Abstract of Title

A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an option as to the condition of title.  Also known in some states as a "preliminary title report."

Acknowledgment

A declaration made by a personal siging a document before a notary public or other officer.

Adverse Possession

Most states have laws which permit someone to claim ownership of property which is occupied by him for a number of years. This is common where a fence is erected over a boundary line (called an "encroachment") without the objection of the rightful owner. After a number of years, the person who erected the fence may be able to commence a court proceeding to declare that the property belongs to him.

All-Inclusive Deed of Trust

See "wraparound mortgage"

ALTA

American Land Title Association.

Amortize

To reduce a debt by regular payments of both principal and interest.

Appraised Value

The value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

ARM

An adjustable rate mortgage, that is, a loan whose interest rate may adjust over time depending on certain factors or a pre-determined formula.

Arrears

Payment made after its due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.

Assignment of Contract

A process by which a person sells, transfers and/or assigns his rights under and agreement.  Often used in the context of the assignment of a purchase contract by a buyer or the assignment of a lease by a tenant.

Assumable Loan

A loan secured by a mortgage or deed of trust containing no "due-on-sale" provision.  Most pre-1989 FHA loansand pre-1988 VA loans are assumable without qualification.  Some newer loans may be assumed with the express permission of the note holder.

Assumption of Mortgage

Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust.

Balloon Mortgage

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.

Basis

The financial interest one has in a property for tax purposes.  Basis is adjusted down by depreciation and up by capital improvements.

Binder

A report issued by a title insurance company setting forth the condition of title and setting forth conditions, which, if satisfied, will cause a policy of title insurance to be issued. Also known as a "title commitment."

Buyer's Agent

A real estate broker or agent who represents the the buyer's interests, although typically his fee is a split of the listing broker's commission.  Also known as the "selling agent."

Capital Gain

Profit from the sale of a "capital" asset, such as real property.  A long-term capital gain is a gain derived from property held more than 12 months.  Long-term gains can be taxed at lower rates than short-term gains.

Chain of Title

The chronological order of conveyancing of a parcel of land, from the original owner to the present owner.

Closing

The passing of a deed or mortgage, signifying the end of a sale or mortgage of real property.  Also known in some areas as "passing papers" or "closing of escrow."

Cloud on Title

An uncertainty, doubt or claim against the rights of the owner of a property, such as a recorded purchase contract or option.

Commitment

A written promise to make or insure a loan for a specified amount and on specified items.  Also used in the context of title insurance ("title commitment").

Community Property

In community property states (CA, LA, TX, WI, ID, AZ, NV, NM, WA), all property of husband and wife acquired after the marriage is presumed to belong to both, regardless of how it is titled.

Comparables

Properties used as comparisons to determine the value of a specified property. 

Condominium

A structure of two or more units, the interior space of which are individually owned.  The common areas are owned as tenants in common by the  condomium owners, and ownership is restricted by an association.

Contingency

The dependence upon a stated event which must occur before a contract is binding.  Used both in the context of a loan and a contract of sale.

Contract of Sale

A bilateral (two way) agreement wherein the seller agrees to sell and buyer agrees to buy a certain parcel of land, usually with improvements.  Also used to reference to an installment land contract (see below).

Contract for Deed

See "installment land contract"

Closing Cost

Expenses incurred in the closing of a real estate or mortgage transaction.  Most fees are associated with the buyer or borrower's loan.

Conventional Mortgage

A loan neither insured by the FHA nor guaranteed by the VA.

Cooperative Apartment

A cooperative is a corporation which holds title to the land and building. Each coop owner has shares of stock in the corporation which corresponds to an equivalent proprietary lease of his apartment space. Coops were very popular in New York City at one time, but are less common because of their lack of marketability due to high association fees.

Deficiency

The difference between the amount owed to a note holder and the proceeds received from a foreclosure sale.  The lender may, in some states, obtain a "deficiency judgment" against the borrower for the difference.

