Real Estate Glossary With Essential Terms

In the business of real estate, there is a plethora of terminology that is used specifically in the buying and selling process. This terminology can be confusing to some, so I’ve created a glossary of the most commonly used real estate terms and their definitions in order to take the guesswork out of home buying and help you to feel confident in the process. While this glossary is not exhaustive, it provides a general understanding of real estate concepts for educational purposes.

ABSTRACT – An abbreviation of the cardinal aspects of all recorded deeds, mortgages, leases and other instruments affecting the title to a particular piece of land.

ABSTRACTING – The process of making and compiling an abstract.

ABSTRACTER – The person or company engaged in making abstracts.

ADVERSE POSSESSION – The unauthorized occupation of land belonging to another, by a person who does not have the consent of the owner. Said occupier is said to hold possession adversely to the rights and interests of the owner. In most states, by operation of law, title to the land becomes vested in such occupier after a fixed number of years of peaceful occupancy.

ALL-INCLUSIVE RATE – This is a rate that includes the insurance premium, and at least some part of the cost of the title search, examination and the cost of conducting the closing/settlement.

AMORTIZATION – This term has developed through French and Old English from the Latin words “mors” or “mort” meaning death or dead. It is the killing off of an existing debt by regular partial payments. The word “mortgage” is also derived from the same Latin root.

APR – Annual Percentage Rate. The yearly interest percentage of a loan as expressed by the actual rate of interest paid.

APPRAISAL – An estimate of value of property from analysis of facts about the property; an opinion of value.

 BASIC RATE – When referring to title insurance, the basic rate is the rate charged to a consumer who does not qualify for a reduced rate.

BROKER – One who acts as an agent for another in negotiating sales or purchases in return for a fee or commission.

BROKERAGE – A fee or commission paid to a broker.

CERTIFICATE OF TITLE – In areas where attorneys examine abstracts or chains of title, a written opinion, executed by the examining attorney stating that title is vested as stated in the abstract.

CHAIN OF TITLE – Beginning with a conveyance out of an original source of title such as a government, each succeeding deed, will or other medium which conveys and transfers the title to succeeding owners constitutes a link in the chain of title. The chain of title is the composite of all such links.

 CLAIM – A right to assert, or the assertion of, a demand for payment of money due; or the surrender or delivery of possession of property or the recognition or some right. A demand for something as one’s rightful due.

 CLOSING – In some areas called a “settlement.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.

 CERTIFICATE OF TITLE – In areas where attorneys examine abstracts or chains of title, a written opinion, executed by the examining attorney stating that title is vested as stated in the abstract.

 CHAIN OF TITLE – Beginning with a conveyance out of an original source of title such as a government, each succeeding deed, will or other medium which conveys and transfers the title to succeeding owners constitutes a link in the chain of title. The chain of title is the composite of all such links.

 CLAIM – A right to assert, or the assertion of, a demand for payment of money due; or the surrender or delivery of possession of property or the recognition or some right. A demand for something as one’s rightful due.

 CLOSING – In some areas called a “settlement.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.

DEED – A written document by which title to real estate is conveyed from one party to another.

DEED BOOK – A book among the public records in which deeds are recorded.

DEFAULT – Failure to perform a promised task or to pay an obligation when due.

DEFECT – A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.

DEPRECIATION – Loss in value occasioned by ordinary wear and tear, destructive action of the elements, or functional or economic obsolescence.

ENDORSEMENT – Addition to or modification of a title insurance policy that expands or changes coverage of the policy, fulfilling specific requirements of the insured.

ESCROW – Technically, this term strictly refers to a deed delivered to a third person to be held by him until the fulfillment or performance of some act or condition by the grantee. In the title industry, it means the depositing with an impartial third party (typically an escrow agent or title company) of anything pertaining to a real estate transaction including money and documents of all kinds. The money and documents are to be disbursed and delivered to the rightful parties by the escrow agent or title company when all conditions of the transaction have been met.

ESCROW AGREEMENT – A written agreement usually made between buyer, seller and escrow agent, but sometimes only between one person and the escrow agent. It sets forth the conditions to be performed incident to the object deposited in escrow, and gives the escrow agent instructions with respect to the disposition of the object so deposited.

ESTATE – (1) A sizable piece of rural land usually with a large house and other pretentious improvements. (2) The whole of one’s possessions, especially all of the property, assets, debts, and liabilities left by a deceased or bankrupt person. (3) The nature and extent of an owner’s rights in real estate.

FEE SIMPLE – The highest degree of ownership that a person can have in real estate. An interest in real estate that gives the owner unqualified ownership and full power of disposition.

FIRST MORTGAGE – A mortgage having priority as a lien over any other mortgage or lien on the same property.

FORECLOSURE – A legal proceeding for the collection of real estate mortgages and other types of liens on real estate, which results in cutting off the right to redeem the mortgaged property and usually involves a judicial sale of the property to pay the mortgage debt.

HAZARD INSURANCE – Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. The buyer often adds liability insurance and extended coverage for personal property.

HEIR – A person who inherits or who is entitled to inherit real estate by provisions of law or under the provisions of a will.

LEASE – An agreement granting the use or occupancy of land during a specified period in exchange for rent.

LIEN – The liability of real estate as security for payment of a debt. Such liability may be created by contract, such as a mortgage, or by operation of law, such as a mechanics lien.

MARKET VALUE – An average between the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing, but not compelled to sell, would accept.

MECHANIC’S LIEN – A lien on real estate, created by operation of law, which secures the payment of debts due to persons who perform labor or services or furnish materials incident to the construction of buildings and improvements on the real estate.

METES AND BOUNDS – Describing boundaries by using courses, directions, distances and monuments.

MORTGAGE – A temporary conditional pledge of property to a creditor as security for the payment of a debt that may be cancelled by payment.

PROMISSORY NOTE – A written promise to pay or repay a specified sum of money at a stated time, or on demand, to a named person. In addition to the payment of principal, a promissory note usually provides for the payment of interest.

REALTOR – A copyrighted trade name that can be legally used only by those belonging to the National Association of Realtors.

RECORD TITLE – The aspects of a title that appear in the public records as distinguished from unrecorded title aspects and interests.

REFINANCE RATE – When referring to title insurance, the refinance rate is the reduced rate for a loan policy issued on the new loan in a refinance transaction, in which the original loan was previously insured within some period of years.

SECOND MORTGAGE – A mortgage ranking in priority immediately below a first mortgage.

SETTLEMENT – In some areas called a “closing.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.

TAX LIEN – The lien that is imposed upon real estate by operation of law that secures the payment of real estate taxes.

TENANTS IN COMMON – Two or more persons in whom title to a single piece of real estate is vested in such a manner that they have a common or equal right to possession and enjoyment of the property, but each holds a separate individual interest or estate in the property. Each owner may sell or encumber his respective interest or dispose of it by will, and if he dies without leaving a will, his heirs inherit his undivided interest.

UNDERWRITER – An insurance company that issues insurance policies either to the public or to another insurer.

​​WAIVER – The voluntary and intentional relinquishment of a known right, claim or privilege.