"B" through "D" credit customers - a graduated consumer credit grading system for consumers who have anything from less than perfect to outright bad credit and who usually cannot qualify for traditional financing. Also called sub-prime credit customers.

Bad Debt - any delinquent debt that is written off as uncollectible.

Balance Due - The amount currently owed on a debt; the principal balance due. 

Balance Sheet - a financial statement showing a business' current financial condition.  Assets appear on the left side while liabilities & net worth on the right side.

Balloon - the final payment (or the balance of principal) on a mortgage, trust deed, or land contract. This final payment amount may be greater than the preceding installment payments, pays the loan in full and occurs before such time the debt is fullly amortized.
   
Balloon Note - A note establishing periodic payments for a specified amount of time at which the final amount is due as one large lump-sum payment. The initial payments were insufficient to amortize the full amount of the note prior to maturity, so the remaining principal balance, known as a “balloon” is due at the end of the contract period (maturity).

Bankruptcy - The financial inability to pay one's overwhelming debts when due. The debtor seeks relief through court action   (proceedings under federal bankruptcy statutes) that may work out or erase debts. The bankrupt's property is distributed by the court to the creditors as full satisfaction of the debts, in accordance with certain priorities and exemptions. The debtor petitions for voluntary bankruptcy; creditors petition for involuntary bankruptcy.

Bene Statement - cf. Beneficiary Statement.

Beneficiary - the intended recipient of the benefits of a certain act (such as the payout proceeds of a life-insurance policy upon the death of the insured).

Beneficiary Statement - also called an "offset statement" or "bene" statement.  a statement by the holder of a deed of trust stating the amount of the unpaid principal on the note as well as other information about the deed.  A small fee is usually paid to the holder to get this statement.

Bill of Lading - a logistics term giving instruction to the freight handling company was in possession of a shipment.

Bill of Sale - a document a seller uses to transfer the title of certain goods to a particular buyer.

Blanket Mortgage or Blanket Trust Deed -  a mortgage or deed of trust covering more than one piece of property.  For example, it may cover an entire subdivision and provide for the partial reconveyance of individual lots as the lots are sold.

Business-based income streams - financial instruments that guarantee cash streams to a business or government agency.
   
Bill Discounted - A promissory note from which the interest is deducted in advance. 
   
Bona Fide - A Latin phrase meaning "In good faith"; "without fraud".
   
Breach of Contract - A violation of the terms of a legal contract; or the failure to perform a contract, in whole or part, without legal excuse. 
   
Buydown - A payment to the lender from the seller, buyer, third party, or some combination of these, that causes the lender to decrease the interest rate during the early loan years. A buydown is usually for the first 1 to 5 years of the loan. Refer to “Certificate-backed Mortgage.”  

Buyer - Also referred to as "Vendee" or "Purchaser." A party (individual or corporation) who purchases property. 
   
Buy-Sell Offer - An offer by one owner of a business or real estate to buy-out the interest of another owner of the same business or real estate (a partner or other shareholder), or to sell the offerer's interest at the same price or proportionate price if unequal ownership. Example: Abigail and Bob each own a ½ interest in a small commercial lot. Abigail offers to buy Bob's interest for $20,000, or she is willing to sell her interest to Bob for $20,000. Supposed very fair, since Bob has the option to buy or sell. However, Bob's interest may be worth $23,000, but Bob is financially unable to buy Abigail's interest (also worth $23,000). 

Capital Gain or Loss  The difference between the base price (the cost and the purchase expenses) of a capital asset and its sale price. 
   
Carrying Charges  The costs in holding onto a property that is intended to produce income (either as a sale or rental income) but has not yet done so. 
   
Cash Out  To take out the seller's total amount of equity in a property as cash rather than to keep some monetary interest in the property. Also referred to when paying off anyone having an interest in the property and thereby ending their interest. 
   
Certificate of Title  A written statement furnished by an abstract, title company, or attorney stating that the title to a piece of property is legally vested in the present owner. 
   
Certification  To show evidence of ownership or debt. 
   
Chain of Title  The complete history of all the documents transferring title to a parcel of real estate, starting with the earliest existing document and ending with the most recent. It includes all conveyances as well as encumbrances affecting the title. 
   
Chattel  Anything owned and tangible other than real estate. For example, furniture, appliances, jewelry, motorcycles, and automobiles. 
   
Clear Title  Title not encumbered or burdened with defects such as mortgages, unpaid taxes, or underlying liens. 
   
Client  Also referred to as a “Principal.” The person who enters into a written agreement with a realtor/broker. 
   
