Modern Real Estate Practice – Essential Vocabulary

Vocabulary flashcards covering key real estate terms from Modern Real Estate Practice, 21st Edition. These cards aid exam preparation by defining critical concepts, laws, financing, ownership, valuation, contracts, and environmental issues.

Abstract of Title

Condensed history of recorded ownership, conveyances, and encumbrances for a parcel, certified complete and accurate.

Acceleration Clause

Mortgage clause allowing lender to demand entire loan balance immediately if borrower defaults.

Accession

Acquiring title to additions or improvements to real property due to annexation of fixtures or accretion.

Accretion

Natural increase of land from deposits of soil by water action (river, lake, sea).

Accrued Depreciation

Total loss in property value from physical deterioration, functional obsolescence, and external factors.

Ad Valorem Tax

Real estate tax levied according to assessed value; also called a general tax.

Addendum

Supplement added to a contract without altering original terms; must be signed by all parties.

Adjustable-Rate Mortgage (ARM)

Loan with interest rate that fluctuates based on a stated index.

Agency

Fiduciary relationship in which a principal authorizes an agent to act on their behalf in transactions.

Air Rights

Right to use and control space above a property, often for development purposes.

Alienation Clause

Mortgage clause requiring full loan payoff if property is sold; prevents transfer without lender approval.

Amortized Loan

Loan repaid in equal periodic installments of principal and interest over its term.

Antitrust Laws

Laws prohibiting price-fixing and market allocation to promote free competition in real estate.

Appraisal

Professional opinion or estimate of a property’s market value based on established methods.

Appurtenance

Right or privilege that runs with the land, such as easements or water rights.

Avulsion

Sudden loss of land by natural forces like flood or earthquake.

Balloon Payment

Final loan payment larger than previous installments when loan is only partially amortized.

Benchmark

Permanent reference mark used by surveyors to measure elevation.

Bilateral Contract

Agreement obligating both parties to perform (e.g., purchase and sale contract).

Blockbusting

Illegal act of inducing owners to sell by suggesting demographic changes will lower values.

Buffer Zone

Strip of land (often a park) separating areas of incompatible use, like residential from commercial.

Building Code

Ordinance setting minimum construction standards to ensure safety and health.

Bundle of Legal Rights

Ownership concept including rights of possession, control, enjoyment, exclusion, and disposition.

Capitalization Rate

Rate of return used in the income approach to convert NOI into value.

Chain of Title

Unbroken record of ownership transfers for a property.

Closing Disclosure

CFPB form listing all settlement charges for borrower and seller; replaces HUD-1 for most loans.

Cloud on Title

Any claim or encumbrance that may impair or cast doubt on ownership.

Commingling

Illegal mixing of client funds with personal or business accounts.

Common Elements

Shared parts of a condominium (hallways, pool) owned undivided by unit owners.

Community Property

Ownership system where spouses share equal interests in property acquired during marriage.

Comparative Market Analysis (CMA)

Price comparison of similar recently sold homes to aid in setting a listing price.

Comprehensive Plan

Long-term governmental guide for physical development of an area; a master plan.

Condominium

Absolute ownership of an individual unit plus undivided interest in common elements.

Constructive Notice

Legal presumption of knowledgeachieved by proper recording or possession of property.

Contingency

Contract condition that must be met for agreement to be binding (e.g., financing approval).

Counteroffer

New offer replacing and rejecting a previous offer.

Covenant of Quiet Enjoyment

Landlord warrant guaranteeing tenant’s possession free from owner interference.

Curtesy

Life estate interest some states grant to surviving husband in wife’s real property.

Datum

Horizontal plane from which elevations are measured.

Deed

Written instrument that conveys title or interest in real estate when executed and delivered.

Deed Restriction

Limitation in a deed controlling future use of property.

Defeasible Fee Estate

Fee simple estate that may be lost upon occurrence or non-occurrence of a specified event.

Depreciation (Appraisal)

Loss in value from any cause, including wear, functional issues, or external factors.

Dominant Tenement

Parcel that benefits from an easement over another property (servient tenement).

Easement

Non-possessory right to use another’s land for a specific purpose.

Easement by Prescription

Right acquired through continuous, open, hostile use for statutory period.

Eminent Domain

Government power to take private property for public use with just compensation.

Encroachment

Illegal extension of a structure onto another’s land.

