Real estate terms, defined properly

230 terms, each with a plain definition, the term it is most often confused with, and how the license exam actually asks about it. Most of this vocabulary arrives in near-identical pairs — easement appurtenant against easement in gross, market value against market price — and the exam lives in the gaps between them.

ABCDEFGHIJKLMNOPQRSTUVZ

Read the warnings

7 of these entries carry a printed warning, and they are the ones worth reading first. They cover rules that differ from state to state — net listings, dual agency, stigmatized property — where a nationally correct answer can still be wrong where you practice, and habits that quietly turn into complaints.

Dual agencyNegative amortizationNet listingPrice fixingPuffingSteeringStigmatized property

By subject

A to Z

A

  • Abstract of title — a summary of every recorded document affecting a property’s title
  • Acceleration clause — a clause making the whole balance due immediately on default
  • Accretion — the gradual addition of land by natural deposit of soil along a waterway
  • Acre — 43,560 square feet
  • Ad valorem tax — a tax levied according to value
  • Adjustable-rate mortgage (ARM) — a loan whose rate moves with an index over the life of the loan
  • Adverse possession — acquiring title by occupying land openly and without permission for the statutory period
  • Agency — the relationship in which one person acts on another’s behalf and in their interest
  • Air rights — the right to use or control the space above a parcel of land
  • Alienation clause — a due-on-sale clause: the balance falls due if the property is transferred
  • Americans with Disabilities Act (ADA) — federal law requiring accessibility in places of public accommodation
  • Amortization — repaying a loan through regular payments that cover both interest and principal
  • Annual percentage rate (APR) — the total yearly cost of credit expressed as a percentage
  • Appraisal — an independent opinion of value produced by a licensed or certified appraiser
  • Appreciation — an increase in a property’s value over time
  • Appurtenance — a right or improvement that belongs to land and transfers with it
  • Assessed value — the value a taxing authority assigns to a property for tax purposes
  • Assessment ratio — the percentage of market value at which property is assessed
  • Assignment — transferring contract rights to another party, without release from liability
  • Assumption — a buyer taking over the seller’s existing loan and its obligations

B

C

  • Capitalization rate — the rate of return an investor requires, used to convert income into value
  • Caveat emptor — "let the buyer beware" — the older rule that buyers inspect at their own risk
  • Chain of title — the unbroken succession of recorded owners from the earliest to the present
  • Chattel — another word for personal property
  • Client — the party a brokerage represents and owes fiduciary duties to
  • Closing Disclosure — the final statement of loan terms and closing costs, delivered before closing
  • Cloud on title — any claim or defect that casts doubt on the owner’s title
  • Commingling — mixing client funds with the brokerage’s or the licensee’s own money
  • Community property — a marital property system in which most property acquired during marriage is owned equally
  • Comparative market analysis (CMA) — a licensee’s pricing analysis based on comparable sales and current listings
  • Condemnation — the legal process by which eminent domain is exercised
  • Condominium — fee ownership of an individual unit plus an undivided share of the common elements
  • Consideration — the thing of value each party gives to make a contract binding
  • Constructive notice — notice the law imputes to everyone because the information is publicly recorded
  • Contingency — a condition that must be met or waived for the contract to proceed
  • Conventional loan — a loan not insured or guaranteed by a government program
  • Conversion — using client funds for the licensee’s or the brokerage’s own purposes
  • Cooperative — a corporation owns the building; residents own shares and a proprietary lease
  • Cost approach — land value plus the cost to build the improvements new, minus depreciation
  • Counteroffer — a response that changes the terms, rejecting the original offer and making a new one
  • Credit — an amount in a party’s favour on the settlement statement
  • Customer — a party a brokerage works with but does not represent

