Real Estate Definitions

DEFINITIONS

Before Mike was practicing real estate, he needed to pass the Federal and State pre licensing exams to become a licensed real estate agent in Massachusetts. He also needs to take continuing education classes every 2 years to keep his license up to date. There are strict guidelines in place to protect all buyers and sellers and any other client MVP takes on. Below are many terms and definitions you can look over to become familiar with as they may help in your home search! Feel free to use this and come back to whenever necessary as you are educating yourself about the real estate market.

21E Certificate – certifies that property is free from contamination

203(b) – FHA financing program for anyone purchasing a primary 1-4 family, owner-occupied residence

1031 Exchange – way to defer capital gains tax; property owner must re-invest profits from the sale of an investment property into another investment property within 6 months

1099 – independent contractor status according to the IRS tax classifications

1099-S – tax form used to report real estate sales to the IRS

ABAs – Affiliated Business Arrangements; service providers, such as mortgage brokers and real estate attorneys, package their services together as an offering to their clients

Abandonment – when the tenant leaves the property before the lease expires, without consent

Abatement – a reduction of municipal property taxes; must file taxes before requesting

Abstract of title – a history of property ownership (title), summarizing all instruments in chain of ownership; provided by lender's attorney and paid by borrower

Abutting – neighboring land with a common boundary

Acceleration Clause – a clause in the note protecting the lender by permitting them to demand the loan balance be paid immediately in the event of a default

Acceptance – indication by the offeree (most often by signature) that they are willing to be bound by terms of offer from offeror

Accretion – increase of property by gradual natural additions (usually wind or water)

Accretion line – the water’s edge; often the mean high tide line

Accrued depreciation – difference between cost of replacing property new as of date of appraisal and present value; already occurs when property is purchased

Acknowledgement – an act of executing a legal instrument such as a deed, mortgage or discharge before a lawyer or other officer of state such as a notary public; this act declares signing to be free and voluntary; this is necessary before recording at registry

Acre – 43,560 square feet

Action of law – a way in which a lease can be terminated; includes eminent domain taking, tax sale, etc.

Active income – income generated from active activities, such as a salary; cannot deduct depreciation from this income unless you are a real estate professional

Actual Eviction – legal action originated by lessor whereby lessee in default is physically ousted pursuant to a court order (unlawful detainer)

Actual Notice – specific notice of something (e.g. being served a lawsuit)

Adjacent – nearby or abutting

Adjoining – touching and contiguous

Adjustments – the proration of costs and income (taxes, rents, HOA fees, etc.) between buyer and seller at closing of title (passing of papers)

Administrator/Administratrix – person appointed by court to probate or prove and settle estate of person leaving no will

Ad Valorem – tax assessment based on actual value

Adaptability – one of the tests to determine if something is real or personal property; was it custom built to fit the space or can it fit anywhere

Adverse possession – the right to acquire legal title to privately owned property if held openly, notoriously, adversely and without permission for 20 years; also known as squatter's rights

Aeolian soil – soil deposited by wind, such as sand dunes or silt

Affidavit – a sworn written statement

Affirmation – a solemn declaration

Agency – a contract by which someone represents another in a transaction or area of business

Agency for Toxic Substances and Disease Registry – created by CERCLA as part of their environmental protection programs

Agent – an individual, corporation, or other person, acting on behalf of another person with permission and legally binding authority

Agreement – one of the tests to determine whether something is real or personal property; buyer and seller agree to make that decision; this overrides all other tests, but should be in writing per Statute of Frauds

Agreement of sale – a bilateral contract whereby buyer promises to buy and seller promises to sell by execution and delivery of deed; also known as Purchase and Sale Agreement (P&S); Agreement means the same as Contract

Air rights – ownership or lease of air space over a specific parcel of realty, such as a building over a turnpike; also known as air lots or vertical interests; typically extend no more than 80-500ft above real estate, depending on where navigable air space begins

Alienation – loss of ownership; can be voluntary, such as in a real estate sale or involuntary, such as in a foreclosure

Alienation clause – also known as due on sale clause or assumption clause; permits lender to speed up the due date of the loan in the event of a title transfer; prevents transfer of mortgage to a third party

Alluvion – increasing of land area along a shore by deposited alluvium or by the recession of water

Alluvium – clay, silt, sand, gravel, or similar detrital material deposited by running water

Amenities – the features of a property that make it desirable like fitness centers, access to transport, views, etc.

Amortization – the payment of a debt in equal installments; each payment is the same, and pays down the debt over time, with a portion of each payment going to the principal and interest on the loan

Anchor tenants – major tenants which draw consumers to a shopping center, such as department stores

Annexation – when property that was personal becomes real

Annual Property Operating Data (APOD Sheet) – sheet that shows the annual income of a rental property; profit and loss statements for investment properties; looks at vacancies, operating expenses (, debt service (mortgage), and capital expenditures (improvements).

Anticipation –the benefit a property owner expects to receive over the lifetime of their ownership

Appraisal – an estimate of value

Appraiser – professionals with an appraisal license who estimate what buyers will pay for real estate

Appreciation – increase in value resulting from market forces such as demand stronger than supply

Approaches to value – three methods used by appraiser to form an estimate of value such as cost, market and income approaches

Appurtenance – a right belonging to and passing with a property such as having a right of way through adjoining property

ARM – Adjustable Rate Mortgage; loan with an interest rate that adjusts

Arm’s length transaction – an open and willing sale without cooperation or coordination between the buyer and seller

Asbestos – hazardous material that was used as an insulation material and fire retardant; carcinogenic; most often seen in homes with popcorn ceilings; most dangerous in a friable state

Assemblage – the act or process of combining two or more lots into one

Assessed value – also known as tax value; value given to realty by assessor’s office for property taxation purposes

Assets – all of the property someone owns

Assignment – transfer of one’s remaining interest in a lease or option to a third party

Assignee – person receiving a portion of rights or obligations under someone else’s contract

Assignor – person assigning a contract

Associate broker – a broker who chooses to work for another broker

Assumption of mortgage – method of taking over a mortgage; borrower and original mortgagor are both responsible for the loan and liability for any deficiency after foreclosure; joint responsibility

At risk – the total amount a limited partner has invested and can lose; any tax deduction for losses by a limited partner is limited to this at risk amount

Attachment (court action) – a writ issued, beginning or during a legal action commanding sheriff to attach (“seize”) property, rights and effects of defendant to satisfy possible credit demands of plaintiff if judgment comes out in plaintiff’s favor; involuntary lien

Attachment (test) – one of the ways to test whether something is real or personal property; whether or not the property is attached with roots or nails to the land

Attest – affirmation that something is true or authentic

Attestation – testimony or evidence given under oath

Attorney-at-law – a licensed lawyer

Attorney-in-fact – someone holding a written power of attorney

Auction – public sale of property to highest bidder

Avulsion – sudden separation of land from one property and it’s attachment to another typically by flooding or changing course of a river

Bait and switch – form of fraud where an agent advertises a certain property that may or may not be available, with the intention of switching it out for something more expensive or lower quality when the client comes into the office to view; prohibited under licensing law

Balance – the notion that value is created and maintained when there is equilibrium in the market

Balloon mortgage – principal loan amount paid off in lump sum at end of term as opposed to amortized direct reduction method

Bargain and Sale Deed – also known as a certificate of sale; provides no warranties; typically used in tax foreclosures

Benchmark – mark on stone or cement permanently fixed to ground; used as measuring point by surveyors

Beneficiary – someone receiving money from a trust

Bequeath – to transfer personal property in a will

Bequest – an item of personal property transferred in a will

Betterments – improvements adding to value of realty, done by local government and paid for by gainers of value; sidewalks, streets, etc. Results in a special assessment

Biennially – every 2 years; real estate licenses are renewed on this time frame

Bilateral contract – one person’s promise in exchange for another person’s promise such as purchase and sale agreement

Bill of sale – a written instrument that is the evidence of transfer of one person’s right in personal property to another

Binder – deposit or earnest money given as evidence of good faith by buyer to secure property until sale is consummated; it can also refer to a temporary memorandum outline a real estate deal, similar to a letter of intent.

