Real Estate 101
Glossary of Real Estate Terms — Page 4

Qualifying ratios: Calculations that are used in determining whether a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.

Quiet title: To free the title to a piece of land from the claims of other persons by means of a court action called a "quiet title" action. The court decree obtained is a "Quiet Title" decree.

Quitclaim deed: A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

Rate and Term Refinance: A refinance transaction which is not intended to put cash in the hand of the borrower. Instead, the new balance is calculated to cover the balance due on the current loan and any costs associated with obtaining the new mortgage.

Rate Lock: A lender's commitment to a borrower that guarantees a specified interest rate for a specified period of time at a specific cost.

Ratification: The adoption or approval of an act performed on behalf of a person without previous authorization.

Real Estate Broker: A person licensed to negotiate and transact the sale of real estate.

Real Estate Investment Trust: A special arrangement under Federal and State law whereby investors may pool funds for investments in real estate and mortgages and yet escape corporation taxes; requires one hundred persons or more.

Real Estate Settlement Procedures Act: A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Real Property: Refers to the right to own land and improvements. Commonly used interchangeably with Real Estate and Realty.

Realtor: A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Reconveyance: The transfer of the title of land from one person to the immediately preceding owner. This instrument is commonly used in California when the performance or debt is satisfied under a deed of trust and the trustee conveys the title he has held back to the owner.

Recorder: The public official who keeps records of transactions that affect real property in the area.

Recording: The act of entering in the public records, the written record of title to real property, and essentially making it a public record.

Redemption: The buying back of one's property after it has been lost through foreclosure through payment of delinquent taxes after sale to the State.

Refinance Transaction: The process of paying off one loan by obtaining a new loan using the same property as security, usually done to secure better interest rates.

Registrar of Deeds: The public official who keeps records of transactions that affect real property in the area.

Remaining Balance: The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges; the amount of principal that has not yet been repaid.

Rent Loss Insurance: Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

Repayment Plan: An arrangement made to repay delinquent installments or advances.

Replacement Reserve Fund: A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

Rescission of Contract: Annulling a contract by mutual consent from both parties as if there had not been a contract.

Restriction: Limitations on the use or occupancy of real estate contained in a deed or in local ordinances pertaining to land use.

Reverse Annuity Mortgage: A loan that enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. A borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.

Reversion: The right to future possession or enjoyment by the person or his heirs, creating the preceding estate.

Reversionary Interest: A type of interest a person may have in lands or other property upon the termination of the preceding estate.

Revolving Debt: Debt owned on an account that the borrower can repeatedly use and pay back without having to reapply every time credit is used. Credit cards are the most common type of revolving debt.

Right of First Refusal: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Survivorship: Right to acquire the interest of a deceased joint owner. Distinguishing characteristic of a Joint Tenancy Deed.

Right to Egress: The right to leave designated premises.

Right to Ingress: The right to enter designated premises.

Right of Way: A privilege operating as an easement upon land where the owner agrees to give another person the right to pass over his land.

Sale-Leaseback: A technique in which a seller deeds property to a buyer for a consideration, and the buyer simultaneously leases the property back to the seller.

Sales Contract: A contract by which buyer and seller agree to terms of a sale.

Sandwich Lease: A leasehold interest which lies between the primary lease and the operating lease. It is created when the lessee enters into a sublease.

Satisfaction: A legal document recorded on the county recorder's books when a mortgage has been paid in full. it is signed by the mortgagee and recites that the debt has been satisfied.

Second Mortgage: Another mortgage which has already been pledged as collateral for an earlier mortgage and carries rights which are subordinate to those of the first.

Secondary Market: The buying and selling of existing mortgages, usually as part of a "pool" of mortgages.

Secured Loan: A loan that is backed by collateral.

Security: The property assigned as collateral for a loan.

Seller Carry-Back: An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.

Separate Property: Property owned by a husband or wife and acquired prior to marriage or by gift.

Servicer: An organization that deals with the ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your yearly tax and/or homeowners insurance bills.

Servicing: The collection process of mortgage payments from borrowers and related responsibilities of a loan servicer.

Settlement Statement: A document that provides a complete breakdown of costs involved in a real estate sale usually prepared by broker, escrow, closing agent, title company, or lender.

Sheriff's Deed: Deed given at sheriff's sale in foreclosure of mortgage.

Simple Interest: Interest computed on principal alone, as opposed to compound interest.

Situs: Location.

Specific Performance: A legal act to force the performance of a contract according to its terms.

Statute of Frauds: A State law that requires certain contracts must be written in order to be enforceable at law.

Statutory Law: A involuntary lien, such as tax liens, judgment liens, mechanic liens, etc.

Straight Line Depreciation: Definite sum set aside annually from income to pay cost of replacing improvements without reference to interest it earns.

Subdivision: A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subject to Mortgage: The buyer of an already mortgaged property makes the payments, but does not take personal responsibility for the loan. Should the mortgage be foreclosed and the property sold for a lesser amount than is owed, the grantee-buyer is not personally liable for the deficiency, but the grantor-seller is.

Sublease: A lease given by a lessee.

Subordinate Financing: Any mortgage or other lien that has a priority and is lower than the first mortgage.

Subordination Clause: Clause in some mortgages which allows subsequent mortgages on the same property to have higher claim than the current mortgage.

Subrogation: The substitution of another person in place of the creditor to whose rights he succeeds in relation to the debt. The doctrine is often used when one person agrees to stand surety for the performance of a contract by another person.

Surety: One who guarantees the performance of another.

Survey: A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Sweat equity: Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash. Tax Sale: A sale of property, usually at auction, for non-payment of taxes assessed against it.

Taxes: A forced contribution of wealth to meet the public need for government.

Tenancy at Sufferance: A tenancy which arises when a tenant holds over after the termination of a lease without consent.

Tenancy at Will: A tenancy for an indefinite period which may be terminated at the will of either the lessee or the lessor.

Tenancy in Common: Ownership by two or more persons which does not pass ownership to the others in the event of death.

Tender: An offer of money.

Third-Party Origination: A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Time is of the Essence: A clause in a contract contemplating performance by a specified date.

Title: A legal document showing rights of ownership.

Title Company: A company that specializes in examining and insuring titles to real estate.

Title Insurance: Insurance issued by a title company to protect the property owner against loss if the title is questionable.

Title Search: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Tort: Damage, injury, or a wrongful act done willfully, negligently, or in circumstances involving strict liability, but not involving breach of contract, for which a civil suit can be brought.

Townhouse: A single family attached dwelling unit with common walls.

Transfer of Ownership: Any means by which the ownership of a property changes hands.

Transfer Tax: State or local taxes that must be paid when title passes from one owner to another.

Treasury index: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

Trust Deed: An instrument which transfers (conveys) the bare legal title of a property to a trustee to be held pending fulfillment of an obligation, usually the repayment of a loan to a beneficiary.

Trustee: A person who holds or controls property for the benefit of another in order to meet an obligation.

Trustee's Sale: A sale at auction by a trustee under a deed of trust, pursuant to foreclosure proceedings.

Trustor: The borrower of money secured by a trust deed. One who transfers his bare legal title to a trustee to be held as security until he has performed his obligation to a lender under terms of a note secured by a deed of trust.

Truth-in-Lending: A federal law that requires lenders to fully disclose the terms and conditions of a mortgage, in writing, including the annual percentage rate (APR) and other charges.

Two- to Four-Family Property: A property that consists of a structure that provides living space (dwelling units) for two to four families, but the property is under one ownership.

Two-Step Mortgage: An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term AND a different interest rate for the remainder of the amortization term.

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