Real Estate Glossary Practice Flashcards

Vocabulary practice flashcards covering essential real estate concepts, legal terms, and financial definitions from the glossary.

abandonment

The voluntary surrender or relinquishment of possession of real property with the intention of terminating one’s possession or interest but without the vesting of this interest in any other person.

acceleration clause

The clause in a mortgage or trust deed or note that can be enforced to make the entire amount of principal and interest due immediately if the mortgagor defaults on an installment payment or other covenant.

accretion

The increase or addition of land by the deposit of sand or soil washed up naturally from a river, lake, or sea.

actual eviction

The result of legal action, originated by a lessor, whereby a defaulted tenant is physically ousted from the rented property pursuant to a court order.

adjusted basis

The investor’s initial cost for the real estate (basis) plus the cost of physical improvements and minus depreciation claimed as a tax deduction.

ad valorem tax

A tax levied according to value; generally used to refer to real estate tax.

adverse possession

The actual, visible, hostile, notorious, exclusive, and continuous possession of another’s land under a claim of title. Possession for a statutory period may be a means of acquiring title.

agency

The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.

alienation clause

The clause in a mortgage or deed of trust stating that the balance of the secured debt becomes immediately due and payable at the mortgagee’s option if the property is sold by the mortgagor; also called a due-on-sale clause.

allodial system

A system of land ownership in which land is held free and clear of any rent or service due to the government; land in the United States is held under this system.

amortized loan

A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.

appraisal

An estimate of the quantity, quality, or value of something; the process through which conclusions of property value are obtained.

appurtenances

Those rights, privileges, and improvements that belong to and pass with the transfer of real property but are not necessarily a part of the property, such as easements and water rights.

assemblage

The combining of two or more adjoining lots into one larger tract to increase the total value.

assumption of mortgage

Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage.

avulsion

The sudden tearing away of land, as by earthquake, flood, volcanic action, or a sudden change in the course of a stream.

balloon payment

A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.

bilateral contract

A contract where both parties to the contract are legally bound to act as promised.

blanket mortgage

A mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien on repayment of a definite portion of the debt.

blockbusting

The illegal practice of inducing homeowners to sell their properties by making representations regarding the entry or prospective entry of minority persons into the neighborhood.

boot

Money or property given to make up any difference in value or equity between two properties in an exchange.

buffer zone

Zoning districts that gradually change from a higher-intensity use to a lower-intensity use.

bundle of legal rights

The concept of land ownership that means ownership of all legal rights to the land (such as possession and control) rather than ownership of the land itself.

buydown mortgage

A mortgage on which a cash payment, usually measured in points, has been made to the lender to reduce the interest rate a borrower must pay usually for the first two or three years.

capitalization

A mathematical process for estimating the value of an income-producing property by dividing the annual net operating income by the capitalization rate.

caveat emptor

A Latin phrase meaning 'let the buyer beware.'

chain of title

The succession of conveyances from some accepted starting point, whereby the present holder of real property derives title.

channeling

The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status; also known as steering.

cloud on the title

Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful.

commingle

The illegal act of a real estate broker who mixes the money of other people with his own money instead of maintaining a separate trust account.

community property

A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage.

comparative market analysis (CMA)

A comparison of the prices of recently sold homes similar to the subject home to assist a seller in determining a listing price.

condemnation

A judicial or an administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use.

condominium

The absolute ownership of an apartment or a unit based on a legal description of the airspace plus an undivided interest in the ownership of common elements.

constructive eviction

Actions of the landlord that so materially disturb or impair the tenant’s enjoyment that the tenant is effectively forced to move out and terminate the lease without liability.

constructive notice

Notice given to the world by recorded documents.

contract for deed

A contract for the sale of real estate wherein the purchase price is paid in periodic installments and title is retained by the seller until final payment; also called an installment contract.

cost approach to value

An estimate of value based on current construction costs, less depreciation, plus land value.

deed

A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

deed of trust

An instrument used to create a mortgage lien by which the borrower conveys title to a trustee who holds it as security for the benefit of the lender.

deficiency judgment

A personal judgment levied against the mortgagor when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.

discount points

An added loan fee charged by a lender to make the yield on a lower-than-market-value loan competitive with higher-interest-rate loans.

dominant tenement

A property that includes in its ownership the appurtenant right to use an easement over another person’s property for a specific purpose.

duress

Unlawful constraint or action exercised on a person whereby the person is forced to perform an act against her will; renders a contract voidable.

earnest money deposit

An amount of money deposited by a prospective buyer as evidence of good faith to be forfeited if the buyer defaults.

easement

A right to use the land of another for a specific purpose, such as for a right-of-way or utilities.

easement by prescription

An easement acquired by continuous, open, uninterrupted, exclusive, and adverse use of the property for $10\,\text{years}$.

emblements

Growing crops, such as grapes and corn, that are produced annually through labor and industry; deemed to be personal property.

eminent domain

The right of a government or public entity to acquire property for public use.

