Glossary 

At IMH, we strongly encourage the ongoing education of our clients. Below you will find an abridged glossary of real estate terms that may help you gain a better understanding of our business. If you ever have any questions, please feel free to call us at (602) 889-3410 and any one of our associates would be glad to speak with you.

Assessed Value

A value placed upon property by the tax assessor.

Beneficiary

(1) One entitled to the benefit of a trust; (2) One who receives profit from an estate, the title of which is vested in a trustee; (3) The lender on the security of a note and deed of trust.

Blanket Encumbrance

A single mortgage or trust deed which covers more than one piece of real estate.

Capitalization Rate

The rate of interest which is considered a reasonable return on the investment. It is used in the process of determining value based upon net income.

Compound Interest

Interest paid on the original principal and on interest accrued from time it became due

Conventional Loan

A loan that's neither guaranteed nor insured by Federal Housing Administration (FHA) or Veterans' Administration (VA).

Conveyance

The transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.

Convenants

Agreements written into deeds and other instruments promising performance or non-performance of certain acts or stipulating certain uses or non-uses of the property.

Deed

A written instrument which, when properly executed and delivered, conveys title to real property.

Deed in Lieu of Foreclosure

A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Default

Failure to fulfill a duty or promise or to discharge an obligation, or to perform any act in an instrument in writing, that has been agreed upon.

Deficiency Judgment

A judgment given when the security pledged for a loan does not satisfy the debt upon its default.

Depreciation

Loss of value in real property brought about by age, physical deterioration or functional or economic obsolescence.

Discount Fee

Sometimes referred to as "points," a fee charged by the lender in order to obtain a higher earning than the interest stated in the mortgage note.

Documentary Transfer Tax

A state enabling act allows cities and counties to adopt a documentary transfer tax to apply on all transfers of real property located within their jurisdictions.

Easement

Created by grant or agreement for a specific purpose, an easement is the right privilege or interest which one party has in the land of another. (Example: right of way.)

Economic Life

The period over which a property will yield a return on the investment, over and above the economic or ground rent due the land.

Encumbrance

Anything which affects or limits the fee simple title to property, such as mortgages, trust deeds, easements or restrictions of any kind which do not prevent alienation of the fee title by the owner. Liens are special encumbrances which make the property security for the debt.

Equity

The interest or value which an owner has in real estate over and above the liens against it.

Escrow

The deposit of instruments and funds with instructions to a third party to carry out the provisions of an agreement or contract; when everything is deposited to enable carrying out the instructions, it is called a complete or perfect escrow.

Estate

The degree, quantity, nature and extent of interest which a person owns in real property.

Exchange

A means of trading equities in two or more real properties, treated as a single transaction through a single escrow or as a deferred exchange through two or more escrows.

Executed Contract

A contract that is fully performed.

Execution of Contract

To sign a contract.

Executory Contract

A contract not yet fully performed.

Executor

A person named in a will to carry out its provisions as to the disposition of the estate of a deceased person.

Executor's Deed

A legal deed to real property given by an executor of an estate.

Fee Simple

The terms "fee" and "fee simple" are substantially synonymous. The term "fee" is of old English derivation. "Fee simple absolute" is an estate in real property by which the owner has the greatest power over the title which it is possible to have, being an absolute estate. In modern use, it expressly established the title of real property in the owner, without limitation or end. They may dispose of it by sale, or trade or will, as he chooses.

FHA Loan

A loan that is underwritten to the standards of the Federal Housing Administration, which grants approval of the loan and insures the lender against financial loss.

Fiduciary

A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under rules of agency.

Fixtures

Appurtenances affixed to buildings or land, usually in such a way that they cannot be moved without damage to themselves or the property; plumbing, electrical fixtures, fences, trees, shrubbery, etc. Fixtures are real property.

FNMA (Fannie Mae)

A private corporation dealing in the purchase of first or second mortgages, at discounts.