Depreciation

Decrease in value to real property improvements caused by deterioration or obsolescence.

Documentary Tax Stamps

Stamps, affixed to a deed, showing the amount of transfer tax. Some states simply charge the transfer tax without affixing stamps.  Also known as "doc stamps."

Double Closing

A closing wherein a property is bought and then sold simultaneously.  Also called "double escrow" and "flipping."

Due-on-Sale Clause

A provision in a mortgage or deed of trust that gives the lender t the option to require payment in full of the indebtedness upon transfer of title to the property (or any interest therein).

Easement

An interest which one has in the land of another.  May be created by grant, reservation, agreement, prescription, or necessary implication.

Eminent Domain

A Constitutional right for a Governmental authority to acquire private property for public use by condemnation, and the payment of just compensation.

Encroachment

Construction or imposition of a structure onto the property of another.

Encumbrance

A claim, lien or charge against real property.

Equity

The difference between the market value of the property and the homeowners mortgage debt.

Equitable Title

The interest of the purchase under an installment land contract (see below).

Escrow

Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event.

Escrow Payment

That portion of a borrower’s monthly payment held in trust by the lender to pay for taxes mortgage insurance, hazard insurance, lease payments, and other items as they become due.   Also know as "impounds."

Estate

From the English feudal system, this defines the extent of one's ownership in a property.

Estate for Years

An estate limited to a term of years. An estate for years is commonly called a "lease." Upon the expiration of the estate for years, the property reverts back to the former owner.

Fee Simple

The highest form of ownership.  An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited.  Also known as "Fee" or "Fee Simple Absolute."

Federal Housing Administration (FHA)

A federal Agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.

Freddie Mac (FHLMC)

Federal Home Loan Mortgage Corporation. A federal Agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System, and the Federal Home Loan Bank System.

Foreclosure

A proceeding to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.  About half of the states use a "mortgage foreclosure," which is a lawsuit in court.  About half use a "power of sale" proceeding which is dictated by a deed of trust and is usually less time-consuming.

Ginnie Mac (GNMA)

Government National Mortgage Association. A federal association working with FHA which offers special assistance in obtaining mortgages, and purchases mortgages in a secondary capacity.

Good Faith Estimate

A lender's estimate of closing costs and monthly payment required by R.E.S.P.A.

Grant Deed

A deed commonly used in California to convey title.   By law, a grant deed gives certain warranties of title.

Grantor/Grantee Index

The most common document recording indexing system is by grantor (the person conveying an interest, usually the seller or mortgagor) and grantee (the person receiving an interest, usually the buyer or mortgagee). All documents conveying property or an interest therein (deed, mortgage, lease, easement, etc.) are recorded by the grantor's last name in the grantor index. The same transaction is cross-indexed by the grantee's last name in the grantee index.

Heirs and Assigns

Words usually found in a contract or deed which indicate that the obligations assumed or interest granted or binding upon or insure to benefit of the heirs or assigns of the party.

Homeowner's Association

An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area.  Also used in the context of a condominium association.

Impound Account

Account held by a lender for payment of taxes, insurance, or other payments.  Also known as an "escrow" account.

Index

The measure of interest rate changes that the lender uses to decide how the interest rate on an ARM (adjustable rate mortgage) will change over time.

Installment Land Contract

The ILC is an agreement wherein the buyer makes payments in a manner similar to a mortgage. The buyer has "equitable title."  However, the seller holds legal title to the property until the contract is paid off. The buyer has equitable title, and, for all intents and purposes, is the owner of the property. Also known as a "contract for deed" or "contract of sale."

Installment Sale

A sale which is involves the seller receiving payments over time.  The Internal Revenue Code contains specific definitions and promulgates specific rules concerning installment sales and tax treatment of them.  Also known as an "owner carry" sale.

Insured Mortgage

A mortgage insured against loss to the mortgagee in the event of default and failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure.

Interest Rate

The percentage of an amount of money which is paid for its use for a specified time.

