Massachusetts Real Estate Glossary


Real estate agents and those we partner with during real estate transactions use many words and phrases to describe what is going in at any given moment. I thought it was time to start putting all of the real estate terminology into one place so that anybody who is looking to purchase or sell a house can find definitions easily.

There are too many terms to complete this in one sitting so I will continue to add to the list in alphabetical order. If you notice any words that are missing, I would love to hear from you so I can add them. When the real estate glossary is complete, I will offer it as a PDF file that you can download.

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Massachusetts Real Estate Glossary


Top South Shore real estate agent Alice Pierce

The term ‘abatement’ is a common legal term meaning “the beating down, removal, or diminishment” of something. The term is sometimes used in a homebuyer’s Purchase and Sale Agreement, or inspection report. A “Lead Abatement” means that the lead paint used many years ago on an older house must be removed. The term “Rent Abatement” is a financial incentive offered by a landlord like a reduction in typical fees, free rent or early occupancy.

Absorption Rate
The absorption rate uses a formula to measure how quickly real estate is selling or leasing. The higher the rate, the faster the real estate market is. In real estate sales, the formula is calculated by using the number of home sales for a specific period of time and dividing it by the number of homes on the real estate market. An absorption rate above twenty percent mean that the market is favoring home sellers, and a rate below fifteen percent means that the real estate market is favoring home buyers.

The absorption rate is also used for commercial real estate. Available rental space is divided into the total number of leased and occupied square feet within a certain time period, and then space that was already occupied is subtracted from that total.

Abstract of Title
An abstract of title is the historical summary of recorded instruments and proceedings on the title of a property.

Acceleration Clause
A condition of a mortgage that allows the lender to demand payment of the outstanding loan balance for various reasons like payment default, or uninformed title transfers.

The word ‘active’ is used to describe homes currently for sale in the Multiple Listing Service (MLS).

Active Contingent
Active contingent means that the home seller has received an offer on their home, but the person making the offer has to meet certain conditions before the sale can be finalized.

Active First Right
Active/First Right means that a prior arrangement has been made between a home seller and home buyer where the buyer is given the opportunity to match any offers. An offer is made contingent on the sale of the buyer’s current home. The home in questions remains active on the real estate market, and when another offer comes in, the first buyer can either back out or purchase using the same terms as the new offer.

Active income

Income from salary, wages, tips, commissions, and activities in which the taxpayer materially participates.

An addendum is part of a homebuyer’s Purchase and Sale Agreement used for additional information not found in the original agreement.

Air Rights
Air rights are the legal ability to use or control the space above a property. Air rights can be sold, rented or leased to another party.

Adjustment date
The date the interest rate changes on an adjustable-rate mortgage.

Adjustable-Rate Mortgage or ARM
An adjustable rate mortgage loan is also called by its acronym “ARM.” It is a home owner’s loan where your interest rate changes at set intervals. The adjustment in the monthly payments depends on the benchmark index or prime rate.

Adjusted Sales Price
The adjusted sales price is the price on the purchase contract, minus credit concessions by the seller.

Amenities are enhanced features of a home that are not considered typical necessities. These usually include things like fireplaces, swimming pools, bowling alleys, docks, gardens etc.

Amortization is the repayment of your mortgage in equal monthly installments. Amortization assigns part of your monthly mortgage payment towards accruing interest and part towards the principal loan amount. When your loan begins, most money is paying off interest. Over time, the interest portion decreases as the balance of your loan decreases. This results in more money being applied towards the principal.

Amortization Schedule
An amortization schedule shows how much money is going towards principal and interest each month.

Annual Percentage Rate or APR
This number represents the cost of borrowing money including interest and all fees associated with the loan. The percentage comes from a government formula meant to reflect the yearly cost of borrowing.

The form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.

Assessor Parcel Number or APN
An Assessor Parcel Number (APN) is the unique number assigned to each plot of land by a county tax assessor. The local government uses APNs to identify and keep track of land ownership for property tax purposes.

An appraisal is the evaluation of a property by a licensed appraiser who, in the context of a real estate transaction, is working on the behalf of a lending institution. The appraiser submits a report that is a written justification of the selling price of the home. The appraisal is based on an analysis of comparable home sales of in the area. The lender uses the appraisal to ensure the value of the home is equal to or greater than the loan amount.

An individual qualified by education, training, and experience to estimate the value of real property and personal property.

Appraised Value
An appraiser’s opinion of a property’s fair market value based on comparable sales.

Appreciation is the increase in your home’s value over time based on changes in market conditions, inflation, or other causes.

A home assessment is the value assigned to your home for the purpose of determining property tax payments. Home assessments are not the same as than home appraisals.

Assessed Value
The valuation placed on property by a public tax assessor for purposes of taxation.

A public official who establishes the value of a property for taxation purposes.

An asset is something owned by an individual that has value. Liquid assets are things like bank accounts, stocks, bonds, and mutual funds that can be quickly converted into cash. Other assets include real estate, personal property, and debts owed.

Assignment is the process where a contract is transferred from one party to another. Things like mortgages, leases and deeds of trust can be assigned. If ownership of your mortgage is transferred it is called an assignment.

Assumable Mortgage
An assumable mortgage is a home loan that can be transferred from the home seller to the home buyer.

This is the term used when a buyer assumes the seller’s mortgage.

The attorney-in-fact is a person appointed to perform legal acts for another under a power-of-attorney.

An auction is where property is sold at a public forum.

An average is calculated by adding together each number in a set and dividing by the total number of values. Sometimes real estate data reflects the median price rather than the average price since extremely high and low property values skew the data.

MA Real Estate Terms

Backup Offer

A backup offer is when a home seller has already accepted an offer from a buyer, but is still accepting new offers.

Balance Sheet
A financial statement showing assets, liabilities, and net worth as of a specific date.

Balloon Mortgage
A balloon mortgage is a short-term mortgage with fixed installments of principal and interest that do not fully amortize the loan. The balance of the mortgage, or the remaining principal is due in a lump sum at the end of the term. The mortgage may have the optiosn to extend the due date and reset the interest rate with certain conditions.

Balloon Payment
The final lump sum payment that is due at the maturity date of a balloon mortgage.

Bankruptcy happens when someone files for financial restructuring in federal bankruptcy court in order to relieve themselves of debts and liabilities. It is determined to be a legal state declaring one unable to pay back debts.

Before-tax Income
Is also known as gross income, and is one’s income before taxes are deducted.

Bill of Sale
A document that transfers the title to personal property and often required to document the source of your funds.

Biweekly Mortgage
A mortgage requiring payments every two weeks. The extra payments substantially reduce the principal, and therefore the amount of time it usually take to pay off a thirty year mortgage.

Board Approval
A condition in a cooperative sales contract that requires approval from the board of directors of the cooperative corporation before completing the sale.

Bona fide
In good faith, true.

Bond Market
The daily buying and selling of thirty year treasury bonds. Fixed rate mortgages are affected by market yields.

Bridge Loan
Bridge loans are used when a buyer has not yet sold their current property and is closing on a new property. This short-term loan then funds the new down payment and is paid off at the sale of the other.

Broker has several meanings and is often a misused term. Many people call Realtors “brokers,” when in fact they are agents who work under a broker. The general definition is anyone who brings two parties together for one transaction and earns a fee.

Broker Price Opinion
This is an estimate of a home’s value, and determined by a real estate agent. Also called a Market Value Analysis of Comparable Values.

Building Code
Guidelines set by local governments to determine that a building’s design and construction are safe, habitable environments. Homeowners must get a permit before building a new home, get a home inspection and a certificate of occupancy confirming that the home is up to code for the safety, health and welfare of the public.

A terms sometimes used in property listings that means a seller has already received an offer from a buyer who has not yet met the conditions of the sale.

Bump Clause
A term used in the Purchase and Sale Agreement stating that an offer on the home is valid only if the buyer is able to sell his current home.

This is a fixed rate mortgage where the interest rate is “bought down,” usually for one to three years. After this the payments return to market rates. The interest rate is bought down using a money held in an account just for theses purposes and supplements the borrowers monthly payments. The money in the account often comes from the seller or property developer and is incentive to buy their property.

Buydown Account
The account where funds are held as they are applied to a monthly mortgage payment.

Buyer’s Agency Agreement
The document a prospective buyer signs to work with a buyer’s agent at a particular brokerage firm. Aside from a standard buyer’s agency form, brokerage forms provide their own agreement with conditions of the relationship between the buyer’s agent, his brokerage and the prospective buyer. Buyer’s agency agreements ensure that the buyer’s agent is compensated if a sale occurs.

Buyer’s Broker
A buyer’s broker is a Realtor who represents the buyer in a property purchase. Also called a buyer’s agent, this person negotiates with the listing agent to come to a final price.

Buyer’s Market
A buyer’s market favors anyone looking to purchase a home, and one where there is more supply than demand.

By-laws are the rules by which the cooperative corporation or condominium operates.

Real estate terms and definitions


A component of an Adjustable Rate Mortgage (ARM) that limits the amount of change to a mortgage loan interest rate.

Capital Expenditure
How much money is spent on permanent renovations or improvements to your home that will last longer than one year.

Capital Gain
A profit the seller makes from the sale of their property

Capital improvement
Something done to add value to your home.

