Real Estate Dictionary
Your Subtitle text

Dictionary Real Estate 4

Dictionary Real Estate continued:

JOINT TENANCY - A type of co-ownership of real property (real estate) by two or more persons, giving each tenant equal rights in the property and equal undivided interest in the property. 

The rights of a joint tenant include the right of survivorship, which allows survivors, upon the death of an owner, to automatically assume the decedent’s interest (ownership) in the property. If there is more than one survivor in the joint tenancy, the survivoring joint tenants split the share of the decedent co-owner.

The right of survivorship means that no will is required to effect the transfer of the real property interest to the surviving co-owner(s), avoiding delays and costs of probate. Also see Tenancy In Common and Tenancy By The Entirety.

JUDGMENT LIEN - A lien, or money judgment, on the real property (real estate) of a debtor, based upon a court’s decree. The debtor is the defendant in the court action.

JUMBO LOAN - A loan which totals an amount in excess of what Fannie Mae or Freddie Mac considers eligible for purchase. Also called Jumbo Loan. The amount varies depending upon market conditions. Also called Non-Conforming Loan.

JUMBO LOAN (Non-Conforming Loan) - A loan which exceeds the amount that will allow it to be purchased by the Freddie Mac and Fannie Mae. Also known as a Non-Conforming Loan.

JUNIOR MORTGAGE - A mortgage loan that is subordinate to the First-Lien Mortgage, which is the primary loan. Examples of a Junior Mortgage include a second or third mortgage.

LAND - An area on the surface of the earth, including all things that are naturally attached to it (e.g., trees, water, minerals, etc.), and which also extends down into the ground (e.g., subsurface rights) as well as up toward the sky.

LANDLORD - An owner of real property (real estate) such as land, a home, an apartment building, or an office building, which is rented or leased to others, who are known as the tenants.

LATE CHARGE - A fee imposed upon a borrower as a penalty when the borrower fails to make a scheduled payment in a timely manner.

LATENT DEFECT - A hidden problem or defect with real property (real estate) which cannot easily be seen. A termite infestation, for example, may not be easily detected because it exists within the walls of the structure. Latent defects must be disclosed during any real estate transaction.

LEASE - A contract (either oral or written) stating an agreement between a tenant (lessee) and a landlord (lessor), including a conveyance and a use and/or occupation of premises by the lessor to the lessee. A lease may involve real estate (real property), such as commercial office space or a resiential home, or a lease may involve personal property (personalty), which may include things like cars.

LEASED FEE INTEREST - The remaining interest of a landlord who owns a leasehold property. See Leashold Conversion.

LEASEHOLD CONVERSION - A real estate process that involves converting leasehold property to fee simple ownership. This leasehold conversion process entails buying the remaining interest of the landlord. This remaining interest is known as the leased fee interest.

LEASEHOLD (Leasehold Ownership) - The right to use or hold real property (real estate) for a stated time period and price, as formally written in a lease agreement, and with no ability to transfer ownership. When the time period expires the property returns to the owner.

When a fee simple landowner enters into a ground lease with a lessee, this contractual agreement creates a leasehold interest.

LEASEHOLD ESTATE - The interest of a tenant in or right to hold possession of real property (real estate). The leasehold estate is a form of real estate that allows a tenant to build permanent structures on leased land and also gain income from these structures during the term of the lease. 

Typically a leasehold estate involves a long-term lease for a time period ranging from about twenty to ninety-nine years. An advantage to the landowner is the development of their property without costing them any money. They retain rights to the property and are able to avoid having to sell it prematurely and instead are able to generate income. 

An advantage to the tenant is the ability to avoid the cost of buying land, and the ability to utilize partiular properties that otherwise would not be available. 

A disadvantage of the leasehold estate is that the investment of the tenant becomes increasingly uncertain as the term of the lease approaches, and the landlord gains an unfair advantage in possibly being able to make monetary demands, above the normal fair market price, upon tenants.

Leaseholds are typically commercial though many residential properties are also leasehold, particularly in the state of Hawaii where there are many leasehold condominiums.

LEASE-PURCHASE OPTION (Lease With Option To Purchase) - A lease that provides the lessee (e.g., tenant) with an option to purchase the property within a stated period of time. A portion of each rent payment may be put toward a down payment and/or the closing costs of the potential purchase.