Blanket mortgage – a single mortgage covering more than one piece of real estate as collateral for a loan; usually includes partial release clause

Blind advertising – when real estate agents advertise property under their own name, without disclosing the name of their broker/brokerage and that they are a licensed agent; prohibited under licensing law

Blockbusting – employing fear tactics to induce panic selling or panic peddling in a neighborhood: illegal

Board of Registration of Real Estate Brokers and Salespersons – licensing authority in Massachusetts under the Division of Public Licensure. Issues real estate licenses

Bona fide – in good faith and without fraud

Bond – a type of insurance that provides a guarantee from a third party that they will make good any loss, up to a certain amount, suffered by someone dealing with the covered party; insurer is the surety or obligor, and the person or entity the insurance is payable to is the obligee

Boot – unreplaced property value or reduced mortgage debt; taxable

BPO – Broker Price Opinion; a broker or their subagent’s opinion of real estate’s value based on evaluating data of comparative properties; used to determine listing price

Bounds – directions

Breach – violation of the terms of a contract

Bridge loan – short-term loans designed to bridge the gap in cash flow, such as between development projects

Broker – a type of real estate license, must take a 40-hour course, state exam and be bonded for $5,000; may handle client money

Broker of record – owner of the brokerage; may also be known as employing broker

Brownfields – lands previously used for commercial purposes and are contaminated by hazardous waste or pollution

Brownfields Act of 1998 – encourages cleanup and redevelopment of land contaminated by hazardous waste

Buffer zones – used to ease transitions between zoning areas

Building code – regulations establishing minimum structural requirements; a police power

Building inspector – a municipal employee who ensures that buildings are built in accordance to local rules

Building line – line drawn certain distance from lot lines; no building can be erected between building line and lot lines

Build out – the modification of the leased premises to fit a particular business; also known as a fit out or a fit up

Building permits – approval to build something

Bundle of rights – all of the rights that included with the ownership of realty; include rights of possession, exclusion, control, disposition and enjoyment

Buy down mortgage – the seller pays to subsidize the interest rate on a buyer’s loan for a number of years; in a high interest rate market, this allows buyers to have more affordable mortgage payments

Buyer’s agent – Broker or their subagent who represents a buyer; owes obedience, loyalty, confidentiality, disclosure, account and reasonable care to the buyer

Buyer’s agency agreement – agreement that covers exclusivity of buyer and their broker, but not compensation

Calling the note – first step in the foreclosure process; when the lender accelerates the maturity date of the loan

Capital expenditures – also known as capital improvements; investments of cash for improvements to remain competitive in a business; seen on APOD sheets

Capital gains – tax paid on profits from the sale of an investment property; can be short term (property held for <12months) or long term (property held for > 12months)

Capital reserves – money held in a reserve fund account by condo associations and investors to pay for improvements to a property

Capitalization – process of computing current value from expected future income by dividing annual net income by selected rate of return desired for that type of property; the cap rate

Capitalization rate – also known as cap rate; profit expressed as a percentage that an investor expects from an investment on a yearly basis. A rate of return.

Carrying charges – any expenses incurred from holding a property while awaiting zoning or construction approvals; also known as carrying costs

Cash flow – profit left over after debt service and capital expenditures are paid from net operating income

Cash on cash return – percentage of total investment received as cash flow, before taxes; method of the income approach to value, similar to the cap rate, except it is based on an investor’s cash investment in the property, rather than the property’s total value; helps an investor determine how a property is performing compared to their investment goals

Caveat emptor – let the buyer beware

CERCLA – Comprehensive Environmental Response, Compensation and Liability Act of 1980; federal superfund act; cleans up contaminated sites where hazardous materials have been dumped; holds responsible parties liable for clean up

Certificate of no defense – also known as an estoppel certificate; used to confirm debt or a lease when a property is sold; prevents current tenants from defrauding new owner

Certificate of occupancy – shows that a building has been inspected and found to satisfy building codes

Certificate of reasonable value (CRV) – document issued by the VA determining the maximum value for a VA guaranteed loan

Certificate of title – a written opinion by an attorney or title company that certifies condition of title; registers land

CFCs – Chloroflourocarbons; non-toxic, non-flammable chemicals used as refrigerants and cause ozone layer depletion

Chain – 66 feet

Chain of title – the history of ownership for a piece of property

Change – with respect to principles of value, real estate cycles are cyclical and change over time in response to economic climate, interest rates, employment rates, inflation, etc.

Chapter 21E – Massachusetts Oil and Hazardous Material Release Prevention and Response Act; MA superfund law that regulates storage, transportation and disposal of oil and other hazardous waste; establishes liability and creates Office of Brownfield Revitalization

Chapter 40A – Zoning Enabling Act; Massachusetts zoning laws that create a comprehensive or master plan for towns

Chattel – an article of personal property

Chattel mortgage – mortgage where personal property is used as collateral

Chlordane – used to treat pest infections, such as termites, during the 1940s-1980s by acting as a chemical barrier around the home; toxic and can impact well water and air quality; must be disclosed

Clear title – also known as good and clear title or marketable title; title free of encumbrances

Client – person who hires an agent

Closing costs – costs to transfer real estate

Closing statement – a written accounting of funds to seller and buyer at passing of papers.

Cloud on title – outstanding claim or encumbrance that, if proved to be valid, would impair title and marketability of property.

CMA – Comparative (or competitive) Market Analysis; used to determine listing price; typically based on price per square foot; a broker or their subagent’s opinion of real estate’s value based on evaluating data of comparative properties; also known as BPO

Coastal Zone Management Act – federal law; protects coastal zones by limiting or prohibiting development these areas

Collateral – property pledged to satisfy a debt if payment is not made

Collusion – agreement to defraud another

Colonial Ordinances of 1641-1647 – In MA, littoral rights work differently than other states, where properties own all of the land up to the accretion line; Rights in Massachusetts extend from the mean high tide line to the mean low tide line or 100 rods, whichever is less; Public has easement between high and low tide lines.

Color of title – someone has instrument which appears to provide good title, but actually does not

Commercial – refers to property that may be used for business

Commingling – the mixing of client money with the broker’s personal or business funds; prohibited under licensing law

Commission – money paid to a broker for services rendered; negotiable

Common area load – the percentage of rentable square footage above any usable square footage. Typically covers shared common areas (lobbies, elevators, etc.)

Community property state – states where married persons share the ownership of all property, even if it was purchased before they were married

Comparative-unit method – cost of recently constructed similar properties divided by their square footage to produce a price per square foot cost of construction, which is called the replacement cost

Competition – with respect to principles of value, profit attracts competition; leads to supply which drives down price

Comprehensive Loss Underwriting Exchange (CLUE) – records past consumer claims that are used in homeowner’s insurance underwriting when determining insured value

Comps – comparative properties used to help determine value; typically similar properties in size and style, within a 1-mile radius from the last 6 months of sales/rentals

Condemnation – the taking of private property by eminent domain

Conditional sales contract – a contract in which owner retains title until buyer has met all terms and conditions; a common device in land sales; also called land contract or installment contract, Buyer acquires “equitable title” until final payment; after delivery of deed, buyer has “legal title”

Conditional use permit – also known as limited variance or special use permit; special permission to do something otherwise forbidden in zoning laws as long as it is deemed to be in the interest of the public

Condominium – a form of ownership where owners share common space but own their individual unites separately

Conformity – the idea that maximum value is achieved when a property is similar to other surrounding properties

Consideration – something of value exchanged between parties of a contract; money, services, goods or promises

Consistent use – value can’t be based on a higher speculative use; value must be based on current use and current improvements on the land

Construction loan – used in property construction; borrower receives money from lender in stages or draws during construction

Constructive eviction – tenant may vacate a property and end their obligations under a lease if the landlord violates the covenant of quiet enjoyment making the premises unfit for tenancy

Constructive notice – public notice of something (e.g. recordation of a title transfer at the registry of deeds)

Contingency Clause – makes the contract reliant on something else occurring

Contract – a legal instrument between two parties to do or not to do something; in realty, it must be in writing to be enforceable; essentials of a contract include offer and acceptance, legal object, consideration and reality of consent and competence

Contribution – additional investment in a piece of property as measured by an increase in value

Conventional Loan – loans outside of the government insured programs

Converted use properties – properties that have received a limited variance and changed from one zoning category to another

Convey – to transfer and grant; most commonly refers to a transfer of title in a deed

Cooperative – shared property owned by a corporation or company; owners have shares of interest in the building and proprietary leases for their individual units.

