Robert Carl Adams - Real Estate Glossary

Abandonment: The voluntary surrender of property rights, with no intention of reclaiming them and without vesting interest in another person. Nonuse is not necessarily abandonment.

Absorption rate: An estimate of the rate at which a particular classification of space - such as new office space, new housing, new condominium units and the like - will be sold or occupied each year.

Abstract (or Abstract Of Title): A summary of the public records relating to the title to a particular property. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title. The abstract also identifies encumbrances, easements and covenants that affect the property. Also known as a Title Report.

Abutter: A person whose property abuts, is contiguous, or joins at a border or boundary; where no other land, road or street intervenes.

Acceleration Clause: Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage. Many states have statutes which limit the enforcement of these provisions.

Acceptance: The expression of the intention of the person receiving an offer (offeree, usually the seller) to be bound by the terms of the offer. The acceptance must be communicated to the offeror and must be in writing to be enforceable. The buyer has the right to revoke the offer anytime before the seller's acceptance.

Accession: Acquisition of title to additional improvements to real property as a result of annexation of fixtures or of accretion of alluvial deposits.

Accretion: An increase in dry land by gradual deposit of waterborne, solid material and riparian land, i.e., accretion by alluvion. The owner of riparian land becomes owner of title to land formed by accretion. Antonym: erosion.

Accrued depreciation: The difference between the present worth of improvements and the reproduction or replacement cost new, both measured on the appraisal date.

Acknowledgment: A formal declaration made before an authorized official by a person executing a document, that he signs the document by a free act and deed. The official is usually a notary public who witnesses the signature and verifies the identity of the person.

Acquisition: The act of becoming the owner of certain property; used also of the thing or property acquired.

Acre: A measure of land equaling 43,560 square feet; or 4,840 square yards; or 160 square rods; or a tract about 208.71 feet square.

Acre foot of water: A volume of water that will cover an area of one acre to the depth of one foot: 43,560 cubic feet.

Active installation: An installation in continuous use by active Army organizations.

Actual Cash Value: An amount equal to the replacement value of damaged property minus depreciation.

Ad valorem tax: A tax on the value of the object or thing subject to taxation.

Adjustable-Rate Mortgage (ARM): Also known as a variable-rate loan, usually offers a lower initial rate than fixed-rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, the monthly payments will increase and when the interest rate on an ARM decreases, the monthly payments will be lower.

Adjustment Period: The time between interest rate adjustment dates for an ARM. They are usually the initial period between the time the ARM is originated and the first interest rate change date, and subsequent adjustment periods between each interest rate change after the first interest rate change.

Administrator: A person appointed by the court to manage and settle the estate of a deceased person who has left no will.

Adverse possession: Acquisition of title to real property owned by someone else, by open, notorious, and continuous possession for the statutory period of time. Burden to prove title is on the possessor, who does not have a marketable title until he obtains and records a judicial decree quieting title. No right of adverse possession may be obtained against the United States.

Affidavit: A written declaration, sworn before an officer who has authority to administer oaths.

Agreement of Sale: Known by various names - such as contract of purchase, purchase contract, purchase agreement, purchase & sales agreement, or sales agreement - according to local custom. This is a written contract in which a seller agrees to sell and a buyer agrees to buy the subject property. This contract spells out specific terms and conditions of the agreement and is signed by both parties.

Air rights: The rights vested by a grant of an estate in real property to build upon, occupy, or use, in the manner and degree permitted, all or any portion of space above the ground or any other stated elevation within vertical planes, the basis of which corresponds with the boundaries of the real estate described in the grant.

Alienation: The voluntary transfer of real property from one person to another.

Allotment: Authorization by the head of an agency to subordinates to incur financial obligations up to a specified amount. An agency makes allotments under the regulations in OMB Circular No. A-34, and not to exceed the amount allowed by OMB.

Alluvion: a kind of accretion on riparian land by action of water which deposits sediment. See also alluvium, avulsion.

Alluvium: Sand, clay or mud deposited as sediment on riparian land.

Amenities: Tangible and intangible benefits generated and received through exercise of rights to real property, not necessarily in the form of money.

Amortization: A term used to describe the process of paying off a loan over a predetermined period of time at a specific interest rate. The amortization of a loan includes payment of interest and a portion of the outstanding principal balance during each payment cycle.