D

  • Debit — a charge against a party on the settlement statement
  • Dedication — an owner’s transfer of private land to public use
  • Deed — the written instrument that transfers an interest in real property
  • Deed in lieu of foreclosure — a borrower voluntarily conveying the property to the lender to avoid foreclosure
  • Deed of reconveyance — the instrument returning title from the trustee to the borrower on payoff
  • Deed of trust — a three-party security instrument in which a trustee holds title until the debt is paid
  • Deed restriction (CC&R) — a private limit on land use, recorded and running with the land
  • Defeasance clause — a clause requiring the lender to release its claim when the debt is paid
  • Deficiency judgment — a judgment for the shortfall when a foreclosure sale raises less than the debt
  • Depreciation (appraisal) — loss in value from any cause, deducted in the cost approach
  • Designated agency — a broker appoints different licensees in the firm to represent each side
  • Discount points — prepaid interest paid at closing to reduce the loan’s interest rate
  • Dual agency — one brokerage representing both buyer and seller in the same transaction

E

  • Earnest money — a buyer’s deposit evidencing good faith, held by a neutral party
  • Easement — a right to use someone else’s land for a specific purpose
  • Easement appurtenant — an easement benefiting one parcel of land at the expense of another
  • Easement by necessity — a court-recognized right of access for a landlocked parcel
  • Easement by prescription — a use right earned by open, continuous, unpermitted use over the statutory period
  • Easement in gross — an easement benefiting a person or company rather than a neighboring parcel
  • Effective gross income — potential gross income less vacancy and collection losses, plus other income
  • Emblements — annual crops treated as the tenant’s personal property
  • Eminent domain — the government’s power to take private property for public use, paying just compensation
  • Encroachment — a structure that physically intrudes onto a neighboring property
  • Encumbrance — any claim or right in a property held by someone other than its owner
  • Equal Credit Opportunity Act (ECOA) — federal law prohibiting discrimination in any aspect of a credit transaction
  • Equitable title — the buyer’s right to obtain legal title once the contract conditions are met
  • Equity — the value of an owner’s interest: market value less what is owed against it
  • Equity of redemption — the borrower’s right to pay the debt in full and stop a foreclosure sale
  • Errors and omissions insurance — professional liability cover for negligence in providing real estate services
  • Escheat — the state taking property left by an owner who died with no heirs and no will
  • Escrow — a neutral third party holding funds and documents until conditions are met
  • Estate at sufferance — a tenant who entered lawfully and stayed after the right to possess ended
  • Estate at will — occupancy with the owner’s consent, for no fixed term, terminable by either party
  • Estate for years — a lease with a definite beginning and a definite end
  • Exclusive agency listing — one brokerage is appointed, but the seller may sell it themselves and owe nothing
  • Exclusive right-to-sell listing — the listing broker is paid on any sale during the term, whoever finds the buyer
  • Executed contract — a contract in which both parties have fully performed
  • Executory contract — a contract in which something remains to be done
  • External obsolescence — value lost through influences outside the property boundary

F

  • Fair Housing Act — the federal law prohibiting discrimination in housing on protected characteristics
  • Familial status — protection for households with children under 18, and for pregnant people
  • Fee simple absolute — the most complete ownership recognized in law: unlimited in duration, freely transferable
  • Fee simple defeasible — ownership that can be lost if a stated condition occurs or a stated use ends
  • FHA loan — a loan made by an approved lender and insured by the federal housing administration
  • Fiduciary duty — the duties an agent owes their client: obedience, loyalty, disclosure, confidentiality, accounting, reasonable care
  • Fixed-rate mortgage — a loan whose interest rate does not change for its whole term
  • Fixture — personal property that has become part of the real estate by attachment
  • Foreclosure — the process by which a lender forces the sale of property to satisfy a debt
  • Functional obsolescence — value lost through a defect in the property’s own design or utility

G

H

  • Habendum clause — the deed clause defining the extent of the interest being conveyed
  • Highest and best use — the legally permissible, physically possible, financially feasible and maximally productive use
  • Homeowners association (HOA) — the body that enforces a community’s recorded restrictions and manages common areas
  • Hypothecation — pledging property as security without giving up possession of it

I

  • Impound account — a lender-held account collecting monthly amounts for taxes and insurance
  • Income approach — valuing an investment property from the income it produces

J

  • Joint tenancy — co-ownership with right of survivorship
  • Judgment lien — a general, involuntary lien arising from a court money judgment
  • Judicial foreclosure — foreclosure through a court proceeding ending in a court-ordered sale