Foreclosure

Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

Forfeiture

Loss of money or anything of value due to failure to perform, such as a deposit given to insure performance.

Fraud

The intentional and successful employment of cunning, deception, collusion; or artifice used to cheat or deceive another person whereby that person acts upon it to the loss of his property and to his legal injury.

Graduated Lease

A type of long-term lease agreement which provides for a fixed rental fee during the initial period of the lease with increases and/or decreases in rental amount at stated times during the balance of the contract term.

Grant Deed

A technical legal term in a deed of conveyance bestowing an interest in real property on another. The words "convey" and "transfer" have the same effect.

Grantee

The purchaser; the person to whom a grant is made.

Grantor

Seller of property; one who signs a deed.

Gross Income

Total income from property before any expenses are deducted.

Guarantee of Title

The opinion of a title company backed by its assets as to the true condition of the title to a certain piece of land at a particular time, as shown by the public records in the recording office.

Homestead

A home upon which the owner or owners have recorded a Declaration of Homestead, as provided by California statutes; protects home against judgments up to specified amounts.

Hypothecate

To give a thing as security without the necessity of giving up possession of it. To mortgage real property.

Income Property

Property which produces income from residential or commercial rentals and profits attributable to real estate other than rent.

Injunction

A writ or order issued under the seal of a court to restrain one or more parties to a suit or proceeding from doing an act which is deemed to be inequitable or unjust in regard to the rights of some other party or parties to the suit.

Installment Note

A note which provides that payments of a certain sum or amount be paid on the dates specified in the instrument.

Instrument

A legal document in writing to create, alter, modify or terminate a right.

Interest Rate

The percentage of a sum of money charged for its use.

Involuntary Conveyance

Sheriff's deed; tax deed; an instrument against the will of the owner.

Involuntary Lien

A lien imposed against property without consent of owner. Examples: taxes, assessments, federal income tax liens, judgments, etc.

Joint Tenancy

Joint ownership by two or more persons with right of survivorship.

Judgment

Final decision, determination, decree or sentence of a court of law.

Land Contract

An agreement for the purchase or sale of real property. (See agreement of sale, conditional sales contract.)

Lease

A contract between the owner of real property, called the lessor, and another person, called the lessee, covering conditions under which the lessee may occupy and use the property.

Legal Description

A written description by which property can be located definitely by reference to government surveys or approved recorded maps.

Leverage

The use of a small amount of cash to control a large amount of property values.

Lien

A charge or encumbrance upon property for the payment or discharge of a debt.

Life Estate

An interest in real property, which is held for the duration of the life of some certain person. It may be limited by the life of the person holding it or by the life of some other person.

Liquidate

Disposal of property or settlement of debts.

Liquidity

The ability of property to be exchanged for cash.

Liquid Value

The estimated amount that a property could be liquidated upon short notice.

Lis Pendens

A notice recorded for the purpose of warning all persons that the title or right of possession of certain real property is in litigation. Gives constructive notice of such litigation.

Loan Costs

The actual expense for services rendered in obtaining a loan. Includes appraisal fees, attorney fees, survey fees,loan commissions. Usually itemized for the benefit of the borrower.

M.A.I.

Designates a person who is a member of the American Institute of Real Estate Appraisers

Marketable Title

Merchantable title; one free and clear of objectionable liens or encumbrances.

Market Price

The price the property brings in a given market.

Market Value

The price a willing buyer would pay and a willing seller would accept, both being fully informed and the property being exposed for sale for a reasonable time period.

Mechanic's Lien

A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.

Moratorium

Temporary suspension, usually by statute, of the enforcement of liability for an obligation.

Mortgage

An instrument by which property is hypothecated to secure the payment of a debt.

Mortgage Broker

One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.

Mortgagor

One who borrows money on his property and gives a mortgage as security.

Net Worth

Value remaining after subtracting the liabilities from the assets of a company or an individual.