Joint and Several Liability

A liability which allows a creditor to collect against any one of the debtors for the entire amount of the debt, regardless of fault or culpability.  Most mortgage notes that are signed by husband and wife create joint and several liability. 

Joint Tenancy

An undivided interest in property, taken by two or more joint tenants. The interests must equal, accruing under the same conveyance, and beginning at the same time. Upon death of a joint tenant the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Judgment

The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Land Lease

Owners of property will sometimes give long-term leases of land up to 99 years. A lease of more than 99 years is considered a transfer of fee simple. Land leases are commonly used in lands that are held by a government entity but leased for development. They are also often used to build banks, car lots and shopping malls upon.

Land Trust

A revocable, living trust primarily used to hold title to real estate for privacy and anonymity.  Also known as an "Illinois Land Trust" or "Nominee Trust."  The land trustee is a nominal title holder, with the beneficiaries having the exclusive right to direct and control the actions of the trustee.

Lease/Option

An agreement by which the lessee (tenant) has the unilateral option to purchase the leased premises from the lessor (landlord).  Some lease/option agreements provide for a portion of the rent to be applied towards the purchase price.  The price may be fixed at the beginning of the agreement or be determined by another formula, such as an appraisal at a later time.  Also referrred to as a "lease/purchase."

Lease/Purchase

Often used interchangeably with the expression "lease/option," but technically means a lease in conjunction with a bilateral purchase agreement.  Often used by real estate agents to mean a purchase agreement whereby the tenant takes possession prior to close of escrow.

Lien

An encumbrance against property for money, either voluntary (e.g., mortgage) involuntary (e.g. judgment) or by operation of law (e.g. property tax lien).

Life Estate

An estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party.

Lis Pendens

A legal notice recorded to show pending litigation relating to real property and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.  Often filed prior to a mortgage foreclosure proceeding.

License

An authority to do a particular act or series of acts upon the land of another without possessing any estate or interest therein. (E.g., a ski lift ticket). A license is similar to an easement in that it gives someone permission to go across your property for a specific purpose. An easement is a property interest, whereas a license is a contractual right.

Liquidated Damages

A contract clause which limits a party to a sum certain in lieu of actual damages.  In the case of a real estate purchase and sale contract, the seller's legal remedy is limited to the buyer's earnest money deposit.

Loan-to-Value Ratio

The ratio of the mortgage loan amount to the properties appraised value (or the selling price whichever is less).

Market Analysis

A report estimating the resale value of a property.   Usually prepared by a real estate agent showing comparable sales of properties in the vicinity based on tax records and information from the Multiple Listing Service.

Marketable Title

Title which can be readily marketed to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

Mechanics Lien

A lien created by state law for the purpose of securing priority of payment for the price of value of work performed and materials furnished in construction of repair of improvements to land, and which attached to the land as well as the improvements.

Mortgage Broker

One who for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.

Mortgage Guaranty Insurance Corporation (MGIC)

A private corporation which, for a fee, insures mortgage loans similar to FHA and VA insurance, although not insuring as great a percentage of the loan.

Mortgage

A security instrument given by a borrower to secure performance of payment under a note.  The document is recorded in county land records, creating a lien (encumbrance) on the property.  Also known as a "deed of trust" in some state.  The borrower is also called a "mortgagor."

Mortgage Insurance

Insurance required for loans with a loan-to-value ratio above 80%.  Also called "PMI," "MIP."

Note

A written promise to repay a certain sum of money on specified terms.  Also known as a "promissory note."

Option  

The unilateral right to do something.  For example, the right to renew a lease or purchase a property.  The optionee is the holder of the option.  The optionor is the grantor of the option.  The optionor is bound by the option, but the optionee is not. 

Originination Fee

A fee or charge for work involved in the evaluation, preparation and submission of a proposed mortgage loan.   Usually about 1% of the loan amount.

