The potential home buyer will find this glossary helpful for understanding words and terms used in the real estate industry. There are, however, some factors that may affect these definitions:
- Terms are defined as they are commonly understood in the mortgage and real estate industry. The same terms may have different meanings in another context.
- The definitions are intentionally general, non-technical and short. They do not encompass all possible meanings or nuances that a term may acquire in legal use.
- State laws, as well as custom and use in various States or regions of the country, may modify or completely change the meanings of certain terms defined.
Quantity Survey Method—In appraisal, a method of estimating the replacement cost of a structure. It involves a detailed estimate of the quantities and grades of material used and their cost (i.e. 1,500 bricks at $0.25 each), the labor hours required and their coat, and overhead expenses such as insurance and contractor's profit. It is the most time consuming of the three methods of replacement cost estimation. The other two approaches are Unit in Place and Square Foot.
Quite Enjoyment—The right of an owner or lessee legally in possession of property to the use and possession of the property without interference.
Quiet Title Action—A lawsuit to establish clear title to a piece of property or to remove a cloud on the title.
Quitclaim Deed—A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See deed.)
Range—In the Government Survey System, a strip of land six miles wide, running north and south.
Range Line—One of the north-south lines located six miles apart, used by the Government Survey System for the location and description of townships. They are meridians or longitude lines.
Real Property—The land and all things affixed to or appurtenant to the land, including buildings and other fixtures.
Realtor—A broker or salesperson who is an active member of a state or local real estate board which is affiliated with the National Association of Realtors®.
Realty—Real property; land, its attachments and appurtenances.
Recording—Placing a document affecting the title to real property, such as a deed or mortgage, on file in the book of public records in the Office of the County Auditor or County Recorder for the county where the property is located. Placing such an instrument on file in the public records gives constructive notice (notice to all the world) of the existence of the instrument and its contents.
Rectangular Survey—Another name for the Government Survey System of land description. Sometimes called the Township and Range System.
Redemption, Post-sale—The right of redemption enables a defaulting debtor to regain property after foreclosure by paying the amount of indebtedness, plus interest, court costs, and attorney's fees within a specified time.
Redemption, Equitable Right of—The right of a borrower to redeem property from forfeiture prior to the foreclosure sale, by paying the debt, together with interest and costs. SEE: Redemption, Post-sale.
Refinancing—The process of the same mortgagor paying off one loan with the proceeds from another loan.
Replacement Cost—In appraisal, the amount of money that would be needed (on the basis of current prices) to replace a structure with one having the same utility, but constructed with modern materials, design, etc. COMPARE: Reproduction Cost.
Reproduction Cost—The amount of money that would be needed (on the basis of current prices) to duplicate the structure being appraised, using the same or similar materials, design, quality of workmanship, layout, etc. COMPARE: Replacement Cost.
Recission—In contract law, the remedy of abrogating, annulling, or terminating a contract and restoring the parties, as nearly as possible, to the positions they were in before entering the contract.
Restriction—A limitation on the use of real property. Restrictions may be private, such as restrictive covenants dealing with setbacks, or public, such as zoning ordinances.
Restrictive Covenants—Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected.
Revocation—The unilateral termination of an agency relationship by the principal. Can be held to be a breach of contract.
Rezone—A change in zoning.
Right of Recission—A buyer's right to rescind after signing any contract to buy or lease a lot covered by ILSFDA.
Right of Way—A public or private easement giving the holder the right to pass over the land of another.
Riparian Rights—The rights of a landowner resulting from owning land which borders on a stream or other surface waters, including the right to reasonable use of the water.
Running with the Land—Rights, restrictions, or covenants which affect successive owners of a parcel of land are said to run with the land.
Sales Agreement—See agreement of sale.
Sale-Leaseback—A form of real estate financing in which the owner of industrial or commercial property sells the property and leases it back from the buyer, normally under a net lease in which the seller/lessee pays taxes, insurance, etc. In addition to certain tax advantages, the seller/lessee obtains more cash through the sale than would normally be possible by borrowing and mortgaging the property, since lenders will not often lend 100% of the value.
Section—In the government survey system, a section is one mile square and contains 640 acres. There are 36 sections in a township.
Security Deposit—Defined in Minnesota as any deposit of money, the function of which is to secure the performance of a residential rental agreement. Most often required by landlords to insure payment of rent and protect the property against damage. Does not include a deposit that is exclusively an advance payment of rent.
Security Interest—The interest a creditor has in the personal property of a debtor. It has replaced the chattel mortgage and the pledge.
Seizin—Actual possession of real estate by one so entitle. Also called seizen and seisin.
Setback Ordinance—A local law prohibiting improvements from being erected within a certain distance from the property line.
Settlement—The fulfillment of promises made by the buyer and seller in the purchase and sale agreement. SEE: Closing.
Settlement Statement—A document prepared by an escrow agent, which reflects the financial status of a contract of sale.
Severalty Ownership—Ownership by one person only, severed from anyone else.
Sheriff's Sale—A judicial foreclosure sale under a mortgage or deed of trust.
Special Assessments—A special tax imposed on property, individual lots or all property in the immediate area which have benefited from a public improvement (such as a road, sidewalks, sewers, street lights, etc.), levied to cover the cost of the improvement.
Special Lien—A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.)
Special Exception Permits—Permits granted under special circumstances to allow property to be used for a purpose which is not normally allowed under the zoning laws. SEE: Variance.
Special Warranty Deed—A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.
Spot Zoning—A rezone of one property or a small area within a neighborhood, which is illegal unless based on sound planning policy and clearly justified by such factors as the surrounding areas, the comprehensive plan, and community benefit.