Amortization period: The period of time for economic recovery of the net investment in a project. This period is the lesser of 1) the period of time over which the plan can be expected to serve a useful purpose, or 2) the period of time when further discounting of beneficial and adverse effects will not appreciably influence design.

Amortization Schedule: Provided by mortgage lenders, the schedule shows how over the term of your mortgage the principal portion of the mortgage payment increases and the interest portion of the mortgage payment decreases.

Animal Unit: A measure of numbers of livestock equivalent to a mature cow. One A.U. equals 1,000 pounds live weight, or one cow, horse, or mule; five sheep or swine; six goats.

Animal unit month: A measure of forage or feed sufficient to feed one animal unit for 30 days. Usually expressed relative to acres of land.

Annexation: The act of attaching, adding or joining one thing to another, generally a smaller or subordinate thing with a large or principal thing. Usually with respect to land or fixtures.

Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees and certain other credit charges that the borrower is required to pay.

Application Fee: The fee that a mortgage lender charges to apply for a mortgage to cover processing costs.

Apportionment: A distribution by OMB of amounts available for obligation in an appropriation or fund account, including budgetary reserves established by law. An apportionment divides amounts by specific time periods (quarters), activities, projects, objects, or a combination.

Appraisal: A professional analysis, including references to sales of comparable properties, used to estimate the value of the property.

Appraiser: A professional who conducts an analysis of the property, including references to sales of comparable properties in order to develop an estimate of the value of the property. The appraiser's report is called an "appraisal".

Appreciation: An increase in the market value of a home due to changing market conditions and/or home improvements.

Appropriation: Authorization by act of Congress permitting Federal agencies to incur obligations and make payments out of the 'treasury for specific purposes.

Appropriations bill: A bill that gives legal authority to spend or obligate money from the Treasury. An appropriations bill usually provides the actual monies approved by authorization bills, but not necessarily the full amount permissible.

Appurtenance: Something annexed to another principal thing and which passes as incident to it, for example a right of way or barn passing with a principal property.

Arbitration: A process where disputes are settled by referring them to an impartial third party (arbitrator) chosen by the disputing parties who agree in advance to abide by the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator issues the decision.

Asbestos: A toxic material that was once used to make insulation and fireproofing material in houses. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. However, some older homes may still have asbestos in these materials.

Assets: Everything of value an individual owns.

Assumption of Mortgage: An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption. T mortgagee's consent is required to release the original mortgagor. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not necessarily required for a sale subject to a mortgage.

Balloon Mortgage: A mortgage with monthly payments based on a 30-year amortization schedule and the unpaid principal balance due in a lump sum payment at the end of a specific period (usually 5 or 7 years) earlier than 30 years. The mortgage contains an option to reset the interest rate to the current market rate and to extend the maturity date provided certain conditions are satisfied.

Bankruptcy: Legally declared unable to pay your debts as they become due. Bankruptcy can severely impact your ability to borrow money. Talk to a credit counselor as soon as you realize you are having problems paying your bills on time to try to prevent bankruptcy.

Binder (or Offer to Purchase): A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.

Building Line (or Setback): Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability, your assets and reserves, and the amount of your income each month that is available after you have paid for your housing costs, debts and other obligations.

Certificate of Title: A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not nearly as great as that offered in a title insurance policy.

Closing: The actual process whereby all parties to a real estate transaction conclude the details of a sale or mortgage. This process includes the signing and transfer of documents and the distribution of funds.

Closing (Closing Date): When the real estate transaction between buyer and seller is completed. The buyer signs the mortgage documents and the closing costs are paid. Also known as the settlement date.

Closing Agent: A person that coordinates closing-related activities, such as recording the closing documents and disbursing funds.

Closing Costs: The expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership or mortgage of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a general list of buyer's and seller's expenses: Loan Fees, Documentary Stamps on Notes, Cost of Abstract, Recording Deed and Mortgage, Documentary Stamps on Deed, Escrow Fees, Real Estate Commissions, Attorney's Fees, Title Insurance, Survey Charge, Appraisal Fees, Inspection Fees. The agreement of sale negotiated previously between the buyer and the seller should state in writing who will pay each of the above costs or how they will be split. Most areas have local customs that guide which party typically pays which expense.

Closing Statement: An accounting of funds made at the completion of every real estate transaction.