LENDER - Provider of mortgages and beneficiaries of deeds of trust (security devices for real property); an entity that provides funds for others to borrow with the intention of full repayment, usually with interest.

LESSEE - A person leasing or renting property from another. In residential leases, the lessee is often referred to as the tenant.

LESSOR - A person (e.g., landlord) who leases or rents property to another (e.g., a tenant).

LETTER OF CREDIT - A bank’s agreement with a customer (at the customer’s request) to honor demands of payment of drafts from third parties as long as the conditions of the letter of credit are met. The bank is the issuer, the customer is the account party, and the the third party is the beneficiary.

LETTER OF INTENT - A nolegally-binding yet formal expression of an intent to buy, invest, lease, or develop.

LEVERAGE - Using borrowed money to buy investment property in the hopes that the investment will yield a substantial profit; an attempt to generate a large (magnified) rate of return by borrowing money. 

LEVY IMPROVEMENT DISTRICT (LID)--A specific type of Water Control and Improvment District that is used to build as well as maintain levies that provide flood control for creeks and rivers.

LIABILITIES - Debts and other financial obligations of an individual.

LICENSE - A temporary and revocable privilege allowing a land owner to use the land for a specific purpose.

LI-See Levy Improvement District.

LISCENSED REAL ESTATE APPRAISER (Liscensed Appaiser)--See Appraiser.

LICENSEE - A person who possesses an active license as either a principal real estate broker, real estate broker, or property manager. Licensing agencies and regulations/requirements vary by state.

LIEN THEORY STATE - A state (e.g., Texas) where the legal title of  mortgaged real property (real estate) resides with the borrower (mortgagor), and the mortgage serves as a lien against the property. Also see Title Theory State.

LIFE ESTATE - An interest in real property (real estate) which is limited to the duration of a person’s lifetime.

LIFE TENANT - A person who has a life estate in real property (real estate).

LIMITED EQUITY HOUSING - Housing that is offered at a distinctly low price and with a low down payment with the goal of encouraging moderate-income and low-income families to purchase housing. If the owner sells the house and the market value of the property has risen, the owner will not receive any of the profit, which instead goes to the organization that constructed the home, which may then be resold at an affordable price.

LINE OF CREDIT - A specific amount of money that is the maximum a particular bank will lend to a specific customer (based on their credit standing) without any further required submission for a loan. Also see Home Equity Loan; Home Equity Line of Credit.

LISTING (Listing Agreement) - A legal agreement between a listing broker/agent and a property owner (vendor), giving authority to the broker to find a buyer or tenant for a piece of real property and listing out the services to be rendered and terms of payment.

LIST PRICE (Listing Price) - The amount of money stated (requested) for a piece of real property (e.g., a house) which is for sale. Also called Asking Price.

LOAN BROKER - A firm or person who, for gain or compensation, acts as an intermediary between a lender and borrower to sell or negotiate a loan against real property (real estate) with a deed of trust or mortgage as security, or to continue service of such a loan. Typically a mortgage broker will accept and handle the application and may also process and close the loan. Also see Mortgage Broker.

LOAN COMMITMENT - A promise by a lender that they will loan a certain amount of money to a particular borrower for a specified real estate property, and for a determined amount of time with certain terms.

Dictionary Real Estate continued:

LOAN ORIGINATION - The various components of the loamaking process including accepting and processing a loan application as well as underwriting and closing the loan.

LOAN SHARKING - Charging a borrower interest rates that are higher than the rates permitted by law. Also called Usury.

LOAN-TO-VALUE RATIO (Loan To Value Ratio; LTV) - The ratio of the mortgage loan amount to a property’s value (either the appraised value or the sale price, whichever is lower), expressed as a percentage. For example, a million dollar property with a $700,000 mortgage has a loan-to-value ratio of 70%.

LOCK-IN RATE (Lock) - A written agreement by a lender which commits to (guarantees) a specific mortgage loan interest rate or other loan feature for a definite time period. 

The lock-in rate protects a buyer of real property from interest rate increases from the time of the loan application until the closing (finalizaing) of the real estate transaction, when the borrower ulitmately receives the loaned funds.

LOYALTY - A provision of fiduciary duties which requires an agent to place the interests of a client above all others’ interests, and this includes the agent’s own interest. 

For example, if an agent knows that a seller (who is a customer and not a client) is willing to take $400,000 for a piece of real property (real estate).

