Real Estate Dictionary

Acceptance: Agreeing to the terms of an offer to enter into a contract, thereby creating a binding contracting.

Acknowledgement: When a person who has signed official (usually a notary public) that he signed voluntarily.  The official can then attest that the signature is voluntary and genuine.

Acre: An area of land equal to 43,560 square feet or 0.4 hectares.

Addendum: An attachment to a purchase and sale agreement or other contract that contains additional provisions that apply to that transaction.

Adjacent: Nearby, next to, bordering, or neighboring; may or may not be in actual contact.

Appraisal: An estimate of opinion of the value of a piece of property as of a particular date.

Assessment: The valuation of property for purposes of taxation.

Boundary: The perimeter or border of a parcel of land; the dividing line between one piece of property and another.

Capital Gain: Profit realized from the sale of a capital asset.  If the asset was held for more than one year, it is a long-term capital gain; if the asset was held for one year or less, it  is a short-term capital gain.

CC&Rs: A declaration of covenants, conditions, and restrictions: usually recorded by a developer to place restrictions on all lots within a new subdivision.

Closing: The final stage in a real estate transaction, when the seller receives the purchase money, the buyer receives the deed, and title is transferred.  Also called settlement.

Closing costs: Expenses incurred in the transfer of real estate in addition to the purchase price: for example, the appraisal fee, title insurance premium, brokerage commission and excise tax.

Closing date: The date on which all the terms of a purchase and sale agreement must be met, or the contract is terminated.

Commission: A fee or percentage of the selling price agreed upon between the selling broker and the property owner.

Comparable: A recently sold and similarly situated property that is used as a point of comparison by an appraiser.

Condominium: Property developed for concurrent ownership, where each co-owner has a separate interest in an individual unit, combined with an undivided interest in the common areas of the property.

Counter-offer: A response to a contract offer, changing some of the terms of the original offer; it operates as a rejection of the original offer (not as an acceptance).

Deed: An instrument which, when properly executed and delivered, conveys title to real property from the grantor to the grantee.

Deferred maintenance: Physical deterioration of a structure caused by postponed maintenance and/or repairs.

Deposit: Money offered as an indication of commitment or as a protection, and which may be refunded under certain circumstances, such as an earnest money deposit.

Earnest Money: A deposit that a prospective buyer gives the seller as evidence of his good faith intent to complete the transaction.

Easement: An irrevocable right to use some part of another person’s real property for a particular purpose.

Escrow: An arrangement in which something of value (such as money or a deed) is held on behalf of the parties to a transaction by a disinterested third party (an escrow agent) until specified conditions have been fulfilled.

Escrow Agent: A third party who holds money and documents in trust and carries out the closing process. Or a company that is licensed to engage in the escrow business.

Execute: To sign an instrument and take any other steps that may be necessary to its validity.

Excise Tax: A state tax levied on every sale of real estate, to be paid by the seller.

Fee simple: The highest and most complete form of ownership, which is of potentially infinite duration.  Also called a fee or a fee simple absolute.

FIRPTA: The Foreign Investment in Real Property Tax Act; this federal law requires withholding funds from a sale of real property when the seller is not a U.S. citizen or a resident alien, in order to prevent tax evasion.

Frontage: The distance a property extends along a street or a body of water; the distance between the two side boundaries at the front of the lot.

Home Equity Loan: A loan secured by the borrower’s equity in the home she already owns.

Homeowners Association: A nonprofit association made up of homeowners in a subdivision, responsible for enforcing the CC&Rs and managing other community affairs.

Homeowners’s Insurance: Insurance against damage to the real property and the homeowner’s personal property.

Inspection Period: An agreed upon time period during which a buyer conducts all inspections and due diligence.

Land: In the legal sense, it is the solid part of the surface of the earth, everything affixed to it by nature or by man, or anything on it or in it, such as minerals and water; real property.

Leasehold: A possessory interest in real property that has a limited duration, such as an estate for years or a periodic tenancy.

Legal Description: A precise description of a parcel of real property; may be a lot and block description, a metes and bounds description, or a government survey description.

Listing Brokerage: The brokerage that takes a listing and thus represents the seller.

Lot: A parcel of land: especially, a parcel in a subdivision.

Market Price: The current price generally being charged for something in the marketplace.  The price actually paid for a property.

Notary Public: Someone who is officially authorized to witness and certify the acknowledgement made by someone signing a legal document.

Offer: When one person (the offeror) proposes a contract to another (the offeree); if the offeree accepts the offer, a binding contract is formed.

Pending: The status of a property changes from Active to Pending when a purchase and sale agreement has been accepted by all parties.

Plat: A detailed survey map of a subdivision, recorded in the county where the land is located. A plat book is a large book containing subdivision plats, kept at the county recorder’s office.

Preliminary Title Report: A report issued by a title company, disclosing the condition of the title to a specific piece of property, before the actual title insurance policy is issued.

Property Manager: A person hired by a property owner to administer, merchandise, and maintain property, especially rental property.

Property Tax: The general real estate tax.  Any ad volorem tax levied on real or personal property.

Recording: Filing a document at the county recorder’s office, so that it will be placed in the public record.

Refinancing: When a homeowner takes out a new loan – usually to take advantage of lower interest rates – and uses the loan proceeds to pay off the existing loan.

Riparian Land: Land that is adjacent to or crossed by a body of water.

Running with the land: Binding or benefiting the successive owners of a piece of property, rather than terminating when a particular owner transfers his/her interest.  Usually said in reference to an easement or a restrictive covenant.

Settlement Statement: A document that presents a final, detailed accounting for a real estate transaction, listing each party’s debits and credits and the amount each will receive or be required to pay at closing. Also called a closing statement.

Standard Coverage Title Insurance: Title insurance that protects against latent title defects (such as forged deeds) and undiscovered recorded encumbrances, but does not protect against problems that would only be discovered by an inspection of the property.

Survey: The process of precisely measuring the boundaries and determining the area of a parcel of land.

Take-Out Loan: Long-term financing used to replace a construction loan (an interim loan) when construction has been completed.

Tax-Deferred Exchange: A transaction in which a piece of property held for investment or used in a trade or business is traded for a piece of like-kind property, thus deferring tax on the gain.  Sometimes called a 1031 tax exchange.

Tidelands: Land that is submerged at high tide.

Title Insurance: Insurance that protects against losses resulting from undiscovered title defects. An owner’s policy protects the buyer.  Always used in real estate transactions.

Title Search: An inspection of the public record to determine all rights and encumbrances affecting title to a piece of property.

Trust: A legal arrangement in which title to property (or funds) is vested in one or more trustees, who manage the property on behalf of the trust’s beneficiaries, in accordance with instructions set forth in the document establishing the trust.