Performance Mortgage

A mortgage or deed of trust given to secure performance of an obligation other than a promisorry  note

Periodic Tenancy

An estate from week-to-week, month-to-month, etc. In the absence of a written agreement (or upon the expiration of a lease once payments are accepted), a periodic tenancy is created. Either party can terminate this type of arrangement by giving notice, usually equal to the amount of the period or as prescribed by state law.

Points

Fee paid by a borrower to obtain a loan.  A point is one percent of the principal amount of the loan. The borrower may usually pay more points to reduce the interest rate of the loan.

Prorate

To divide in proportionate shares.  Used in the context of a closing, at which such as propery taxes, interest, rents and other items are adjusted in favor of the seller, buyer or lender.

Purchase Money Mortgage

A loan obtained in conjunction wit the purchase of real estate.

Quiet Title Proceeding

A court action to establish or clear up uncertainty as to ownership to real property. Often required if a lien or cloud appears on title that cannot be resolved.

Quit Claim Deed

A deed by which the grantor gives up any claim he may have in the property.  Often used to clear up a cloud on title.

Real Estate

Land and anything permanently affixed to the land, and those things attached to the buildings.

Recording

The act of publicly filing a documents, such as a deed or mortgage

Recourse Note

A note under which the holder can look personally to the borrower for payment.

Redemption

The right, in some states, for an owner of lien holder to satisfy the indebtedness due on a mortgage in foreclosure after sale.

Refinancing

The repayment of a loan from the proceeds of a new loan using the same property as collateral. 

Re-issue Rate

A discounted charge for a title insurance policy if a previous policy on the same property was issued within a specified period (usually three to five years).

Release

An instrument releasing a lien or or encumbrance (e.g., mortgage) from a property.

RESPA (Real Estate Settlement Procedures Act)

A federal law requiring disclosure of certain costs in the sale of residential property which is to be financed by a federally insured lender.   Also requires that the lender provide a "good faith estimate" of closing costs prior to closing of the loan.

Second Mortgage

A loan secured by a mortgage or trust deed, which lien is junior to a first mortgage or deed of trust.

Secondary Mortgage Market

The buying and selling of first mortgages and deeds of trust deeds by banks, insurance companies, government agencies, and other mortgagees.

Security Instrument

A document under which collateral is pledged (e.g. mortgage)

Settlement Statement

A statement prepared by a closing agent (usually a title or escrow company) giving a complete breakdown of costs and charges involved in a real estate transaction.  Required by RESPA on a form HUD-1.

Specific Performance

An action to compel the performance of a contract.

Sublet

To let part of one's estate in a lease.  A subtenant is not in privity of contract with the landlord and neither can look to each each for performance of a lease agreement.

Subject-To

When transferring title to a property encumbered by a mortgage lien without paying off the debt or assuming the note, the buyer is taking title "subject to."

Subordination

The process by which a lien holder agrees to permit his lien to become junior or "subordinate" to another lien.

Tenancy in Common

With tenancy in common, each owner (called a "tenant") has an undivided interest in the possession of the property. Each tenant’s interest is salable and transferable. Each tenant can convey his interest by deed, mortgage or by a will. Joint ownership is presumed tenants in common if nothing further is stated on the deed.

Tenancy by the Entirety

A form of ownership recognized in some states by which husband and wife each owns the entire property. As with joint tenancy, in event of death of one, the survivor owns the property without probate.  In some states, tenancy by entirety protects the property from obligations of one spouse.

Title

Title is the evidence of ownership. In essence, title is more important than ownership because having proper title is proof of ownership. If you have a problem with your title, you will have trouble proving your ownership and thus selling or mortgaging your property.

Title Insurance

An insurance policy which protects the insured (purchaser and/or lender) against loss arising from defects in title.  A policy protecting the lender is called a "Loan Policy," whereas a policy protecting the purchaser is called a "Owner's Policy."  Virtually all transactions involving a loan require title insurance.

Truth in Lending

Federal law requiring, among other things, a disclosure of interest rates charges and other information about a loan.