LTV--See Loan-To-Value Ratio.

MANUFACTURED HOME - A home which is constructed in a factory.

MARGIN - A percentage (e.g., the number of percentage points) which a lender adds to the assigned index in order to establish the new interest rate on each adjustment date on an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage), as per the provisions stated in the terms of the loan.

MARKETABLE TITLE - Good or clear title (e.g., title without clouds), which may or may not be perfect, yet has been determined to be reasonably free from risk of litigation as a result of possible defects (e.g., liens, judgments). A Marketable Title may be marketed to a reasonably informed and prudent buyer of real property (real estate). Also called Merchantable Title.

MARKET VALUE - The current maximum amount of money that a particular piece of real property (real estate) would bring if offered for sale for a reasonable time period in a competitive market, to a willing seller who is not compelled to sell and from a willing buyer who is not compelled to buy (neither party is under pressure to act), with both parties having a reasonable knowledge about all pertinent facts including all purposes to which the property is best suited and for which it is capable of being used. An appraisal is an attempt to determine the home’s market value. Also called Fair Market Value.

MASTER ASSOCIATION - A second level homeowner’s association comprised of representatives from associations covering particular areas within a planned unit development (PUD) or large condominium complex.

MATURITY/MATURITY DATE - The date on which a loan (e.g. mortgage loan) must be paid in full as stated in the note, in accordance with the terms of the loan.

MECHANIC’S LIEN - A statutory lien used by individuals and companies (e.g., general contractors and subcontractors). This specific type of lien is placed against real property (real estate) for labor performed and/or materials used.

MERCHANTABLE TITLE - Good or clear title (e.g., title without clouds), which may or may not be perfect, yet has been determined to be reasonably free from risk of litigation as a result of possible defects (e.g., liens, judgments). A Marketable Title may be marketed to a reasonably informed and prudent buyer of real property (real estate). Also called Marketable Title.

MILL - A method of expressing property tax rates.

MORTGAGE - A loan that uses your home as collateral. The word mortgage also refers to the contract that states the terms of the loan. 

The Mortgage is a legal document that serves to secure performance of an obligation, and codifies the agreement that the home is the collateral for the loan, thus placing a lien on the real property (real estate). 

The home buyer, the mortgagor, is then required to make a series of scheduled payments, and if the buyer defaults on the note payment, the mortgagee, the lender, can look to the specified real estate property.

MORTGAGE BANKER - A firm or corporation that provides its own funds to originate and engage in mortgage financing, loaning the money, and closing the transaction in their name.

MORTGAGE BROKER - A firm or person who, for gain or compensation, acts as an intermediary between a lender and borrower to sell or negotiate a loan against real property (real estate) with a mortgage or deed of trust as security, or to continue service of such a loan. Typically a mortgage broker will accept and handle the application and may also process and close the loan. Also see Loan Broker.

MORTGAGE BROKER - A person or a firm who acts as an intermediary between a borrower and a lender to negotiate or sell a loan against real property, usually accepting and handling the necessary applications for the loan and possibly also processing and closing the loan. The Mortgage Broker negotiates or sells the loan for compensation or gain, and utilizes a mortgage or deed of trust as security. Mortgage Broker may also act as an intermediary to continue service on these loans.

MORTGAGEE - The lender of money; the receiver and holder of a mortgage document that serves as security for a debt or obligation; the individual or institution who is given a mortgage (e.g., the lender).

MORTGAGOR - The borrower or debtor (e.g., landowner, property owner); provides a mortgage document as security for a debt or obligation (offers the property as security to guarantee the repayment of the loan).

MORTGAGE GUARANTY INSURANCE CORPORATION (MGIC) - A private corporation that is the United States’ largest provider of private mortgage insurance, though MGIC does not insure as large of a percentage of the loan as VA and FHA insurance. MGIC also provides underwriters and other services to home mortgage lenders.

MORTGAGE INSURANCE - Insurance which protects lenders against losses due to a borrower defaulting on a mortgage loan.

The borrower purchases Mortgage Insurance in order to protect the lender and also to allow the lender to increase the ratio of the loato-market-value of the real property, sometimes providing lending of more than 90% of the property’s market value. 

Mortgage Insurance, which is also known as Private Mortgage Insurance (PMI) is usually required if the borrower’s down payment is less than a 20% of the purchase price.