encroachment

A building or some portion of it (such as a wall or fence) that extends beyond the land of the owner and illegally intrudes on land of an adjoining owner.

encumbrance

Any lien, easement, or restriction on the use of the land that may diminish the value of a property.

equitable right of redemption

The right to redeem a property before a foreclosure sale by paying the full debt plus interest and accrued charges.

equitable title

The interest held by a vendee under a contract for deed; the right to obtain absolute ownership when legal title is held in another's name.

equity

The current market value of a property minus any loans.

escheat

The reversion of property to the state in the event the property is abandoned or the owner dies without a will and has no heirs.

escrow

The closing of a transaction through a third party who receives funds and documents to be delivered on the performance of certain conditions.

exclusive agency

A listing contract under which the owner appoints one broker as exclusive agent but reserves the right to sell without paying commission if the owner finds the prospect.

exclusive right to sell

A listing contract under which the owner agrees to pay the broker a commission regardless of who sells the property during the designated period.

executed contract

A contract in which all parties have fulfilled their promises; it is considered executed upon closing and funding.

executory contract

A contract under which something remains to be done by one or more of the parties.

external obsolescence

Reduction in property’s value caused by factors outside the subject property, such as social or environmental forces.

fee simple estate

The maximum possible estate or right of ownership of real property, continuing forever.

fiduciary relationship

A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

fixture

An item of personal property that has been converted to real property by being permanently affixed to the realty.

foreclosure

A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default.

general warranty deed

A deed in which the grantor fully warrants good clear title; it offers the greatest protection of any deed.

gross lease

A lease of property under which a landlord pays all property charges regularly incurred through ownership, such as repairs, taxes, and insurance.

ground lease

A lease of land only, on which the tenant usually owns a building or is required to build his own building.

highest and best use

That possible use of land that would produce the greatest return and thereby develop the highest land value.

holographic will

A will that is written, dated, and signed in the testator’s handwriting but is not witnessed.

homestead

Land that is owned and occupied as the family home; in Texas, it is protected from forced sale by creditors for most debts.

hypothecation

The pledge of specific real or personal property as security for an obligation without surrendering possession of it.

interest-only loan

A loan in which interest is paid periodically but no principal is paid until the due date on the note; also called a term loan.

intermediary broker

A broker employed to negotiate a transaction between both parties who acts fairly so as not to favor one party over the other.

intestate

The condition of a property owner who dies without leaving a valid will.

involuntary alienation

The act of transferring property to another without the owner's consent, such as through eminent domain or adverse possession.

joint tenancy

Ownership of real estate between two or more parties where, upon the death of one, the interest passes to the surviving joint tenant(s) by the right of survivorship.

laches

An equitable doctrine used by courts to bar a legal claim or prevent the assertion of a right because of undue delay or failure to assert the claim.

latent defect

A hidden structural defect presumably resulting from faulty construction, known to the seller but not to the purchaser and not readily discoverable by inspection.

league

In Texas, a tract of land granted by the Mexican government consisting of $6.919\,\text{square miles}$.

leasehold estate

A tenant's right to occupy real estate during the term of a lease; generally considered a personal property interest.

leverage

The use of borrowed money to finance the bulk of an investment and to magnify the rate of return.

lien

A right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usually by means of a court sale.

lien theory

Interpretation of a mortgage as being purely a lien on real property, where the mortgagee must foreclose to sell the property if the mortgagor defaults.

life estate

An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person.

liquidated damages

An amount predetermined by the parties as total compensation an injured party should receive if the other party breaches the contract.

lis pendens

A recorded legal document giving constructive notice that an action affecting a particular property has been filed in court.

littoral rights

A landowner’s claim to use water in large navigable lakes and oceans adjacent to the property up to the mean vegetation line.

lot-and-block description

A description of real property identifying a parcel by reference to lot and block numbers within a subdivision on a recorded plat.

market value

The highest price a ready, willing, and able buyer would pay and the lowest price a ready, willing, and able seller would accept.

mechanic’s lien

A statutory lien created in favor of contractors, laborers, or materialmen who have performed work or furnished materials for the repair or erection of a building.

metes-and-bounds description

A legal description of land that begins at a well-marked point and follows boundaries using directions and distances back to the place of beginning.

misrepresentation

An unintentional misstatement of a fact; incorrect or misleading representation.

monetary policy

Governmental regulation of the amount of money in circulation through institutions like the Federal Reserve Board.

net lease

A lease requiring the tenant to pay not only rent but also all costs incurred in maintaining the property, including taxes, insurance, and repairs.

novation

Substituting a new obligation for an old one or substituting new parties to an existing obligation.

option

The right to purchase property within a definite time at a specified price; the seller is obligated to sell if the holder exercises the right.

partition

The division of cotenants’ interests in real property when the parties do not agree to terminate co-ownership voluntarily.

percentage lease

A lease commonly used for retail property where rental is based on the tenant's gross sales at the premises.

personalty

Items of personal property; chattels.