K

  • Kickback — an unearned payment for referring settlement service business

L

  • Land contract — seller financing where the seller keeps legal title until the price is paid
  • Latent defect — a hidden defect a buyer would not discover on a reasonable inspection
  • Leasehold estate — a tenant’s right to possess property for a period, without owning it
  • License — revocable personal permission to do something on another’s land
  • Lien — a monetary claim against property as security for a debt
  • Lien theory — the borrower keeps legal title and the lender holds a lien against the property
  • Life estate — ownership measured by someone’s lifetime
  • Life estate pur autre vie — a life estate measured by the life of someone other than the holder
  • Liquidated damages — an amount the parties agree in advance will settle a breach
  • Lis pendens — a recorded notice that litigation affecting title to a property is pending
  • Listing agreement — the employment contract between a seller and a brokerage
  • Littoral rights — water rights belonging to land bordering a lake, sea or ocean
  • Loan Estimate — the disclosure of estimated loan terms and costs given shortly after application
  • Loan-to-value ratio (LTV) — the loan amount as a percentage of the property’s value or price
  • Lot and block — a description by lot number within a block on a recorded subdivision plat

M

  • Market allocation — competitors agreeing to divide territories, property types or customers
  • Market price — the price a property actually sold for
  • Market value — the most probable price a property should bring in a fair, open sale
  • Marketable title — title a reasonable buyer would accept, free from serious doubt or litigation risk
  • Material fact — a fact that would affect a reasonable party’s decision about the property
  • Mechanic’s lien — a contractor’s or supplier’s lien for unpaid work or materials on a property
  • Metes and bounds — a description tracing a boundary by directions and distances from a point of beginning
  • Mill rate — a tax rate expressed in thousandths: one mill is $1 per $1,000 of assessed value
  • Mineral rights — the right to extract minerals from beneath a parcel
  • Misrepresentation — a false statement of material fact that another party relies on
  • Monument — a fixed marker — natural or placed — used as a reference point in a description
  • Mortgage — the instrument pledging property as security for a debt
  • Multiple listing service (MLS) — a cooperative arrangement among brokers to share listings and offers of cooperation

N

  • Negative amortization — a loan balance that grows because payments do not cover the interest due
  • Net listing — the broker keeps everything above a price the seller sets
  • Net operating income (NOI) — effective gross income less operating expenses, before debt service
  • Non-conforming use — a lawful existing use that no longer matches a newly changed zoning rule
  • Non-judicial foreclosure — foreclosure under a power of sale in the security instrument, without a lawsuit
  • Novation — substituting a new contract or a new party, releasing the original one

O

  • Offer — a proposal that becomes a contract if accepted on its terms
  • Open listing — a non-exclusive listing; only the broker who procures the buyer is paid
  • Option contract — a paid right to buy on set terms within a set period, with no obligation to buy
  • Origination fee — the lender’s charge for processing and making the loan

P

  • Partition — a court action dividing co-owned property or ordering it sold
  • Periodic tenancy — a lease that renews automatically period to period until notice is given
  • Personal property — movable property; everything that is not real property
  • Physical deterioration — value lost through wear, age and damage to the structure
  • Plat — a recorded map dividing land into lots, blocks, streets and easements
  • Police power — government authority to regulate land use for public health, safety and welfare
  • Power of sale — a clause authorizing sale on default without going to court
  • Predatory lending — lending practices that exploit a borrower rather than serve them
  • Prepayment penalty — a charge for repaying a loan ahead of schedule
  • Price fixing — competing firms agreeing on what to charge
  • Primary mortgage market — where loans are originated — lender to borrower
  • Principle of contribution — an improvement is worth what it adds to the whole, not what it cost
  • Principle of substitution — a buyer will pay no more than the cost of an equally desirable alternative
  • Prior appropriation — a water rights system allocating use by priority of claim rather than by land ownership
  • Private mortgage insurance (PMI) — insurance protecting the lender against default on a high-ltv conventional loan
  • Procuring cause — the broker whose efforts started the unbroken chain of events leading to the sale
  • Progression and regression — a property’s value is pulled toward the values of those around it
  • Promissory note — the borrower’s written promise to repay a debt on stated terms
  • Property management agreement — the contract appointing a manager as the owner’s general agent for a property
  • Proration — dividing a shared expense or income between buyer and seller at closing
  • Protected class — a characteristic on which housing discrimination is prohibited
  • Puffing — exaggerated opinion in sales talk that a reasonable person would not take as fact