Cloud On Title: An outstanding claim, condition or encumbrance which adversely affects the marketability of title.

Collateral: Property which is pledged as security for a debt. In the case of a mortgage, the collateral would be the land, the house, and other buildings and improvements.

Commission: Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price -- 5 to 7 percent on houses, and can be up to 10 percent on land.

Commitment Letter: A letter from your lender that states the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges.

Concession: Something yielded or conceded in negotiating a transaction.

Condemnation: The taking of private property for public use by a government unit with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium: A unit in a multiunit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for maintenance for building and property upkeep, taxes and insurance on the common areas and reserves for improvements.

Contractor: In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Conventional Mortgage: A mortgage loan not insured by HUD (FHA loans) or guaranteed by the Veterans' Administration (VA loans). It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States.

Cooperative Housing: An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Counter-offer: An offer made in return by the person who rejects the previous offer.

Credit: The ability of a person to borrow money, or obtain goods with payments over time, as a consequence of the favorable opinion held by a lender as to the person's financial situation and reliability.

Credit Bureau: A company that gathers information on consumers who use credit and sells that information in the form of a credit report to credit lenders.

Credit History: A credit history is a record of credit use. It is comprised of a list of individual consumer debts and an indication as to whether or not these debts were paid back in a timely fashion or "as agreed." Credit institutions have developed a complex recording system of documenting your credit history. This is called a credit report.

Credit Report: A document used by the credit industry to examine an individual's use of credit. It provides information on money that individuals have borrowed from credit institutions and a history of payments.

Credit Score: A computer-generated number that summarizes an individual's credit profile and predicts the likelihood that a borrower will repay future obligations.

Creditworthy: Your ability to qualify for credit and repay debts.

Debt: A sum of money owed from one person or institution to another person or institution.

Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expense, installment debts, alimony, child support, car payments, and payments on revolving or open-ended accounts such as credit cards.

Deed: The legal documents conveying title to a property.

Deed of Trust: A legal document in which the borrower conveys the title to a 3rd party (trustee) to hold as security for the lender. When the loan is paid in full the trustee reconveys the deed to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.

Default: Failure to perform a legal obligation; a default includes failure to pay on a financial obligation, but may also be a failure to perform some action or service that is nonmonetary.

Deposit: The amount of money you put down on a house to hold it.

Depreciation: A decline in the value of a house due to changing market conditions, decline of a neighborhood or lack of upkeep on a home.

Documentary Stamps: A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State and in some States stamps are no longer used. In some States these are also known as Transfer Taxes.

Downpayment: The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale, also known as Earnest Money. The downpayment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the downpayment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the downpayment and to pay interest and expenses incurred by the purchaser. Downpayment also refers to the difference between the sales price and maximum mortgage amount. It is expressed as a dollar figure or a percentage of the purchase price. For example, when a house is purchased for $100,000 and $90,000 is borrowed to finance the purchase, then the downpayment is said to be 10% ($10,000).

Earnest Money Deposit: The deposit you make to show that you are committed to buying the home. The deposit will not be refunded to you after the seller accepts your offer, unless one of the sales contract contingencies is not satisfied.

Encroachment: An obstruction, building, or part of a building or other improvement that intrudes beyond a legal boundary onto neighboring land. A common example would be fences or walls that are built on the other side of a property line and thereby "encroach" on the neighbors property.

Encumbrance: A legal right or interest in land that affects or limits complete ownership and control over property. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes or restrictive convenants. An encumbrance does not necessarily prevent transfer of the property to another, but may diminish its value. A title search will usually reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase the property with the encumbrance.

Equity: The value in your home above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.

Escrow: The holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

FICO Score: A credit rating generated by an automated processing of a credit report. Mortgage lenders utilize the score to assist with the credit decision. Higher scores are indicative of better credit. Many situations can negatively effect ones score, including: delinquent accounts, history of late payments, collection accounts, bankruptcy, limited credit history, high credit card/credit line balances. Additionally, other credit report inquiries reduce ones score

Fixed-Rate Mortgage: A mortgage with an interest rate that does not change during the entire term of the loan.

Foreclosure: A legal action that terminates all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.

General Warranty Deed: A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Gift Letter: A letter that a family member writes verifying that he/she has given you a certain amount of money as a gift and that you do not have to repay it. You can use this money towards a portion of your down payment through some mortgage products.

