by fuses and circuit breakers.

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Land Contract
A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made.Also known as a contract for deed, agreement of sale, conditional sales contract, or installment contract.

Lender
A bank, savings institution or mortgage company that offers home loans.

Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Lien
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

Listing
Piece of property placed on the market by a listing agent.

Lock or Lock-In
A lender's guarantee of an interest rate for a set period of time. The time period is usually that between loan application approval and loan closing. The lock-in protects you against rate increases during that time.

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Market Value
Price that a piece of property sells for at a particular point in time. The value of a property based on current demand.

Mechanic's Lien
A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labor or materials but has not been paid. A lien must be properly filed by a claimant. It has a limited life, prescribed by statute that varies from province to province. If the lien-holder takes action within the prescribed time, the homeowner may be obliged to pay the amount claimed by the lien-holder.

MLS®, Multiple Listing Service®
Used in conjunction with a real estate database service, operated by local real estate boards, under which properties may be listed, purchased or sold. An MLS® listing means REALTORS have agreed to work together for the marketing of a listing.

Mortgage
A mortgage is security for a loan on the property that you own. It provides for your personal guarantee to repay the loan as well as a pledge of the property as security for the loan.

Mortgagee
The lender.

Mortgagor
The borrower.

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Negative Amortization
The situation occurs when a borrower's monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller. Most fixed-rate loans are not subject to negative amortization, but many adjustable-rate mortgages are susceptible.

Net Worth
The value of ones assets minus their liabilities.

Non-Recurring Closing Costs
Costs that are one-time only fees for such items as an appraisal, loan points, credit report, title insurance and a home inspection.

Note
Legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

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Offer To Purchase
A written contract setting out the terms under which the buyer agrees to buy. Upon acceptance by the seller, it forms a legally-binding contract subject to the terms and conditions stated in the document.

Open House
Marketing tool in which a listing agent opens a house for public viewing.

Open Mortgage
A mortgage which can be prepaid at any time, without penalty.

Owner Financing
A transaction in which the seller of a property agrees to finance all or part of the purchase.

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Parcel
An officially described piece of land.

Penalty
A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.

P.I. (Principal & Interest)
Principal and interest due on a mortgage.

P.I.T. (Principal, Interest, & Taxes)
Principal, interest and taxes due on a mortgage.

P.I.T.I.
The owner's typical monthly payment, which includes principal, interest, (property) taxes and (mortgage) insurance. Most lenders collect a portion of annual tax and insurance bills each month, then pay them when they're due.

Point
A point is 1 percent of the loan amount. For example, two points on a $100,000 loan would be $2,000. You can pay points to get your lender to give you a lower interest rate. Or, you can refuse to pay points and keep the interest rate offered. Often the increase in payment is quite small, so weigh the pluses and minuses carefully before you decide. Points are also called loan discount fees.

Prepayment Option
The right to prepay specified amounts of the principal balance. Penalty interest may be incurred on prepayment options.

Principal
The amount you still owe the lender at any time, not including interest. The amount of money actually borrowed.

Probate Sale
A real estate sale triggered by the death of the owner, with proceeds to be divided among heirs or creditors.

Promissory Note
A Promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer.

Property
Property is commonly thought of as a thing which belongs to someone and over which a person has total control. But, legally, it is more properly defined as a collection of legal rights over a thing.

Purchase Agreement
Also known as "Agreement of Purchase and Sale". The contract that sets out the terms and conditions agreed to by the buyer and the seller in the sale of land.

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

Qualifying Ratios
Lenders compute qualifying ratios to determine how much a potential buyer can borrow.

Queen Anne Style
A Victorian-era style of architecture that originated in San Francisco.

Quit-Claim Deed
Document that releases a party from any interest in a piece of real estate.

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Ranch House (Rancher)
A description of a one-storey house, developed from the old, western-style homes.

Rate (Interest)
The return the lender receives for loaning you the money for the mortgage.

Real Estate
Term for land and all fixtures to land, including buildings and other improvements.

Real Estate Agent
A person licensed to negotiate and transact the sale of real estate.

Real Estate Board
A non-profit organization representing local real estate brokers/agents, salespeople, which provides services to its members and maintains and operates a MLS® system in the community.

Realtor®
A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Referral
A recommendation, a suggestion to a client of the value of the services of a person or firm. (i.e. a real estate agent may refer a purchaser to a particular banker or lawyer.)

Residence
The dwelling in which a person lives, may also refer to the country or state where a person lives.

Residential Property
Real estate that is occupied by the owner.

Reverse Annuity Mortgage (RAM)
A type of mortgage where the equity in the home serves as security for periodic payments made by the lender to the borrower.Mortgage is generally paid out upon the sale of the property.

Rezoning
The amendment of the classification of a property under use and building by-laws or ordinances. A property may rezoned from industrial to residential to allow a warehouse to be converted into condominiums.

Right Of First Refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Rural
A term to describe something which is not of an urban center.