Nonconforming Use

A use that was lawfully established and maintained, but no longer conforms to the use regulations of the zone in which it is located because of a subsequent change in a zoning ordinance.

Note

A signed written instrument acknowledging a debt and promising payment.

Notice of Default

A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on the payments).

Notice of Non-Responsibility

A notice provided by law designed to relieve a property owner from responsibility for the cost of improvements ordered by another person

Notice of Rescission

A recorded notice to rescind a notice of default of a mortgage or deed of trust.

Obsolescence

Loss in value due to reduced desirability and usefulness of a structure because it has become old fashioned and not in keeping with modern needs or because of adverse social or economic influences.

Open-End Mortgage

One which provides that the outstanding balance can be increased in order to advance additional loan funds to the borrower, up tothe original sum of the note.

Option

A right given for a consideration to purchase or lease a property upon specified terms within a specified time.

Planned Development

Five or more individually owned lots where one or more other parcels are owned in common or there are reciprocal rights in one or more other parcels. A subdivision.

Plat

A map or plan of a certain parcel of land.

Plat Book

A book showing the lots and legal subdivisions of an area.

Possessory Interest

Right to possess.

Power of Attorney

instrument authorizing a person to act as the agent of the person granting it.

Preliminary Title Report

A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued.

Prepayment Penalty

The percentage a lender may require to be paid in addition to the unpaid principal balance when a loan is paid off ahead of schedule.

Prescription

Obtaining title to property by adverse possession by occupying it for the period determined by law to bar action for recovery.

Prima Facie

Presumptive on its face; true, valid, or sufficient at first impression.

Principal

The employer of an agent.

Promissory Note

The document signed by the borrower promising repayment of the loan showing the amount of monthly payments, interest rate, first payment date, last payment date, and the late charge and prepayment provisions.

Proration of Taxes

To divide or prorate the taxes equally or proportionately to time of use.

Purchase Money Encumbrance

(1) A trust deed or mortgage given by the buyer to the seller as part or all of the purchase price of the property. (2) A trust deed or mortgage given to a third party as security for the borrowing of money used to purchase less than five residential units, one of which is to be occupied by the purchaser.

Quiet Title

A court action brought to establish title; to remove a cloud on title.

Quitclaim Deed

A deed used to remove clouds on title by relinquishing any right, title or interest that the grantor may have.

Ratification

The adoption or approval of an act performed on behalf of a person without previous authorization.

Real Estate Investment Trust (REIT)

A special arrangement under Federal and State law whereby investors may pool funds for investments in real estate and mortgages and yet escape corporation taxes; requires one hundred persons or more.

Reconveyance

The transfer of the title of land from one person to the immediately preceding owner. This instrument is commonly used in California when the performance or debt is satisfied under a deed of trust and the trustee conveys the title he has held back to the owner.

Redemption

The buying back of one's property after it has been lost through foreclosure. Payment of delinquent taxes after sale to the State.

Rescission of Contract

The annulling, revocation or repealing of a contract by mutual consent of the parties to the contrac or for cause by either party to the contract.

Restriction

The term, as used in relation to real property, means that the owner of real property is restricted or prohibited from doing certain things relating to the property or using the property for certain purposes.

Reversion

The right to future possession or enjoyment by the person or his heirs, creating the preceding estate.

Reversionary Interest

A type of interest a person may have in lands or other property upon the termination of the preceding estate.

Right of Survivorship

Right to acquire the interest of a deceased joint owner. Distinguishing characteristic of a Joint Tenancy Deed.

Right-of-Way

A privilege operating as an easement upon land, whereby the owner does, by grant or by agreement, give to another the right to pass over his land.

Sandwich Lease

A leasehold interest which lies between the primary lease and the operating lease. It is created when the lessee enters into a sublease.

Satisfaction

In real estate practice, an instrument to be recorded on the county recorder's books when a mortgage has been paid in full. it is signed by the mortgagee and recites that the debt has been satisfied.

