Real estate terms, defined properly

280 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.

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Read the warnings

15 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.

Color of titleCurtesyDual agencyEscalation clauseHoldover tenantNegative amortizationNet leaseNet listingPower of attorneyPrice fixingPuffingRestrictive covenantSteeringStigmatized propertyTorrens system

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
  • Alluvion — the soil deposited on a bank by the gradual action of water
  • 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
  • Appurtenant easement — an easement that is appurtenant — attached to a parcel of land rather than to a person
  • 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
  • Attorney in fact — a person authorized by a power of attorney to act for someone else

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
  • Color of title — an instrument that appears to give title but is legally defective
  • 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
  • Conditional use permit — permission for a use the zoning allows only on stated conditions
  • 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 eviction — conditions the landlord fails to fix that make the premises unusable
  • 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
  • Covenant of seisin — the grantor’s promise that they own the estate the deed purports to convey
  • Credit — an amount in a party’s favour on the settlement statement
  • Curable and incurable depreciation — whether a loss in value pays for itself to correct
  • Curtesy — a surviving husband’s common-law life interest in his deceased wife’s land
  • 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
  • Downzoning — rezoning an area to a less intensive use or a lower density
  • 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 by necessity — a court-recognized right of access for a landlocked parcel
  • Easement in gross — an easement benefiting a person or company rather than a neighboring parcel
  • Economic life — the period over which improvements still contribute value to the property
  • Effective age — the age a property appears to be from its condition rather than from its build date
  • 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
  • Escalation clause — a clause raising a buyer’s offer automatically above competing offers
  • 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
  • Estoppel certificate — a signed statement of the current facts of a loan or lease that the signer cannot later contradict
  • 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
  • Freehold estate — an estate of ownership lasting an indefinite period
  • Functional obsolescence — value lost through a defect in the property’s own design or utility

G

  • General agent — an agent authorized to act for a principal in a range of matters
  • General lien — a lien attaching to everything the debtor owns rather than to one parcel
  • General warranty deed — a deed warranting title against all defects, whenever they arose
  • Graduated lease — a lease with rent that steps up at points fixed in advance
  • Grantee — the party receiving an interest in real property
  • Granting clause — the words of conveyance in a deed that actually transfer the interest
  • Grantor — the party conveying an interest in real property
  • Gross lease — a lease in which the landlord pays the operating expenses out of the rent
  • Gross rent multiplier (GRM) — sale price divided by gross rent, used as a quick comparison tool
  • Ground lease — a long-term lease of land on which the tenant builds
  • Group boycott — competitors agreeing to refuse to deal with a particular firm

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
  • Holdover tenant — a tenant who stays on after the lease term has ended
  • 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
  • Inverse condemnation — an owner’s action forcing government to pay for property it has effectively taken
  • Involuntary lien — a lien created without the owner’s consent

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

  • Laches — the loss of a claim through unreasonable delay in asserting it
  • 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 lease — a lease in which the tenant pays operating expenses on top of rent
  • 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

  • Package mortgage — one mortgage covering real property together with personal property
  • Partition — a court action dividing co-owned property or ordering it sold
  • Party wall — a shared wall on the boundary between two properties, used by both owners
  • Percentage lease — a lease where rent includes a share of the tenant’s gross sales
  • 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
  • Planned unit development — a development approved as one plan rather than lot by lot, mixing uses and densities that ordinary zoning would separate
  • Plat — a recorded map dividing land into lots, blocks, streets and easements
  • Plottage — the increase in value from combining adjacent parcels into one larger site
  • Police power — government authority to regulate land use for public health, safety and welfare
  • Power of attorney — the written instrument creating authority to act for another person
  • 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
  • Prescriptive easement — a use right earned by open, continuous, unpermitted use over the statutory period
  • Price fixing — competing firms agreeing on what to charge
  • Primary mortgage market — where loans are originated — lender to borrower
  • Principal meridian — the north–south reference line for a rectangular survey area
  • Principle of anticipation — value comes from the benefits a buyer expects to receive in the future
  • Principle of conformity — value is maximised where the properties in an area are reasonably similar
  • 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
  • Purchase money mortgage — a mortgage the buyer gives back to the seller as part of the purchase price

Q

  • Quiet enjoyment — the tenant’s right to possess the premises without interference by the landlord
  • 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
  • Reliction — land uncovered when water permanently recedes
  • 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
  • Restrictive covenant — a private promise limiting how land may be used, recorded against the title
  • 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
  • Satisfaction of mortgage — the recorded document showing a mortgage has been paid in full
  • 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 lien — a lien attaching to one identified property
  • Specific performance — a court order compelling a party to perform rather than pay damages
  • Spot zoning — rezoning a single parcel inconsistently with the area around it
  • 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
  • Subsurface rights — the right to the earth beneath the surface of a parcel

T

  • Tacking — adding a predecessor’s period of possession to your own to complete the statutory period
  • 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
  • Tenancy in severalty — sole ownership by one person or one entity
  • 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
  • Torrens system — a registration system in which the state itself certifies who owns the land
  • 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

W

  • Wraparound mortgage — a new seller-financed loan that wraps around an existing loan left in place

Z

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

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