Square Foot Method—In appraisal, a method of estimating the replacement cost of a structure, it involves multiplying the cost per square foot of a recently built comparable structure by the number of square feet in the subject structure.
State Deed Tax—A Minnesota state tax charged on the difference between the purchase price and the assumed mortgage. If no assumed mortgage, the tax is based on the total purchase price.
Statute—A written law of the federal government or of a state government.
Statutory New Home Warranty Law—A state law that establishes that certain warranties are implied in every sale of a newly completed dwelling, and in every contract for the sale of a dwelling to be completed.
Subdivision—A piece of land divided into two or more parcels.
Survey—1. The process of measuring the boundaries and determining the area of a parcel of land. 2. A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him or her that a building is actually sited on the land according to its legal description.
Tenancy—Possession of land under right or title. The possessor is the tenant.
Tenancy, Joint—A form of concurrent ownership of property by two or more people with the distinctive characteristic of right of survivorship. Joint tenants each hold an equal interest.
Tenancy in Common—The most basic form of co-ownership, where each owner holds an interest in property. There are no restrictions on the division of ownership, and there is no right of survivorship. All owners are necessary to transfer a complete parcel.
Tenure—The period of time during which a person holds certain rights with respect to real property.
Term—A prescribed period of time. A loan that is to be paid back over thirty years has a thirty-year term.
Tier—A row of townships running east-west.
Time is of the Essence—A clause in a contract which means that performance on the exact dates specified is an essential element of the contract; failure to perform on time is a material breach.
Timeshare—A method of ownership in which co-owners have exclusive right to possess property for specified time periods each year.
Title—As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate. Also, the evidence of that ownership.
Title, Chain of—The history of ownership, conveyances and encumbrances that have affected title to a particular parcel of real estate.
Title, Clear—A good title to property, free from encumbrances or defects; a merchantable or marketable title.
Title Insurance—Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.
Title, Marketable—Title free and clear of objectionable liens or encumbrances, so that a reasonable prudent person with full knowledge of the facts would not hesitate to purchase the property. Also called Merchantable Title.
Title Report—A report issued by a title company which discloses the condition of the title to a specific parcel of land.
Title Search—An inspection of the public record to determine all rights to and encumbrances on a piece of real property.
Township—In the Government Survey System, a parcel of land 6 miles square containing 36 sections, each one a mile square.
Tract—1. A parcel of land of undefined size. 2. In the Government Survey System, and area comprised of 16 townships; 24 miles by 24 miles.
Trade Fixtures—Articles of personal property annexed to real property by a lessee which are necessary for his or her business and are, therefore, removable by the tenant.
Trespass—An unlawful physical invasion of property owned by another.
Trust Funds—Money or things of value received by a real estate agent on behalf of a principle or another in the performance of any acts for which a real estate license is required, and not belonging to the agent but being held for the benefit of others.
Trust Fund Account—An account, segregated from a broker's own funds, in which a broker may deposit funds collected for clients.
Underwriting—In real estate lending, the analysis of risk by a lender to determine the probability of a borrower repaying a loan, and matching the risk to an appropriate term and rate of return.
Undivided Interest (UDI)—The right which co-tenants have to possession of the whole property, rather than to any particular part. Their financial interests may be equal, as in a joint tenancy, or unequal, as in many tenancies in common, but they still have equal rights to possess and use the whole.
Unilateral Contract—A contract that binds only one party and is accepted by performance. An option agreement is an example of a unilateral contract.
Valid—The legal classification of a contract that is binding and enforceable in a court of law.
Valuable Consideration—Something of value given to influence a person to enter into a contract. It need not be transferable into dollars and cents—though it usually is—but is sufficient if it consists of a promise of personal services, goods or the relinquishment of a legal right, or anything else that would have a value to the person making the promise.
Valuation—The act or process of estimating value; essentially synonymous with appraisal.
Value—The amount of goods or services offered in the marketplace in exchange for a given product.
Value, Assessed—The value placed on property by the taxing authority (County Assessor) for the purposes of taxation.
Value, Fair Market—The amount of money that a piece of property would bring if placed on the open market for a reasonable period of time, with a buyer willing, but not forced to buy, and a seller willing, but not forced to sell, and both buyer and seller being fully informed as to the possible use of the property.
Value Market—The price for which property can be sold on the open market if there is a willing and informed seller and a willing and informed buyer.
Variance—Permission obtained form proper authorities to use land in a manner contrary to existing zoning ordinances. SEE: Nonconforming Use.
Void—Having no legal force or effect.
Voidable—That which can be nullified or adjudged void (particularly a contract) but which is valid until some action is taken to void it. A voidable contract must be rescinded by the innocent party if he or she wishes to avoid performance. Inaction can result in ratification of the contract.
Waiver—The voluntary relinquishment or surrender of a right.
Waste—The destruction, damage, or material alteration of property by one in possession of the land who holds less than a fee estate, such as a life tenant or lessee.
Water Table—The level at which water may be found, either at the surface or below.
Will—The written declaration of an individual that stipulates how his or her estate will be disposed of after death. Also called a testament.
Will, Written—A will which meets the statutory requirements of a valid will; must be signed by witnesses.
Yield—The return of profit to an investor on an investment, stated as a percentage of the amount invested.
Zone—An area of land set off for a particular use or uses, subject to certain restrictions.
Zoning—Government regulation, through zoning ordinances and regulations, of the uses of property within specified areas.
Zoning Ordinances—The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.
Zoning Amendment—A change in the zoning law of a community, requiring the approval of the local legislative body.