Cash-out Refinance
When refinancing a mortgage for personal use by borrowing more money than the balance on the current loan

Carry-Cost Rule
Used by banks to evaluate borrowers by giving the maximum percentage of a borrower’s income that the bank will accept.

Cash Flow
The money produced by an investment property after deducting expenses and debt.

Cash Reserve
Money in a bank account at the time of closing that is equal to a predetermined number of months of the cost of principal, interest, taxes, and insurance.

A warning or caution added as an amendment to a contract of sale.

Caveat Emptor
Means “let the buyer beware.”

Certificate of Occupancy
Certificate issued by a local government that states the structures on the property or structural improvements comply with the codes, ordinances and regulations so that they may be occupied.

Certificate of Title Opinion
Report based on a title examination where the examiner states an opinion of the quality of a title.

Cession Deed
Used to relinquish property to a municipality for a road or other public work necessity.

A land measurement that equals 66 feet.

Chain of Title
The successive conveyance of title to a particular parcel of land.

Personal property.

Civil Rights Act of 1866
Federal law that prohibits all discrimination on the basis of race.

Civil Rights Act of 1964
Federal law that prohibits discrimination on the ground of race, color, or national origin under any program or activity receiving federal financial assistance.

Transfer of ownership of a property from seller to buyer.

Closing Costs
Expenses incurred in the purchase and sale of real estate. These are paid at the time of closing.

Closing Statement
Accounting of funds received and distributed in a real estate transaction.

Cluster Zoning
Zoning that provides for different types of land use within a zoned area.

Arrangement between two brokerage firms to share a commission.

Code of Ethics
The Code of Ethics is any standard of conduct, in the case of real estate it is required by license laws and by the National Association of Realtors.

Some tangible security put up in exchange for a loan, which can be taken by the bank if the loan goes unpaid. The collateral is the property in the case of a home loan.

Commercial Zones
Allow usage for retail stores, restaurants, hotels and service businesses.

Percentage of purchase price paid to the real estate broker for his or her efforts marketing and selling the property.

Commission Split
Sharing of commissions between the listing real estate agent and the other Realtor involved.

Commitment Fee
A fee paid to the lender for processing, underwriting and originating the mortgage.

Commitment Letter
A letter issued by the lender to the home buyer stating that states funds will be provided subject to the written terms and conditions.

Common Charge
The monthly charge levied by a condominium to cover the cost of maintaining the common areas and services, also called “Condo Fees.”

Comparables (Comps) or Comparative Market Analysis
Used to assess the fair market value of a property by comparing like real estate.

Compensatory Damage
Amount of money lost, which will be awarded by a court in case of a breached contract.

Competent Parties
People or organizations who are legally qualified to manage their own affairs, including entering into contracts.

Complete Performance
Execution of a contract once all parties have performed all terms.

The taking private property for public use.

Condemnation Value
Market value of condemned property.

Any fact or event detailed in a contract that, without occurring, extinguishes a legal obligation.

Ownership of a building is partitioned into unit interests where every owner receives a unit deed and owns an individual unit, but common areas are shared with the other unit owners.

Condominium Declaration
The document that creates a condominium which is also called a master deed.

Conforming Loan
A mortgage issued within the framework of Fannie Mae/Freddie Mac guidelines.

The homogeneous uses of land within a given area to maximize land value.

Consent Decree
A compromise in civil lawsuits where the accused party agrees to stop alleged illegal activity without admitting guilt.

Is anything of value, as recognized by law, offered as persuasion to enter into a contract.

Construction Loan or Mortgage
A short-term loan to obtain funds to construct an improvement.

Constructive Eviction
When the premises become unsuitable for use as described in a lease.

Consumer Price Index (CPI)
An index used to measure of the rate of inflation.

A contractual condition relieving a party of liability if a specified event occurs or does not occur.

A legally binding agreement between two parties. A Contract of Sale in real estate is but one of many real estate contracts.

Contract Buyer’s Policy
Title insurance that protects the contract buyer against defects in contract seller’s title.

Contract for Deed
A contract of sale where the seller agrees to convey the property title when the buyer completes the purchase.

Contract Vendee Sale
A transaction where a seller transfers the right of possession and obligations of ownership to the purchaser and agrees to close at a future date.

Conventional Mortgage Loan
A home loan without federal government guarantees of payment to the lender and is for an amount under that of a jumbo mortgage.

Change in ownership status.

Convertible Apartment
An apartment that has space to make another bedroom.

Transfer of title to real property.

Cooling-off Period
The three-day right of rescission for certain loan transactions.

Cooperative (Co-op)
An apartment building owned by a corporation where each apartment is allocated shares of stock and a proprietary lease.

A title to real property held by two or more people, and at the same time.

Cost Approach
An property appraisal method used when few, if any, comparables are available.

A new offer made by the buyer or seller when rejecting a previous offer.

A promise made in writing.

Covenant Against Encumbrances
A promise that the title does not cause encumbrances except those set forth in the deed.

Covenant for Further Assurances
Promise that the grantor will execute further assurances to perfect the title.

Covenant of Quiet Enjoyment
Promise in a deed or lease that the property is free from defects that might prevent quiet enjoyment of the same.

Covenant of Right to Convey
A promise that the grantor has the legal capacity to convey the title.

Covenant of Seisin
Assurance to the grantee that the grantor has the title in possession.

Covenant of Warranty
A promise that the grantor will defend the title against lawful claimants.

Credit Score
A numerical rating provided on a credit report.

Cubic-foot Method
A means of estimating reproduction or replacement cost, using the volume of the structure.


An amount financial loss incurred as a result of another’s action.

An amount of money or value owed to another.

Debt-to-Equity Ratio
Sometimes referred to as the loan-to-value ratio. A condition used by banks that requires a borrower to invest a minimum amount of cash in order to get a mortgage. This amount is typically from 10% to 25% of the purchase price.

Debt Service
The overall monthly cost of carrying a loan that includes the payment of interest and principal.

Debt-to-Income Ratio or Debt-Service Ratio
A borrower’s monthly payment divided by gross monthly income, expressed as a percentage. Sometimes called “bottom ratio.”

The master deed that has the legal description of a condominium facility.

Declaration of Restrictions
The document used to record restrictive covenants on the public record.

An appropriation of land or an easement by the owner to the public.

Dedication by Deed
Deeding of land to a municipality.

Deductible Expenses
The tangible costs of operating investment of business property that are subtracted from gross income to arrive at net income.

A legal document that conveys title to a property.

Deed in Lieu of Foreclosure
A deed that conveys title to a lender when the borrower is in default and wants to avoid foreclosure. The lender can then choose whether or not to discontinue foreclosure activities.

Deed Restriction
A imitation on land use appearing in a deed.

Deed of Trust
Some states, like California, record a deed of trust instead of a mortgage. Both equate to the same thing.

A failure to pay mortgage payments when they are due resulting in a breach of the mortgage contract.

Defeasance Clause
Statement in a mortgage or deed of trust that gives a borrower the right to redeem the title and have the mortgage lien released at any time prior to defaulting by paying the debt in full.

Defeasible Fee
A revokable, conditional title.

Deficiency Judgment
A court judgment obtained by a mortgagee for monetary deficiency after a foreclosure sale.

A failure to make a mortgage payment on time.

Delivery and Acceptance
The moment when the transfer of a title by deed is given by the grantor to the grantee.

Conveyance of a leased estate for years.

Also called an “earnest money deposit,” a deposit is a sum of money given in advance of a larger amount.

When the value of property declines.

Distribution of property to qualified heirs.

Description by Monument
Legal description of multiple-acre tracts of land referring to permanent objects like stone walls, large trees or boulders.

Description by Reference
A deed description that refers to a plat of subdivision or other legal document.

Gift of real property by will.

Disclosure and Informed Consent
A description of a real estate agent’s relationship to his or her agent and the verbal and written consent of the relationship by the client.

Disclosure Statement
Accounting of all financial aspects of a mortgage loan.

Discount Points
A reference to government loans and loan points that are paid for.

Distribution Box
Septic system component that distributes the flow from a septic tank evenly to the absorption field.

Dominant Tenement
Land that benefits from an easement.

Double-Declining-Balance Depreciation
A technique for tangible property where an asset is divided by its useful life and the resulting number doubled. In every year following, the accumulated depreciation is deducted from the original asset value to calculate depreciation.

Part of the real estate of a deceased husband given by law to his widow during her life.

Down payment
Percentage of the purchase price of a property that the buyer pays in cash, in the form of a certified check without borrowing.

Dual Agent
A broker or real estate agent who represents the buyer and seller in the same real estate transaction.

Due Diligence
Investigation of a property to determine any legal liability.

Due-on-Sale Provision
A condition where the mortgage allows the lender to demand repayment in full if the borrower sells the property.

Duplex Apartment
A duplex apartment consists of a two level, rented living space.


Earnest Money Adjustment
Deposit made by a buyer when submitting an offer that demonstrates the intent to purchase. Sometimes called a binder or good faith deposit and shows the buyer is serious about the purchase.

A right of way allowing the use of land without ownership.

Easement Appurtenant
The right to use adjoining land of another. This right moves with the title of the property with the easement.

Easement by Condemnation
Exercising the right of eminent domain.

Easement by Grant
An easement granted in a written agreement between landowners, most commonly in a deed.