PRIVATE MORTGAGE INSURANCE (PMI) - Default insurance used in conventional mortgage loans with the goal of protecting the lender against default by the borrower. The borrower purchases a Private Mortgage Insurance policy to protect the lender in the event of nopayment of the loan. 

Private Mortgage Insurance policies are typically required by the lender if the borrower’s down payment is less than 20% of the home’s sale price.

Thus Private Mortgage Insurance usually insures just

MORTGAGE LENDER - The lender who provides the funds (money) for a mortgage loan and also oversees the loan application through processing, and also oversees the review of the applicant’s credit worthiness (credit history, income, assets, etc.).

MORTGAGE LIFE INSURANCE - A term life insurance policy purchased by a home buyer, which will pay the remaining mortgage loan balance in the event that the borrower passes away. The coverage provided by mortgage life insurance gradually decreases over time as the unpaid balance of the mortgage loan decreases.

Dictionary Real Estate continued:

MULTI-DWELLING UNITS - Multiple properties including separate housing units (e.g., providing housing for more than one family) yet together serving as security for one mortgage loan.

MULTIPLE LISTING SERVICE (MLS) - A service originated by real estate agents to facilitate the sharing of listings among real estate firms. The Multiple Listing Service facilitates a systematic exchange of detailed information about real estate properties for sale (listings) and serves as a clearinghouse of listing information for agents/brokers. Commissions are typically shared with MLS members who locate buyers.

NATIONAL ASSOCIATION OF REALTORS® (NAR) - The world’s most established and also the largest real estate organization with more than 600,000 members in the United States. The National Association of Realtors strives to encourage professionalism in activities related to real estate and promulgates rules with that goal. The NAR also strictly regulates the term Realtor®, and ensures that all Realtors adhere to the organization’s Code of Ethics which obligates Realtors to protect and promote their client’s interest and treat all parties, including both clients and customers, honestly and fairly whether or not they are being represented by the Realtor.

NEGATIVE AMORTIZATION - This occurs when a borrower’s monthly payments do not cover interest costs, increasing the loan’s principal balance by the amount of the unpaid interest.

In other words, the amortization is such that the payment made are insufficient to fund a complete repayment of the loan at its termination, and the balance owed increases instead of decreases over the life of the loan.

For example, Negative Amorization may occur if an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage) has a cap (ceiling) on the monthly payments, and an increased interest rate creates a situation where the monthly payments aren’t big enough to cover the interest. The borrower may end up making their payments yet still owing more than they did before the payments.

NEGOTIATION - Two or more parties bargaining over the terms of a contract and/or coming to an agreement on how they will complete a business transaction (e.g., real estate transaction).

NET CASH FLOW - Income remaining for an investment property subsequent to paying all expenses (e.g., monthly operating income minus the monthly housing expenses).

Expenses include the mortgage loan’s payments for PITI (principal, interest, taxes, and insurance) for the mortgage loan.

NET INCOME - Money an investment or business earns after subtracting from the gross income all expenses, such as taxes and insurance. The Net Income also takes into account other costs of the business or investment, such as unrented units (vacancies), or tenants who don’t pay their rent.

NET LEASE - A lease which may hold a tenant responsible for specific costs such as taxes, insurance, repairs to the premises, or maintenance costs. Also see Triple Net Lease.

NET LISTING - A real estate listing that permits the real estate agent to keep any money which is more than the net amount which the home seller requires for the home (the listing price). The the agent’s commission is determined when the sale price is determined. Net Listing is illegal in most states.

NET MONTHLY INCOME - The amount of money you earn/receive each month, minus any taxes paid/owed on that money. The net montly income is also referred to as take home pay after taxes.

NET WORTH - The total value of the assets (including cash) of a company or individual, minus all liabilities.

NON-CONFORMING LOAN - A loan which totals an amount in excess of what Fannie Mae or Freddie Mac considers eligible for purchase. Also called Jumbo Loan. The amount varies depending upon market conditions. Also called Jumbo Loan.

NOLIQUID ASSET - An asset which is not readily convertible to cash.

NOTARY PUBLIC - A peson who is officially authorized (by law) to certify and attest to specific documents by his or her hand and official seal.

NOTE - A written instrument of credit. A note is a written promise to pay a specific amount of money under certain conditions which are agreed upon by both the lender and the borrower. 