Corporation – a legal person created under state or federal law and owned by one or more people

Cost approach – uses construction costs to determine a property’s value; used for unique properties, such as a church or properties lacking comparable property data

Cost of reproduction – cost to create an exact duplication of a property

Cost to cure – method that calculates depreciation costs based on how much it will cost to repair any curable depreciation, plus any incurable depreciation

Counter offer – an offer made in response to an existing offer; voids the original offer

Covenant – a promise or guarantee in a deed; could also be considered a restriction created by a developer of a subdivision and considered a private limitation

Covenant against encumbrances – grantor warranties that the property is unencumbered under general warranty deed

Covenant of further assurances – grantor promises to obtain and deliver any instruments necessary for obtaining marketable title under a general warranty deed

Covenant of quiet enjoyment – tenant’s right to undisturbed enjoyment of the property; premises must be suitable for occupancy at all times; landlord must not trespass; all services promised must be provided; under general warranty deeds for transfer of title, grantor guarantees that the grantee will never have an issue with title

Covenant of seizin – grantor warrants they own and may convey a property a under general warranty deed

Covenant of warranty forever – grantor promises to compensate grantee for any losses associates with claims against title now and in the future under a general warranty deed

Covert – hidden or concealed

Cubage – length x width x height of interior

Cul de sac – a road with one entrance and exit, usually ending in a circle

Curable depreciation – loss in property value that can possibly be fixed, such as a leaky roof

Curtesy – rights of husband to share in wife’s realty upon her death only; Dower is rights of wife to share in husband’s realty upon his death; both these rights are life interests only

Customer – an unrepresented party (e.g. a buyer at an open house without an agent)

Damages – monetary payment as compensation for harm

Datum – point used to measure elevation in metes and bounds survey method; usually defined as mean seal level of some local official point

Debenture – an unsecured note or debt

Debt service – mortgage payments; used in reference to investment properties and APOD sheets

Decedent – deceased person

Dedication – to convey private property over to public use, such as the giving of land for conservation use

Deed – a receipt for real estate; transfers title to real estate from one party to another

Deed executed pursuant to a court order – deeds issued as a result of a will or court decision

Deed of trust – also known as a trust deed; in some states used instead of a mortgage deed

Deed restriction – language in a deed somehow limiting the use of a property; can create a fee simple defeasible estate

Default – failure to perform under a contract

Defeasance clause – the clause in a mortgage which removes the mortgage on full payment of the loan

Defendant – the person being sued

Deferred payments – payments to be made at future date

Deficiency judgment – court award to a lender if an auction sale does not fully pay off a debt

Delinquency – a loan in default or overdue

Delivery – transfer of something, like a deed at closing

Demand – number of people willing and able to buy a property; if demand is high and supply is low, this generally creates higher value

Demand loan – a loan where the lender can demand repayment of the loan at any time

Demise – to lease

Density – number of dwellings and commercial units per acre

DEP – Department of Environmental Protection

Depreciation – book deprecation or cost recovery; decrease in value for various reasons

Depreciation recapture tax – tax of 25% applied to any depreciated value that is made back at the sale

Designated agent – when a broker or their subagent chooses another agent to represent a buyer or seller; can be used if an agent does not want to be a dual agent or if their client will not consent to dual agency

Designated Realtor – owner of a brokerage who participates in the National Association of Realtors

Destruction –when a property is destroyed; can be a way to terminate a contract

Devise – to transfer real property by will

Devisees – heirs receiving real property

Devisor – person leaving real property in a will

DIDMC – Depository Institutions Deregulation and Monetary Control Act; exempts many mortgage loans from state usury laws

Direct reduction mortgage – also known as a fully amortized loan; amortized debt repaid by installment payments; each payment credited first to interest and then to principal; each payment remains the same for entire term and at the end, the entire debt will be paid off

Discount rate – the rate that The Federal Reserve Board loans to banks

Discount points – points paid up front to buy down the interest rate; used to reduce the monthly payment

Disintermediation – outflow of funds from one investment instrument, such as thrift institutions to another, such as U.S. Treasury Instruments, in order to gain a higher yield.

Doctrine of capture – the owner of land has the right to capture any liquid minerals, such as gas or oil under their land

Doctrine of estoppel – states that once you cause someone to act in a certain way based on information given, you can’t go back on your word

Doctrine of prior appropriation – rights to a river where the ownership is based on whoever uses the water first; used in most Western states

Dodd Frank Act – changed RESPA requirements and processes to allow for more transparency; coupled with the Consumer Financial Protection Bureau to create more consumer protection in lender

Domicile – the place where someone has permanent residence, no matter where they are currently living

Dominant tenement – the property owner with the right in an easement appurtenant

Dower’s rights – when a surviving spouse is granted a life estate for real property not willed to them; they are entitled up to 1/3 interest in place of whatever was left in the will; abolished in Massachusetts

DTI – Debt to Income Ratio; monthly gross salary one earns vs. their obligations to creditors each month; front end ratio includes housing expenses such as mortgage payments, insurance and property taxes and back end ratio includes personal obligations, such as credit card debt, car loans or student loans

Dual agent – a broker or subagent who works for both the buyer and the seller in the same transaction; must be disclosed and both parties must consent to it in writing per licensing law

Due on sale clause – also known as alienation or assumption clause; permits lender to accelerate maturity date of the loan in the event of a title transfer; prevents transfer of mortgage to a third party

Duplex – a home designated for two families

Duress – unlawfully forcing someone to do something against his or her will

Earnest money – deposit given with offer to purchase

Easement – a right which one person has in lands of another

Easement appurtenant – involve two adjoining lots of land where one owner has the right of way across another

Easement in gross – a personal right to use another’s land.

Economic life – period of time in which property may be profitably used; each income property sale begins a new property economic life

Economic obsolescence – a loss in value due to economic factors; examples include loss of public transportation, high foreclosure rates, etc.; type of incurable depreciation; type of external obsolescence

Egress – an exit

Ejectment – legal action to regain possession of realty with damages payable for its unlawful retention

Elements of value – D.U.S.T; Demand, Utility, Supply and Transferability

Emblements – crops, such as wheat or corn, that require annual or semi-annual planting and harvesting; considered personal property

Eminent domain – right of government to take private property against owner’s wishes for public use with fair compensation

Employing broker – a broker who hires real estate agents to work under their license/brokerage

Encapsulation – when a hazardous material is covered and sealed off

Encroachment – physical trespass of a property on that of another, such as an improperly placed fence; the discovery is by survey; may result in a loss of land through ONCHA

Encumbrance – anything that burdens (limits) the fee title to property, such as a lien, easement or restriction of any kind

Endangered Species Act of 1973 – protects endangered species by restricting property use and development in any areas that could be habitats, breeding, or nesting grounds for those species; it is illegal to kill an endangered animal

Entry-only listing – also known as flat fee listing; type of listing agreement where broker is paid a flat fee to list the property on MLS, but does not represent the seller or conduct any showings or negotiations

Environmental impact statement – required to determine if there are any environmental impacts that a development might have on an area under the National Environmental Policy Act and how a developer might handle those issues

ECOA – Equal Credit Opportunity Act; prohibits discrimination in lending

Economic Life – the useful lifetime of a property

EPA – Environmental Protection Agency

Equity – the difference between the property value and any mortgage debt; the cash value in the property

Equity participation – a loan where the lender takes an equity position in the property in addition to receiving interest

Equity right of redemption – in Massachusetts, under the Statutory Right of Redemption, property owners have up to 1 year from the date of foreclosure to regain ownership of their property, if they can pay back their debt plus interest

Equitable title – a future right to obtain legal title

Erosion – the process by which the surface of the earth is worn away by the action of water, wind, etc.