Easement in Gross
Right to land use without the requirement that the holder of the right own adjoining land.

The lowest part of the roof that projects beyond the walls of the structure.

Economic Depreciation
The physical deterioration of property caused by damage, normal use, or failure to adequately maintain property.

Economic Life
The period of time during which property is financially beneficial to its owner.

Effective Age
Rather than an actual, chronological age number, an appraiser makes an estimate of the physical condition of a building that may or may not match its actual age in years.

Effective Interest Rate
The actual rate of interest paid on a loan.

An exit from a building or parcel of land.

Eminent Domain
The right of a government to take private property for public use upon payment of its fair market value.

Enabling Acts
The authorization of cities and counties to regulate land use within their jurisdictions by law.

The trespassing on land by a structure or other object usually made when improvements are made.

Liability, claim or lien attached to real property.

Environment Impact Statement (EIS)
The State Environmental Quality Review Act requires a statement prior to the change of land use when it might have an adverse effect on the environment.

Environmental Protection Agency (EPA)
The federal agency that oversees land use.

Equal Credit Opportunity Act (ECOA)
A federal law that prohibits discrimination.

Equitable Title
Made so that a court will take notice and protect the owner’s rights.

The difference between the fair market value of a property and the amount still owed on its mortgage and other liens.

Equity of Redemption
After a default and before a foreclosure sale, the borrower may redeem the title by paying off all debt in full.

When land wears away due to natural causes.

When the government takes title to property left by a person who dies without a will or heirs.

A sum of money held in trust for the purpose of assuring the performance under an agreement. Usually an escrow account is used to hold deposits in residential real estate transactions.

Escrow Account
Along with a monthly mortgage payment, the home owner pays into this account on a monthly basis to ensure that the money is there when taxes and insurance fees are due.

Escrow Analysis
Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the expenditures.

Escrow Disbursements
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

The ownership interest of an individual in real property at the time of death.

Estate at Sufferance
Occupation of property after legal authorization has expired.

Estate at Will
A condition of a lease that may be terminated at any point by either party. Known as tenant at will in a rental.

Estate for Life
When the interest of real property ends with the person’s death.

Estate for Years
A lease term of definite duration.

Estate from Year-to-Year
A lease that automatically renews itself for consecutive periods until terminated by either party.

Estate in Real Property –
Having a sufficient interest to provide the right to use, possession, and control of land. I

Estoppel Certificate
A document executed by a mortgagor or mortgagee that defines the amount of principal.

When a landlord uses court process to remove tenant from property.

Examination of Title
The report on the title of a property from the public records or an abstract of the title.

Exclusive Agency Agreement or Exclusive Listing
A real estate agency agreement between seller and broker designating the broker as the home seller’s sole agent for the purpose of selling his or her property. The home owner can still make a sale on their own.

Exclusive Right To Sell Agreement
Same as above, however, if the home owner sells the home, a commission is still due to the broker.

Exclusive Use Zoning
Zoning where only the specified use may be made of property within the zoned district.

Executed Contract
An agreement that has been fully performed.

A person named in a will to administer an estate.

Express Agency
A relationship between the principal, or broker, and real estate agent. For example, Coldwell Banker is the principal and Alice Pierce is the agent.


Fair Credit Reporting Act
Consumer protection law that regulates the disclosure of consumer credit reports by reporting agencies and establishes procedures for ways to correct errors on a credit report.

Fair Housing Act of 1968
A federal act that prohibits discrimination in the sale, rental or financing of housing on the basis of race, color, religion, gender or national origin.

Fair Housing Act of 1988
An update to the above act prohibiting discrimination in the sale, rental, financing, or appraisal of housing on the basis of race, color, religion, gender, national origin, handicap, or familial status.

Fair Housing Amendments Act of 1988
A specific amendment to the Fair Housing Act prohibiting discrimination because of the presence of a mental or physical handicap, or family status.

Fair Market Value
An agreed upon price for property between buyer and seller in a competitive market.

Fannie Mae
The short name for the Federal National Mortgage Association (FNMA), a privately owned corporation that purchase FHA, VA, and conventional mortgages.

Fannie Mae’s Community Home Buyer’s Program
An income-based community lending model with flexible guidelines to increase a family’s buying power by decreasing the total amount of cash deposit needed to purchase a home.

Federal Housing Administration (FHA)
The federal agency that is part of the Department of Housing and Urban Development (HUD) that sets policy for mortgage underwriting and also provides insurance for residential mortgages.

Fee Simple
The greatest possible interest a person can have in real estate.

Fee Simple Estate
An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land. It is of perpetual duration.

Fee Simple Absolute
Fee simple absolute is the inheritable estate in land providing the greatest interest of any form of title.

An agency of the U.S. Department of Housing and Urban Development (HUD) to encourage improvement in housing standards, provide insurance for residential mortgages, and exert a stabilizing influence on the mortgage market. The FHA sets standards for construction and underwriting but does not lend money or construct housing.

FHA 203b
The most popular FHA government loan. It typically requires a three percent down payment.

FHA 203k
A renovation and repair loan through the Federal Housing Authority, typically made for single family properties.

FHA Futures
Down payment assistance for a loan where the buyer can borrow up to 6% of the loan amount to be used towards closing costs and down payment.

FHA Insured Loan
An FHA insured loan is a mortgage insured by the Federal Housing Administration.

Finance Charge
An amount paid by the borrower in a mortgage loan, consisting of origination fee, service charges, discount points, interest, credit report fees, and finders’ fees. Basically anything but the principal amount of the loan.

A relationship which implies a position of trust or confidence. Among the obligations a fiduciary owes to his principal are duties of loyalty, obedience, full disclosure, the duty to use skill, care and diligence, and the duty to account for all finances.

In the context of real estate transactions, a loan secured by real estate property.

Firm Commitment
An agreement made by a lender to make a loan to a specific borrower on a specific property.

First Mortgage
The superior lien on a property, in first place above and beyond any others.

First Right Of Refusal
A legal right by an individual giving that person the first opportunity to purchase or lease real property.

Fixed Lease
Where the rental amount remains the same for the entire term of the lease.

Fixed-Rate Mortgage
A loan secured by property that has an unchangeable interest rate for the term of the loan.

Personal property that, once attached or installed, becomes part of the real estate. For example, light fixtures, shelving, closet organization, plantings of special import etc.. Most of these are negotiable.

Flip Tax
A percentage of the purchase price usually paid by the seller when ownership is transferred.

Floating Rate
A mortgage with an interest rate that varies according to changes in specified indexes. Also called an Adjustable Rate Mortgage or ARM.

Flood Insurance
Insurance that provides homeowners compensation for physical property damage resulting from flooding. This insurance is required in federally designated flood areas.

The act of refraining from taking legal action despite the fact that payment of a promissory note in a mortgage or deed of trust is in arrears. It is usually granted only when a borrower makes a satisfactory arrangement by which the arrears will be paid at a future date.

The legal process where a lender takes back the title to a property when a borrower is in default of the loan for a certain period of time. The property is usually sold at public auction.

Freddie Mac
Freddie Mac is the short name for Federal Home Loan Mortgage Corporation (FHLMC), a corporation owned by the Federal Home Loan Bank System that purchases FHA, VA, and conventional mortgages.

Technical word for the ownership of the property, meaning that it belongs to the owner without limitations of time.

Front Foot
A linear foot of property frontage on a street or highway.

Full Bath
A bathroom that consists of a sink, toilet, and a bathtub or shower.

Fully Amortizing Mortgage
A mortgage with scheduled uniform payments that will fully pay-off the loan over the agreed upon term of the mortgage.

Functional Obsolescence
Property that becomes flawed or faulty because of overall advances or changes in surrounding environments or technological expansion.

An employer-sponsored investment plan for individuals to set aside tax-deferred income for retirement or emergency purposes.

401(k)/403(b) loan
Loans against money accumulated in these plans. Loans against 401K plans are an acceptable source of down payment for most types of loans.


Garden Level
Usually means a basement level living space, although in a brownstone the windows are ground-level and overlook a small garden and patio.

A legal process that provides a way for creditors to protect the personal property of a debtor which is in the hands of a third party.

General Agent
A general agent is someone who has full authority over a property for the principal, like a property manager.

General Lien
A general lien is ordered by the court and attaches to the property of a person. This type of lien includes all of the property owned by the debtor, rather than a specific property.

General Warranty Deed
A general warranty deed is an unlimited guarantee of title.

Displacement of lower income residents by higher income residents in a neighborhood.

Gift Letter
If the buyer of property has been given a cash gift, a lender will request a statement saying that the person gifting the cash is not expecting the gift to be repaid.

Gift Tax
A graduated federal tax paid by a donor upon making a gift.

Ginnie Mae
The short and common name for Government National Mortgage Association (GNMA), a U.S. government agency that purchases FHA and VA mortgages.

Good Faith Estimate
Federal law requires that lenders provide an estimate of the fees required to pay at closing.

Good Faith
An act done honestly, whether it be done negligently or not.

Good Will
An intangible, salable asset arising from the reputation of a business.

Government Survey
A system of land description in which large blocks of land are divided into tracts bounded by imaginary lines conforming to the true meridian.

Grace Period
A specific amount of time in which monthly payments can be made without the borrower being in default.

Graduated Lease
A lease where the rent changes from period to period over the term of the lease term. This is beneficial for a new business owner whose income will increase over time.