Q

  • Quiet title action — a lawsuit asking a court to settle competing claims and confirm ownership
  • Quitclaim deed — a deed conveying whatever interest the grantor has, with no warranties at all

R

  • Real property — land, everything permanently attached to it, and the rights that go with it
  • Reasonable accommodation — a change to a rule or policy so a disabled person can use a dwelling equally
  • Reconciliation — weighing the value indications from each approach to reach one final opinion
  • Recording — entering an instrument in the public land records of the county
  • Rectangular survey system — the government grid of townships, ranges and sections used across most of the country
  • Redlining — refusing or worsening credit or insurance terms for whole areas
  • Remainderman — the person who takes title when a life estate ends
  • Replacement cost and reproduction cost — the cost to build equivalent utility, versus the cost to build an exact copy
  • Rescission — cancelling a contract and returning both parties to their prior positions
  • RESPA — the real estate settlement procedures act, governing settlement services and referrals
  • Return on investment — return expressed as a percentage of the amount invested
  • Reversion — the grantor’s right to get the property back when a lesser estate ends
  • Riparian rights — water rights belonging to land bordering a flowing watercourse

S

  • Sales comparison approach — valuing a property against recent sales of similar properties
  • Secondary mortgage market — where existing loans are bought and sold between investors
  • Section — one square mile of land: 640 acres
  • Seller financing — the seller extends credit to the buyer instead of a third-party lender
  • Settlement — the closing: funds and documents change hands and the transaction completes
  • Severance — turning real property into personal property by detaching it
  • Sherman Antitrust Act — the federal law prohibiting agreements that restrain trade
  • Short sale — a sale for less than the debt, requiring the lender’s consent
  • Special agent — an agent authorized for one specific transaction
  • Special assessment — a charge on benefited properties for a specific public improvement
  • Special warranty deed — a deed warranting only against defects arising during the grantor’s ownership
  • Specific performance — a court order compelling a party to perform rather than pay damages
  • Statute of Frauds — the rule requiring certain contracts to be written and signed to be enforceable
  • Statutory redemption — a right in some states to reclaim property for a period after the foreclosure sale
  • Steering — directing people toward or away from areas on the basis of a protected characteristic
  • Stigmatized property — property some buyers find undesirable for reasons unrelated to its physical condition
  • Subagency — a cooperating broker acting as an agent of the listing broker’s client
  • Subject to — buying with an existing loan left in place, without assuming personal liability
  • Subordination — an agreement letting a later lien take priority over an earlier one

T

  • Tenancy by the entirety — joint ownership by spouses, with survivorship and protection from individual creditors
  • Tenancy in common — co-ownership with no right of survivorship; each share is inheritable
  • Tie-in arrangement — conditioning the sale of one thing on the purchase of another
  • Time is of the essence — a clause making every stated deadline a strict condition
  • Title — the legal evidence and fact of ownership — not a physical document
  • Title insurance — indemnity against defects in title that existed before the policy was issued
  • Title theory — legal title passes to the lender until the debt is repaid
  • Trade fixture — an item a business tenant attaches to conduct their trade, and may remove
  • Transaction broker — a non-agency role: assisting a transaction without representing either party
  • Transfer tax — a state or local tax on conveying real property, usually charged per unit of price
  • TRID — the rule combining truth in lending and respa disclosures into two forms
  • Trust account — a separate account holding client money, never the brokerage’s own funds
  • Truth in Lending Act (Regulation Z) — federal law requiring the cost of consumer credit to be disclosed

U

V

  • VA loan — a loan guaranteed by the department of veterans affairs for eligible veterans
  • Valid contract — an agreement meeting every legal requirement, binding on both parties
  • Variance — permission to depart from a zoning requirement because of hardship
  • Vicarious liability — liability imposed on one party for another’s acts because of their relationship
  • Void contract — an agreement with no legal effect from the beginning
  • Voidable contract — a contract one party may cancel and the other may not

Z

  • Zoning — local regulation dividing land into districts with permitted uses

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