Escheat – power of government to take property left without a will or heirs

Escrow account – also known as trust account; special bank accounts to hold client money; broker holding money is called the escrow agent

Estate tax lien – type of federal tax lien used to secure an estate’s tax payments

Et al – and others Et con – and husband Et ux – and wife

Eviction – court action revoking someone’s right to possess a property Exclusive agency – seller or buyer hires one broker who earns a commission and can co-broke with other brokers, however, if a seller finds their own buyer, then no commission is paid; must be in writing with an expiration date

Exclusive right to sell – listing agreement where seller hires one broker who earns a commission and can co-broke with other brokers; seller must pay a commission even if they find their own buyer; must be in writing with an expiration date

Executor/trix – person named in will to execute or probate the will

Executed contract – when terms and obligations under a contract are satisfied and fulfilled; complete and finished

Executory contract – when a contract has been agreed to, but not yet completed

Express Authority – explicitly granted authority to do something (as opposed to implicit authority)

External obsolescence – loss in value due to outside forces, such as neighborhood deterioration; considered incurable

Facilitator – also known as a non-agent, transaction broker, transaction coordinator or contract brokers; a licensed agent that helps buyer and seller reach an agreement, but does not represent either party

Factory built home – homes manufactured in pieces in a factory and later assembled on land

Farm Service Agency – USDA agency that provides loans to new farmers or ranchers that wouldn’t normally qualify for financing

Federal Electronic Signatures in Global and National Commerce Act (E-Sign) – electronic signatures on contracts are binding

Federal Funds Rate – rate for interbank lending

Federal Home Loan Mortgage Corp. (FHLMC) – commonly known as “Freddie Mac,” it is a secondary mortgage market buyer that buys conventional mortgages from lenders to keep market for mortgages fluid; focuses on FHA and VA loans

Federal Housing Administration (FHA) – part of the U.S. Department of Housing and Urban Development (HUD), it insures mortgage loans originated by qualified and approved lenders

Federal income tax lien – when the Internal Revenue Service places a lien on your real and personal property to claim debt owed to them; involuntary, general lien

Federal National Mortgage Association (FNMA) – commonly known as “Fannie Mae,” it is a secondary mortgage market buyer that focuses on FHA/VA loans

Federal Open Market Committee – buying and selling of US debt to and from member banks of The Federal Reserve Board

Federal Reserve Board – “The Fed”; U.S. central bank known as the ‘bank’s bank’; establishes and regulates monetary policy

Fee simple absolute – also known as fee, fee simple, or fee simple indefeasible; default, absolute type of ownership in real estate, type of estate that is inheritable and without limitations, except any public and private restrictions

Fee simple defeasible – a grant of title dependent on a specific condition named in the deed Fee simple determinable – fee simple defeasible estate where when a limitation is violated, title is automatically lost

Fee simple subject to a condition subsequent – fee simple defeasible estate where when a limitation is violated, the grantor who wrote the limitation can request forfeiture of title via court action

Fee simple subject to an executory limitation – a fee simple defeasible estate where when a limitation is violated, the property transfers to a third party named by the grantor

FHEO – the Office of Fair Housing and Equal Opportunity; part of HUD, administers and enforces federal fair housing laws FICO score – credit history based on an average of the three major credit bureau ratings; used to determine your financial risk to lenders during the pre-approval process

Fiduciary – a relationship of trust

Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Title XI – appraisers must have a valid appraisal license to make an appraisal for all federally related transactions and most real estate transaction in general

Financing – receiving or providing money for the purchase of real estate Finder’s fee – fee to broker for arranging loan for client; can also mean fee to broker for locating a property for client (aka a commission)

Fixed rate – an interest rate that is locked and remains the same over the life of the loan

Fixture – something that was personal property, but is now real property because it is permanently attached to land

Flocked ceilings – also known as ‘popcorn ceilings’; ceilings with texture that were often created with asbestos based products, if applied before 1986

Foot – 12 inches

Forcible entry – legal action to recover possession of premises unlawfully held

Foreclosure – legal remedy whereby collateral is sold to pay debt because note terms, such as non-payment, were not met; typically, are judicial, meaning initiated by a law suit, however some states permit non-judicial foreclosure if a deed of trust was used

Foreign Investment in Real Property Tax Act – 10% of the proceeds of property sale by a non-US citizen are withheld by the buyer and forwarded to the IRS

Forfeiture – loss of money or anything of value due to failure to perform according to terms of contract; type of liquidated damages

Forfeiture of title – loss of title; can be voluntary (real estate sale) or involuntary (foreclosure) Four Stage Life Cycle – properties will go through 4 stages: growth, stability, decline and revitalization Fraud – intentional deception resulting in a loss of money Freehold – an ownership interest in realty Friable – crumbling or flaking; when friable, asbestos is in its most dangerous state because particles can disperse into the air

Front foot – number of feet of frontage on street side

Fully amortized loans – also known as direct reduction loans; loans are completely paid off when last payment is made

Functional obsolescence – loss in value due to out-of-date; examples include poorly designed or old-fashioned fixtures or equipment; may be curable

Furlong – 660 feet

Garn St. Germain Act – due on sale clause can’t be triggered in the event of a death, divorce, marriage, leasing, devising on property, or transfer into family trust

General liability insurance – insurance coverage for personal or property damage that can occur at the brokerage or on showings

General lien – a lien on any and all property or assets of debtor such as: judgment, decedent’s debts, inheritance taxes, state tax liens, IRS liens

General warranty deed – grantor accepts all liability for any claims made against title for all past, present and future owners of the property; includes a variety of warranties such as covenant of seizin, covenant against encumbrances, covenant of further assurances, covenant of quiet enjoyment, and covenant of warranty forever

GI Bill – what initiated the creation of VA financing in 1944 Good consideration – something of value that is not money, for example a service

Government limitations – also known as public limitations; local, state and federal governments can restrict what property owners can do with their property; these limitations include police power, eminent domain, taxes and escheat

Government National Mortgage Assoc. (GNMA) – commonly known as “Ginnie Mae”; a government backed secondary mortgage market buyer that focusses on FHA affordable and low-income housing loans

Government rectangular survey – also known as public land survey system or rectangular survey system; not used by 13 colonies, but common in Western states; divides land using principle meridians that run north/south and base lines that run east/west, along with tiers and range lines that form townships

Graduated lease – a lease whose rent increases on an agreed upon schedule; escalator clause increases or decreases the rent

Graduated loan – lower payments are made early in the loan, resulting in negative amortization

Graduated payment mortgage (GPM)– payments on the loan are lower in the beginning of the loan term and gradually increase; for buyers with predictably rising incomes, such as lawyers or doctors

Granting title – transferring ownership Grantee – the person receiving title to real estate Grantor – the person giving title to real estate Greenfields – uncontaminated lands Gross lease – a lease where the landlord receives rent and pays for any common area expenses, like insurance or taxes Gross living area (GLA) – all finished, heated and above grade parts of a property, as measured from the outside of the building

Gross rent multiplier (GRM) – how many months of gross rent is takes for a property to pay for itself; helps investors decide if a property is a good value

Ground lease – a lease where tenant rents the land and builds improvements on the land; at the end of the lease, improvements belong to the landlord; most common among fast food chains; typically, 99 years which the max lease length

Growing equity mortgage (GEM) – extra payments on a loan are made to the principal; allows homeowners to pay off their debt faster and save on interest over the life of the loan

Habendum clause – the “to have and to hold” clause in deed which defines or limits the estate being granted; seen in life estate deeds

