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Real Estate Glossary

negative amortization
Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination. Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment which should be paid is added to the remaining balance owed. The balance owed may increase, rather than decrease over the life of the loan.
net lease
A commercial real estate lease in which the tenant regularly pays not only for the space (as he does with a gross lease) but for a portion of the landlord’s operating costs as well. When all three of the usual costs--taxes, maintenance and insurance--are passed on, the arrangement is known as a "triple net lease." Because these costs are variable and almost never decrease, a net lease favors the landlord.  Accordingly, it may be possible for a tenant to bargain for a net lease with caps or ceilings, which limits the amount of rent the tenant must pay. For example, a net lease with caps may specify that an increase in taxes beyond a certain point (or any new taxes) will be paid by the landlord. The same kind of protection can be designed to cover increased insurance premiums and maintenance expenses.  Contrast with gross lease.
net listing
A price, which must be expressly agreed upon, below which the owner will not sell the property and at which the broker will not receive a commission; the broker receives the excess over and above the net listing price as commission. The broker in this type of listing will have a very hard time maintaining his fiduciary responsibilities to his seller since his interests are potentially at odds with the interests of the seller.
non-escrowing loan
Typically, mortgage lenders require escrow accounts for property taxes, hazard insurance, and sometimes, homeowner's association dues.  Monthly contributions to these accounts are rolled into a lender's mortgage payment.  In Texas, escrow accounts are non-interest bearing, so many borrowers prefer the option of keeping the monies for their hazard insurance and property taxes in their own interest bearing accounts, until they become due.  Most lenders only allow non-escrowing loans on mortgages with an 80% or lower, loan-to-value ratio.
Property taxes can be paid as late as January 31st of the following year before interest and penalties begin to accrue.  If the borrower has the discipline to save the monies for taxes and insurance independently, a non-escrowing loan would be the smart choice.  Most lenders charge a one-time fee at closing for selecting the non-escrow option.  Non-escrowing loans also have lower closing costs since the lender does not collect reserves, which place a 2-3 month cushion of pro-rated payments in the escrow account.  Additionally, the seller's pro-rated share of the year's property taxes is applied directly to the buyer's closing costs, instead of being placed into the escrow account.
note
A written instrument of credit attesting to a debt and promise to pay.

 
nuisance
Something that interferes with the use of property by being irritating, offensive, obstructive or dangerous. Nuisances include a wide range of conditions, everything from a chemical plant's noxious odors to a neighbor's dog barking. The former would be a "public nuisance," one affecting many people, while the other would be a "private nuisance," limited to making your life difficult, unless the dog was bothering others. Lawsuits may be brought to abate (remove or reduce) a nuisance. See quiet enjoyment, attractive nuisance.
obsolescence
A loss in value of real property caused by changes either internal or external to the property. See economic obsolescence, functional obsolescence, and physical deterioration.
offer
A proposal to enter into an agreement with another person. An offer must express the intent of the person making the offer to form a contract, must contain some essential terms--including the price and subject matter of the contract--and must be communicated by the person making the offer. A legally valid acceptance of the offer will create a binding contract.
open house
An opportunity for prospective buyers to view a house in a low pressure environment.
open listing
A listing under which the principal (owner) reserves the right to list his property with other brokers.
option
The right to purchase property within a definite time at a specified price. There is no obligation to purchase, but the seller is obligated to sell if the option holder exercise the right to purchase. For the option to be valid, it must include consideration.
option fee
An amount of money payed by a prospective Buyer, to a Seller, in order to obtain an option period, as specified in Paragraph 7 of a TREC promulagated earnest money contract.  If a Buyer decides to close on the property, the option fee may be credited to his funds at closing.
option period
Current residential earnest money contracts, promulagated by the Texas Real Estate Commission offer the choice of an option period, under Paragraph 7.  During this period, the length of which is negotiable, the Buyer has a right to inspect the property and has an absolute right to terminate the offer/contract for any reason, without penalty.  In exchange for this option period, the Buyer pays an option fee to the Seller.  If the Buyer decides to continue with the sale of the property, this option fee may be credited to him at closing.  Typical option periods run from 7 to 14 days long.
ordinance
A law adopted by a town or city council, county board of supervisors or other municipal governing board. Typically, local governments issue ordinances establishing zoning and parking rules and regulating noise, garbage removal, and the operation of parks and other areas that affect people who live or do business within the locality's borders.
origination fee
A fee charged by lenders, in addition to interest, for services in connection with granting of a loan. Usually a percentage of the loan amount.
panic peddling
The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective entry, of members of a minority group; blockbusting. See Fair Housing.
party wall
Wall erected on line between adjoining properties for the use of both properties.

