Glossary Of Real Estate Terms
A - E | F - Q | R - Y

- F -

Fee ‑ The fullest estate a person may own in real property. It is the estate almost all owners hold. Also called fee simple.

Fictitious Deed of Trust ‑ A trust deed recorded by a trustee that does not cover an actual transaction. The trustee may then in later deeds of trust refer to the fictitious trust deed and incorporate its terms without repeating them in the part of the trust deed being recorded. This saves recording fees.

Finance Change ‑ The total dollar amount of all charges and interest the lender will make to the borrower over the life of the loan. Includes everything except principal.

Finder's Fee ‑ A fee agreed to be paid to one person, called a finder, who locates another person, such as a buyer or lender, desired by the party promising to pay the fee. The fee is payable when the deal is consummated. In real estate transactions, the finder may introduce the parties, but may not engage in negotiations unless the finder holds a real estate broker's or sales license.

First Lien ‑ The debt recorded first (earliest in time) such as a first mortgage or first deed of trust. This debt has priority as a lien over all other debts. In cases of foreclosure, the first lien will be satisfied before other liens are paid off.

Foreclosure ‑ The procedure of enforcing a lien by the sale of the property covered by the lien.

Foreclosure Sale ‑ The sale of property in a foreclosure. Most often, it is the sale of the property securing a debt after default in payment.

Free and Clear ‑ Free means a freehold estate, and, in this expression, it means a simple title. Clear means there are no money encumbrances against the property. Generally used to refer to a property free of mortgage debt.

Future Advance ‑ Money loaned to a borrower after the execution of a trust deed under a clause making the trust deed security for such later advanced. "Obligator future advances" are those the lender is required to make under contract with the borrower. Non‑obligatory future advances are those the lender is not required to make.

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- G -

Grace Period ‑ Additional time allowed to perform an act or make a payment before a default occurs.

Grant ‑ A term used in deeds of conveyance to indicate a transfer of real property.

Grantee ‑ The party to whom the title to real property is conveyed by deed; the buyer.

Grantor ‑ The party who conveys real property by deed; the seller.

Gross Profit Percentage ‑ Realized gain on the sale or exchange of real property divided by the net sales price of the property. Used to multiply by each year's principal received on a purchase money note to calculate the recognized gain for the year for tax reporting.

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- H -

Hard Money ‑ (1) Cash loaned; contrasted with soft money, which means credit extended rather than cash. These expressions are often encountered in such a term as hard‑money trust deed. (2) Some people use this term to mean a high‑interest loan.

Hazard Insurance ‑ Insurance against damage to property from physical hazard, such as fire and windstorm.

Holder in Due Course ‑ A person who takes a negotiable instrument, such as a note or check in good faith for value before it is past due and without notice of any defects when it was negotiated. Certain defenses that the maker could have claimed against the original payee, such as payment in full or in part, or certain types of fraud cannot be claimed against a holder in due course.

Hypothecation ‑ Giving real or personal property as security without parting with possession.

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- I -

Installment Contract ‑ See Land Contract.

Installment Note ‑ A promissory note calling for periodic payments.

Installments ‑ Parts of the same debt, payable at successive periods as agreed.

Institutional Lender ‑ An institution that makes substantial numbers of real estate loans such as a bank, a savings and loan association, or an insurance company.

Instrument ‑ A writing executed as the expression of some contract, act, or proceeding, such as a deed.

Insurable Interest ‑ An interest in property such that damage to the property would cause the owner of the interest a financial loss; for example, the interest of a tenant or the holder of a trust deed.

Interest ‑ (1) Legally, any charge a lender or creditor makes for the use, forbearance, or detention of money, no matter how the charge is labeled by the parties. (2) In daily usage, the percentage charged by the lender.

Interest‑Only Loan or Note ‑ A loan or note for which the installment payments are 100% interest; thus the payments do not reduce the principal balance of the loan or note.

Interest Rate ‑ The charge made for a loan of money or use of credit, expressed as a percentage of the principal.