Closing Date  The date when the buyer takes over the property. 
   
Cloud on Title  Any situation (a valid outstanding claim or encumbrance) that a title search reveals that adversely affects the owner's title to a property. Usually a cloud on title can be remedied with a quit claim deed, release, or court action. 
   
Codicil  A change or addition to a will. 
   
Collateral  Property or other security pledged for the payment of a debt. 
   
Commingling  To combine funds held in trust with other funds. Example: A broker combines business payments that should be deposited into a business or trust account with his personal funds – an act that occurs when he deposits the business payments into his personal account. Commingling is by itself a violation for which a broker can lose their license; however, it does not mean that the broker had intended to misappropriate the funds. 
   
Commission  A fee charged for brokerage services. 
   
Commit Waste  To neglect (abandon, ignore, or forget) a property or allow it to be used in a way that lessens its value. 
   
Comps  Sales comparisons. Refer to “Appraisal by Comparison.” 
   
Condemnation  To acquire private property for public use with fair compensation to the owner. Also refer to “ Eminent Domain. ” 
   
Conditional Sales Contract  A contract to sell property that states that although delivery is to be made to the buyer, the title is to remain vested in the seller until the contract provisions have been met. 
   
Consideration  Anything given as an incentive to enter into a contract, such as property, money, barter, or personal services. This contract becomes a legal right or promise exchanged for the act, promise, or property of another person.  For example, in a contract to purchase of a piece of property, the property and the money paid (or promised to be paid) are the considerations made by the seller and the new property owner, respectively. Note: Any contract, lease, agreement, mortgage, or other obligation may later be modified without added consideration if the change is made in writing and signed by both parties. 
   
Contract  A legally enforceable agreement between two or more persons (or entities) that creates or changes a legal relationship. A contract is typically based upon an offer and its acceptance. 
   
Convey  To deed or transfer title to another party. 
   
Conveyance  A document, such as deed, mortgage, or lease that is used to produce a transfer or reassignment of property. 
   
Covenant  A legally enforceable promise or restriction that is written into a contract. A promise can include a promise to perform, a promise to not perform certain acts, or to stipulate certain uses or restrictions on a property. A breach of a promise (covenant) usually creates a default and can be the basis for foreclosure. Example: A purchaser on a mortgage, trust deed, or land contract may covenant to keep the property in good repair, pay all necessary taxes, and insure the property for full value against fire and other casualties. The purchaser may also covenant against creating any additional encumbrances on the property. 
   
Cram Down  Refer to “Lien Stripping.” 
   
Creative Financing  A general term that encompasses any method of financing property that exceeds traditional lending practices. 
   
Credit Report  A historical report on a loan applicant's past ability to pay installment payments in full and on time. Example: TRW is an example of a national company that makes such reports. 
   
Creditor's Position  [1] The portion of the value of property that is mortgaged, rather than its equity. Also, [2] the portion of the value of property upon which a first mortgage could be obtained. 
   
Debt Service  An annual amount that a debtor pays for borrowed money. 
   
Deed  [1] A written document that conveys or transfers title from one party to another. These are various types of deeds; however, the two most commonly used are warranty and quit claim. Also, [2] An instrument in writing, duly executed and delivered, that gives fee title to real property upon sale. 
   
Deed of Trust  An instrument used in many states in place of a mortgage. Legal title to the property is vested in one or more trustees to secure the repayment of the loan. 
   
Deed Restrictions  A restriction imposed in a deed to limit the use of property. Example: A deed may include clauses that prevent the sale of liquor or that may define improvements and placement of additions to a property.  

Default  A failure to perform (fulfill a duty, promise or to discharge an obligation) on one or more of the terms of a note or of the covenants of a mortgage or land contract. Note: With regard to property foreclosure, default is typically the failure to pay loan installments in full when they become due. 
   
Defeasance Clause  The clause in a mortgage that allows the mortgagor to redeem their property upon payment of the obligations to the mortgagee.

Defendant  The party sued or called to answer in any criminal or civil lawsuit. 
   
Deferred Payments  [1] Installment payments. [2] Payments to start at a future time. 
   
Delinquent Payment  A late payment. The payment was not paid on a specified payment due date. Example: If a mortgage payment is due on the first day of every month and it is not received until the fifth day of the month, that mortgage payment is late or delinquent. If a mortgage, trust deed, or land con tract has a 15-day grace period, then a payment would not be considered " delinquent" until the 16th day after the due date. 
   