 
patio home
A single-family home that sits on a small lot, often with one outside wall of the structure sitting on the property line.  Patio homes have no common structural walls with adjoining propeties, but their zero lot line wall may form part of their neighbors backyard fence/wall.  These properties often have a small back or side yard large enough for a patio or garden area.  Also known as a garden home.
percentage lease
Lease in which all or part of rental is a specified percentage of gross income from total sales made upon the premises.
person
An individual, a partnership, or a corporation, foreign or domestic.
personal property
Property which is tangible, movable, and not fixed to the land. Also called chattel and personalty. Contrast with real property.
personalty
Personal property; chattel. Contrast with Realty.
physical deterioration
The loss of value to real property from all causes due to the action of the elements and old age. Physical deterioration can be either curable or incurable.
PITI
Principal, Interest, Taxes and Insurance.
planned unit development (PUD)
In a PUD, the planned unit development association owns and maintains property in a real property development project for the benefit of its members, who are owners of individual parcels of real property in the development and are members of the association because of that ownership.  The level of services and fees are similar to a condominium complex, but since each owner has title to a specific parcel of land, lenders may treat units as non-condominiums.  This allows higher LTV loans and eliminates owner occupancy percentage requirements.
plat book
A record of recorded subdivisions of land.
PMI
Acronym -  private mortgage insurance.
points
Fees paid to induce lenders to make mortgage loans at a particular interest rate. Each point is equal to one percent (1%) of the loan principal. Same as discount points.
police power
The authority of a government to adopt and enforce law governing the use of real estate based on the need to promote public safety, health, and general welfare.
power of attorney (POA)
A written authorization by a person to another person to act for him on his behalf.
prepayment
Paying off all or part of the mortgage before the scheduled date.
prepayment clause in a mortgage
Statement of the terms upon which the mortgagor (borrower) may pay the entire or stated amount on the mortgage principal at some time prior to the due date.
prepayment penalty
A fee paid to the lending institution for paying a loan prior to the scheduled maturity date.
primary mortgage market
Lenders who originate loans and makes funds available directly to the borrowers. Contrast with secondary mortgage market.
prime rate
The interest, or discount rate charged by a commercial bank to its largest and strongest customers.
principal
The amount of money owed to the lender not including interest.
principle of conformity
An appraisal principle which holds that the maximum value is realized when a reasonable degree of homogeneity (sameness) exists in a neighborhood.
private mortgage insurance (PMI)
Default insurance on conventional loans, normally insuring the top 20%-25% of the loan and not the whole loan.
promulgated contracts
The Texas Real Estate Commission has prepared and authorized various standard contracts which must be used by all licensees when acting as agents in real estate transactions with limited exceptions.

 
property taxes
Taxes that are paid yearly on real property.  Property taxes are ad valorem, based on the assessed value of the real property.  In Texas the assessed value is determined by the County Appraisal District.  Each taxing authority multiplies this appraised value by its annual tax rate.  Taxing authorities include local school districts, counties, cities, water districts(MUD's, PUD's, LID's, etc.), and other special tax districts.