Good-Faith Estimate: A written statement itemizing the approximate costs and fees for the mortgage.

Grantee: That party in the deed who is the buyer or recipient.

Grantor: That party in the deed who is the seller or giver.

Gross Monthly Income: The income you earn in a month before taxes and other deductions. Under certain circumstances, it may also include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Hazard Insurance: Protects against damages caused to property by fire or other common hazards.

Home Inspection: A professional inspection of a home to review the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Homeowner's Insurance: A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances.

Housing Expense Ratio: The percentage of your gross monthly income that goes toward paying for your housing expenses.

HUD: The United States Department of Housing and Urban Development. Federal Housing Administration (FHA) is a division of HUD which insures home mortgage loans made by lenders and sets minimum standards for such homes.

HUD-1 settlement statement: A final listing of the costs of the mortgage transaction. It provides the sales price, and down payment, as well as the total settlement costs required from the buyer and seller.

Index: The published index of interest rates on a publicly traded debt security used to calculate the interest rate for an ARM. The index is usually an average of the interest rates on a particular type of security such as the LIBOR.

Individual Retirement Account (IRA): A tax-deferred plan that can help build a retirement nest egg.

Inflation: An increase in the general level of prices.

Inquiry: A request for a copy of your credit report. An inquiry occurs every time you fill out a credit application and/or request more credit. Too many inquiries on a credit report can lower your credit score.

Interest: The cost you pay to borrow money. It is the payment you make to a lender for the money it has lent to you. Interest is usually expressed as a percentage of the amount borrowed.

Interest Only Loan: A non-amortizing loan in which the lender receives only interest during the term of the loan and the principal is repaid at maturity.

Interest Rate: The percentage of loan amount borrowed which is charged by the lender for use of the money. Interest rates are usually expressed as the percentage per year.

Keogh Funds: A tax-deferred retirement-savings plan for small business owners or self-employed individuals who have earned income from their trade or business. Contributions to the Keogh plan are tax deductible.

Liabilities: Your debts and other monetary obligations.

Lien: A claim or charge on property for payment of some debt. With respect to a mortgage, it is the right of the lender to take the title to your property if you do not make the payments due on the mortgage.

Loan Origination Fees: The fee paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.

Lock-in rate: A written agreement guaranteeing a specific interest rate when your mortgage closes.

Low-Down-Payment Feature: A feature of a mortgage, usually a fixed-rate mortgage that helps you buy a home with as little as a 3% down payment.

Margin: The amount (expressed as a percentage) added to the index for an ARM to establish the interest rate on each adjustment date.

Market Value: The current value of your home based on what a willing purchaser would pay. The value determined by an appraisal is sometimes used to determine market value.

Marketable Title: A title that is free of objectionable liens, easements, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will reasonably accept without objection.

Maturity (or Maturity Date): The date a loan becomes payable in full. This is most often the due date of the final payment of a loan.

Mortgage: A loan secured by a lien on your home. In some states the term mortgage is also used to describe the document you sign to show that you have granted the lender a lien on your home; other states use a deed of trust document instead of a mortgage. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.

Mortgage (Open-End): A mortgage note with a provision that permits borrowing additional money in the future without refinancing the loan. Open-end provisions often limit such borrowing to no more than would raise the balance to the original principal amount.

Mortgage Broker: An independent finance professional who specializes in bringing together borrowers and lender to facilitate real estate mortgages.

Mortgage Commitment: A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance (MI or PMI): Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).

Mortgage Insurance Premium: With FHA loans, the payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

Mortgage Lender: The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.

Mortgage Note: A written agreement to repay a loan that is secured by a mortgage. The note serves as proof of indebtedness, states the actual amount of the debt that the mortgage secures and enumerates the terms of repayment.

Mortgage Rate: The cost or the interest rate you pay to borrow the money to buy your house.

Mortgagee: The lender in a mortgage agreement.

Mortgagor: The borrower in a mortgage agreement.

Mutual Funds: A fund that pools the money of its investors to buy a variety of securities.

Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Offer: A formal bid from the homebuyer to the home seller to purchase a home.

Open House: When the seller's real estate agent opens the seller's house to the public. You do not need a real estate agent to attend an open house.