Demand Note  Deposits to a financial institution that can be withdrawn with prior notice. 
   
Devise  A gift of real estate by a will or last testament. 
   
Discount  Financially, the difference between face value of an installment note, mortgage, or deed of trust and its present cash value. 
   
Dispossess  To obtain physical possession of a property from another party by due process of law. 
   
Dominant Tenement  A parcel of land that benefits from an easement. Refer to “Easement Appurtenant,” “Easement in Gross,” "Easement of Necessity," and “Servient Tenement.” Example: To get to plot B you must travel across the easement of plot A. plot B is the dominant tenement and plot A is the servient tenement. 
   
Dower  Under common law, the legal right of a wife or of a child to a part of a deceased husband's or father's estate, regardless of the provisions in his will. 
   
Down Payment  The amount of money paid at the start of a mortgage or a land contract. This lump sum of money is subtracted directly from the original sales price. The remaining principal balance then begins to accrue interest at the specified interest rate. 
   
Due-On-Sale Clause  Also referred to as “Alienation Clause.” A provision in a contract (mortgage, deed of trust, land contract) that is a type of acceleration clause. This clause establishes that the Lender has the right to demand full payment ("call in") the loan balance upon the sale or transfer of the secured property by the Borrower to a third party. 
   
Earnest Money  A deposit that a Purchaser makes to show good faith in purchasing a property 
   
Easement  A right that an individual or the public can exercise on, over, or through the property of others. This right is created by grant, reservation, agreement, prescription, or necessary implication, that one party has in the land of another party.  Example: A utility easement is a public utility company's right to lay their lines across a party's property. 
   
Easement Appurtenant  An easement for the benefit of another parcel of land. The easement will pass with the transfer of property to a new owner. Example: The right to use a driveway to reach a home located behind another person's home. Refer to “Dominant Tenement,” “Easement in Gross,” “Easement of Necessity,” and “Servient Tenement.” 
   
Easement in Gross  An easement for the benefit of a person or entity – not for the benefit of a piece of land. Example: Public utility easements. Refer to “Dominant Tenement,” “Easement Appurtenant,” “Easement of Necessity,” and “Servient Tenement.” 
   
Easement of Necessity  An easement that a court would have to grant when it is absolutely needed to use and enjoy a parcel of land. Example: Land-locked parcels. Refer to “Dominant Tenement,” “Easement Appurtenant,” “Easement in Gross,” and “Servient Tenement.” 
   
Encroachment  A building, part of a building, or an obstruction that intrudes upon the property of another party. Example: A pool or a fence are also examples of common encroachments. 
   
Encumbrance  A claim, lien, charge, obligation, or liability attached to and binding real property. This right to or interest in land effects its value, its use, and the ability to transfer. Example: Examples may include outstanding mortgages, liens, judgments, unpaid taxes, easements, or deed restrictions. An encumbrance creates a “cloud” on the property's title. Note: With regard to foreclosure property, the likely encumbrances are mortgages and claims for unpaid taxes. 
   
Endorsement  The act of the holder of a note, bill, check, or other negotiable instrument of assigning said instrument by signing the back of the instrument, with or without qualification. 
   
Equity  The difference between fair market value of a property and what's owed on it (its current indebtedness or balance due. Example: If a person owes $25,000 on his home and the market value is now $100,000, he now has 75% equity in his home ($100,000 less $25,000). 
   
Equity Loan  A subordinate (junior) loan based on a percentage of equity. 
   
Equity of Redemption  Refer to “Right of Redemption.” 
   
Escrow  An agreement between two or more parties providing that certain instruments or property be placed (entrusted) with a third party for safekeeping, pending the fulfillment or performance of a specified act or condition. Once the agreement terms have been fulfilled, the third party will deliver the agreement to the designated party. 
   
Escrow Account  An account in which an agreed-upon amount of money is deposited each time a payment is collected for use in paying real estate taxes and/or insurance. Example: A mortgage, trust deed, or land contract may require a monthly payment of $320 with an additional $60 to pay insurance and taxes. This $60 goes into an escrow account which, technically, belongs to the Purchaser. 
   
Estate  The degree, quantity, nature, and extent of interest (ownership) that a party has in real property. 
   
Estoppel Certificate  Refer to “Payoff Letter.” 
   
Estoppel Letter  Refer to “Payoff Letter.” 
   
Eviction  A legal proceeding that a landlord uses to recover possession of real property. 
   
Exclusive Right to Sell  An agreement to give a realtor/broker the exclusive right to sell for a specified period. If a sale during the term of the agreement is made by the owner or by any other realtor/broker, the realtor/broker holding the exclusive right is entitled to pay their compensation. 
   