The note is an express and absolute promise that the signer will repay the money, usually also including interest, and typically secured by a mortgage or a trust deed.

NOTE RATE - The interest rate as it is stated on the mortgage note or any other loan agreement.

NOTICE OF COMPLETION - Public notice of work completed. A notice of completion includes filing the proper documents of the work done, which then limits the time period in which a valid mechanic’s lien may be filed against the real property (real estate).

NOTICE OF DEFAULT - A formal written notice that is provided to a borrower to let them know they are in default (e.g., due to non-performance of a contract), and thus legal action may be taken against them.

OBEDIENCE - This provision of fiduciary duty requires an agent to promptly and efficiently follow the client’s instructions as long as they are legal, ethical, and conform to the agency relationship.

OBSOLESCENCE - A loss in value of a piece of real property (real estate) as a result of either internal (e.g., functional obsolescence) or external (economic obsolescence) forces or events, including physical deterioration (physical obsolescence).

OFFER - A written promise by one party (e.g., a home buyer) to act or perform in a certain manner if the other party (e.g., a home seller), acts or performs as requested. An example of an Offer is when a potential home buyer makes a formal bid to a home seller.

OPEN-END MORTGAGE - A mortgage with an upper limit on how much may be borrowed; the borrower may use, in incremental advances, an amount  of money up to but not exceeding that original borrowing limit, with all of the borrowed monies being secured by the same mortgage.

OPEN HOUSE - Opening a seller’s listed house to the public to show the home to potential buyers. This is typicall done by appointment with the listing real estate agent, or on certain pre-arranged days.

OPEN LISTING - A listing the principal (owner) makes available to any number of brokers; the commission is earned by the first broker to secure a purchaser who is ready, willing, and able to buy at the terms of the listing.

ORIGINAL PRINCIPAL BALANCE - The total amount of principal owed on a mortgage previous to any payments being made.

ORIGINATION FEE - A finance fee a lender charges to place a mortgage, and which may include reimbursement for various costs including document preparation, credit review and evaluation, home inspection, appraisal fees, submission, and other costs. The fee is usually a percentage of the amount of the loan.

OWNER FINANCING - A real estate transaction in which the buyer’s purchase of the property is financed either partly or completely by the seller.

OWNER-OCCUPIED - A home that is the primary residence of the purchaser.

PAYMENT (P&I) - The principal and interest of a monthly mortgage payment, excluding any insurance payments and taxes.

PERIODIC RATE CAP - A provision in the terms of an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage) which limits any increases or decreases in the interest rate or the loan payments.

PERMANENT BUYDOWN - Money paid toward a home loan to reduce the monthly payment or to reduce the loan’s interest rate for the complete term of the loan. Also see Interest Rate Buydown; Temporary Buydown.

PERSONAL PROPERTY - All property that is not considered real property.

PHYSICAL CHARACTERISTICS OF REAL ESTATE - Uniqueness, Immobility, Indestructibility.

PHYSICAL DEPRECIATION -  Normal wear and tear on real property (real estate), including such things as aging mechanical, electrical, or cooling systems, a cracked foundation, or peeling paint due to time and the exposure to the elements.

Physical deterioration may be considered either incurable or curable depending upon the particular situation. Also called Physical Obsolesence; Physical Deterioration.

PHYSICAL DETERIORATION - Normal wear and tear on real property (real estate), including such things as aging mechanical, electrical, or cooling systems, a cracked foundation, or peeling paint due to time and the exposure to the elements.

Physical deterioration may be considered either incurable or curable depending upon the particular situation. Also called Physical Obsolesence; Physical Depreciation.

PHYSICAL OBSOLESCENCE -  Normal wear and tear on real property (real estate), including such things as aging mechanical, electrical, or cooling systems, a cracked foundation, or peeling paint due to time and the exposure to the elements.

Physical deterioration may be considered either incurable or curable depending upon the particular situation. Also called Physical Deterioration; Physical Depreciation.

PITI - An acronym that stands for Principal, Interest, Taxes, and Insurance, the four primary components of typical mortgage loan payments. These money to pay these items is usually put into an escrow account (impound account).