Height – under zoning laws there are restrictions with regards to how high property can be built HELOC – Home Equity Line of Credit; also known as equity line of credit, equity loan, or open-end mortgage; borrower is given a line of credit against the equity in their home; junior lien Helping Families Save Their Homes Act – part of Truth in Lending Act; states that while a mortgagor doesn’t have to have consent from the borrower to sell off their loan to a third party, the mortgagor must inform the borrower of the sale of their loan

Hereditaments – all inheritable property Highest and best use – the use of a property that produces the most net income Holographic – handwritten wills

Homestead laws – laws designed to protect homeowners from the forced sale of their home to pay off unsecured debts

Homeowners Protection Act of 1998 – when a homeowner’s LTV dips below 78%, the PMI will automatically discharge per this act Holdover tenant – a tenant that has retained possession of a property past their lease expiration without permission HUD – the Department of Housing and Urban Development Hypothecate – pledging something as security for a debt without giving up possession and use (for example, in a mortgage)

Implicit authority – authority that exists but is not explicitly granted Implied easement – when the seller of property implies an easement through the sale, but failed to create a legal easement

Implied warranty of habitability – Massachusetts automatic warranty on all newly constructed property; developer must warranty systems, structural components and mechanics that keep the property free from the elements for up to 3 years after sale date

Impounds – reserves held by a lender in escrow on behalf of the borrower for payment to a third party; for example, property tax payments

Inactive licensees – licensed real estate professionals who are no longer actively practicing real estate, typically for a year or longer; may make referrals to active licensees; must continue continuing education and pay their licensing fee to maintain this status, otherwise they become expired

Income Approach – also known as Investment Value; how appraisers determine value for investment property or property that produces income

Increasing/decreasing returns – money spent improving a property may or may not add value; function of substitution Incurable depreciation – loss in property value that can’t be fixed, such as high foreclosure rates in an area

Index lease – a lease whose rent is tied to a particular index, generally the consumer price index; when index changes, rent changes with it

Influences on property value – social trends (people’s desires), economic (inflation, employment rates, etc.), government and legal (zoning and building codes), environmental and physical (location to transportation, highways, natural resources)

Infrastructure – the public facilities and utilities in an area

Ingress – entering or an entrance

Injunction – an order of court to restrain one or more parties to a suit from doing an inequitable or unjust act in regard to the rights of some other party to the suit

Installment sales contract – also known as a contract for deed, land contract, or conditional sales contract; essentially a rent to own contract

Instrument – a formal written document

Insurable title – ownership with some known defects that a title insurance company agrees to cover

Insurable value – value of a property for an insurance company

Intention – one of the tests to determine if something is real or personal property; the intent of the person who installed the property

Interbank lending – short term loans between banks

Interim financing – a bridge loan or other short term loan made before long term financing

Intestate – no will or a defective will left by the deceased

Inverse condemnation – if government action in taking neighboring land leads to a decrease in property value, the property owner can claim compensation

Investment – amount put into the property

Investment value – value of a property for investors

Involuntary lien – lien that is placed on a property by a third party, such as a mechanic’s lien

Ironclad Merger Clause – also known as Integration Clause, Merger Clause, Entire Agreement Clause; states that any other agreements outside of the written contract will not have any force or effect and that there isn’t a prior agreement in place

Irrevocable – cannot be taken back

Joint tenancy – ownership by two or more persons with a right of survivorship

Judicial lien – a lien put in place by a court

Judgment – the final decision of a court

Junior mortgage – any mortgage subordinate to the first mortgage (most often a second mortgage)

Laches – unreasonable delay in asserting one’s rights causing the loss of such rights

Land and surface rights – rights associated with the land and often extend to approximately 30ft. below the earth’s surface

Land contract – typical method of financing land sales; buyer makes down payment, then monthly payments until final price is paid; buyer does not receive deed until final payment

Land locked – when a property owner can’t legally access their land and may need an easement appurtenant by necessity

Lease – also known as tenancy for years, estate for years, interest for years or demise; contract between lessor and lessee for exclusive possession of realty for specified period under specific terms after which property reverts to lessor

Leaseback – purchasing a property and then leasing it back to the seller; frees capital and creates favored tax treatment for seller

Leasehold – the interest held by a lessee; a rental

LEED Certification – Leadership in Energy and Environmental Design; system of ratings for design, construction, operation and maintenance of green buildings, homes and neighborhoods; encourages environmentally conscious building in exchange for permitting and financial incentives

Legal description – method of describing property so that it can be found by a surveyor; property’s address, a land description and title reference

Legal instrument – a legal document

Legal life estate – life estate created by law; examples include homestead and dower’s rights

Legal title – legal ownership

Legatees – heirs receiving personal property

Lessee – tenant

Lessor – landlord

Leverage – the use of borrowed money to purchase something

License – personal, revocable, non-assignable permission to enter someone else’s property, such as with a ticket to an event

Lien – a debt; claim against property for payment of some debt

Lienholder – person or legal entity that has a lien against a property

Lien theory state – borrower holds legal title of a property that is financed

Life estate – ownership held for the term of someone’s life; non-inheritable

Life estate in remainder – a life estate where, when the grantee dies, title will pass to a third party or remainderman

Life estate in reversion – a life estate where, when the grantee dies, title will revert back to the grantor

Life tenant – also known as the grantee in a life estate; person who receives property from grantor of a life estate; entitled to all of the bundles or rights except devise; has a present interest in the property

Liquidated damages – pre- agreed upon amount of money to be paid in the event of a breach of contract

Liquidation value – foreclosure value of a property; usually much lower than market value

Liquidity – a person’s cash position

Lis pendens – notice filed in a registry of deeds warning all persons that title to certain property is in litigation

Listing agreement – also known as broker employment contract; used to hire a broker and their subagents to sell a property; indicates commissions to be paid, authority given, and deadline for sale

Litigation – court proceedings in a lawsuit Littoral – shoreline of large body of water

LLC – a limited liability company; this is a pass through entity that is treated as a legal person Loan flipping – when lenders encourage frequent refinancing in order to generate fees; an example of predatory lending

Loan modification – when a lender avoids the foreclosure process by agreeing to a change in the loan terms if a borrower can’t afford their payments

Lot and block survey method – a type of land survey method that involves dividing land of a subdivision by streets into blocks and then subdividing those blocks into lots, then each individual lot is described using metes and bounds

Lot line – line marking the end of one lot and the beginning of another

Lot size – size of a plot of land; under zoning laws there are minimal permissible lot sizes for building

LTV – Loan to Value Ratio

Mandatory agency disclosure – must be presented upon first personal meeting with a prospective buyer or seller; discloses the relationship of the agent with the client

MAR – Massachusetts Association of Realtors; local chapter of the National Association of Realtors

Market price – actual amount paid for real estate

Market value – also known as fair market value; the theoretical price for which real estate can be sold for if there is a willing and able seller, a willing and able buyer, no time pressure, and an arm’s length transaction

Marketable title – also known as good and clear title; title free from clouds that a buyer and lender would accept

Massachusetts General Law Chapter 93A (MGL Chapter 93A) – Massachusetts Consumer Protection Act; enacted in 1967 and amended in 1969 to allow for right of private action; protects consumers from unfair and deceptive business practices by allowing them to submit a 30-day demand letter to the business who wronged them, requesting monetary damages

Massachusetts River Protection Act – added to the Wetlands Protection Act in 1996; protects riverfront areas that are not designated wetlands; provides $30M for acquisition and protection of riverfront areas

Massachusetts Uniform Electronic Transactions Act (UETA) – electronic signatures on contracts are binding

Master deed – document that creates a condominium and defines individual units and common areas Material defect – something that would objectively impact a buyer’s or seller’s decision; also called a material fact

MCAD – the Massachusetts Commission Against Discrimination; enforces Massachusetts fair housing laws Mechanic’s lien – an involuntary lien placed against a piece of real estate to recover payment for work that improved it

Meeting of the minds – offer and acceptance

Metes – distances Metes and bounds – boundaries of land described using metes and bounds between monuments or benchmarks; starts and ends at point of beginning MI – mortgage insurance on FHA loans Mile – 5,280 feet Mills – dollars per $1,000; used to calculate tax rate or millage rate Millage rate – varies by town; used to calculate property taxes; based on mills

Mineral rights – also known as subsurface rights or vertical interests, include solid and liquid mineral rights, typically extend to earth’s core

Mixed use developments – properties containing multiple uses, such as a mix of residential and commercial real estate

MLS – Multiple Listing Service; database for real estate listings

Modified gross lease – a lease where the tenant pays a fixed amount a rent the first year, known as the base year and then the next year there is an increase based on the landlord’s increase in operating expenses

Modular home – homes whose components are manufactured in a factory, and are later assembled on site

Monument – a visible marker, natural or artificial used to establish a land boundary Moratorium – action by government temporarily halting public activities such as a “freeze” on apartment construction

Mortgage – a legal instrument that conveys conditional title to a lender to collateralize a debt

Mortgage banker – works directly for the bank and can only offer loan products from their bank; can originate loans

Mortgage broker – someone who brings together borrowers and lenders in exchange for a fee

Mortgage commitment – a written notice from lender promising a future loan under certain conditions and terms

Mortgage covenants – everything the borrower promises such as making payments, keeping property insured, etc.