Exclusive Agency  An agreement to employ one realtor/broker only. If the sale is made by any other realtor/broker, both are entitled to commissions. 
   
Executor  A person, corporate entity, or any other type of organization named in a will to carry out its directions. 
   
Fee Simple  Also referred to as “Fee Absolute.” The highest and best form of ownership that the law recognizes. An owner is entitled to the entire property with unconditional power to sell it. 
   
FHA  Federal Housing Administration. Refer to FHA Mortgage. 
   
FHA Mortgage  Mortgage loan insured by the FHA. 
   
Fiduciary  A person who transacts business or handles money or property on behalf of another. The relationship implies great confidence, trust, and obligations. 
   
First Mortgage  A real estate loan that creates a primary lien against real property. This lien has priority over all other mortgages. If foreclosure occurs, the first mortgage will be paid before all other mortgages are paid off. 
   
Fixtures  Improvements or personal property attached to the land that it has become part of the real estate. Example: A porch, a bathroom mirror, or an attached hanging light would be considered fixtures, whereas plants in pots in the garden are personal property. 
   
Foreclosure  The termination of any and all of a mortgagor's rights to a property pledged as security for a debt such as a mortgage. The foreclosure procedure allows for the sale of the property to pay the debt in the event of default in payment or terms. 
   
Forfeiture  The loss of money or anything of value due to failure to perform under contract. Example: If a purchaser failed to make mortgage payments, they forfeit all of their rights to the property. 
   
Free and Clear Title  Title to a property without encumbrances. This phrase is generally used to refer to a property that is free of any mortgage debt. 
   
Grace Period  The additional period after a payment is due during which one party can make a payment or perform an action without being considered in default. 
   
Grantee  The party to whom an interest in property is conveyed (transferred). Note: In a land contract sale, the Grantee is most often referred to as the Purchaser. 
   
Grantor  The person conveying (transferring) an interest in a property. Note: In a land contract sale, the Grantor is most often referred to as the Seller. 
   
Guaranty  A written promise by one party to pay a debt or per form an obligation contracted by another if the original obligor fails to pay or perform as contracted. Example: A parent may guarantee payments owed by their son or daughter. 
   
Habendum Clause  The “to have and to hold” clause that defines or limits the quantity of the estate granted in the deed. 
   
Hazard Insurance  A type of insurance bought to insure property against losses due to theft, fire, vandalism, etc. Most land contracts require the purchaser to carry hazard insurance at all times to protect the seller from insurable losses. 
   
Heir  The party who inherits a property. 
   
Hereditaments  Any property, real or personal, tangible or intangible, that may be inherited. 
   
Homeowner's Policy  An insurance policy designed especially for homeowners. This policy typically protects an owner from losses by theft, common disasters, etc. 
   
HUD  Department of Housing and Urban Development. This federal agency has a very broad mission in the entire housing industry. 
   
Hypothecate  To use something as security without giving up possession of it. 
   
Improvements  Additions to undeveloped land such as sewers, streets, buildings, etc., that tend to increase the land's value. 
   
Installments  Parts of the same debt, payable at consecutive pe?riods as agreed. These payments are made to reduce a mortgage. 
   
Insurance Premium  The amount paid to purchase insurance. 
   
Interest or Interest Rate  The percentage of money charged for its use. Also refer to “Usury.” Example: A seller may charge a purchaser 9% interest on the unpaid balance of a mortgage, trust deed, or land contract. 
   
Intestate  A person who dies before making a will, or whose will is defective in form. 
   
Irrevocable  Unchangeable. Incapable of being recalled or revoked. 
   
Joint Tenancy  Ownership of property by two or more parties, each of whom has an undivided interest with the right of survivorship. 
   
Judgment  A court decree declaring that one individual is indebted to another for a specific, fixed amount. 
   
Judgment Lien  A lien upon a debtor's property based on a court's decree. 
   
Judicial Foreclosure  Having a defaulted debtor's property sold at a price the court approves. 
   
Junior Mortgage  A mortgage second in lien (subordinate) to a primary mortgage. 
   
Land Contract  A promise to pay. A real estate installment sale agreement whereby the buyer may use, occupy, and enjoy land, but the seller does not give a deed (therefore no title passes) until all or a specified part of the sale price has been paid. Example: If you buy a house using a land contract, you promise to pay an agreed-upon sum on or before a specific date. Once you fulfill the terms of the land contract, the seller will deed you the property. 
   