Equitable Title

Buyer’s right to future legal title upon fulfillment of contract terms (e.g., land contract).

Escrow Account

Trust account for holding others’ funds until conditions are met or transaction closes.

Exclusive Right-to-Sell Listing

Listing granting one broker full commission regardless of who sells the property.

External Obsolescence

Loss in value from external factors (e.g., nearby factory); usually incurable.

Fair Housing Act

Federal law prohibiting housing discrimination based on race, color, religion, sex, national origin, disability, or familial status.

Fee Simple Absolute

Highest form of ownership with unlimited duration and inheritable rights.

FHA-Insured Loan

Mortgage insured by Federal Housing Administration; lenders protected against default.

Fiduciary

Person in position of trust (agent) owing loyalty, care, obedience, disclosure, accounting, confidentiality.

Foreclosure

Legal process to sell property pledged as security to satisfy unpaid debt.

General Lien

Lien against all property of a debtor (e.g., judgment lien, IRS tax lien).

General Warranty Deed

Deed with greatest protection; grantor guarantees clear title through all time.

Ginnie Mae

Government agency that guarantees mortgage-backed securities using FHA/VA loans.

Graduated-Payment Mortgage

Loan with initial lower payments that increase at preset intervals before leveling.

Granting Clause

Deed wording stating grantor’s intent to convey (e.g., “convey and warrant”).

Gross Lease

Landlord pays all property operating expenses; tenant pays fixed rent.

Gross Rent Multiplier (GRM)

Ratio of sales price to gross monthly rent for estimating residential value.

Habendum Clause

Deed clause “to have and to hold,” defining extent of ownership.

Highest and Best Use

Most profitable legal use of a property producing maximum value.

Holdover Tenancy

Tenant remains after lease expiration and landlord accepts rent; creates periodic tenancy.

Hypothecation

Pledging property as loan collateral while retaining possession.

Implied Agency

Agency created by actions, not written agreement, indicating mutual consent.

Improvement

Any addition to land (structure or infrastructure) that increases value or utility.

Incurable Depreciation

Loss in value that cannot be economically corrected (often external factors).

Index (ARM)

Benchmark interest rate to which an adjustable mortgage rate is tied.

Ingress and Egress

Rights of entry and exit over another’s land; essential for landlocked parcels.

Joint Tenancy

Co-ownership with right of survivorship and four unities (PITT).

Judgment

Court’s final decision creating a general lien on debtor’s property when recorded.

Latent Defect

Hidden property defect not discoverable by ordinary inspection.

Lead-Based Paint Disclosure

Federal requirement to inform buyers/tenants of pre-1978 housing risks.

Lease Option

Lease giving tenant right (not obligation) to purchase property within set period.

Leasehold Estate

Tenant’s possessory interest for finite period under a lease.

Lien

Charge against property to secure a debt or obligation.

Lis Pendens

Recorded notice of pending legal action affecting real estate title.

Lot-and-Block System

Legal description referencing lot and block numbers in a recorded plat.

Market Value

Most probable price a property should bring in open, competitive market.

Mechanic’s Lien

Statutory lien for unpaid labor or materials improving real property.

Metes-and-Bounds

Legal description using distances, directions, and monuments to outline property.

Mill

One-tenth of one cent; used in tax rates (e.g., 30 mills = $0.03 per $1 value).

Mortgage

Document pledging property as security for a loan; creates lien in lien theory states.

Mortgagee

Lender receiving mortgage pledge.

Mortgagor

Borrower who gives mortgage to lender.

Mortgage Insurance Premium (MIP)

FHA insurance fee paid by borrower to protect lender.

Net Lease

Tenant pays rent plus some or all property expenses (taxes, insurance, maintenance).

Net Listing

Listing where broker’s commission is any sale price above seller’s net amount; illegal in many states.

NOI (Net Operating Income)

Income after operating expenses but before debt service and depreciation.

Nonconforming Use

Existing property use that doesn’t meet new zoning but is grandfathered.

Notarization

Certification by authorized officer (notary) verifying signature authenticity.

Novation

Substitution of new contract or parties, releasing original obligor.

Obsolescence

Loss of value from outdated design (functional) or external factors.

Option

Right to purchase or lease property at set terms within specified time.

Partition

Court-ordered division or sale of co-owned property when owners can’t agree.

Percentage Lease

Commercial lease charging base rent plus percentage of tenant’s gross sales.