Glossary of Real Estate Terms
1031 Tax Deferred Exchange: A 1031 tax deferred exchange allows you to roll-over all of the proceeds received from the sale of an investment property into the purchase of one or more other like-kind investment properties.
Abstract of Title: A summary prepared by a licensed abstractor of all documents recorded in the public records of the political subdivision where the land is located. An abstract in some states or areas is reviewed by an attorney or other experienced title examiner to determine the status of title. Virtually every abstractor today provides actual copies of the records rather than an abstract of each document.
Agent: One who has authorization, either expressed or implied, to act for or represent another party, usually in business matters, such as issuing title insurance policies on behalf of a title insurer for a portion of the premium.
Appraisal: An estimate of value of property resulting from analysis of facts about the property; an opinion of value.
Amortization: is the process of decreasing, or accounting for, an amount over a period of time.
Assumption: The act of conveying real property; taking title to a property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the property.
Building Contract:An agreement between an owner or lessee and a building contractor, setting forth terms relative to the construction of a proposed structure.
Capitalization Rate (CAP Rate): The percentage (acceptable to an average buyer) used to determine the value of income property through capitalization.
Close of Escrow: The date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance becomes effective.
Closing: The final procedure in the real estate sales process, where the sale and pertinent loan are completed by the execution of documents for recording. In some areas, this procedure is known as the closing of escrow.
Comparable Sales: Sales that have similar characteristics as the subject property, used for analysis in the appraisal. Commonly called "comps."
Depreciation: Depreciation is an income tax deduction that allows a taxpayer to recover the cost of property or assets placed in service. Depreciation is contrasted with an expense. Business expenses are fully deductible when incurred. The expense for purchasing a fixed asset, however, must be spread out over a number of years.
Earnest Money Deposit: Down payment made by a purchaser of real estate as evidence of good faith; a deposit or partial payment.
Easement: A right or interest in the use of the land of another which entitles the holder to some use, privilege or benefit, such as to place pole lines, pipe lines or roads thereon.
Encumbrance: A right or claim upon real property (land) held by one other than the property owner. Encumbrances are divided into two classes, as follows:
a) Liens (mortgages, deeds of trust, mechanics' liens, local taxes, assessments, judgments, attachments, etc.).
b) Encumbrances other than liens which are limitations on the ownership of the land (such as conditions, restrictions, reservations, easements, etc.).
Equity: (1) A legal doctrine based on fairness, rather than strict interpretation of the letter of the law. (2) The market value of real property, less the amount of existing liens. (3) Any ownership investment (stocks, real estate, etc.) as opposed to investing as a lender (bonds, mortgages, etc.).
Escrow: An independent third party who acts as the agent for buyer and seller, or for borrower and lender, carrying out instructions of both and disbursing documents and funds. Escrow closes and the transfer of property or document is completed upon fulfillment of certain conditions specified in the written instructions, whereupon the necessary deeds and other instruments are recorded.
Estate: (1) The interest or nature of the interest which one has in property, such as a life estate, the estate of a decreased, real estate, etc. (2) A large house with substantial grounds surrounding it, giving the connotation of belonging to a wealthy person.
Full Disclosure: In real estate, revealing all the known facts which may affect the decision of a buyer or tenant. A broker must disclose known defects in the property for sale or lease.
Gross Rent Multiplier (GRM): A rule of thumb method frequently used by some individuals that arrives at an estimate of fair market value by multiplying gross rental income by a factor that varies with the type of property and its location.
Indemnity: Insurance against possible loss or damage. A title insurance policy is a contract of indemnity.
Lease: An agreement by which an owner of real property (lessor) gives the right of possession to another (lessee), for a specified period of time (term) and for a specified consideration (rent).
Legal Description: A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.
Lender: Any person or entity advancing funds which are to be repaid. A general term encompassing all mortgagees, and beneficiaries under deeds of trust.
NNN: Triple net.
Parcel: Any area of land contained within a single description.
Partnership: An association of two or more persons who have contracted to join in business and share the profits.
Personal Property: Any property that is not designated by law as real property (i.e., money, goods, evidences of debt, rights of action, furniture, automobiles).
"PRE," "PRELIM" OR Preliminary Report: A written report issued by a title company, preliminary to issuing title insurance, which shows the recorded condition of title of the property in question. See Commitment.
Quitclaim Deed: A deed operating as a release; intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.
Survey: The measurement by a surveyor of real property which delineates the boundaries of a parcel of land. An ALTA survey additionally delineates the exact location of all improvements, encroachments, easements and other matters affecting the title to the property in question. A survey may be required by a title insurance company whenever the company is requested to issue an ALTA Extended Coverage Policy.
Title: (1) A combination of all the elements that constitute a legal right to own, possess, use, control, enjoy and dispose of real estate or a right or interest therein. (2) The rights of ownership recognized and protected by the law.
Title Insurance: Insured statement of the condition of title or ownership of real property. For a one-time-only premium, the named insured and their heirs are protected against title defects, liens and encumbrances existing as of the date of the policy and not specifically excluded from it. In the event of a claim, the title company provides legal defense from the policyholder and pays any covered losses incurred as a result of such claim.
Title Report: See Preliminary Report.
Variable Interest Rate: An interest rate that fluctuates with the current cost of money; subject to adjustment if the prevailing rate moves up or down.
Waive: To voluntarily and intentionally relinquish a known right, claim or privilege.
"I could not have hoped for a better outcome. You not only listened to our needs, you appreciated the quality of our building much more than anyone else I spoke with. In fact, you sold the building for substantially more than your competition said that it was worth."