Land Trust  A method of taking control of a property anonymously. The only name that will appear on public records will be the name of the trust and usually the name of the trustee. Note: The land trust creates some asset protection because it requires a good deal of investigation via legal channels to discover if who is the beneficiary of a trust. 
   
Landlord  A party who rents property to another. 
   
Late Charge  A penalty fee charged to a person for failing a regular installment payment on time (i.e., the payment is delinquent). The most common methods of charging late fees are to charge a fixed-dollar amount or a percentage of the payment. Note: Usually this fee is not allowed as interest for tax deductions. And it may or may not be included as usury. If not, the amount of late charge is either set by statute or must be considered “reasonable.” 
   
Lease  A contract in which, for a payment termed rent, the one who is entitled to the possession of real property transfers those rights to another party for a specified period (such as for life, for a number of years, or at will). 
   
Leasehold  The interest given to a lessee of real estate by a lease. 
   
Legal Description  A property description recognized by law which is sufficient to locate and identify the property. A typical legal description will identify the county, township, and section of the township where the land is located. 
   
Legal Rate of Interest  A rate of interest that the law determines rather than by an agreement or contract. 
   
Legatee  A party who receives property (real or personal) through a will. 
   
Lessee  A party to whom property is rented through a lease. 
   
Lessor  A party who rents property to another party (a lessee) through a lease. 
   
Liability  A debt or financial contract. 
   
Liable  Legally responsible. Example: Typically a person who borrows money from a bank is personally and legally responsible (or liable) to repay the loan. 
   
Lien  A legal right or claim against a specific property that attaches to the property until the debt is paid. The property becomes the security for repaying a debt, taxes, judgment, or mortgage. The voluntary (mortgage) or involuntary (judgment) encumbrance against property has a specific dollar value. Note: A lien is a type of encumbrance. A specified lien is against certain property only. A general lien is against all of the property owned by the debtor. All liens are encumbrances, but all encumbrances are not liens (e.g., utility easement is an encumbrance but not a lien for repayment). 
   
Life Estate  The transfer of property title for the duration of the grantee's life. 
   
Life Pendens  A legal document filed in the county clerk's office that gives public notice that an action or proceeding is pending in the courts affecting the title of a property. 
   
Long-term Financing  A mortgage or deed of trust for a term of 10 years or more, as distinguished from shorter-term construction loans or interim loans. 
   
LTV  Loan-to-value ratio. This ratio refers to the amount of money loaned on a property relative to its actual value. Example: A loan of $25,000 on a $100,000 house would be a 25% LTV ratio. 
   
Market Value  The highest price a willing buyer will pay and a seller will accept, supposing both parties are fully informed, and the property is exposed for a reasonable period of time. Market value can differ from the selling price of a property at a given time (market price).
   
Marketable Title  A title that the court considers to be so free from defect that it will enforce the purchaser's acceptance. 
   
Maturity  [1] The date on which an instrument of indebtedness (a note such as a mortgage or land contract) becomes due and payable. [2] Termination period of a note. Example: A 20 year mortgage has a maturity date in 20 years. 
   
Mechanic's Lien  A claim made for contractual obligations. The amount of the claim typically includes the cost of labor and the furnished materials. Example: A pool company or plumber may make a claim for unpaid services rendered. 
   
Moratorium  An emergency act that a legislative body uses to postpone the legal enforcement of contractual obligations. 
   
Mortgage  A written pledge (executed and delivered) of real property that creates a lien on the property as security for the payment of a specific debt. With a mortgage, the borrower retains possession and use of the property. A mortgage is typically signed simultaneously with a note.
   
Mortgage Broker  An individual or corporation who is paid to match borrowers with lenders. 
   
Mortgagee  The party lending the money and takes a mortgage to secure their payment. The party both lends the money and receives the mortgage. Note: Some states treat the mortgagee as the “legal” owner, entitled to rents from the property. Other states treat the mortgagee as a secured creditor, the mortgagor being the owner. The latter is the more modern and accepted view.  
 
Mortgagor  The party borrowing money secured by real estate and giving a mortgage on their property as security for the payment of the debt. 
   
Multiple Listing  An agreement among members of the Board of Realtors allowing brokers to advertise their listings to other members. If a sale occurs, commissions are divided between the broker providing the listing and the broker making the sale. 
   
Non-qualifying Assumption  A mortgage or deed of trust that does not contain a “due-on-sale” clause and therefore allows the transfer of title freely without permission from the lender. 
   