 
pro-rate
To divide or distribute proportionally. At closing, various expenses such as taxes, insurance, interest, rents, etc. are prorated between the seller and buyer.
Public Utility District (PUD)
A water district, created by a city or county, promoting development of a designated area by providing water and sewer services.  The PUD operates in the same manner as a Municipal Utility District, but is created by a local government, not a private developer.
PUD
Acronym - planned unit development.
Acronym - Public Utility District.
puffing
Non-factual or extravagant statements and opinions made to enhance the perceived desirability of a property. The is a fine line between legal puffing and illegal misrepresentation, and puffing is best avoided. An example of puffing would be, "This home has the best view in the city". Also known as puffery.
purchase offer
A document that lists the price, terms and conditions under which a buyer is willing to purchase a property.
qualify
To meet a mortgage lender's approval requirements.
qualifying ratios
Comparisons of a borrower's debts and gross monthly income.
quiet enjoyment
The right of a property owner or tenant to enjoy his or her property without interference.  Disruption of quiet enjoyment may constitute a nuisance. Leases and rental agreements often contain a "covenant of quiet enjoyment," expressly obligating the landlord to see that tenants have the opportunity to live undisturbed.

 
quitclaim deed
A deed that transfers whatever ownership interest the transferor has in a particular property.  The deed does not guarantee anything about what is being transferred, including an actual ownership interest.  For example, a divorcing husband may quitclaim his interest in certain real estate to his ex-wife, officially giving up any legal interest in the property.  A quit claim deed may also be used to clear up a cloud on the title to the property in cases where there is a question of a possible ownership claim.  Compare with grant deed.
ready, willing and able
A buyer who is prepared to buy on the seller's terms and has the financial capacity to do so.
real estate
Refers to land and improvements and the rights to own or use them. "A leasehold, as well as any other interest or estate in land, whether corporeal, incorporeal, freehold, or non-freehold, and whether the real estate is situated in this state or elsewhere." {TRELA, Section 2(1)} In popular usage, Real Estate is used interchangeably with real property and realty.
real estate board
A non profit organization representing local real estate agents/brokers and salespeople, which provides services to its members and maintains and operates the Multiple Listing Service in the community.
real estate agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real Estate Appraiser, licensed
A person licensed to legally appraise real estate property for a fee.  Texas has required its appraiser be licensed since 1939.  In 1991 the responsibility for licensing real estate appraisers was transfered from the Texas Real Estate Commission to a newly formed Texas Appraiser Licensing and Certification Board (TALCB).  There are several classes of licensed real estate appraisers, with the highest classification - Certified General RE Appraiser, requiring a minimum of 180 classroom hours, and 3,000 hours appraisal work over at least 2˝ years.
Real Estate Broker, licensed
To be eligible to apply for a real estate Broker License, an individual must have not less than two (2) years active experience in Texas as a licensed real estate salesperson and 180 classroom hours of core real estate coursesplus an additional 720 classroom hours in related courses acceptable to the Commission.  The applicant must also pass the TREC Real Estate Broker's exam, and then continue to maintain his license with mandatory continuing education (MCE) courses .
Real Estate Center
In 1971, the Texas Real Estate Research Center was created by the state legislature. It is located on the campus of Texas A&M University, and is part of the Lowry Mays College and Graduate School of Business. Today, the shortened "Real Estate Center" name is used.  The mission of the Real Estate Center is to conduct real estate related research based on needs of the Texas citizenry and disseminate the results and findings.
Real Estate Inspector, licensed
A Licensed Real Estate Inspector is someone who is licensed by TREC who holds himself out to the public as being trained and qualified to inspect property. Formerly known as Registered Real Estate Inspector before January 1, 1996.
Real Estate Salesperson, licensed