Mortgage interest deduction – residential homeowners can write off their mortgage interest on mortgage debt up to $750,000 on a primary residence

Mortgagee – the lender

Mortgagee-in-possession – a lender that has taken over a property and is collecting rent from it prior to a foreclosure auction

Mortgagor – the borrower

Multi-family – property containing several different units, but it not subdivided

Municipal lien certificate – a document required at closing issue by a municipality that confirms the status of payment for property taxes, water, etc.

Municipal property taxes – major form of revenue for towns/cities; helps pay for town services, schools, trash removal, etc.; if not paid, can be priority lien

Mutual Release Papers – an agreement by which the parties to a contract release each other from their obligations under the contract. Also known as a mutual release agreement

National Flood Insurance Program – established by Congress in 1968 by the National Flood Insurance Act; administered by Federal Emergency Management Agency (FEMA); requires property owners in high-risk flood zones or who have a federally backed loan to purchase a flood insurance policy.

NAR – National Association of Realtors; a national private trade association with state and local chapters; members are referred to as Realtors; does not have any lawmaking or licensing capabilities, but does lobby the legislature

Narrative form – written form or report

Negative amortization – when the monthly payments of a loan fail to cover the entirety of the principal and interest due; unpaid interest is added on to the principal amount owed Net income – also known as net operating income (NOI), it is the effective gross income minus operating expenses

Net lease – lease where the owner receives rent and tenant also pays building expenses normally paid by owner, such as property taxes, property insurance and operating expenses

Net listing – an illegal commission arrangement with an unspecified commission, most commonly arranged so that the agent receives all money over a certain fixed price in a sale

Net worth – assets minus liabilities (debts)

Nominal consideration – a small amount used as consideration for a contract (e.g. property sold for $10)

Nonconforming use – a legal use that was in existence prior to current zoning, which may continue to exist; “grandfathered in”

Non-freehold – type of interest in real estate with possession and use, but not ownership; a rental or lease

Non-recourse loan – loan where borrower is not personally liable for any deficiency in the event of foreclosure

Note – evidence of a debt; also known as a promissory note or a mortgage note

Novation – the cancellation of contract and the replacement of it by a new one

Nuncupative will – verbal will; not enforceable in most states

Obsolescence – a loss of value from outdated design

Occupancy Rate – the percentage of full (occupied) units in a rental property

Offer – a presentation of terms; a shortened letter version is known as a binder or letter of intent and serves similar purpose

ONCHA – Open, Notorious, Continuous, Hostile, Adverse use of land for 20 years + allows a person to claim an easement by prescription or potentially claim ownership to a piece of land that was not previously theirs

Open listing – any hired broker can sell property for a commission, but if owner finds their own buyer, no commission payable; can be verbal or written

Open mortgage – a mortgage that has matured or is overdue and subject to foreclosure

Open end mortgage – a HELOC or line of credit secured by real estate

Operating expenses – deductible costs associated with running an investment property; seen on APOD sheets

Option – a contract between a property owner (optionor) and a potential buyer or lessee (optionee) to buy or lease the property in the future at pre-agreed terms

Ordinance – local municipal laws and rules

OSHA – the Occupational Safety and Health Administration; oversee workplace and construction site safety Over improvement – spending too much money improving a property; may not necessarily add value per concept of substitution

Overt – openly known Ownership – an interest the excludes others; title Package mortgage – a loan secured by a mortgage on both real and personal property Parol – oral or verbal Partial release clause – used in blanket mortgages; releases a portion of the collateral in exchange for partial payment of loan

Participation mortgage – loan where the lender participates as an equity partner in a development project

Partition – a legal action (e.g. lawsuit) to divide co-owned property

Party wall – a common shared boundary where all owners are responsible for its upkeep, like a wall or a fence

Passive income – income generated by passive activities, such as collecting rents

PCBs – Polychlorinated Biphenyls; > 200 chemical compounds not found naturally; were used for flame resistance in electrical equipment and are carcinogenic

Percentage lease – a lease contract where the rent is based on a percentage of gross sales, often with a fixed minimum; commonly used for department stores

Percolation test – a test that measures soil water absorption and drainage; often used for septic systems Performance – a contract terminates because the obligations have been met, such as when a lease automatically terminates at the end of the lease term Personal property – also known as personalty, chattel, or moveable property; anything not attached to the land

Physical depreciation – also known as physical deterioration; loss in value resulting from wear and tear, such as a leaky roof; a type of curable depreciation

PITI payment – principal, interest, property taxes and homeowners insurance payments

Plaintiff – person bringing a lawsuit

Planned unit development – a type of high density mixed use development with designated public space components

Plat – a plan or map used in a lot and block survey that shows the layout of a subdivision

Plat book – the public record of recorded plats

Pledged account mortgage – the borrower pays to subsidize the interest rate on their loan for a number of years; in a high interest rate market, this allows buyers to have more affordable mortgage payments

Plot plan – a diagram showing the existing or proposed use of a property, including any improvements

Plottage value – the increase in value from assemblage; a plottage increment

Points – an origination fee charged by lenders at closing; one point is 1% of the loan

Point of beginning (P.O.B.) – the starting point in a metes and bounds description of property, either from a monument or a reference point on the street; the description begins and ends at the P.O.B.

Police power – right of government to enact laws, such as building codes and zoning bylaws in the public interest Power of attorney – a written instrument authorizing someone to act on someone else’s behalf; person given power is an attorney-in-fact

Power of sale clause – permits lender to take the property and sell it in the event of a default on the terms of the loan

Pre-approval letter – sometimes known as commitment letter or letter of commitment on the exam; states that the buyer has been approved for a certain purchase price based on qualifying criteria such as income, credit history, and assets; non-binding

Predatory lending – unfair, deceptive or abusive lending Prepayment penalty – a penalty for paying a loan before its due date Prescription – a method of obtaining an easement by adverse use of someone else’s property

Primary mortgage market – the market where loans are made by lenders to borrowers

Primary residence – owner-occupied residence where someone will live for at least 2 of 5 years

Prima facie – based on the first impression Prime rate – the theoretical lowest interest rate a borrower can receive Principal – the client; the person who is paying you

Principles of value – change, anticipation, substitution, progression, regression, four stage life cycle, balance, conformity, contribution, increasing and decreasing returns, competition, consistent use, highest and best use, and plottage value

Private restriction – a covenant, condition, or restriction placed on realty by the grantor at the time of sale that runs with the land

Privity of contract – doctrine that permits the right to sue under a contract Privity of estate – legal relationship between two parties with a common interest in the same property Pro forma statement – a projection of future income and expenses

Probate – legal process by which the deceased’s belongings are distributed

Procuring cause – the effort of a broker who produced a ready, willing and able buyer

Professional liability insurance – also known as errors & omissions insurance; protection against mistakes made by the broker or their subagents, while providing real estate services to their clients

Progression/Regression – the increase and decrease of property value caused by substitution

Promulgate – to publish or make publicly known

Property manager – a person (legal or natural) hired to care for and maintain a rental property on behalf of the property’s owner. They are hired to represent the property owner, and granted agency authority, in a property management agreement.