Notary Public  One who is authorized by the state or federal government to administer oaths and attest to the authenticity of signatures. Note: A federal authorization may extend authority to attest to the authenticity of certain documents. 
   
Notice of Action  Also referred to as “Lis Pendens.” A recorded notice that property may be subject to a lien, or even that the title is defective, due to pending litigation. Notice of a pending suit. 
   
Notice of Default  A letter sent to a defaulting party as a reminder of a default. Such a notice may state a grace period and the penalties for failing to cure the default. 
   
Obsolescence  Loss in value or income due to a property's reduced desirability and usefulness. This status can occur when a structure's design and construction become obsolete, old fashioned, and not keeping with modern standards. 
   
Open Listing  A listing given to any number of brokers but with commissions payable only to the broker who secures the sale. 
   
Opinion of Title  A certificate, typically from an attorney, stating the validity of the property title being sold. 
   
Option  A right given for the consideration to purchase or lease a property upon specific terms and within a specific timeframe. If the party that holds the option does not exercise their right, they are not subject to liability for damages. If the party that holds the option does exercise their right, the grantor of the option must perform. 
   
Outstanding Balance  The amount currently owned on a debt. 
   
Owner Will Carry  A phrase used to indicate that the seller is willing to take back a purchase money mortgage. Refer to Purchase Money Mortgage [1]. 
   
Paper  A mortgage, deed of trust, or land contract that is given as an alternative to cash. A seller would take back a note (paper) if they he or she received a mortgage, deed of trust, or land contract as part of the purchase price. 
   
Parcel  A piece of property under one party's ownership; a lot in a subdivision. 
   
Parcel Number  A unique number given to a piece of property that the county assigns for tax purposes. 
   
Payment  An agreed-upon dollar amount that a purchaser pays in regular installments. The most common installment method for mortgages is monthly payments. 
   
Payoff Letter  Also referred to as an “Estoppel Letter” and ”Estoppel Certificate. “  A letter from a lender stating the current balance due on the mortgage as of the date of the certificate's execution . 
   
Per Annum  In or for each year annually. 
   
Performance Bond  A bond used to guarantee the specific completion of an undertaking in accordance with an agreement or contract. 
   
Personal Property  Any property that is not real property. Example: Personal property would include such items as appliances, cash, securities, furniture, and mobile homes not permanently attached to a site. 
   
Plat  A plan or map of a specific land area. 
   
Plat Book  A public record containing maps of land and showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels. 
   
Points  Discount charges that lenders enforce to raise the yields of their loans. One point is equal to 1% of the loan amount. 
   
Power of Attorney  A document that grants authority from one person (principal) to act for or on behalf of another (agent or attorney in fact). Two types of Powers of Attorney exist: General power – Authorizes sale, mortgaging, etc. of all property of the principal. This is invalid in some jurisdictions .
Special power – Specifies property, buyers, price, and terms.  Specificity varies in by each state. 
 
Power of Sale  Clause in a mortgage or deed of trust giving the mortgagee or trustee the power to sell the property in the event of default. These laws govern the sale, which must be at public auction, but there is no court action necessary (judicial foreclosure). 
   
Premises  An estate; land. 
   
Prepayment Clause  The clause in a mortgage that gives the mortgagor the privilege of paying the mortgage off before it is due, either with or without prepayment penalties. Refer to “Prepayment Penalty” and “Prepayment Privilege.” 
   
Prepayment Penalty  The penalty fee the lender charges the mortgagor for early payoff of a loan. 
   
Prepayment Privilege  The right to prepay a loan without penalty, either in full or in part.

Refer to “Prepayment Penalty.” 
   
Principal  [1] The person who gives authority to an agent or attorney (refer to Attorney-in-Fact). [2] Amount of debt, not including interest. The face value of a note, mortgage, trust deed, or land contract, etc. Refer to "Amortization" for an example of a payment having both principal and interest portions. 
   
Principal and Interest Payment  A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance. 
   
Principal Balance  The unpaid balance owed on a mortgage or land contract. 
   
Promissory Note  A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer. 
   
Proration  Allocation of closing costs and credits to buyers and sellers. 
   
Purchase Money Mortgage  [1] A mortgage given from the buyer to seller to secure all or a portion of the purchase price. [2] Any mortgage from which the funds are used to purchase the property. 
   
Purchase Money Trust Deed  Refer to “Purchase Money Mortgage.” 
   
Purchaser  The party who purchases property. Also referred to as "Vendee" or "Buyer." 
   
Quiet Title Suit  A suit in court to determine the legal rights of an owner to a certain parcel of real property. 
   