Graduated Payment Mortgage (GPM)
This type of mortgage has payments that are lower for the first few years and increase on a schedule.

Grandfather Clause
A “grandfather clause” means that activities now subject to new rules, laws or regulations may still be allowed.

A grant is a transfer of title to real property by deed.

The person to whom an interest in real property is conveyed. The terms grantee and grantor are often designations used in deeds and titles.

The person conveying an interest in real property.

Gross Area
The total floor area of a building measured from the exterior of the walls (excluding those unenclosed).

Gross Closed Commission Income
The amount of income a real estate sales agent or broker receives from closed transactions.

Gross Debt Service
Amount of money needed to pay principal, interest and taxes, and sometimes energy costs.

Gross Income Multiplier
A way to estimate market value of income producing residential property.

Gross Lease
A lease where the lessor pays all costs of operating and maintaining property, including the property taxes.

Gross Monthly Income
Income before deductions for taxes, social security, saving plans, court ordered child support, etc.

Gross Sale Price
The sale price before any concessions.

A person given lawful custody and care of another.


Habendum Clause A statement in a deed that starts with the phrase, “to have and to hold” and reaffirms the type of ownership in real estate granted.

Used mainly in rental properties and means fit to live in. A landlord has an obligation to keep leased premises in a habitable condition.

Half Bath
A half bath, or powder room, or guest room, has a sink and toilet, but does not have a bathtub or shower.

Hazard Insurance
Specific insurance policy that covers you in case of any physical damage to your property from fire, wind, vandalism, or other hazards, with the exception of flooding, if your property is in a flood zone.

The metric system equivalent to 2.47 acres.

Someone who inherits under a will or by the laws of descent if the decedent dies without a will (intestate).

Highest and Best Use
A term used in appraisals describing the use likely to produce the greatest net return to the land and/or the building over a given period of time.

High Rise
A terms describing a condominium or apartment building generally higher than six stories.

Hold Harmless Clause
A contractual clause where one party agrees to indemnify and protect the other party from any injuries or lawsuits arising out of the particular transaction.

Holding Period
The length of time a property is owned.

Holdover Tenant
A tenant that remains in possession of a property after a lease terminates.

Home Equity Conversion Mortgage (HECM)
Also called a reverse annuity mortgage. Instead of making payments to a lender, the lender makes payments to you. It is a way for older property owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. The qualification parameters are based on the home value rather than income. Repayment of the loan is not made until the owner no longer occupies the property.

Home Equity Loan
Also referred to as a home equity line of credit. This is a mortgage loan secondary to the original mortgage the allows the borrower to apply for a cash draw against the equity of the home, up to a predetermined amount. Many homeowners use this for improvements to the property, although the money can be used for anything.

Home Inspection
A home inspection is part of the process of purchasing real estate. A thorough inspection is done by a professional to evaluate the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

Homeowners’ Association
A nonprofit entity to manage common areas of a planned unit development (PUD) or condominium project. Monies received are from monthly condominum fees.

Homeowner’s Insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

Homeowner’s Warranty
A type of insurance often purchased by homebuyers that will cover repairs to certain mechanical items like heating or air conditioning, if they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay.

A home which is used as a personal residence.

Homestead Law
A “Declaration of Homestead” protects the equity or cash value in your home. This is the money left after subtracting what you owe on your mortgage from the fair market value of your house. If you own your home, Massachusetts homestead law (M.G.L. c. 188) may protect your home against the claims of creditors. For this protection to be active you must reside in your home, or plan to, and it must be your primary residence. If your or your family members have debts, creditors cannot sell your home to get money. Your family inherits the homestead protection while they are living in your home.

Your home is not protected against secure claims such as your mortgage lender because you agree to give the lender your property if you cannot pay your loan. Therefore, regardless of your homestead status, this cannot stop a foreclosure. It is also not protected from tax debt or child support obligations.

Housing Expense Ratio
The relationship of a borrower’s monthly payment to a mortgage company divided by gross monthly income, expressed as a percentage. It is also referred to as top ratio.

Acronym for the Department of Housing and Urban Development which is a federal department.

HUD Median Income
Median family income for a particular county or metropolitan statistical area. The data is comprised and estimated by the Department of Housing and Urban Development (HUD).

HUD-1 Settlement Statement
A document that provides an itemized listing of the funds that were paid at closing. Some of the itemizations include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Also called a “closing statement,” or “settlement sheet.”

HVAC is an acronym that stands for heating, ventilation and air conditioning.

Hypothecate is to pledge property as security for the payment of a debt without giving up possession.


Implied Warrant of HabitabilityLegally binding condition for a landlord where there is a duty to make the leased premises acceptable to live in, ready for occupancy and maintained in a state of repair throughout the entire term of the lease.

Impound account
A trust established to set aside funds for future needs.

Improved Land
Property whose value has been enhanced by the addition of on-site and off-site improvements such as roads, sewers, utilities, buildings, etc.

Additions or changes made to property, amounting to more than repairs, costing labor and capital. Intended to enhance the value of the property with improvements like grading, sidewalks, sewers, streets, utilities, buildings, fences, and the like. Improvements are changes or additions made to a property that typically increase the value of the property.

Imputed Interest
Interest implied by the federal tax law.

Income Approach
Valuation or appraisal of real property determined by the amount of net income the property will produce over its economic life.

Income Property
Property purchased for income and certain tax benefits like accelerated depreciation. Income property can be commercial, industrial or residential.

Incorporeal Rights
Intangible rights in property like easements, licenses, and profits.

Indemnification is the reimbursement or compensation paid to someone for a loss already suffered.

Independent Contractor
Someone retained to perform an action, but the person paying for the services does not have control of the individual. Not an employee or and agent.

Index is a benchmark, like a published interest rate used to calculate the interest rate of an adjustable rate mortgage when rate is scheduled to change.

Index Lease
A lease that includes a method of determining rent by an index.

Industrial Park
Area zoned for industrial use containing numerous sites for multiple, separate industries. Usually developed and managed as a uni with provisions for common services.

The right to enter real property or parcel of land, usually used as interchangeably with the term egress, meaning leaving and entering respectively.

Court orders to discontinue a specified activity. A legal and enforceable action forbidding someone from performing an certain act, and insisting that the person to whom it is directed to refrain from doing a particular thing.

Innocent Purchaser for Value
Someone who purchases property without notice of any superior rights or interests in the real property.

Insider Rights
Special rights offered tenants in a building where the property is converting to a co-op or condo. The rights give the occupying tenants the exclusive rights to purchase their living space, usually at a discounted price. This right is for a limited period of time.

Any visit whose sole purpose is for the review of the premises. A prudent purchaser of property always inspects the premises before closing.

Installment Sale
A property sale where the purchaser pays the purchase price over a period of years. The seller accrues a tax gain, and a percentage of the profit received on each payment as it is received.

Institutional Lender
All financial institutions like banks, insurance companies, savings and loans or lending institution whose loans are regulated by law.

Insurable Interest
The amount of property qualifying for insurance.

Insured Value
The amount that a structure is insured for, including the cost of replacing the structure if completely destroyed.

The sum paid or accrued in return for the use of money.

Interest-Rate Spread
The differential between the retail interest rate charged to a borrower, and the wholesale rate accepted by the financial industry when acquiring home mortgage loans. Simply put, the spread is the profit to the bank.

Interest Rates
The interest rate is the cost of borrowing money from a lender. Rates will vary and will change over time.

Interim Financing
A short-term or temporary loan such as a construction or bridge loan.

Interim Interest
The interest owed by the borrower to the lender on the mortgage loan from the day of the closing to the date of the first payment.

Intestate is the condition that occurs when someone dies without a valid will.

An itemized list of property. Many brokers recommend that their clients attach to the sales contract an inventory of property to be included in the sale of a residential property.

Inverse Condemnation
An action calling for compensation for a person whose property has been substantially interfered with or taken without just compensation

Involuntary Alienation
Transfer of title to real property as a result of a lien foreclosure sale, adverse possession, filing a petition in bankruptcy, condemnation under power of eminent domain, or, upon the death of the titleholder, to the state if there aren’t any heirs.


Joint Liability When more than one party is liable to repay a debt or fulfill an obligation.

Joint Tenancy
A form of property ownership by two or more people with the same interest, and that arises using one conveyance.

Joint Venture
The joining of two or more people in a specific business enterprise such as the development of a condominium project or a shopping center.

Judgement Lien
A lien binding on all the property of one debtor. This gives the holder of the judgment a right to seize the properties for satisfaction of the judgment.

Judicial Foreclosure
A method of foreclosing using a court supervised sale. After an appraisal, the court determines the price below which no bids to purchase will be accepted.

Jumbo Loan
A mortgage issued in an amount exceeding the threshold stipulated under Fannie Mae (FNMA) regulations for a conforming loan.

Junior Mortgage
A mortgage which is subordinate in right or lien priority to an existing mortgage on the same realty, such as a second mortgage.

The authority or power to act, such as the authority of a court to hear and render a decision that binds both parties.

Just Compensation
An amount of compensation to be received by a party for the taking of property under the power of eminent domain.


Key Money
A payment made to a building owner, manager or landlord by a potential tenant in an attempt to secure a desired tenancy.

