Dictionary / Glossary / Directory
of Real Estate Terminology
Definitions & Commonly Used
Real Estate Terms
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this dictionary directory glossary of real estate terminology, definitions and commonly used terms.
Real Estate Terminology Definitions & Commonly Used Terms
In Alphabetical Order
Without access. Property is landlocked when it has no legal right of access to a public way. The law in most states disfavors transactions that landlock parcels. Cities and counties, where applicable, will not permit
lot splits or transactions that result in landlocked parcels.
An interest in real estate created by a contract called a lease. The leasehold owner is entitled to possession and the landowner is entitled to rent. The parties may choose to allocate the costs of ownership and
occupancy (such as property taxes and utilities) between themselves. There are four types of leaseholds. A tenancy for years is a leasehold that automatically terminates at the end of a specified period of time. A
periodic tenancy is a leasehold that endures from period to period, with an indefinite termination date. Each period the leasehold is automatically renewed for another period, unless it is terminated by the landlord or
tenant. Many apartment owners use a month-to-month tenancy, that is, a periodic tenancy. The tenancy at will has no specific termination date and simply endures until ended by the landlord or tenant. Finally, a
tenancy at sufferance exits when a tenant wrongfully refuses to vacate at the end of the leasehold. This tenancy is not really a leasehold, rather it is a status.
Lease with an Option to Buy:
A lease agreement that gives the tenant the right to purchase the property at a stated price upon stated terms. A portion of the rent may count as part of the down payment, or price, in the event the option is
exercised. The lease-option is a favorite method to purchase real estate because it does not require an initial down payment. The advantages to sellers include a top-dollar sales price, that the option money isn't taxed
until the option is exercised, that the rent is usually above market, and that the tenant/buyer usually takes good care of the property because he intends to own it. The advantages to the buyer/tenant include low up-front
cash requirement, a potential profit should the property increase in value during the option term, that all or part of the rent applies to the purchase price, and that there is no need to qualify for an institutional loan.
A form of encumbrance that usually makes property the security for the payment of a debt or the discharge of an obligation. Examples of involuntary liens are a judgment lien, and a tax lien. A mortgage is a
voluntary lien. Like other encumbrances, liens must be recorded to preserve their priorities.
A document executed by a lien holder (the creditor) that lifts a lien from the real property. A contractor may ask for a lien release from a subcontractor before payment to make certain that no mechanic’s lien problem
can arise thereafter. A judgment debtor who pays off a judgment creditor will obtain a lien release that, when recorded, releases the lien from his property.
A guarantee by a bank of a sum of money payable to a beneficary on behalf of the bank’s customer (called the “applicant” or “account party”).
A written expression of the intent to make a real estate acquisition or to take some future action. A letter of intent is a preliminary step to allow a prospective buyer additional time to evaluate a possible acquisition
without drafting a detailed offer to purchase. Standing alone, it typically is not a legally enforceable contract, although it can blossom into enforceability depending upon the circumstances that follow its issuance. The
signature of the seller is typically required and some degree of commitment is thereby made, at least to the extent that the property must be held available.
The use of borrowed money to purchase investment or other property, with a goal of increase in market value and profit. The ratio between the amount of financing and the amount of equity in real estate. A ninety
percent leverage means the owner has a ten percent equity position. If the property increases in value by ten percent, the equity owner has doubled his position which is a one hundred percent return. Or, if the real
estate decreases in value by ten percent, the equity has been wiped out through reverse leverage.
An ownership estate in real property characterized by the full use and possession of the property for one’s life; upon death the life estate is automatically terminated and the remainderman is instantly vested with
fee simple title. The most important characteristics are:
The owner of a life estate is called a life tenant.
- that life tenants cannot cut off the future interests of their remainderman, as through conveyance or by Will, and
- there are no state or federal death
taxes on the value of a life estate upon the life tenant’s death.
Limited Liability Company ( LLC ):
An unincorporated entity that combines the partnership benefits of flow-through taxation and management flexibility with the corporate benefit of limited liability. LCCs enjoy a single level of tax instead of the
two-level corporate system. They are not required to follow any corporate formalities (e.g., directors’ meetings) in operations.
Limited Liability Partnership ( LLP ):
A variation of the general partnership in which if the firm (of lawyers, for example) is sued by a client for malpractice, only the lawyer(s) actually guilty of the charges will be held liable.
A recorded document that gives legal notice to the world of the filing of a legal action affecting specified real property. A lis pendens may be recorded only when the underlying lawsuit claims title to or possession of
the property. Once recorded, it becomes a cloud on title. Its purpose is to prevent a defendant from conveying away property that otherwise could be obtained by the plaintiff in the lawsuit. A bona fide lis pendens may
be expunged by court order on the posting of an adequate bond. Or, an improper lis pendens may be expunged by the court without bond following a preliminary court proceeding. The buyer of property subject to a lis
pendens would effectively be "buying a lawsuit."
The act by a prospective seller of hiring a real estate broker to market real property to prospective buyers. The document which establishes the employment relationship is called a Listing Agreement, which sets
forth the listing (asking) price, commission, term of listing, etc.
An agent who obtains a listing, that is, a contract to solicit a buyer on behalf of his principal, the seller. An agent must be licensed by the state to solicit listings or buyers, or to engage in any other aspects of
negotiating the sale or purchase of real estate. Some agents specialize in obtaining listings, other agents specialize in the selling function.
An employment contract between an owner of real estate and a licensed real estate broker. Under such an agreement, the licensee is an agent, the landowner is the principal, and the purpose is to consummate a
sale. The agent is authorized to market the property to prospective buyers, to accept earnest money deposits, and the principal is obligated to pay compensation, called a commission, to the agent if a ready, willing and
able buyer is found at the price and terms set forth in the listing, or any other price and terms acceptable to the seller. The term listing is somewhat of a euphemism because a listing agreement carries with it serious
potential dangers for a homeowner. There are three basic varieties of listings: the open listing, the exclusive listing, and the exclusive-agency listing. All listings include such details as its duration of the employment,
the compensation (commission) to be paid, authorization for multiple listing, and whether it is an open exclusive, or exclusive-agency listing, etc.
A parcel of land which has been created by sub-dividing a larger parcel or tract of land. A "Lot" may be commercial, residential or recreational in nature, and vary in size, depending on local, county & state
Real Estate Terminology Definitions & Commonly Used Terms
In Alphabetical Order
While great care has been undertaken to provide accurate explanations and definitions for real estate terms and words in our real estate terms dictionary glossary dirctory, no real estate vocabulary dictionary cannot
be completely accurate in all jurisdictions. Any / all definitions are for general purposes only and should not be used for any legal purpose. By use of this dictionary glossary directory of real estate terms, you agree to
hold United Country - Guardian Real Estate harmless for any responsibility for any liability, loss or risk that may be claimed or incurred as a consequence of using this information.