Quitclaim Deed  A deed that transfers the grantor's title, interest, claims, or right to real estate, if any, at the time the conveyance is executed. This deed operates as a release and is without representations or warranties as to the nature of the rights conveyed. It is considered inadequate except when interests are being passed from one spouse to the other. 
   
Real Estate  [1] Land and anything permanently attached to the land, such as buildings, fences, and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property if not attached. The term is generally synonymous with real property, although in some states a distinction may be made. [2] May refer to rights in real property as well as the property itself. 
   
Real Estate Board  An organization whose members consist of primarily real estate brokers, realtors, and salespersons. 
   
Real Estate Owned  Also referred to as “REO.” Property that a lender acquires through foreclosure and holds in its inventory. 
   
Real Estate Syndicate  A partnership formed for a real estate venture. Partners may be limited or unlimited in their liability. 
   
Real Property  Real estate. The land and generally any structures on or attached to it. 
   
Realtor  A term used to identify active members of the National Association of Realtors (NAR). This term is often used to refer to anyone licensed to sell real estate; however, the term “Realtor” only applies to those members who pay dues to NAR. 
   
Recording  The act of writing or entering into a book of public record instruments affecting the title of real property. The recording of an instrument for a particular piece of real estate occurs at the county court house where the property is located. 
   
Recourse  The right to claim against an owner of a property. 
   
Redlining  The refusal to lend money within a specific area for various reasons. The practice is illegal because it discriminates against the credit worthy persons who happen to live in that area. 
   
Release Clause  A clause found in a blanket mortgage that gives the property owner the privilege of paying off part of the debt, and thus freeing part of the property from the mortgage.  Example: Commonly used with builders in newly formed subdivisions. The builder pays off certain lots when a new homeowner purchases the property. 
   
REO  Refer to “Real Estate Owned.” 
   
Repo  A slang term or abbreviation for repossession. 
   
Representations  Descriptions as to the character or quality of something. Example: A home may be represented as being free from structural defects. 
   
Right of Redemption  Also referred to as “Equity of Redemption.” Right to recover property transferred by a mortgage or other lien by paying off the debt either before or after foreclosure. 
   
Right of Survivorship  Right of the surviving joint owner to succeed to the interests of the deceased joint owner. The right is a distinguishing feature of a joint tenancy or tenancy by the entirety. 
   
Sales Contract  A contract by which the buyer and seller both agree to the terms of a sale. 
   
Sales Price  The mutually agreed upon dollar amount to be paid for a particular piece of property. 
   
Second Mortgage  A mortgage a home buyer makes makes takes out in addition to an existing first mortgage. The order of recording determines the seniority of the lien, not the amount of the mortgage. 
   
Security  Something given as a pledge for payment. 
   
Seller  Individual who has sold real estate; also referred to as "Vendor." 
   
Seller Financing  Refers to the property owner who agrees to carry a mortgage on the property that they are selling. This creative financing technique is used so the buyer doesn't have to obtain any or all of the financing from another source or lending institution. 
   
Servient Tenement  A piece of land that is encumbered by an easement. Refer to “Dominant Tenement,” “Easement Appurtenant,” “Easement in Gross,” and Easement of Necessity.” 
   
Sidwell Number  Refer to "Parcel Number." 
   
Specific Performance  A remedy in a court of equity compelling a defendant to carry out the terms of an agreement or contract. 
   
Split Funding  A technique whereby an investor offers a small amount of cash to close the deal with the balance due at a later date in the form other than extended monthly payments. 
   
Statute of Frauds  The law that requires certain contracts to be made in writing or partially complied with to be legally enforceable. 
   
Subdivision  A tract of land divided into lots or plots. 
   
Subject To  A term used to imply that the buyer is not assuming the existing loan. 
   
Subordinate  Something that moves to a lower priority. Example: A lien would move to a lower priority if it changes from a first mortgage to a second mortgage. 
   
Subordination  See “Subordination Clause.” 
   
Subordination Clause  A clause written into a mortgage that gives (first) priority to a mortgage taken out at a later date. The seller agrees to go into second, third, or fourth position allowing you to obtain new financing senior to their lien without paying them off from the proceeds. 
   
Substitution of Collateral  The act of taking an existing mortgage on one property and transferring the mortgage to another property. 
   
Successor  The party who receives title to a property. 
   
Survey  [1] The blueprint of a parcel of land that shows its boundaries, the measurements, and the area of its location. [2] The process by which a parcel of land is measured and its area established. 
   