A right added to a debt instrument to make it more desirable to potential investors by giving the debt holder the option to purchase shares in the issuer.


Land Contract
Contract to loan money between a seller and buyer of property. The seller finances the buyer and subsequently the buyer agrees to repay the loan in regular installments.

Land Lease
A land lease, or ground lease, allows a tenant to use owned land in exchange for rent. The tenant can construct a temporary (or in some arrangements, permanent) structure at his own cost.

Land Trust
A revocable trust used to hold title to real estate for privacy and anonymity. The land trustee is a nominal title holder, with the beneficiaries having the exclusive right to direct and control the actions of the trustee.

A condition of a lot of land that has no public access except through an adjacent lot.

A landmark is the designation given to a building or neighborhood that is under government protection for purposes of preservation.

Landmarks Commission
Landmarks commissions is a city governmental agency responsible for recommending properties and neighborhoods to be landmarked and ensuring that landmarks are properly preserved.

A contract specifying that for a rent payment, the property owner transfers those rights to another or a specified period of time.

Lease Option
A lease, as above, but combined with an option giving the tenant the right to purchase the property under specified terms.

Lease Purchase
A lease combined with a purchase agreement obligating the tenant to purchase the property under specified conditions.

An interest or estate on which a tenant has a lease.

Leasehold Estate
Holds title to a property so the mortgagor does not own the property but has a recorded long-term lease on it.

Legal Blemish
A tarnish on a piece of property, such as a zoning violation or fraudulent title claim.

Legal Description
The legally acceptable definition and description of real estate by government survey, metes and bounds, or recorded plot.

The person to whom property is rented under a lease.

The person who rents property to another under a lease.

To “let” means to rent a property to a tenant.

Letter of Adequacy
A letter found in the offering plan of a building converting to cooperative or condominium ownership affirming that the income and expenses, as expressed in the proposed budget, are adequate to cover the costs of running the building.

Letter of Intent
A written document expressing the desire to enter into a contract without actually doing so.

Liabilities are a person’s debts or financial obligations and include long or short term debt, and potential losses from legal claims.

Liability Insurance
A specific type of insurance coverage that protects against claims alleging that a property owner’s negligence resulted in bodily injury or property damage to another party.

LIBOR is the abbreviation for “London Interbank Offered Rate.” LIBOR is a common index used as a benchmark for adjusting mortgage interest rates in adjustable-rate mortgages.

Security for money owed using a claim on a property of another. Common lien types are tax liens, mechanics liens, court judgements, and mortgages.

Lien Foreclosure Sale
A lien foreclosure sale is the sale of property without owner consent and is ordered by a court or authorized by state law due to a debt resulting in a lien.

Lien Theory State
For example, the state of Texas is a Lien Theory State. The legal title of mortgaged property resides with the borrower, with the mortgage as a lien against the property.

Life Estate
A life estate is an interest in property that terminates upon the death of a specified person.

Life Estate in Remainder
A life estate in remainder is a form of life estate in which certain persons are designated to receive the title upon termination of the life tenancy.

Life Tenant
A life tenant is someone who allowed to use property for life or the lifetime of another designated person.

Lifetime Cap
This is the highest amount over the initial interest rate that an adjustable mortgage can be raised.

Like-Kind Exchange
An exchange of similar property as defined in the Internal Revenue Code that can be performed without recognition of taxable gain at the time of transfer.

Like-Kind Property
Another property having the same qualities.

Limited Liability Company
A form of organization similar to a partnership, in that income and expenses flow directly through to the owners for tax purposes, but that still permits insulation from liability. It is similar to that of a corporation.

Limited Partnership
A partnership is one in which there is at least one partner who is passive and limits liability to the amount invested and at least one partner whose liability extends beyond monetary investment.

Line Of Credit
This is an agreement by a lender, like a credit card company or a home equity mortgagor, to extend credit up to a certain amount for a certain time without the need for the borrower to file another application.

Liquidated Damages
Specifies the amount agreed upon in a contract that one party will pay the other in the event of a breach of contract.

The degree of ease of converting assets to cash.

Lis Pendens
This is a Latin term that means “suit pending.” It is a recorded notice that a lawsuit has been files and the outcome of which may affect title to real property.

A listing in real estate terms is a written agreement between a principal and an agent authorizing the agent to perform services for the principal involving the principal’s property. This term is commonly used by brokers to market an apartment for sale or rent.

Listing Broker
The listing broker represents the interests of the seller or landlord in the sale or rental of his or her property.

Loan Application
A loan application that is required for loans and has become the standard application for most residential loans, even non-conforming loans.

Loan Commitment
The loan commitment is the written obligation from a lending institution to provide a mortgage to a borrower.

Loan Origination Fee
Most mortgage companies charge borrowers an origination fee, also called points, for processing a loan. A point is equal to 1 percent of the total loan amount.

Loan Package
A group of documents containing all of the information required to obtain an underwriting decision of loan approval or loan denial. Some of the common documents included in a loan package are: loan application, statement of use of funds, statement of net worth, P & L statements, tax returns, pay stubs, statements from various types of banking and investment accounts, property appraisal, letters of explanation, credit report, verification of employment, verification of housing payments, and purchase agreement.

Loan-to-Value (LTV)
The LTV ratio is the size of the loan to the value of the property.

Lock-In / Rate Lock Agreement
A lock-in is an agreement by the lender guaranteeing the applicant a specified interest rate on the mortgage loan provided the loan closes within a set period of time.

A loft is an open living space that was converted from commercial space to residential space. They contain very high ceilings, large windows and open space.

Lot and Block
A method of identifying legal description of property.

Lot Line
The line bounding a lot as described in a property survey.

Low-Documentation Loan
A mortgage that requires only minimal verification of income and assets.

Low-Down-Payment loan
A home loan that requires the borrower to make only a small down payment before obtaining the financing needed to purchase a house.


Maintenance Fees

The monthly charge levied on owners by a cooperative corporation to cover the building’s operating costs, real estate taxes, and the debt service on the building’s underlying mortgage.

Management Agreement
Legally binding agreement allowing for the owner of a property to give a property manager responsibilities for caring for the maintenance and repairs of the property.

The margin is a fixed percentage amount over an index that determines a lender’s yield on an adjustable rate loan. In other words, the margin is part of the formula that is used to determine the interest rate of an adjustable rate loan. Both the index and the credit worthiness of the borrower are used in the formula.

Market Value
The market value of a property is an estimation of the price for a property in relation to the current real estate market.

Market Value Analysis
The market value of a property being considered for sale using comparisons of other like homes sold in a close, proximal area and during the same period of time. This analysis is presented by a Realtor when lsiting a home for sale.

Marketable Title
A marketable title is one free from defect.

Master Deed
A master deed is the instrument that legally establishes a condominium. It is also referred to as a condominium declaration.

Master Lease
The master lease is the controlling lease.

When a loan matures it means that maturity is reached on a certain date when the principal balance becomes due and payable

Maximum Financing
This is the fullest amount of a loan amount within 5 percent of the highest loan-to-value ratio allowed for a property.

Mechanic’s Lien 
A lien given by law upon a building or other improvement as security for the payment of labor and materials furnished for improvement.

Merged Credit Report
A report that draws information from the three main credit eporting companies: Equifax, Experian, and Trans Union Corp.

Metes and Bounds
Metes and bounds is a system of land description with distances and directions.

Minimum Payment
This is the minimum amount of a monthly payment paid on a loan. Depending on the type of loan, this can be either interest only, or principal combined with interest.

Monthly Mortgage Insurance Payment
This is the portion of monthly payment that covers the cost of Private Mortgage Insurance or PMI.

Monthly Payment
Generally this refers to the monthly mortgage payment on a home loan, and includes, principle and interest.

Monthly Principal & Interest Payment
The payment of just principal and interest on a loan, occurring monthly and often abbreviate as P & I.

Monthly Taxes & Insurance Payment
The monthly payment that includes taxes and insurance usually paid from funds in an escrow or impound account for taxes and insurance.

A lien against real estate property given by a borrower to a lender as security for money borrowed. It is a legal document that also describes and defines the conditions of the loan and describes the terms of repayment of the debt. It is also referred to as a deed of trust.

Mortgage Banker
A mortgage banker is an institution that performs services similar to those of a mortgage broker. However, a mortgage banker is also legally permitted to lend its own funds.

Mortgage Broker
A real estate professional who represents an array of banks seeking to issue mortgages. The mortgage broker meets with a customer who is purchasing real estate and assists with the application, and then facilitates the mortgage process on behalf of the borrower and the bank.

Mortgage Insurance Premium
The Mortgage Insurance Premium is a payment made by a borrower of FHA insured mortgages to provide a reserve protecting lenders against losses.

Mortgage Insurance
Mortgage insurance, often called Private Mortgage Insurance and abbreviated as PMI, is insurance that protects the lender in case the home buyer does not make their mortgage payments. Typically, a borrower would be required to pay a fee for mortgage insurance if their down payment is less than 20%.

Mortgage Interest Deduction
The tax write-off that the Internal Revenue Service allows for annual interest payments made on real estate loans.

Mortgage Loan
A loan secured by a mortgage lien filed against the real property purchased with the same loan.

Mortgage Note
A mortgage note is a document signed at closing which stating the borrower’s promise to re-pay a sum of money, including an interest rate within a fixed period of time.