PLANNED UNIT DEVELOPMENT (PUD) - A zoning designation for a real estate project in which the property is developed or subdivided typically at either a similar or greater overall density than conventional development, and often with improvements in open, common areas. Individuals hold title to a residential lot and house while a homeowners association owns and maintains the common areas for the benefit of the individual PUD unit owners who are members of the association because of their property ownership within that development. PUDs may be residental, industrial, or commercial.

POA--See Power of Attorney.

POCKET LISTING - A listing that a broker retains yet does not place it onto the Multiple Listing Service (MLS), and thus it is unavailable to other real estate agents who will not be aware the property is for sale. This may be done so the property can be shown to the agent’s preferred buyers without competition from other buyers (a breach of the agent’s fiduciary duty). A seller can avoid this by asking the listing agent to provide an MLS number within 24 hours of the listing agreement.

Dictionary Real Estate continued:

POINT OF BEGINNING - A point on a piece of real property (real estate) where the property description starts. 

POWER OF ATTORNEY - A written authorization (legal document; instrument) giving one person (the attorney-ifact) permission to act as an agent for another person (to act in their behalf) to a particular extent as indicated in the authorizing instrument. The power of attorney may be limitd to particular periods of time and/or particular acts.

PRE-APPROVAL - An indication by a lender to a particular borrower of the total amount of money the borrower is eligible for on a mortgage loan. The process of Pre-Approval typically includes a thorough review of the applicant’s financial information including income and assets as well as credit history.

PRE-APPROVAL LETTER - A mortgage lender’s letter stating that a particular borrower qualifies for a mortgage of a certain amount of money.

PREDATORY LENDING - Refers to a variety of unethical practices related to loaning money including providing mortgage loans to persons who do not have sufficient income to repay those loans, repeatedly refinancing loans for people who would otherwise be unable to continue making their regularly scheduled payments and charging them higher fees for this refinancing, and also “packing” credit insurance onto loans.

PREPAID INTEREST - The payment of interest before it is due.

PREPAYMENT - Money paid to reduce a loan’s principal balance before it is due.

PREPAYMENT PENALTY - A penalty the creditor (borrower) may be required to pay to the debtor (lender) if the creditor wishes to pay off some or all of the debt before its scheduled maturity (due date) to either retire (fully repay) the debt or to substantially reduce the unpaid principal balance so as to reduce the amount of interest to paid to the lender. The intent of the penalty is to compensate the lender for lost revenue that had been anticipated at the time the loan was originally granted. This penalty (fee) is not allowed for government backed loans such as VA and FHA loans.

PREPAYMENT PRIVILEGE - A debtor’s right to pay off all or part of a debt (e.g., mortgage) without penalty before it reaches maturity.

PRE-QUALIFICATION - A preliminary assessment by a lender, before pre-approval and loan application, to determine how much money a potential home buyer is eligible to borrow. This usually occurs before applying for a loan or seeking pre-approval for a particular loan amount, though it does not guarantee that the lender will provide a mortgage to the borrower. 

To complete an affordability analysis, the Pre-Qualification takes into account the potential home buyer’s income, assets, and available funds as well as liabilities, and also considers the type of home loan and all of the costs of a home (insurance, taxes, closing costs, etc.) in order to make a preliminary assessment of the amount that can be loaned to a particular potential home buyer.

PRE-QUALIFICATION LETTER - A letter provided by a mortgage lender to a potential home buyer stating that the buyer has pre-qualified for a home loan. However, the Pre-Qualification Letter does not absolutely commit the lender to providing a certain mortgage loan amount.

PREVIEWS® PROPERTY SPECIALIST - A certification conferred upon Coldwell Banker professionals who achieve the performance criteria and meet the luxury real estate experience and training standards required for this designation involving marketing and selling luxury properties. The designation required the completeion of a presribed course of study through Coldwell Banker as well as other institutions.

PRICE FIXING - An illegal agreement (e.g., among brokers) that involves the setting of minimum prices.

PRIMARY MORTGAGE MARKET - The market that involves lenders who originate loans and provide funds directly to borrowers. Also see Secondary Mortgage Market.

PRIME RATE - The minimum (lowest) interest rate (discount rate), charged by commercial banks on short-term loans to their most creditworthy customers (e.g., those clients who have the highest credit ratings).

PRINCIPAL (Financial) - The capital sum borrowed (the basic element of the loan), or the amount of the original money borrowed which has not been repaid, and upon which the interest is paid. Principal does not include any interest charged to the borrower by the lender, nor does it include mortgage insurance premiums.