Property tax lien – when a property owner doesn’t pay their property taxes, the town will place a lien on their real property, involuntary, specific lien; priority lien against real estate

Proprietary leases – lease that a corporation of a cooperative gives to its unit owners

Prorate – proportionally distributing money paid and owed for taxes, rents, etc.

Prospectus – an advertisement of a particular offering, most often securities, to members of the public

P&S – Purchase & Sale Agreement; an agreement signed between buyer and seller, typically 5-10 days after the offer which outlines both buyer and seller promises and obligations

Public restriction – a government law or regulation restricting the use of real estate Puffing – an exaggeration made by a salesperson or found in an advertisement that concerns the quality of goods offered for sale; can be cause for Chapter 93A claim Pur Autre Vie – “for another’s life”; life estate not based on grantee’s life, but on another third party’s life

Purchase money mortgage (PMM) – also known as seller financing, this is when the buyer gives a note and a mortgage to the seller in exchange for the property

Qualified lenders – lenders who can originate government-insured loans, such as FHA, VA or USDA Quantity survey method – determines the cost of rebuilding the property exactly as it appears today using local construction costs, permits, etc.; used for reproduction costs

Quiet enjoyment – the right of a property owner or tenant to possession of realty without interference

Quieting title – a land court action to determine the owner of a property

Quitclaim deed – also known as non-warranty deed; grantor not liable for any claims against title; coveys only whatever interest grantor has at the time of title transfer; can be used to correct mistakes on a deed or in bank foreclosures

Radon – colorless, odorless gas that is the result of the natural breakdown of radioactive elements in the soil; causes cancer; when levels are above 4pCI/L (picocuries per liter), mitigation is recommended

RAM – Reverse Annuity Mortgage; bank makes payments to the borrower against the equity in their home; only for homeowners 62 years of age and older; loan plus interest is repaid when homeowner passes away

Real Estate – land and the property attached to it, although not necessarily all of the rights associated with that land Real Estate professional – under depreciation rules, someone who spends at least 750 hours annually actively engaged in real estate related activities, such as managing property

Real property – land and everything attached to it along with the property rights of that land; also referred to as real estate, realty and immovable property

Reality of consent and competence – agreement to a contract must be real and free from fraud, duress, undue influence, misrepresentation and error; parties signing a contract must be of sound mind, sober and of legal age

Realtor – members of the National Association of Realtors; not a type of license

Reappraisal lease – a lease where rent is based on an appraiser’s opinion of rent, rather than landlord and tenant negotiating it

Reciprocity – a state recognizing the license of another

Recordation – act of making a title transfer public record at the county registry of deeds; not required; provides constructive notice to the public

Recording stamps – also known as transfer or conveyance stamps, or a transfer fee; a tax to sell real estate paid per $500 or $1,000 of value; $2.28 per $500 in Massachusetts

Reconciliation – the last step of the appraisal process; the appraiser weighs each finding through the sales, cost or income approach, determines value and then generates a report

Redlining – credit discrimination

Refinanced – paying off a loan by getting a new loan that replaces the old one

Reliction – an increase of the land by the sudden retreat of the sea or a river

Remainder depreciation – depreciation that occurs after purchase of property

Rental fee disclosure – given at first personal meeting with a tenant; written notice that informs the prospective tenant if they will pay a fee, how much, manner of payment, time of payment and whether or not a fee is due if tenancy is created

Rentable square footage – the total amount of square footage including any common area load REO – Real Estate Owned; a bank owned property which happens if a bank buys its own foreclosure property Reproduction cost – cost to replicate a property; rebuild it with exactly the same materials, but with today’s material costs

Rescission – the cancellation of a contract by mutual agreement Residential – refers to property that is lived in Reserves – cash on hand

Reserve requirement – amount of cash that banks must have against their deposits and liabilities

RESPA (Real Estate Settlement Procedures Act) – a law requiring full disclosure of closing costs to buyer and seller

Restrictive covenant – clause in deed limiting certain realty use

Reversionary interest – when a grantor or landlord have a right to regain possession of a property in the future

Revocation – cancellation or taking back

Right of first refusal – Effectively “dibs” on a property; provides the person holding the right to match a future offer and buy the property ahead of anyone else

Right of way – right of one person to pass over the land of another

Riparian – rights to or along a running body of water

Riparianism – Massachusetts and the other 13 colonies use this type of water right for rivers; properties bordering navigable waterways have rights up to the accretion line of the water and property bordering non-navigable waterways, have rights to the midpoint of the water

Riverfront areas – land between mean high-water line of a river or stream and 200ft. from that mean high water line or 25ft. in densely populated areas

Rod – 16 feet 6 inches

Run with the land – stays with the property, not the property owner; will pass to all future owners

Safe Drinking Water Act of 1974 – permits EPA to set standards for drinking water; drinking water issues must be disclosed

Sale-leaseback – when property owner sells to an investor and rents back their property; allows businesses to pull their equity without giving up their enjoyment of the property; rent is tax deductible for the business

Sales comparison approach – also known as the Market Data Approach; this is the most common appraisal method used for most residential properties, where an appraiser looks at recent comparable sales in the last 6 months and makes adjustments to them to determine appraised value

Salesperson – a type of real estate license; must take a 40-hour course, pass a state exam and work under a broker; may not have access to escrow accounts

SARA – The Superfund Amendments and Reauthorization Act; federal law; provides for innocent landowner status

Satisfaction piece – also known as a mortgage discharge; this is the recorded evidence of the payment of a debt

Secondary financing – junior mortgages, not to be confused with secondary mortgage market Secondary mortgage market – the marketplace for existing mortgages that were originated on the primary market

Security deposit – any money held in escrow by a landlord to pay for damage to a leased property by the tenant

Seisin – possession of real property with a freehold claim; also can be spelled seizin

Seller’s agent – also known as listing agent; broker or their subagent who represent a seller; owes obedience, loyalty, confidentiality, disclosure, account and reasonable care to the seller

Separate property state – a state where married persons may own property separately and in their own name; Massachusetts is an example of a separate property state

Servient tenement – the property owner encumbered by the right of an easement appurtenant

Setback – the minimum distance from a road or other established line before you can build

Settlement – also known as the closing; when seller transfers ownership to the buyer

Severability clause – states that if a portion of the contract is voided, the rest of the contract shall remain in effect

Severalty – ownership by one person

Severance – property that was real becomes personal

Severance damage – a property owner may receive this, if the government takes only a portion of land under eminent domain

Shared appreciation mortgage (SAM) – a loan where an investor makes the down payment for a buyer in exchange for a share of equity in the property

Shared equity loan – a loan where the lender, in addition to providing financing, also pays a portion of the down-payment on behalf of the buyer

Sheriff’s deed – a deed used to convey title to property sold to satisfy a court judgment

Sheriff’s sale – the sale of property to satisfy a court judgment

Short sale – a settlement with the lender where the lender accepts a payment of less than what is owed on the home loan; typically happens if homeowner is “underwater” or they owe more than what the property can sell for

Simple interest mortgage – non-compounding mortgage where interest is calculated daily

Sinking fund – money saved over time to pay for future improvements and capital expenditures

Single family – a property containing only one unit

Special agent – may represent the principal on a particular matter or transaction, for example a broker

Special assessment – bill to property owners for a specific improvement project; could be on property taxes, condo or co-op fees

Special warranty deed – also known as a limited warranty deed; grantor guarantees that they did not cause any issues with title when they owned the property; grantor is only liable for any claims against title, if they occurred when they owned

Specific lien – a lien on one specific piece of property

Specific performance – a court order to do something previously agreed to in a contract