Mortgage Satisfaction
Mortgage satisfaction refers to the full payment of a mortgage loan.

The entity to whom the mortgage is given, or, the person taking out the loan.

The entity who gives the mortgage, or, the lender, bank or mortgage company giving the loan.

Multi-Dwelling Property
A property that contains individual units for several households but carries one mortgage.

Multiple Dwelling
A multiple dwelling is a structure with two or more residential units.

Multiple Listing Service (MLS)
MLS is a central service for real estate listings available to member brokers.


National Association of Realtors (NAR)
Commonly known as NAR, the National Association of Realtors is the largest and most prominent trade organization for real estate brokers and agents.

Needs-Based Pricing
Needs-Based Pricinghis the price a home seller lists their real estate for that is based on the money needed to pay off seller debt. This may include things like funds to pay off the mortgage, or the cost of remodeling or the purchase of another house.

Negative Amortization
This happens when a borrower defers the payment of monthly interest, or their monthly payment towards the mortgage does not cover all of the interest due for that payment period. Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment to allow for this.

Negative Pledge
A negative pledge is when the condominium places restrictions on the unit deed and trust agreement restricting the right of an owner to finance a condominium unit for more than a specified amount.

In real estate, this means the process of offering and coounteroffering that precedes an agreement.

Net Cash Flow
Net Cash Flow is income generated by investment property after the expenses like principal, interest, taxes and insurance are subtracted.

Net Operating Income (NOI)
Net Operating Income is used when describing properties that produce income. It is the gross income minus the total of all expenses except for debt service. Cash flow is defined as NOI minus the total of all debt service payments.

Net Lease
A net lease refers to a type of lease in which the tenant pays a fixed rent plus the operational costs of the property.

Net Worth
Net worth is your assets less your liabilities.

No Cash-Out Refinance
The amount of the new mortgage covers the remaining balance of the first loan, closing costs, any liens and cash no more than 1 percent of the principal on the new loan.

No Income Verification Loan (NIV)
This is a loan primarily for those who are self-employed and requires little, if any documentation. It is underwritten based on the borrower’s written representation of their annual income as stated on the loan application. No tax returns, operating statements or other verification of the income is required. Debt ratios are computed based on the stated income. This allows business owners and freelancers to use actual cash flow and not just their the net incomes normally reported in tax filings. Higher interest rates usually are the compensation to lenders.

Non-Assumption Clause
A Non-Assumption Clause is a loan condition that prohibits the transfer of a mortgage to another borrower without lender approval.

Non-Conforming Loan
This type of loan does not meet the underwriting requirements of Fannie Mae and Freddie Mac, which represents the majority of residential mortgage loans.

Nonconforming Use
This term is part of a description whereby the utilization of land does not conform to the zoning ordinance for the area.

Non-Disclosure Non-Compete (NDNC)
A Non-Disclosure Non-Compete is a term used in commercial and multi-unit property listings where sellers can require brokers and buyers to sign an agreement prior to showing the property financials or scheduling an on-site visit.

A buyer who is non-qualifying does not have to qualify for a loan based on traditional bank financing requirements.

Nonrecourse Note
A nonrecourse note is a type of note in which the borrower has no personal liability for payment.

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.

There are many legal documents, including certain leases and contracts of sale, are notarized by a certified Notary Public to verify the authenticity of a signature.

A Note is another word for part of a loan agreement. It is a written promise to repay a certain sum of money on specified terms.

Note Broker
A Note Broker is someone who acts as an intermediary between the holder of an existing note and a prospective purchaser of the note.

Notice of Default
A Notice of Default is the first action that a lender takes once a mortgage payment is late and attempts to reconcile the issue out of court have failed.

Notice of Lis Pendens
Notice of lis pendens is a public record warning all concerned parties that title to a property is the subject of a lawsuit and any lien resulting from the suit will attaché to the title.


The person in whose favor an obligation is entered into.

The person who binds himself or herself to another.

The term offer is used to describe an action made on the part of the homebuyer to purchase a property at a specific price. Once an offer is accepted, then a contract of sale is issued by the seller’s attorney.

Open-ended Listing Contract
This is a contract between a seller and a real estate broker that does not have a termination or end date.

Open-end Mortgage
An open-end mortgage is a mortgage that may be refinanced without rewriting the mortgage contract.

Open Listing
An open listing means that the property owner has not signed an exclusive agreement with a real estate broker.

This defines the right to purchase or lease a property under a set of defined terms and within a specified period of time.

Option to Renew
An option to renew is a provision in a lease that states the method and terms of a lease renewal for the tenant.

An ordinance is a law enacted by the local government that governs the use of land.

Origination is the first step in the mortgage loan process consisting of the completion of the application.

Origination Fee
A service charge by a lending institution for originating a mortgage. It may be the only compensation for their work in arranging and/or processing the loan or it may be only a portion of the compensation. Not every loan has an origination fee.

An originator is the intermediary between an underwriter and borrower to begin the process of getting a loan. This is usually an employee of a financial institution, an employee of a broker or an independent contractor affiliated with several brokers. The originator calculates the numbers to determine what type of loan a borrower qualifies for, and then helps complete the loan application by making sure all the appropriate documentation is in order.

Other Real Estate Owned
This phrase is used to describe bank-owned property where the bank does not have home lending department.

Owner Financing
Owner financing is a situation where the home buyer borrows from and makes payments to the seller instead of a bank.

Ownership in Severalty
Ownership in severalty is title to real property held in the name of one person only.


A parcel is a specific portion of land such as a lot or a tract.

Partition refers to the legal proceeding that divides property of co-owners so each will hold title in severalty.

Party Wall
Party wall refers to the wall in common between two adjoining structures, such as in townhouses and brownstones.

Passive Loss
A passive loss is generated by a real estate investment when the taxpayer’s primary business is not to invest in properties for income purposes. Loss in excess of income may not be fully recognized for tax purposes in the year it was incurred and instead might be recognized over a span of years.

Money one will pay for violating part or all of the terms of a contract.

A penthouse is an apartment on the highest floor in a luxury, high-rise building.

Percentage Lease
A percentage lease has a rental amount that is a combination of a fixed amount plus a percentage of the lessee’s gross sales in commercial real estate.

Percolation is the action of water or liquids moving through something fixed, like soil.

Percolation (Perc) Test
A perc test determines if the soil is sufficiently porous for the installation of a septic tank. The test measures how quickly and how far a specified volume of water moves through the soil where a septic system will be installed.

Perfecting a Loan
When a loan is perfected, it is recorded in the county clerk’s office against the name of the borrower and perfects a security position against the collateral.

Periodic Tenancy Lease
A lease that automatically renews for successive periods unless terminated by either party.

Phantom Gain
A real estate sale where income is recognized for tax purposes but no money has been received correlating to the gain amount. This can occur when the property has been depreciated below the property’s mortgage amount.

Pied-a-terre is a term that refers to an apartment that is not the primary residence of the owner. The term refers to an apartment that is used only sporadically throughout the year.

PITI is the shorter way of referring to a monthly mortgage payment that includes principal, interest, taxes and insurance. In the case where all four elements are part of the payment, the lender escrows the taxes and insurance and then pays them on behalf of the borrower when they come due. Some loans are written such that the payment to the lender consists only of the principal and interest in which case the borrower pays the taxes and insurance directly.

Planned Unit Development (PUD)
A highly designed and engineered residential project that features relatively dense clusters of houses, usually surrounded by areas of commonly owned open space maintained by a nonprofit community association.

A plat is a property map that is part of the public record.

Platform Framing
Platform framing is the most common type of framing in residential construction in which the framing of the structure rests on a subfloor platform.

Points refer to how much money is paid to a lender as consideration for that lender issuing you a mortgage. The amount is usually based on the amount of money you are borrowing.

Portfolio Loan
A non-conforming loan that is held by the original lender rather than being sold on the secondary market.

Powder Room
A powder room is also referred to as a half-bath, and only has a toilet and sink.

Prepayment Penalty
fee charged for paying off a loan within a relatively short period of time after the loan has closed, provision is currently found only in non-conforming products, time period during which it applies is usually one to three years.

Pre-qualification adds value to you as a homebuyer and is a process where a loan officer calculates the housing-to-income ratio and the total debt-to-income ratio to determine an approximate maximum mortgage loan amount.

Price-to-Earnings Ratio (P/E Ratio)
A common metric used to assess the relative valuation of equities.

Price-to-Income Ratio
A universal measure of affordability for homes using the ratio of median house prices to median familial disposable incomes. This is expressed as a percentage or as years of income and used in mortgage lending decisions.

Price-Rent Ratio
This is the average cost of ownership divided by the received rent income (if buying to let) or the estimated rent that would be paid if renting (if buying to reside).

Primary Residence
A primary residence can be only one place – and that is a property that an an owner or renter occupies the majority of time, usually considered to be 6 months and 1 day out of every year.

The word “principal” in real estate speak is really the principal balance outstanding on a mortgage loan, exclusive of accrued interest.

Private Mortgage Insurance (PMI)
Private Mortgage Insurance applies when you make a down payment of less than 20%. The lender requires private mortgage insurance, or PMI, to protect the lender from losing money if you end up in foreclosure. PMI also is required if you refinance the mortgage with less than 20% equity.