Investment‑to‑Value Ratio ‑ When purchasing a note and deed of trust, the amount invested in the note plus the current unpaid balances of all senior loans divided by the current market value or appraised value of the property securing the loans. Investment‑to‑value ratio is usually expressed as a percentage.

Involuntary Lien ‑ A lien imposed on property without the consent of the owner; for example, real property taxes and judgment liens.

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- J -

Joint Note ‑ A note in which there are two or more makers who share equal liability on it.

Joint Tenancy ‑ Ownership of property by two or more persons, each of whom has an undivided interest with the right of survivorship.

Joint Venture ‑ A business entity composed of two or more people joined to conduct a single enterprise for profit. It is treated legally almost like a partnership, but differs from a partnership by having as its objects a single venture instead of a continuing business.

Judgment ‑ A final determination by a court of law. Most often, a judgment is for a sum of money.

Judicial Foreclosure ‑ Foreclosure through court.

Junior Lien ‑An inferior or subordinate lien; for example, a second deed of trust is a junior to a first trust deed.

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- L -

Land Contract ‑ A security device used in the sale of real property. The buyer contracts to pay the purchase price in installments. The seller contracts that when the purchase price is paid in full, the seller will deed the property to the buyer. Until the purchase price is paid in full, the seller keeps legal title. Also called conditional sales contract, contract for deed, contract of sale.

Late Charge ‑ A specified charge added by a creditor under note or contract when the debtor makes a late payment or after a certain date.

Legal Description ‑ A description of real estate sufficient to allow a competent surveyor to locate the property on the ground.

Level Payments ‑ Payments of equal size.

Lien ‑ A legal right or claim upon a specific property that attaches to the property until debt is satisfied.

Lien Release ‑ A written agreement by a lien holder releasing the debtor from further obligation.

Limited Partnership ‑ A special type of partnership with one or more general partners who manage the business and are responsible for its debts, and one or more limited partners who take no part in its management and are not responsible for its debts.

Loan‑to‑Value Ratio ‑ The sum of current unpaid loan balances for all loans against a property divided by the current market value or appraised value of the property securing the loans. Loan‑to‑value ratio is usually expressed as a percentage.

Lock‑in‑Clause ‑ A clause in a note, mortgage or trust deed setting a period during which no prepayment is allowed on the loan.

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- M -

MAI ‑ The initials stand for Member of American Institute. A designation for a member of the American Institute of appraisers, a part of the National Association of Realtors.

Maker ‑ The person who signs a note agreeing to pay it. Also called the payor.

Market Data Approach ‑ An appraisal technique based on sales of comparable properties. Also called comparison approach.

Market Price ‑ The price paid regardless of motives, pressures, or intelligence.

Market Value ‑ The highest price, estimated in terms of money, that property would bring if exposed for sale in the open market, which allows a reasonable time to find a buyer who purchases with full knowledge of all the uses to which the property is adapted and all the uses for which it is capable of being used.

Mechanic's Lien ‑ A lien given by statute to persons supplying labor, materials, or services to improve real property. To perfect the lien, certain notices and recordings are required.

Mortgage ‑ An instrument in writing, duly executed and delivered, that creates a lien upon real estate as security for the payment of a specified debt.

Mortgage Money Market ‑ The source of financing for real estate. It is divided into two parts: The primary mortgage money market consists of all the sources of loans made directly by lenders; the secondary mortgage money market consists of all buyers of existing real estate loans as collateral.

Mortgage Reduction Certificate ‑ An instrument executed by the mortgagee, setting forth the status of and the balance due on the mortgage as of the date of the execution of the instrument.

Mortgagee ‑ The party who lends money and takes a mortgage to secure payment.

Mortgagor ‑ A person who borrows money and gives a mortgage real property as security for the payment of the debt.

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- N -

Negotiable Instrument ‑ An instrument, such as a check or note, that meets certain legal requirements that allow it to be transferred free of most claims the maker had against previous holders.