To be eligible to apply for a real estate Salesperson License, an individual must complete core education courses in Principles of Real Estate , Law of Agency and Law of Contracts.  An additional six (6) semester (90 classroom) hours must be completed in core courses or in related courses acceptable to the Commission. The applicant must also pass the TREC Real Estate Salesperson's exam, and then continue to maintain his license with mandatory continuing education (MCE) courses.  Recently licensed real estate salespersons are required to complete a total of 18 semester (270 classroom) hours of education by the end of their third year of licensure, taking at least 30 hours per year.
real property
Refers to the right to own land and improvements. Commonly used interchangeably with Real Estate and Realty. Contrast with personal property.
REALTOR®
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the NATIONAL ASSOCIATION OF REALTORS®.
realty
Refers to land and buildings and other improvements from a physical standpoint. Real Estate and Real Property tend to be used interchangeably with Realty in everyday usage. Contrast with personalty.
receiver
Court-appointed custodian who holds property for the court, pending final disposition of the matter before the court.
recorded plat
A subdivision map filed with the county recorder's office that shows the location and boundaries (lot and block number) of individual parcels of land. Contrast with government survey method and metes and bounds.
recording
The act of entering in the public records, the written record of title to real property, thereby giving constructive notice to the public.
recovery fund
A fund maintained by the Texas Real Estate Commission which upon court order is used to reimburse the public for monetary loss due to illegal acts of licensees.
redlining
The illegal practice of refusing to originate mortgage loans, or limiting their number, in certain neighborhoods on the basis of racial or ethnic composition. See Fair Housing.
refinancing
To apply for a new mortgage in order to gain better terms, usually either a lower interest rate or a different principal amount.
Regulation 'Z'
Truth in lending law developed by the Federal Reserve System which requires lenders to provide full disclosure of the terms of the loan, including interest rates expressed as an annual percentage rate (APR).
RELA
Real Estate License Act.
release
To relinquish an interest or claim to a piece of property.
remainder
The future interest in an estate which takes effect after the termination of another estate, such as a life estate; what is left at the termination of a life estate.
rent control
Laws that limit the amount of rent landlords may charge, and that state when and by how much the rent can be raised. Most rent control laws also require a landlord to provide a good reason, such as repeatedly late rent, for evicting a tenant. Rent control exists in some cities and counties in California, Maryland, New Jersey, New York and Washington, D.C.
reserves
Amounts of money set aside by a mortgage company to assure payment of property taxes, homeowners' association dues, and insurance premiums.  The money is kept in an escrow account
reservation
A right reserved by a grantor in the sale or lease of a property. In a sale, the title of all property passes to the grantee, but the use may be reserved for the grantor. Contrast with exception.
RESPA
Real Estate Settlement Procedures Act is a federal law which deals with the procedures to be followed in a real estate closing, and is intended to make borrowers more knowledgeable about possible costs and charges.
restrictions
Limitations on the use or occupancy of real estate contained in a deed or in local ordinances pertaining to land use.
right of survivorship
The right of a surviving joint tenant to take ownership of a deceased joint tenant's share of the property. See joint tenancy.
riparian owner
One who owns land bounding upon a river or water course (stream, creek, bayou, etc.).

 
Road Utility District (RUD)
Pursuant to Article III, Section 52 of the Texas Constitution, a Road Utility District may be created to construct, acquire, improve and provide financing for a road facility.  The term "road facility" is defined as a road constructed, acquired or improved by a district; or property, an easement, or work constructed, acquired, or improved by a district and necessary or appropriate for, or in aid of the improvement of, a river, creek, or stream to prevent overflow; or the construction and maintenance of a pool, lake, reservoir, dam, canal or waterway for the purpose of drainage, if the property, easement, or works is related to, or in furtherance of, the construction, acquisition, or improvement of a road.
running with the land
A phrase used in property law to describe a right or duty that remains with a piece of property no matter who owns it. For example, the duty to allow a public beach access path across waterfront property would most likely pass from one owner of the property to the next.

 
Rural Fire Prevention District (RFPD)
A special taxing district created to provide rural residents with fire-fighting, fire prevention and other emergency services.



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