Real Estate
Terms & Definitions

The real estate industry has its own unique language and, without some knowledge of this language, you may find yourself a bit confused if you become involved in a real estate transaction. Here is an explanation of commonly used terms and phrases in the real estate industry.

Agreement-If in writing, is a legally binding contract made between two or more persons.

Appraisal- A report from an independent third party detailing the estimated value of real estate.

Assessment- (1) The valuation of real estate for purpose of taxes or special improvement charges. (2) The amount of taxes or special improvement charges. Special improvement charges are usually for the costs of streets, sidewalks, sewers, etc.

Closing- A meeting of all parties involved in a property transaction during which the transaction is consummated.

Commitment- Also called "binder." A document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued.

Covenant- A formal agreement or contract between two parties in which one party gives the other certain promises and assurances.

Deed- A document through which a conveyance of property is effected.

Earnest Money- A deposit of funds by the purchaser of a piece of real estate as evidence of good faith.

Easement- A right to use all or part of the land owned by another for a specific purpose. An easement may, for example, entitle its holder to install and maintain sewer or utility lines.

Encroachment- Any building, improvement or structure located on one property (such as a wall, fence or driveway) that intrudes upon the property of another.

Equity- The market value of real property, less the amount of existing liens.

Escrow- A method of closing a real estate transaction in which all required documents and funds are placed with a third party for processing and disbursement.

Fixed Rate Mortgage- A mortgage having a rate of interest that remains the same for the life of the mortgage.

Homeowners Insurance- Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also includes coverage such as personal liability and theft away from home.

Market Value- The average of the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing but not compelled to sell, would accept.

Mortgage- A conditioned pledge of property to a creditor as security for the payment of a debt.

Mortgage Insurance- Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price.

Multiple Listing- The pooling in a central bureau of listings of properties for sale. These listings are held individually by members of a group of real estate brokers, with the agreement that any member of the group may sell the properties and, in the case of a sale, the commission will be divided between the broker making the sale and the broker who filed the listing.

Plat- Also called "plat map." A map dividing a parcel of land into lots, as in a subdivision. A plat book contains the plat maps for a given area.

Sales Agreement- A contract entered into between a buyer and seller, setting forth the terms, provisions and conditions of a sale of real estate.

Title- (1) A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate or an inheritable right or interest therein. (2) The rights of ownership recognized and protected by the law.