Spot zoning – permitted use inconsistent with zoning in area

Square feet – length x width

Square mile – 640 acres

Stachybotrys – genus of mold that contains around 50 different species; S.chartarum and S.chlorohalonata are some of the most dangerous and referred to as black mold or toxic black mold; linked to respiratory issues; must be disclosed

Statute – a law Statutory lien – a lien put in place by law (statute) Statute of Frauds – the law that only written real estate contracts are enforceable Steering – directing clients to or away from certain areas or properties based on protected class status

Stick built home – a wooden house constructed entirely or largely on the site where it will remain

Stigmatized property – property that is psychologically impacted by events such as death, criminal activity, etc. Straight line depreciation – method of calculating depreciation which calculates the annual loss in value based on economic life of the property; IRS uses economic life of 27.5 years for residential and 39 years for commercial Straight mortgages – interest only mortgages; principal is paid in one lump sum on the last payment date

Strict foreclosure – when a foreclosure auction is not required because the lender can sue the borrower for the amount owed in court and if borrower doesn’t pay, the lender automatically receives title in a timeframe ordered by the court

Subagent – an agent working on behalf of another agent to represent the client

Subdivision – the legal division of one parcel of land into two or more parcels

Subject to – a method for taking over a mortgage; original mortgagor is legally responsible for the loan and any deficiencies after a foreclosure; best for buyer

Sublet – transfer of a portion of one’s interest in a lease to a third party

Subordination – to become junior to a future lien holder

Subprime – risky loans made to borrowers with high debt to income ratios or credit scores below 620

Substitution – the idea that consumers will choose the least expensive option when offered similar goods

Superfund Site Assessment – the testing of a piece of real estate under CERCLA to determine if it is contaminated and how it should be cleaned up

Supply – how many there are of something on the market; the more plentiful something is, the less value it has and vice versa

Surety – someone who guarantees and becomes legally responsible for another Surrender – cancelation of a lease or other contract prior to expiration Survey – examining an area to construct a map or description of property

Swing loan – a type of bridge loan used by borrowers purchasing a new home before selling their existing home

Syndication – a corporation formed for the investment in a piece or pieces of real estate

Take over mortgage – when a buyer assumes the debt of the seller during a sale

Taxpayer Relief Act of 1997 – your primary residence is sheltered from capital gains tax up to $250,000 for a single person and $500,000 for a married couple

Tax base – total taxes collectable by the municipality or town

Tax rate – the municipal property tax rate expressed in mills (dollars per $1,000 of value)

Tax roll – the list that shows every property subject to tax in a given town

Tax sale – sale of property by public auction to satisfy delinquent taxes

Tax title – ownership acquired at a tax sale

Tenancy at sufferance – a tenancy arising when a tenant remains in possession after a lease expires, without the owner’s permission

Tenancy at will – a tenancy that may be terminated at any time by either the tenant or the landlord

Tenancy by the entirety – a type of co-ownership for married couples only

Tenancy in common – the default form of co-ownership where owners may have equal or unequal interests

Term – length; could refer to term of lease or other contract Testate – having a valid will before death Testator – person leaving a will

The Board – Board of Registration of Real Estate Brokers and Salespersons; enforces MA licensing law; office located at 1000 Washington St. Boston; made up of 5 members, 3 Brokers with 7+years of experience and 2 unlicensed members of the public

The Clean Water Act of 1972 – regulates pollution of navigable waters

Tidal flats – land between the high and low water lines Time is of essence – punctual performance is required Title – ownership

Title defects – clouds on title or other ownership issues

Title insurance – insurance against the loss of funds due to unknown title defects

Title reference – book and page number stamped on a deed to indicate where recordation may be found at registry of deeds

Title search – an examination of public records to determine property ownership history

Title theory state – a state where the bank holds legal title to mortgaged property, and the borrower holds equitable title

Title V – requires septic system to pass inspection within 2 years prior to sale (or 3 years if pumped every year) or 6 months after sale; seller and buyer negotiate who brings into compliance if septic system fails inspection

Topography – the arrangement of natural features in an area

Torrens system – the US system of land registration

Trade fixtures – property that is permanently attached for business purposes, and treated as personalty despite its attachment

Transferability – real estate free from clouds on title

TRID forms – TILA-RESPA Integrated Disclosure forms which creates a more detailed outline of the costs of credit for the consumer

Trustee’s Deeds – deeds executed by a trustee to convey real estate to anyone besides the trustor

UCC – the Uniform Commercial Code; the laws governing business and financial transactions

UFFI – Urea Formaldehyde; insulation material that produces formaldehyde vapor when it breaks down and was banned in 1979

Under improvement – not spending enough money improving a property; may lead to a decreasing return

Underground storage tanks (USTs) – any storage tanks for chemicals or gas that are 10% or more buried underground; in MA, banned under 21E

Unearned increment – increase in value, not anticipated by owner, due primarily to outside forces rather than personal efforts of owner. For example: population growth and inflation

Unenforceable – when a contract or covenant is unable to be carried out due to something being unfair or impossible; for example, verbal contracts

Uniform Settlement Statement – lists all of the details and costs of the real estate transaction; used to be referred to as HUD-1 and then after October 2015 changed to ALTA Statement

Unilateral contract – one party makes a promise to another without a reciprocal promise

Unimproved property – raw land without improvements

Unit-in place method – evaluates the value of systems and components (ex. HVAC, plumbing) in the property; used for both reproduction and replacement costs

United States Department of Treasury – established in 1789 to manage government revenue; raises revenue through taxes, borrowing money, and printing money

URAR – Uniform Residential Appraisal Report; the most widely used method of communicating a residential appraisal, and required by Fannie Mae/Freddie Mac

USPAP – the Uniform Standards of Professional Appraisal Practice, a code of conduct for appraisers

Usable square footage – the square footage within the four walls of a leased premises

USDA – United States Department of Agriculture; USDA Financing offer loans to low and moderate-income Americans in rural areas

USDA Multi-Family Housing Program – rental housing loans for very low, low and moderate income

Use – under zoning, refers to how a property can be used

USPAP – the Uniform Standards of Professional Appraisal Practice, a code of conduct for appraisers in federally related transactions

Usury – charging a higher rate of interest than is legally allowed Utility – how useful something is; the more useful something is, the more demand there is

Utilization pooling – property owner doesn’t have the right to capture all liquid minerals that exist under their land, but is entitled to a fraction of them

VA Financing – Veterans Affairs financing offered to honorably discharged veterans that allows for 100% financing

Vacancy Rate – The percentage of empty (vacant) units in a rental property

Valid – legally binding; in terms of a contract it has all of the essentials of a contract: offer and acceptance, legal object, consideration, and reality of consent and competence

Valuable consideration – money when exchanged as something of value between the parties of a contract Value – how much a ready, willing and able buyer will pay for something Value-in-Use – the value to a particular user of a property; for example, farm value vs. raw real estate value Variable interest rate – found in an adjustable rate mortgage, this is when the interest rate changes over the lifetime of the loan Variance – special permission from a city to use land in exception to zoning laws

Void – invalid, not legally binding Voidable – a contract that is valid, but can be voided by a court Voluntary lien – a lien or financial limitation to realty that a person willingly assumes, such as a mortgage

W2 – employee status according to IRS classifications

Warranty deed – a deed where the grantor is liable for claims against title Weighted average – an average where each number does not have an equal impact on the final average; used in appraising

Wetlands – areas that are either permanently or seasonably wet creating a certain soil and plant life that has adapted to the moisture

Wetlands Protection Act – Massachusetts law enforced by DEP and conservation commission; requires buffer zones of at least 100ft. from any wetlands with minor changes permitted after 50ft.

Will – how property of the deceased is transferred Wraparound mortgage – seller financing that wraps around the seller’s existing debt, so that the buyer pays not only their mortgage, but also the seller’s existing mortgage Writ of execution – a legal writing issued to enforce a judgment or court decree Yard – 3 feet Zoning – local land controls and regulations enacted for the public good Zoning Board of Appeals (ZBA) – the local authority that approves variances and conditional use permits

Zoning enforcement officer – a municipal employee who enforces zoning