Separate Property

Property owned by a husband or wife which is not community property; property acquired by either prior to marriage or by gift, will or inheritance, and all of the rents, issues and profits thereof.

Sheriff's Deed

Deed given by court order in connection with the sale of property to satisfy a judgment.

Simple Interest

Interest computed on principal alone, as opposed to compound interest.

Situs

Location.

Specific Performance

An action at law to compel the performance of a contract according to its terms.

S.R.E.A.

Designates a person who is a member of the Society of Real Estate Appraisers.

Statute of Frauds

State law which provides that certain contracts must be in writing in order to be enforceable at law.

Statutory Law

Rules formulated into law by legislative action.

Straight Line Depreciation

Definite sum set aside annually from income to pay cost of replacing improvements without reference to interest it earns.

Subject to Mortgage

When a grantee takes title to a real property "subject to mortgage," he is not responsible to the holder of the promissory note for the payment of any portion of the amount due. The most he can lose in the event of a foreclosure is his equity in the property." (See also "Assumption of Mortgage" in this section.) The original maker of the note is not released from his responsibility to pay off the obligation.

Sublease

A lease given by a lessee.

Subordination Clause

Used in a first or senior lien permitting it to be subordinated to a subsequent lien, such as a construction loan. it converts a senior trust deed into a junior trust deed (second, third, etc.).

Subrogation

The substitution of another person in place of the creditor to whose rights he succeeds in relation to the debt. The doctrine is often used when one person agrees to stand surety for the performance of a contract by another person.

Surety

One who guarantees the performance of another. Guarantor.

Taxes

A forced contribution of wealth to meet the public need for government.

Tax Sale

A sale of property, usually at auction, for non-payment of taxes assessed against it.

Tenancy at Sufferance

A tenancy which arises when a tenant holds over after the termination of a lease without consent.

Tenancy at Will

A tenancy for an indefinite period which may be terminated at the will of either the lessee or the lessor.

Tenancy in Common

Ownership by two or more persons who hold undivided interests without right of survivorship.

Tender

An offer of money, usually in satisfaction of a claim or demand.

Time Is Of The Essence

A clause in a contract contemplating performance by the date specified therein.

Title

The rights of ownership.

Title Insurance

Insurance written by a title company to protect the property owner against loss if title is imperfect.

Tort

A wrongful act; wrong; injury; violation of a legal right.

Townhouse

A single family attached dwelling unit with party walls; usually an individual unit in a series of five to ten houses, with common walls between the units and side yards on the end units only; may have one to three stories and all necessary facilities and amenities.

Trust Deed

An instrument which transfers (conveys) the bare legal title of a property to a trustee to be held pending fulfillment of an obligation, usually the repayment of a loan to a beneficiary.

Trustee

One who holds bare legal title to a property in trust for another to secure the performance of an obligation.

Trustee's Sale

A sale at auction by a trustee under a deed of trust, pursuant to foreclosure proceedings.

Trustor

The borrower of money secured by a trust deed. One who transfers his bare legal title to a trustee to be held as security until he has performed his obligation to a lender under terms of a note secured by a deed of trust.

Unearned Increment

An increase in value of real estate due to no effort on the part of the owner.

Unit Cost-in-Place Method

A method for determining cost or cost of reproducing an improvement.

Usury

On a loan, claiming a rate of interest greater than that permitted by law.

Voluntary Lien

Any lien placed on property with the consent of, or as a result of the voluntary act of, the owner.

Warranty Deed

A deed used to convey real property which contains warranties of title and quiet possession and the grantor thus agrees to defend the premises against the lawful claims of third persons. It is used commonly in other states but not in California where it has been supplanted by the grant deed. The modern practice of securing title insurance has reduced the importance of express and implied warranty in deeds.

Wrap-Around Mortgage

(Also called the all-inclusive mortgage or all inclusive trust deed.) The wrap-around mortgage is a purchase money mortgage which is subordinate to, but yet includes the encumbrance or encumbrances to which it is subordinated.