Michigan Real Estate Principles and Practices – Key Vocabulary

Vocabulary flashcards summarizing essential real estate terms from the Michigan Real Estate Principles and Practices glossary, designed for exam review.

Abstract of Title

Chronological summary of all recorded documents affecting a parcel’s ownership

Acceleration Clause

Loan clause allowing lender to demand full balance if borrower defaults

Acceptance

Offeree’s agreement that creates a binding contract

Accretion

Gradual addition of land by natural deposits

Acknowledgment

Signer’s sworn declaration before a notary that signature is voluntary

Acre

Land area equal to 43,560 square feet

Actual Eviction

Legal process that physically removes a tenant from property

Ad Valorem Tax

Tax levied according to property value

Adjustable-Rate Mortgage (ARM)

Loan with interest rate that can vary based on an index

Administrator

Court-appointed person who settles an estate with no named executor

Agency

Fiduciary relationship where agent represents principal in dealings with third parties

Agent

Licensed broker authorized to act for a principal

Air Rights

Right to use and control airspace above land

Alienation Clause

Mortgage clause demanding full payoff when property is transferred

Allodial System

System that allows private ownership of land

Amenity

Feature that adds desirability or value to real estate

Amortization

Gradual loan repayment through periodic principal and interest payments

Anticipation

Valuation principle: value created by expectation of future benefits

Appraisal

Professional opinion of property value as of a specific date

Appurtenance

Right or privilege that runs with ownership of land

Assessed Value

Value placed on property for tax purposes

Assignment

Transfer of tenant’s or other interest to another for remainder of term

Avulsion

Sudden loss of land by natural force, e.g., flash flood

Balloon Payment

Final lump-sum payment at end of loan term

Bankruptcy

Court process that relieves or reorganizes debt

Bilateral Contract

Contract where both parties make enforceable promises

Bill of Sale

Document transferring title to personal property

Blanket Mortgage

Single loan covering more than one parcel, e.g., subdivision lots

Blockbusting

Illegal inducement to sell by predicting entry of protected classes

Breach

Failure to perform contractual duty

Broker

Person or entity licensed to represent others for compensation in real estate transactions

Bundle of Rights

Ownership rights: possession, control, enjoyment, exclusion, disposition

Buyer Agency Agreement

Employment contract authorizing broker to represent a buyer

CC&Rs

Covenants, conditions & restrictions governing subdivision use

Closing Disclosure

Final itemized statement of debits and credits in a RESPA transaction

Cloud on Title

Claim or defect that may impair marketable title

Commission

Broker’s compensation, usually percentage of sales price

Comparative Market Analysis (CMA)

Estimate of value using recent comparable sales

Commingling

Illegally mixing client funds with broker’s personal or business funds

Condominium

Ownership of individual unit plus undivided interest in common areas

Conveyance

Transfer of interest in real property

Cooperative

Building owned by corporation where residents own shares and get proprietary leases

Cost Approach

Valuation method: land value + reproduction/replacement cost − depreciation

Counteroffer

New offer that rejects and replaces an earlier offer

Covenant of Quiet Enjoyment

Guarantee of undisturbed legal possession

Deed

Written instrument that transfers title to real property

Deed in Lieu of Foreclosure

Borrower deeds property to lender to avoid foreclosure

Defeasible Fee

Freehold estate with condition that can terminate ownership

Depreciation

Loss in property value from any cause; also tax deduction

Disclosure

Agent’s duty to reveal material facts to relevant parties

Down Payment

Portion of price paid in cash by buyer; balance financed

Dual Agency

Representation of both buyer and seller in same transaction with consent

Easement

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

Easement Appurtenant

Easement benefiting adjacent parcel; runs with land

Eminent Domain

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

Encroachment

Physical intrusion onto another’s property

Encumbrance

Claim or liability that limits title, e.g., lien, easement

Exclusive Right to Sell Listing

Listing giving broker commission no matter who sells property

Fair Housing Act

Federal law prohibiting housing discrimination on protected classes

Fee Simple Absolute

Highest, most complete form of ownership; transferable and inheritable

FHA-Insured Mortgage

Loan insured by Federal Housing Administration; protects lender from loss

Fiduciary

Person in position of trust owing loyalty, care, and other duties

Fixture

Personal property attached to land, becoming part of real property

Foreclosure

Legal process by which lender forces sale to satisfy debt

Freehold Estate

Ownership interest of uncertain duration, e.g., fee simple or life estate

Functional Obsolescence

Loss in value due to outdated design or features

General Warranty Deed

Deed with full covenants defending against all title defects

Gross Lease

Tenant pays fixed rent; landlord pays operating expenses

Habendum Clause

“To have and to hold” clause defining type of estate granted

Highest and Best Use

Most profitable legal and feasible use of property

Hypothecation

Pledging property as security without giving up possession

Implied Agency

Agency created by actions rather than written or oral agreement

Improvements

Man-made additions to land, such as buildings or roads

Joint Tenancy

Co-ownership with equal shares and right of survivorship

Judgment Lien

Lien arising from court decree against debtor

Land Contract

Installment sale where seller holds title until price is paid

Leasehold Estate

Tenant’s right to possess property for a limited time

Legal Description

Precise method to identify parcel, e.g., metes and bounds

Lien

Legal claim against property for debt security

Loan-to-Value Ratio (LTV)

Loan amount divided by property value or price

Market Value

Most probable price a willing, informed buyer and seller would agree upon

Mechanic’s Lien

Specific lien by contractors or suppliers for unpaid work

Metes and Bounds

Description using distances and directions from a point of beginning

Mortgage

Security instrument creating voluntary lien to secure repayment

Net Lease

Tenant pays rent plus some or all property expenses

Nonconforming Use

Pre-existing use that no longer complies with current zoning but is allowed to continue

Principal (Client)

Person who authorizes agent to represent interests

Promissory Note

Borrower’s written promise to repay loan; evidence of debt

Proration

Dividing expenses or income between parties based on time of ownership

Puffing

Non-factual exaggeration of property qualities

Quitclaim Deed

Deed conveying whatever interest grantor has without warranties

Radon

Odorless radioactive gas that can accumulate indoors and pose health risk

Real Property

Land, attachments, and bundle of ownership rights

Redlining

Illegal refusal to lend in certain areas based on demographics

Regression

Value of superior property decreases when near inferior properties

Regulation Z

Implements Truth in Lending Act; mandates disclosure of credit costs

Restrictive Covenant

Private limitation on property use, stated in deed or HOA docs

Right of Survivorship

Automatic transfer of co-owner’s share to surviving owners

Riparian Rights

Water rights of land bordering a river or stream

Sales Comparison Approach

Valuation method comparing recent sales of similar properties