PRINCIPAL (Legal) - An entity (e.g., person, company) which employs (hires; authorizes) another person, called the agent, to assist and represent them in a particular transaction. In a real estate transaction the principal may be either the buyer or a seller.

PRINCIPAL BROKER - The licensed broker who is directly responsible for and in charge of a brokerage company conducting real estate operations.

PRINCIPLE OF CONFORMITY - A principle of appraisal holding that the maximum (highest) value is realized when a reasonable degree of sameness, or homogeneity, exists in a particular neighborhood.

PROMISSORY NOTE - A written unconditional promise by one person to pay a specific sum of money to another person over a specified period of time.

PROPERTY - The interests or rights a person has in something owned; the thing itself including the right to possess, use, transfer, encumber, and exclude - this is known as the “bundle of rights.”

PUBLIC UTILITY DISTRICT (PUD) - A water district that is created by a county or city to promote the development of a designated area by providing sewer and water services. The Public Utility District operates in a manner similar to a Municipal Utility District though it is crEated by a local government rathern than by a private developer.

PU-See Planned Unit Development.

PU-See Public Utility District.

PUFFING - Nofactual opinions that exaggerate certain features with a goal of increasing the perceived attractiveness/desirability of real property. If a real estate agent offers subjective comments to a client not as facts but as opinions, then it is considered puffing. Some examples of puffing are

PURCHASE OFFER - A written document that states the terms and conditions under which a purchaser is willing to buy a particular property, inclduing the price.

RADON - A toxic gas that emanates from the Earth and is known to accumulate inside of some homes in particular areas. When the radon reaches dangerous levels inside of a home it is a potential carcinogen as well as the cause of other medical problems. 

When radon accumulation in a home is a concern then it can be checked during the Appraisal process by a qualified inspector.

RATE CAP - The upper limit on any interest rate increase or decrease on an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage). This rate cap may be specific to the loan’s regular adjustments, or may instead apply to the whole lifetime (term) of the loan. Also see Ceiling.

RATIFIED SALES CONTRACT - A contract which provides evidence that both the buyer and seller have agreed to the buyer’s offer. In some cases the contract will only become binding if contingencies in the contract are satisfied. For example, there may be a contingency in the contract stating that the buyer must be able to secure a mortgage loan, or that the seller must secure an acceptable home inspection.

READY, WILLING AND ABLE - Describes a potential buyer of real property (real estate) who is prepared to buy the property based upon the stated terms of the seller, and who has the capacity to do so.

REAL ESTATE - Physical land including any appurtenances to that land including all structures affixed to or erected up then land, and thus part of the real estate. 

Examples of items that are part of the real estate are trees, mineral deposits, and any mamade improvements to the property (e.g., gates, fences, a garage). An exception is currently growing crops, which are considered personalty (personal property).

Also included as being part of the real property are the rights associated with its ownership, including the right to own or use the property (e.g., the Bundle of Rights). 

Also called Real Property; Realty.

REAL ESTATE AGENT - A person whose profession is to provide services (e.g., to negotiate and transact) in the buying and selling of real property (real estate, realty) such as homes or land, and as such owes fiduciary duties to their client, who is known as the principal. Typically the real estate agent will earn a commision that is based upon a percentage of the sale price of the property.

REAL ESTATE APPRAISER--See Appraiser.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) - A federal law that states in detail the proper procedures (e.g., disclosure rules) that must be followed in real estate transactions involving residential property.

REAL PROPERTY (Real Estate; Realty) - Physical land including any appurtenances to that land including all structures affixed to or erected up then land, and thus part of the real property. 

Examples of items that are part of the real property (realty) are trees, mineral deposits, and any mamade improvements to the property (e.g., gates, fences, a garage). An exception is currently growing crops, which are considered personalty (personal property).

Also included as being part of the real estate are the rights associated with its ownership, including the right to own or use the property (e.g., the Bundle of Rights). 

REALTOR® - A real estate broker or real estate associate holding an active membership their local real estate board affiliated with the National Association of Realtors® (NAR) which promulgates rules and regulates the name Realtor and the use of the advertising seal.

Realtor® is a registered word/service mark, and may only be used by real estate brokers or appraisers affiliated with the National Association of Realtors®. 


Thank you for visiting Dictionary Real Estate - Continued on next page.

Web Hosting Companies