Plat: A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. Plats are generally kept as records of the county, parish or other local government entity.

Points (also Discount Points): An amount of money paid to a lender to obtain a loan at a certain interest rate. A point is one percent of the principal amount of the loan. For example, if a loan is for $100,000, one point is $1,000. Points are paid at closing. Buyers are prohibited from paying points on FHA or VA guaranteed loans; however sellers can pay. On a conventional mortgage, points may be paid by either buyer or seller or split between them.

Pre-approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you are a serious buyer.

Pre-qualification letter: A letter from a mortgage lender that states that you are pre-qualified to buy a home but does not commit the lender to a particular mortgage amount.

Predatory Lending: Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and "packing" credit insurance on to a loan.

Prepayment: Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a prepayment penalty. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.

Principal: The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.

Private Mortgage Insurance: See Mortgage Insurance.

Property Appreciation: See Appreciation.

Quitclaim Deed: A deed which relinquishes any interest in a particular property which the grantor may have. A quitclaim deed is often executed to clear the title when the nature of a grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks because the deed makes no warranties as to the title held by the grantor. Quitclaim deeds may transfer full ownership in a property or no interest at all.

Radon: A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses.

Rate Cap: The limit on the amount that the interest rate on an ARM can increase or decrease during any one adjustment period.

Ratified Sales Contract: A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspections, making repairs, closing by a certain date, and the like.

Real Estate Broker: A licensed middle man or agent who represents buyers and/or sellers in real estate transactions. Brokers' fees for their services are usually charged on a commission basis.

Real Estate Professional: An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you have specifically contracted with a buyer's agent, the real estate professional represents the interest of the property seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers, but are generally not involved in the lending process.

Refinance: Obtaining a new mortgage with all or some portion of the proceeds used to pay off the original mortgage.

Refinancing: The process where a borrower pays-off one loan with the proceeds from another loan. A property can be refinanced with a new loan from the current holder of the mortgage or from a new lender.

Replacement Cost: The cost to replace damaged personal property without a deduction for depreciation.

Restrictive Covenants (or Covenants): Private restrictions limiting the use of real property. Restrictive covenants may bind all subsequent purchasers of the land or may be binding only between the original seller and buyer. Restrictive covenants may affect the property's value and marketability of title. Restrictive covenants are used for many purposes and may limit the use of the property, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or activities occurring. Covenants are widely used today because of the proliferation of privately planned communities which use them as a tool to control and guide future development.

Securities: A financial form that shows the holder owns a share or shares of a company (stock) or has loaned money to a company or government organization (bond).

Special Assessments: A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, or other public projects that benefit particular property owners. In the context of condominium and private community association, special assessments are charges to property owners, over and above their customary periodic payments, to fund special projects

Special Warranty Deed: A deed in which the grantor warrants or guarantees the title only against defects arising during grantor's ownership of the property and not against title defects existing before the time of the grantor's ownership.

State Stamps: See Documentary Stamps.

Survey: 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 sometimes required by the lender to assure him that a building is actually sited on the land according to its legal description.

Title: The right to, and the ownership of, land by the owner. Title is sometimes used to mean the evidence or proof of ownership of land; although another term used for that is "deed".

Title Insurance: Insurance that protects lenders and homeowners against loss of their interest in the property because of legal problems with the title.

Title Search (or Title Records Examination): legal owner and to determine all of the liens, assessments, claims, convenants, or other encumbrances or restrictions that would affect the title to the property. The results of the search are expressed in a Title Report or Abstract. The primary purpose of the search is to establish whether the property has marketable title.

Trustee: A party who is given legal responsibility to hold and administer property for the benefit of another (the beneficiary). Trustee's are obligated to act in the best interest of the beneficiary.

Truth-in-Lending Act (TILA): Federal law which requires disclosure of a truth in lending statement for consumer loans. The statement includes a summary of the total cost of credit such as the APR and other specifics of the loan.

Underwriting: The process a lender uses to determine loan approval. It involves evaluating the property and the borrower's credit and ability to pay the mortgage.

Uniform Residential Loan Application: A standard mortgage application that your lender will ask you to complete. The form request your income, assets, liabilities and a description of the property you plan to buy, among other things.

Warranties: Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.

Zoning: Act of city, county or other local authorities specifying how property may be used in specific areas. Also know as Land Use Plans.