Upside Down

A slang term that describes the condition when more money is owed against collateral than the value of the collateral itself. Example: Suzy owes a mortgage for 110,000 dollars and the property is only worth 100,000 dollars.

Warranty Deed

A deed under which the seller makes a guarantee or warranty that title is marketable and will defend all claims against it.

Wraparound Mortgage

A mortgage that is subordinate to and incorporates the terms of an underlying mortgage.  The mortgagor (borrower) makes payments to the mortgagee (lender) who then makes payments on an underlying mortgage.  Also referred to as an "all inclusive deed of trust" in some states.

Yield Spread Premium

A "kickback" from the lender to the mortgage broker for the additional profit made from marking up the interest rate on a loan.

GLOSSARY • FAQ • LINKS

Frequently Asked Questions

GLOSSARY • FAQ • LINKS

Useful Links

LEGAL SITES

Fair Credit Reporting Act Summary of your rights regarding credit reporting.

State Databases Links to online state databases for searching available corporate names, UCC searches and other public information.

Municipal Codes  Links to over 500 municipal codes around the country!

National Registered Agents, Inc Provides registered agent service for corporations.  Great source of links for  more legal research on their site.

State Codes & Statutes  Links to Online Codes & Statutes for every state!

State Landlord/Tenant Laws & Eviction Rules From Rental Housing Online. Links to state eviction rules, security deposit laws, rent control rules and apartment associations.

State Property Law Statutes  A collection of online state statutes relating to property law from Cornell University.

Corporation Department & Secretary of State Pages  Links to state agencies for searching available business names, trade names, etc.

United State Bankruptcy Code  Searchable index courtesy of Cornell Law School.

Garn-St. Germain Depositary Institutions Act  Text of Federal law pertaining to "Due-on-Sale" Clauses

Federal Tax CodeSearch or browse the entire text of the Internal Revenue Code

Findlaw  The ultimate one-stop shop for finding legal information.  Contains searchable index and links to all 50 states laws

IRS Digital Daily Great information and downloadable official publications.

United States Constitution Full text courtesy of Findlaw.com

LANDLORD / TENANT

Mr. Landlord Collection of links to state law summaries of landlord-tenant law.

Tenant Insider Free and subscriber information commercial, retail, office and industrial leasing.

Saferent Receive complete, objective leasing recommendations in 30 seconds!

Tenant Credit Reports Service that provides credit reports for landlords and property management companies.

Rental Housing Online Rental housing information for Landlords, Tenants & Real Estate Investors.  Hundreds of free pages, dozens of valuable services, even more for members (Java applet-based, so be patient with loading pages!)

Federal Fair Housing Law Full text of federal fair housing statute.

Housing Discrmination Guide Free from Nolo Press (should really be called "Housing NON-discrimination Guide, Shouldn't it?!)

REAL ESTATE LAW & REAL ESTATE RELATED GOVERNMENT SITES

State Landlord/Tenant Laws & Eviction Rules From Rental Housing Online. Links to state eviction rules, security deposit laws, rent control rules and apartment associations.

State Property Law Statutes A collection of online state statutes relating to property law from Cornell University.

State Law Limits on Security Deposits State-by-State summaries from Yahoo! Real Estate & Nolo Press

Real Estate Licensee Rules A compendium of online real estate manuals and laws for most states.

State by State Guide to Escrow Closings Who does closings in my state? What types of deeds are used? Who pays title insurance? When are property taxes due? Find out the answers to these questions and more!

Public Records Searches Links to FREE state records databases, including real estate records.

County Real Estate Records A nationwide listing of County real estate recording offices.

Are You Covered? Answers to common questions about homeowner's insurance coverage.

FORECLOSURES AND BANK OWNED PROPERTIES

Foreclosures.com Excellent guide to foreclosure information nationwide. Offers accurate, state-specific lists of foreclosures for AZ, CA, IL, NY & NJ.

Fannie Mae Online List of online single-family properties for sale.

First Union Bank Foreclosure REOs from a large national bank.