The process of establishing the validity of a will before the courts. Once validity is confirmed, the probate court then administers the sale of property as directed by the will or as authorized by the court to settle any financial obligations

Processing in real estate terms usually refers to the second stage in applying for a mortgage loan when application information is verified and fact checked. Credit reports and the appraisals are used in the process.

Profit Exemption
A profit exemption relates to the current tax rules permitting profit on the sale of a primary residence to be tax exempt for up to a specified amount for an individual or a married couple.

Pro Forma
This Latin terms refers to a document that includes some hypothetical data. For example, the balance of income statement, where certain debts are only proposed and not yet consummated.

Promissory Note
A Promissory Note is a promise to pay a specified sum to a specific person or entity under exact terms, like a mortgage obtained by a borrower as partial payment for a property.

Property Condition Disclosure Form
A comprehensive checklist detailing the condition of the property including its structure and any environmental issues in and around the property.

Property Description
The property description is an accurate, legal, text description of the land and includes boundaries, footprints and easements or rights of way.

Property Tax
The tax issued by a municipality on the ownership of a property.

Proprietary Lease
The lease issued to a tenant/shareholder by a cooperative corporation prescribing his or her right to occupy a specific apartment and the obligations as an owner and tenant.

Pro-Rata Share
In a co-op model, the apartment’s share of the building’s mortgage. The share is determined by dividing the amount of the underlying mortgage by the number of shares in the building then multiplying the per-share amount by the number of shares for your apartment. The lower of either the appraised value or purchase price then divides that number.

A document issued in the process of converting a building to a condominium that provides “full disclosure” of all relevant facts associated with evaluating an investment in the property.

Purchase and Sale –
The Purchase and Sale Agreement, also called the “P & S,” is the official document acknowledging mutual acceptance on an offer to buy property. The contract states whet the final sale price is and all terms of the agreement.

Purchase Money Mortgage
This kind of mortgage secures a note written on a loan used in the purchase of real estate.

Purchase Subject to Mortgage
A real estate purchase where a buyer agrees to make the monthly mortgage payments on an existing mortgage and the original borrower remains liable if the purchaser fails to make the payments as agreed.


A quadruplex is an apartment with four levels.

Qualifying Ratio
A ratio calculated by a lender to determine how much a potential buyer can borrow based on income, assets, expenses and credit.

Quiet Enjoyment
Quiet enjoyment is the right of any property owner or tenant to use of the legally entitled property without undue interference.

Quiet Title Action
The term ‘Quiet Title Action’ is a court action that is meant to remove a defect or obstacle on a property title that then establishes legal ownership.

Quitclaim Deed
A Quitclaim Deed conveys a grantor’s rights or interest in a property without detailing the nature of the rights or interest and with no warranties of ownership.


Radon is a colorless, odorless gas present in soil that sometimes enters a home through small spaces and openings. It is often a test routinely included in a home inspection.

Rate Cap
The maximum interest rate charge allowed on monthly payments of an adjustable rate mortgage during an adjustment period.

Rate Improvement Mortgage
A type of loan that entitles a borrower to a one-time interest rate cut without going through the process of refinancing.

Ratios are guidelines applied by the lender during underwriting a mortgage loan application to determine how large a loan to grant an applicant. The ratios that lenders use are called Loan-to-Value Ratio, Housing-to-Income Ratio, and Debt-to-Income ratio.

Real Estate
The term ‘real estate’ is defined as land, buildings, and the natural resources of the land for residential, commercial and industrial use.

Real Estate Broker
A real estate broker is an individual employed on a fee or commission basis as an agent to bring buyers and sellers together and assist in negotiating real estate contracts between them.

Real Estate Investment Trust (REIT)
A trust owned by shareholders that buys and initiates mortgage loans.

Real Estate Owned (REO)
Property acquired through foreclosure and held in inventory by a lender.

Real Estate Salesperson
A real estate salesperson performs any of the acts of a real estate broker but is supervised by a broker.

Real Estate Settlement Procedures Act (RESPA)
A federal law that regulates the activities of lending institutions in making mortgage loans.

Real Property
Real property is real estate that comes with rights for property owners to use their property as they see fit. Real property consists of physical objects and common law rights while real estate consists of physical objects only.

Real Property Tax Lien
A tax levied against real property by the local government. This lien has priority over all other liens.

The term Realtor is a trademark and designation given to licensed real estate agents who are members of the National Association of Realtors.

If investment real estate has been depreciated for tax purposes, the gain on the sale includes a “recapture” of the previously written-off depreciation as a gain.

Recognition Letter
A document recognizing the secured rights of a lender to the shares of stock and the proprietary lease on a specific apartment.

Recording is registering the ownership, lien, or claim to a specific parcel of real estate with the local county registry of deeds.

Recording Fees
Recording fees are charges made by the recorder’s office to record a document like a mortgage or a deed.

The ability of a lender to make claims against their borrower personally in addition to the original collateral.

Redemption Period
The legally defined period during when a former owner can reclaim foreclosed property.

When a lender resists making loans for the purchase, construction, or repair of a dwelling due to the socio-economic conditions of the property’s location.

Referral Fee
A referral fee is a percentage of a broker’s commission paid to another broker for the referral of a buyer or seller.

When a borrower pays off one loan with the proceeds from another.

When the value of a better-quality property is adversely affected by the proximity of a lesser-quality property.

Regulation Z
The federal regulation requiring creditors to provide full disclosure of the terms of a loan.

A rental is the possession with rights, but not ownership, of a property for a limited duration of time under defined terms and conditions.

Rental Building
A rental building only has apartments for rent and not for purchase.

Rent Control
Type of rent regulation when an apartment has tenants that have been in continual residence since a specific date or for a specified length time. Rent control limits the amount of rent landlords can charge for apartments and restricts their ability to evict.

Rent Stabilization
Similar to rent control but usually applies to buildings built before 1974 and apartments removed from rent control. After the rent has legally been raised to over $2,500 per month, or the household income of the tenants is over $200,000 per year, rent stabilization is no longer in effect. A state specific regulation.

Rescission Period
This is a federally mandated period of three business days that begins on the day after a loan closes when the borrower may cancel the new loan. This three-day period only applies to loans secured by a mortgage on a personal residence for which the borrower is in title at the time of loan origination. The right to cancel does not apply to loans used for the purchase of property.

Reserve Fund
The amount reserved to provide funds for future expenses in order to maintain a cooperative or condominium building and is managed by the building’s board.

Residential Lead-based Paint Hazard Reduction Act
Defines the procedures to be followed in disclosing the presence of lead-based paint in the sale or rental of properties built prior to 1978.

Residential Service Contract
Similar to a home warranty or insurance contract, generally for one year, covering plumbing, electrical, and mechanical systems of the home.

Residual Value
The income remaining after deducting an amount necessary to meet fixed obligations of maintaining real property.

Reverse Annuity Mortgage
A type of mortgage that retirees on fixed incomes can use to generate income out of the equity in their homes while they continue to live in the home.

Reverse Mortgage
A mortgage designed for elderly homeowners with substantial equity where a lender pays a periodic payment to the borrower. The loan balance increases with interest and payments causing a negative amortization.

R-Factor or R-Value
The R-Factor is a rating that measures the degree of resistance to heat transfer.

An addendum to a document that covers supplemental issues.

Ridge Beam
A ridge beam is the highest part of framing in a structure and forms the apex of the roof.

Right of Assignment
Allows the lender to sell a mortgage at any time and obtain money invested, instead of waiting for the completion of the loan term.

Right of First Refusal
The opportunity to match the terms of a proposed contract before the contract is executed.

Right of Survivorship
The right of an owner to receive the title to a co-owner’s share upon death of the co-owner, as in the case of joint tenancy and tenancy by the entirety.

An easement allowing someone to use the land of another for a specific purpose.

Riparian Rights
Rights of property owner adjoining a watercourse such as a river, including access to and use of the water.

Running with the Land 
Refers to rights that are passed with the title of property from the grantor to the grantee.


Sale Leaseback A sale leaseback is when the seller of a property leases the same property at the time of sale.

Sale Price
The sale price is also called the purchase price and is the amount of money that a buyer pays to a seller.

Sales Comparison Approach
The sales comparison approach is an appraisal tool for estimating the value of a property with other similar properties that have sold recently. It is how a Market Analysis is done to determine the listing price, or likely sales price of a home.

Sandwich Lease
A Sandwich lease is when a tenant sublets their rental, more commonly known simply as a sublet.

Satisfaction of Mortgage
The satisfaction of mortgage indicates that a mortgage has been paid in full.

This describes a loan that is longstanding and can establish a borrowers payment history. The length of time generally needed for credit support is six months.

Second Mortgage
A second mortgage is an additional mortgage recorded after another mortgage has already been recorded and not yet released.

Secondary Market
The buying and selling of existing mortgages, usually as part of a “pool” of mortgages.

Section 1031
This is a particular section of the Internal Revenue Service Code dealing with tax-free exchanges of similar properties.

Section 8
Section 8 housing is privately owned rental units that participate in low-income rental assistance.

Secured Loan
A loan that is backed by collateral such as a property.

Security Deposit
A security deposit is usually requested by a landlord that is held in an escrow account during the term of the lease to offset damages incurred due to actions of the tenant, and to protect against any unpaid rent in the situation of a default.