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Seller's Agent
The Seller's Agent represents the seller -- either as a Listing Agent under the listing agreement with the seller or by cooperating as a Sub-Agent, typically through the MLS® system. In dealing with prospective buyers -- customers-- the Seller's Agent can provide a variety of information and services to assist the buyer in his/her decision-making. The Seller's Agent does not represent the buyer.

Settlement (or Closing)
The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).

Specific Performance
An action to compel the performance of a contract, when money damages for breach would not be satisfactory.

Subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Survey
A measurement of land, prepared by a licensed surveyor, showing a property's boundaries, elevations, improvements, and relationship to surrounding tracts.

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Tax Lien
Claim against a property for unpaid taxes.

Tenancy
The right to use and occupy all or part of a property under a rental agreement.

Term Loan
The length of time during which you pay a specific interest rate on your mortgage loan. You may not have paid off your entire mortgage principal at the end of a term because your amortization period will likely be longer than the term.

Title (Freehold or Leasehold)
A freehold title is evidence of ownership of land and buildings for an indefinite period of time. A leasehold title is evidence of a right to sue and occupy land and buildings for a defined period of time. In a leasehold arrangement actual ownership of the land (and perhaps buildings) remains with the landlord.

Total Debt Service Ratio (TDS)
The percentage of gross annual income required to cover all payments for housing and all other debts such as car payments.

Type Of House
These definitions apply to the different types of housing on the market

Single Family Detached: This is what most American's want. It is free standing on its own lot and is occupied by one family.
Semi-detached: One of two single-family houses joined by a common wall.
Duplex: Two dwelling units, one above the other. Often the owner lives in one unit and rents the other.
Row or Town House: One of several single-family homes joined by common walls.
Link or Carriage Homes: Row houses where homes are joined by garages or carports which provide access between the front and rear yards. Builders sometimes join basement walls so that, when see above ground, link houses look like singles on small lots.
High-rise buildings: Multistory residential buildings containing apartments for rent or condominium units. Mobile or manufactured housing: A factory-built, single family dwelling designed to be transported to its ultimate site. They come in single widths or multiple widths which have to be joined on site.

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Underwriting
In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan.

Unencumbered Property
Land that has no claims, Liens or mortgages registered against it.

Uninsurable Title
Ownership of land which is subject to flaws such that a title insurance company refuses insure it.

Urban Renewal
The process of acquiring and redeveloping property for the purposes of increasing its profitability or utility. May be conducted by government, private interests or a combination of the two.

Urban Sprawl
Slang term for the growth of cities in an unplanned and often wasteful manner.

Utilities
Services, such as gas, electricity, water, sewers, which are required in any dwelling and for which the owner must pay separately. In some jurisdictions, arrears in payment of charges for utilities may form a lien on the property.

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Variable Rate
Interest rate that changes periodically in relation to an index.

Variable Rate Mortgage (Floating Rate)
A mortgage where payments can be fixed from one to five years, but the interest rate could change from month to month depending on market conditions. If interest rates go down, the monthly principal is reduced; if rates go up, the monthly payments might not cover the interest owing and payments may be increased for the next term. Most variable rate mortgages allow prepayment of any amount (with certain minimums) on any monthly payment date and usually without penalty.

Vendor Financing (Balance of Sale)
The seller sometimes takes the mortgage at a rate lower than market rates. Most of these arrangements are not renewable or transferable to the next owner.

Vendor Take Back Mortgage
Mortgage financing arranged between the seller of the property and the buyer. The title is transferred to the buyer. Often this type of loan is a second mortgage which the seller is willing to arrange at below market rates to ensure the buyer can make the purchase of the house. Most of these arrangements are not renewable nor can they be transferred to the next owner of the house.

Void
Null, not legally enforceable.

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Waiver
Voluntary relinquishment or surrender of some right or privilege.

Water Rights
The legal right to use water from a water course or body of water on a property.

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.

Writ of Execution
A claim or lien which is registered with the local enforcement officer to enforce a judgment of a court. The officer is then required to enforce the judgment against the judgment debtor and any property owned by that debtor in the jurisdiction.

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X
An X may be used as a substitute for a signature in certain instances. An individual who cannot write his or her name can indicate the intention to sign by marking an X in the place for signature. A witness would then write the name of the signer alongside the X.

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Yard
(1)A unit of measurement equaling three feet . (2)The open, unoccupied space on the plot between the property line and the front, rear or side wall of a building.


Yield
The ratio of investment income to the total amount invested over a given period of time.

Yield to Maturity
The lender's percentage of annual return on actual funds loaned, assuming that the loan will be paid in full at maturity.

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Zero Lot Line
A zoning regulation which allows certain properties to have buildings placed up to the line dividing separate properties.

Zoning Ordinances (or Zoning Regulations)
Local law establishing building codes and usage regulations for properties in a specified area.

Zoning Variance
One-time modification of existing zoning law.


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