Foreclosure Process in Canada Website detailing Canadian foreclosures & listings.

HUD and VA Foreclosures A free nationwide database of HUD & VA repos for sale.

Bank of America Online list of real-estate-owned (REO) properties.

Federal Real Estate Loans & Mortgages Information about credit reporting, foreclosed homes, government and bank-owned properties.

CalPost.com California, Arizona & Nevada foreclosure auctioneers that have listings, including property photographs, opening bids, and property detail.

All-Foreclosure Information National sources for pre-foreclosure, some how-to info and newsgroups to talk to others interested in foreclosure.

Department of Housing & Urban Development A wealth of consumer information on housing, mortgages, discrimination laws, government laws and a state by state list of recently foreclosed homes for sale.

Foreclosure Free Search.com Another state-by-state searchable index of foreclosure properties.

REAL ESTATE INVESTING RELATED SITES

Dealmaker's Cafe Subscriber-based discussion forums for real estate investors

CASHFLOW INSTITUTE - Real Estate Investing And Entrepeneur Catalog

Yahoo Home Values List of comparable sales by address and price in selected states.

Dataquick Detailed information on home sales, comparables, businesses & UCC filings. Fee-based.

First Amercian Real Estate Services Detailed information on home sales, mortgages and loans from public records. Fee-based.

U.S. Housing Markets Collection of local, regional and national housing data.

Real Esatate Investor Web Sites Professional real estate web sites built specifically for the creative real estate investor.

Real Estate Software RealtyGuide's excellent list of of links to real estate-related software online.

Best Real Estate Site Articles about foreclosures, real estate paper and HUD homes.

REALS.com  A Comprehensive Real Estate Directory of agents, lawyers, mortgage brokers, assocations, builders and 50 other categories related to real estate.

Inman Real Estate News Service Features daily real estate news, book reviews and articles from various authors, including syndicated columnist Robert Bruss.

Creative Real Estate Online  Popular site for real estate investing information, including articles from various authors, chat room and newsgroup.

Wealth Network. Over 7,000 pages of information, including articles, FREE software, reports and newsletters, landlord, mortgage and foreclosure laws for all 50 states.

Asset Solutions 2100, LLC. A Real Estate Investment program involving insured international bank instruments in exchange for equity.

Real Estate Link.net An online community of real estate investors sharing ideas.

Real Estate Investing.com A national web site network covering all fifty states & over one hundred cities!

Vandema.com Canadian-based real estate website, offering residential and commercial information.

Real Estate Exchange Nationwide listing of properties for sale with owner terms and exchange

MORTGAGES AND LOANS

HardMoney.com Private residential and commercial bridge loans.  Online applications.

Hard Money Network A list of real estate "hard money" equity lenders.

Mortgage 101 A vast resource for everything and anything about mortgages, including eligibility for VA and FHA loans.

Microsoft Home Advisor Contains tips for buying, inspecting, selling and the closing process, as well as a huge search engine for mortgage loan information.

Go Free & Clear. Information about the inside secrets of home mortgage financing.

NOTE BUYERS

America's Note Network A secondary market for real estate notes and other cash flows.

Midwest Notes A nationwide note purchasing firm specializing in helping Real Estate Agents, Builders, and Investors close more transactions by using Owner Finance Notes. Good information on the "how to" side of simulteanous closings.

GROUPS AND ASSOCIATIONS

Association of Independent Real Estate Owners Dallas-based real estate investors organization.

Boca Real Estate Investment Club South Florida's premier investor association entering it's 10th year.

Texas Real Estate Club Online community for real estate investing.

Real Estate Investment Club of Los Angeles Local investment group for Los Angeles area.

San Diego Creative Investors Assoc. Local investment group for San Diego

Colorado Association of Real Estate Investors  Website for Colorado Real Estate Information.

Wealth Builders Group of Tampa Bay  Local investment group for west coast Florida investors.

Real Estate Navigators  Local investment group for west panhandle Florida investors

GLOSSARY • FAQ • LINKS