Tax Sale  The county's sale of a property after a period of time that the property owner has not paid their taxes. 
   
Tenancy at Will  A license to use or occupy lands and tenements at an owner's choice. 
   
Tenancy by the Entirety  An estate (or a form of ownership) that exists only between husband and wife where each together they owns the entire property – with equal right of possession and enjoyment during their joint lives. When death occurs for one spouse, the survivor owns the property without probate.  

Tenancy in Common  An undivided ownership of real estate by two or more parties, each of whom has an undivided interest (equal or unequal interests), without the right of survivorship. 
   
Tenements  Possessions that are permanent and fixed; structures attached to land. 
   
Term  The amount of time (usually computed in months) until the balance of a mortgage or land contract is due and payable. For example, a land contract may fully amortize over a 10-year period (120 months). However, the contract may also call for a balloon payment to be made at the end of the fifth year (60th month). In this case, the term of the land contract would be 60 months or five years. 
   
Testate  When a person dies and has left a valid, written will and testament. 
   
Time Value of Money  The investment principle that states cash loses value over time to inflation, etc. Immediate cash is more valuable than money received in the future.
   
Title  Evidence that the owner of the land is in lawful possession thereof. 
   
Title Company  A company acting as the agent for a title insurance company. This company examines title to real estate and may also issue title insurance. 
   
Title Insurance  An insurance policy that is typically purchased at the time of closing to insure against any losses or defects in the title of a particular piece of property. Losses or defects could render a title unmarketable. 
   
Title Report  A document that states the current condition of the title, such as liens, easements, encumbrances, covenants, and any other defects. The title report may not describe the chain of title. Upon completion of the transaction, a title insurance policy is issued. 
   
Title Search  An examination of public records, law, and court decisions to disclose the past and current facts regarding owner-ship of real estate. 
   
Township  A six-mile-square tract delineated by a government rectangular survey. 
   
TPA  Third-party administrator who is approved to administer funds from a retirement program. Example: You would use a third-party administer to access money from retirement accounts for self-directed activities. 
   
Transfer Tax  The tax the state imposes when title to real property is transferred. Based on the purchase price or money changing hands. Also referred to as “Documentary Transfer Tax.” 
   
Trust Deed  A claim against real estate similar to a mortgage but a third party (Trustee) holds title for the Beneficiary. 
   
Trustee  A party who holds legal title to property in trust for the benefit of another party to secure performance of an obligation. The trustee is required to perform certain duties with regard to the property, or has been given power affecting property disposition for another party's benefit. 
   
Trustor  Also referred to as “Settlor.” The borrower under a deed of trust who deeds their property to a trustee as collateral for a loan repayment. 
   
Underlying Debt  An original loan that is still in existence, This loan may be owed on a mortgage, trust deed or land contract. 
   
Undivided Interest  A partial interest in real estate by joint tenants or tenants in common under the same title. Interest can be the same percentage or different percentages. 
   
Use Restrictions  A clause in a deed which places limitations or restrictions on the property's use. For example, "this property can never be used to sell liquor" or "this property can never be used to raise farm animals."  These limitations "run with the land" and are therefore binding on subsequent owners.  

Usury  Lending of money at a rate of interest greater than the law allows. Charging a rate that is higher than what a state allows is illegal. 
   
VA  Veteran's Administration. Refer to “VA Loan.” 
   
VA Loan  Mortgage loan that the VA insures. 
   
Variance  The authorization to improve or develop a particular property in a manner that zoning does not authorize. 
   
Vendee  A person who buys property; another word for "Purchaser. ” 
   
Vendor  A person who transfers property by sale; another word for "Seller." 
   
Warranties  Promises contained in a contract, For example, a Seller may warranty that a property sold is structurally sound. 
   
Warranty Deed  A deed that conveys or transfers title from one party to another with covenants from the Grantor guarantees the title – assuring that the title that is transferred is free from all encumbrances. 
   
Waste  Refer to “Commit Waste.” 
   
Without Recourse  Words used to endorse a note or bill that states that the future holder is not to look to the endorser in case of nonpayment from the Payor. 
   
Wrap  Refer to “Wraparound Loan.” 
   
Wrap Mortgage  Refer to “Wraparound Loan.” 
   
Wraparound Loan  A new loan encompassing any existing loans. The new loan usually bears an incoming payment larger than the outgoing payment on the existing loan. 
   
Yield  The rate of return on an investment. For example, if one invests $100 and receives $15 after the first year, one's yield is 15% on the invested cash for the first year.