Nominal Interest Rate ‑ The rate of interest stated in a note or contract. This may not be the true or effective rate (actual cost) to the borrower.

Non‑Institutional Lender ‑ A lender that is not an institution, such as retirement funds, endowed universities, and private individuals.

Non‑Judicial Foreclosure ‑ A foreclosure where property is sold to satisfy a debt without appearing before a judge.

Notary Public ‑ A person empowered to administer oaths and to attest or certify documents to assure authenticity.

Note ‑ An instrument in which one party, the maker or payor, promises to pay a definite sum of money to another, the payee, at a fixed or determinable future time or on demand.

Notice of Default ‑ A notice that is recorded and is given to a person or persons entitled to it, which states that a trust deed is in default and that the trust deed holder has chosen to have the property sold. This notice starts the running of a 3‑month grace period during which the property owner can cure the default by paying up a debt that is past due.

Notice of Trustee's Sale ‑ A notice provided by law that requires the trustee to advertise a property in default once a week for a period of 21 days in a newspaper of general circulation.

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- O -

Obligee ‑ A person to whom a legal obligation or duty is owed; for example, the payee of a note.

Obligor ‑ A person who has obligated himself legally; for example, the maker of a note.

Offset Statement ‑ See Beneficiary Statement.

Open‑End Clause ‑ A clause that permits the outstanding balance of the loan to be increased by the borrower under the provisions outlined in the agreement.

Open End Deed of Trust or Mortgage ‑ A trust deed or mortgage that secures not only that original debt but also future advances made after the date of the trust deed or mortgage.

Option ‑ A contract that gives one party (the optionee) the right to enter some type of contract upon specified terms with another party (the optionor). Usually, the right to buy the optionor's property or note for a particular price.

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- P -

Package Deed of Trust or Mortgage - A trust deed or mortgage secured by both real property and personal property.

PartialReconveyance - A reconveyance that releases a part, but not all, of a tract from the lien of a trust deed.

Partial Release Clause - A provision in a trust deed, mortgage, or land contract that permits the borrower or buyer to secure the release of part of the property by complying with certain terms, such as the payment of a certain sum of money.

Partnership - A voluntary association of two or more persons to carry on business for profit.

Payee ‑ The person to whom a note states it is payable; the person who receives payment. Payor ‑ The person who signs a note agreeing to pay it. Also called a maker.

Point - One percent (1%) of the principal amount of a loan. A lender often charges points when a loan is made, renewed, or assumed to raise the yield on the loan.

Power‑of‑Sale Clause - A clause in trust deeds and in some mortgages that gives the trustee or mortgagee the right to sell property which is security for a loan at public sale, without court procedure, if the debtor defaults.

Preliminary Title Insurance Report ‑ A report by a title insurance company showing the condition of title to a property including liens, restrictions, etc. Prepayment ‑ Pays off all or part of a debt before it is due.

Prepayment Clause ‑ A provision in a note or deed of trust that allows the borrower to pay off all or part of the principal before it is due, with or without a prepayment penalty.

Prepayment Penalty -A charge provided in a note or deed of trust for the privilege of paying all or part of the debt before it is due. Primary Financing - The loan that has first priority; the loan that has its security instrument recorded first.

Primary Mortgage Money Market - See Mortgage Money Market.

Principal - The capital amount of a loan, not including interest. The principal portion of an installment payment on a loan that reduces the outstanding balance of the loan by the amount of the principal payment.

Principal Plus Interest Loan - A loan for which the borrower makes a fixed principal payment each period and pays, in addition, interest on the unpaid principal amount of the loan.

Promissory Note - See Note.

Purchase Money Deed of Trust or Mortgage - A trust deed or mortgage that secures all or part of the sale of real estate.

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- Q -

Quitclaim Deed - A deed that conveys simply the grantor's rights or interest in real estate; generally considered inadequate as a conveyance except when the interest is being passed from one spouse to the other.

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