Self-Amortizing Loan
A loan where periodic payments consist of both principal and interest ensuring that the loan is paid in full by the end of a scheduled term. A fixed-rate loan payment is known in advance, and an adjustable-rate mortgage can still be self-amortizing, but the payments change according to the interest rates.

Seller Carry-Back
An contractual agreement where the owner of a property provides financing, sometimes in combination with an assumable mortgage.

Seller Contribution
The seller contribution is a payment by the seller of a property of some, or all, of the buyer’s closing costs.

Seller Financing
This is also called “Owner Financing” and is when the seller of a property finances the purchase of their property for a buyer.

Seller’s Agent
A seller’s agent is the listing agent that works in the best interests of the seller. Also referred to as the listing agent. Although real estate agents working with buyers might be considered to be buyer’s agents, they are still working for the home seller unless contractually specified.

Settlement Statement
Another term for a closing statement.

Service Drop
A service drop are the above-ground electrical cables that come from the nearest electrical pole connecting the electrical service of the house often described in a survey or plot plan.

Service Lateral
Service lateral are the underground electrical wiring connecting the electrical service of the house and might be specified in a plot plan.

Servicing are activities of the lender like collecting payments, and paying taxes or insurance from an escrow account.

Servient Tenement
Servient tenement refers to land encumbered by an easement.

The distance from the front or interior property line to the point where the structure is located. You hear this term when considering the placement of an outbuilding.

Severalty refers to ownership by a single person.

Shares in a real estate transaction are part of the purchase of a cooperative building where the apartment is not purchased as real estate but as shares in the cooperative corporation are purchased. The number of shares is based on the size and location of the unit in the apartment.

Short Sale
This type of real estate sale takes places when the proceeds fall short of what the owner still owes on their mortgage. Some lenders accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. The benefit to the lender is that they can avoid a lengthy and costly foreclosure.

A soffit is the area under the roof extension of a structure that can be made of wood, vinyl or aluminum. This is a term you are likely to hear as part of a home inspection.

Special Warranty Deed
A deed where the grantor limits the title warranty given to the grantee. It does not warrant against title defects arising from conditions that existed before grantor owned the property.

Specific Performance
A legal action where the court requires a party to perform the terms of the contract they agreed to.

Square Footage
Most commonly used to describe the amount of indoor living space and considered to be approximate since nooks and crannies are not taken into consideration.

A person who occupies property with no legal claim to the property.

Standing Mortgage
A standing mortgage, sometimes called a “Balloon Mortgage” is an interest-only mortgage with no reduction of principal over time.

A term you hear when looking at residential real estate. It describes a housing development created by dividing a tract of land into individual lots for sale or lease by a developer who sometimes also builds the homes.

Subject To
When a buyer takes title to mortgaged property but is not liable for the payment of the amount due.

Subject to Financing
A clause in an Offer to Purchase, or a Purchase and Sales stipulating that the agreement is conditioned upon the buyer’s obtaining financing from a financial institution in an agreed-upon amount.

Also referred to as a “sublet” rental agreement between an original tenant and a new tenant.

When the owner of an apartment or the main lease holder decides to rent the apartment to a sub-tenant. Or when a tenant, with the landlord’s permission, rents a property to someone else for the duration of the lease.

Subordinate Financing
Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Subordination is a clause permitting a mortgage recorded at a later date to take priority over an existing lien on the property.

Super Jumbo Loan
This is a loan that exceeds $1,000,000.

A survey measures a parcel of land very specifically. Through engineering, the lot lines, precise legal boundaries, location of improvements, easements, rights of way, encroachments, land areas and other physical feature s are recorded in a document.

Sweat Equity
Contribution to the construction of a property in the form of labor or services rather than cash.



Take-Out Loan
Long-term financing on a piece of real property that replaces interim financing, such as a short-term construction loan. They are usually mortgages with fixed payments that are amortizing.

Tax Abatement
A tax abatement is a financial incentive offered by a local or municipal government to stimulate development. The owner of the property or the developer has reduced taxes for a specific period of time, and then the taxes are raised incrementally to the full tax burden over the period of a few years.

Tax and Insurance Escrow
A bank account required by a mortgage lender to fund annual property tax assessments and hazard insurance premiums, funded through monthly contributions by the home buyer.

Tax Deductible
A tax deductible expense helps to reduce taxable income and include interest payments on mortgages and real estate taxes.

Tax Lien
Debt attached to the property for a failure to pay taxes.

Tax Lien Foreclosure
Sale of a property resulting from the property owner’s failure to pay tax liabilities.

Teaser Loan
An adjustable-rate mortgage loan where the borrower pays a very low initial interest rate that increases after a few years.

Teaser Rate
This is an interest rate charged on an adjustable rate mortgage for the initial adjustment interval that is lower than the fully indexed rate at the time.

Temporary Lender
A mortgage lender that sells originating loans into the secondary market shortly after closing, as opposed to holding the loans in portfolio. Most lenders are temporary lenders.

Tenancy At Sufferance
An agreement where a tenant is permitted to live in a property after a lease term has expired, but before the landlord demands the tenant vacate the property. The original lease conditions must be met, including the payment of all rents or the tenant can be evicted at any time without notice.

Tenancy At Will
Tenancy at will is when a tenant occupies property with the consent of the owner but without an agreement that specifies a definite rental period or the regular payment of rent.

Tenancy by the Entirety
Tenancy by the entirety refers to co-ownership limited to husband and wife, with the right to survivorship.

Tenancy in Common
Tenancy in common is the co-ownership that does not include the right of survivorship.

Term Amortization
The amortization term is the period of time in which the interest and principal payments of a loan must be made.

Term Mortgage
A term mortgage is a mortgage with interest payments paid only during the mortgage term, with the principal due at the end of the term.

Termination Statement
This releases a lender’s claim on property once a loan is repaid and legally release the borrower’s name in public records.

A general term referring to conditions and arrangements specified within any type of contract.

Term Payment Plan
A way to receive reverse mortgage payments giving the homeowner equal monthly payments for a specified time period.

Third-Party Mortgage Originator
Anyone who markets mortgages or gathers borrower information for a mortgage application that is then transferred or sold to the actual lender. It is also any company involved in the mortgage origination process i.e. underwriting, closing, funding, etc. on behalf of the actual mortgage lender.

Time is of the Essence
This phrase can be used in a contract to instruct authors to make all references to specific dates and times of day exact to avoid potential delays in actions pertaining to the contract.

For a fee one gains the right for usage of a shared property, usually a vacation property. The timeshare model can also be applied to campgrounds, recreational vehicles, boats and private jets. Use is during a specified number of time periods and for a certain duration, usually one or two weeks.

The evidence of ownership and lawful possession.

Title Defect
A title defect can prevent the seller from releasing their property to a buyer. The defect itself is usually an unresolved claim against the ownership of the property.

Title Insurance
Related to a Title Defect, this is an insurance policy that protects the holder from a loss sustained by defects in the title.

Title Search
A Title Search is an examination of public records at a Registry of Deeds to determine the ownership and any encumbrances affecting a property. It examines local public records to determine if any parties have valid claims against the subject property. These claims can include past due taxes, judgments or mechanics’ liens. It also discloses past and current facts about the subject property’s ownership.

Title Theory State
This is when a lender has legal title to the mortgaged property and the borrower has equitable title.

Title Transfer Tax
A tax imposed on the conveyance of title to real property by deed.

Torrens Certificate
A certificate showing ownership of property without requiring a title search to be completed first.

Total Annual Loan Cost (TALC)
The projected total cost that a reverse mortgage holder should expect to pay over the life of the loan.

Total Debt Service Ratio
Abbreviated as “TDS,” this is a measure used by lenders to determine whether or not to extend credit. The borrower’s property taxes, credit card balances and other monthly debt obligations are calculated into a ratio.

A townhouse is a private residence where at least one wall is shared with another residence.

Transactional Funding
Short term financing, and also a “bridge loan” that allows a buyer to purchase a new home while the original home is still on the market. It is also used when an investor funds the purchase and resale of a property.

Transfer of Mortgage
A transaction where the borrower or lender assigns an existing mortgage from the current holder to another person or entity.

Treasury Index
The Treasury Index is the weekly average yield on US Treasury securities adjusted to a constant maturity of one, three or five years, as made available by the Federal Reserve Board.

Triple Mint
Triple mint condition refers to a residence that is in immaculate condition.

Triple Net Lease
Term usually used in commercial real estate transactions where the tenant pays all operating costs of the property including taxes, insurance, and maintenance as well as monthly rent.

A triplex is an apartment that has three levels.

True Lease
A multi-year lease that arranges for the lessor to bear the risks and rewards of ownership of the property. The lessee merely gets to use the property in a rental fashion.

A trust is where property is transferred to a trusted third party trustee by a grantor/trustor. The trustee holds the property for the benefit of the beneficiary.

Trust Deed
The conveyance of real estate to a third party to be held for the benefit of another. Also called a Deed of Trust.

The trustee holds property in trust for another to secure performance of an obligation. Considered the neutral party in a trust deed transaction.

Truth-in-Lending Disclosure
Federal law requires that lender give a disclosure of all details pertaining to mortgage payments and finance charges to the home buyer within three business days after a loan application.

Two-Step Mortgage
Offers an initial fixed-interest rate for a period of time before the interest rate adjusts according to current market rates.


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