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Real Estate Terms You Should Know

Term	Description
Acceptance	Acceptance occurs when all buyers and sellers have signed an identical copy or separate but identical copies of the offer.
Adjustable Rate Loan	A loan with a fluctuating interest rate.
Adverse Fact	Something that significantly and adversely affects the value of a property, significantly reduces the structural integrity of improvements to real estate, prevents a health rist to occupants of the property, or information that indicates that a party to a transaction is not able to or does not intend to meet the obligations under a contract made concerning a transaction.
Agent	A person who is authorized to act on behalf of another
Amendment	An amendment is used to change the terms of a contract.
Appraisal	An estimate or opinion of value based on supportable evidence and approved methods.
Appraiser	An independent person trained to provide an unbiased estimate of value for a fee.
Assessed Value	The determination of a property’s value for determining property taxes. Assessed value is usually a percentage of the appraised value.
Binding Acceptance	Creates an enforceable contract between parties. An offer is binding upon both parties only if a copy of an accepted offer is delivered to the party making the offer prior to the date established for binding expectations.
Bridge Loan	A residential financing arrangement in which the buyer of a new home borrows money and gives a second mortgage on the buyer’s unsold home to fund the acquisition of a new home.
Buyer Agency Agreement	A written employment agreement that creates an agency relationship between a firm and a buyer. The buyer employs the firm to put forth a reasonable effort to find a property for the buyer to purchase and to negotiate on the buyer’s behalf.
Cancellation Agreement and Mutual Release	A contract used to terminate a contract for sale or agency agreement when the parties mutually agree to terminate their original agreement.
Closing Costs	Expenses of a sale that a buyer must pay in addition to the property’s purchase price or that are deducted from a seller’s proceeds. Responsibility for closing costs is negotiated by the parties.
Closing (Settlement)	Completion of a real estate transaction where mortgage funds are given to a buyer who exchanges them with a seller for legal title to the property.
Commission	The amount owed to a firm as payment for services rendered in connection with a listing contract or buyer agency agreement.
Contingency	A provision in a contract that requires the completion of a certain act or the happening of a particular event before that contract is binding.
Contract	A legally enforceable promise or set of promises that must be performed, and for which, if a breach occurs, the law provides a remedy.
Counter-offer	An offer that rejects a prior offer and proposes new terms.
Credit Score	A statistical method of assessing the credit risk of a loan applicant.
Deed	A document that transfers ownership of title.
Deed Restrictions	Clauses in a deed that limit the future use of the property, such as the type of structure that can be erected or the purpose for which a structure may be erected.
Designated Agency	A multiple representation relationship in which both the buyer and the seller are clients of the same firm in the same transaction and each client receives negotiation services from an agent of the firm.
Earnest Money	Up-front cash or an item of value from the potential buyer that indicates an intention to make good on an offer to purchase.
Easement	An incorporeal right held by one party to make use of the land of another for a limited purpose.
Eminent Domain	A government’s right to take private land for public use.
Encroachment	To advance upon, or trespass upon, the property of another, as in the extension of some improvement or object across the boundary of a neighboring tract.
Encumbrance	Any claim against a property that may diminish its value.
Equity	The excess of a property’s fair market value over the outstanding debts.
Escrow	The process by which money and/or documents are held by a disinterested third party until satisfaction of the terms and conditions of the escrow instructions have been achieved.
Exclusion	The right held by a property owner or lessee to keep others from using a property.
Exclusive Agency Listing Contract	An agency agreement giving the listing firm the exclusive right to market the seller’s property. The seller promises to pay a commission to the listing firm if the terms of the contract are fulfilled, except if the seller finds the buyer.
Exclusive Right to Sell Listing Contract	An agency agreement giving the listing firm the exclusive right to market the seller’s property. The seller promises to pay a commission to the listing firm if the terms of the contract are fulfilled, no matter who finds the buyer.
Expired Property	A property that was listed for sale but did not sell during the term of the listing contract.
Federal Housing Administration (FHA)	A government agency that insures mortgage loans for financial institutions against loss in the event of foreclosure.
Firm	A licensed individual broker acting as a sole proprietorship or a licensed broker business entity.
Finance Charge	A charge incurred by a consumer for the service of borrowing money.
Fixed Rate Loan	A loan with a rate that does not change over the life of the loan.
Fixture	An article that was once personal property but has been so affixed to real estate that it has become real property.
Foreclosure	A legal process used when a borrower defaults on a debt. A court orders the sale of a property to satisfy a debt.
Gap Endorsement	When a title company provides coverage for liens that occur between the title commitment and the recording of the deed.
Gap Period	The time between the effective date of a title commitment and the recording of the owner’s interest.
Homestead	The home or dwelling of a married person and so much of the land surrounding it as is reasonably necessary for use of the dwelling as a home, but not less than one-fourth acre, if available, and not exceeding 40 acres.
Interest	A charge for the use of money.
Joint Tenancy	Two or more persons holding title to real property who are named on the same deed and share an undivided possession of the property. Joint tenants by the right of survivorship.
Land Contract	A type of seller financing in which title does not transfer from seller to buyer until the contract has been paid in full. Under a land contract, a buyer gains equitable title and a seller maintains legal title.
Lessee	Tenant.
Lessor	The property owner leased the property to a tenant. Landlord.
Licensee	A licensee generally refers to a licensee, salesperson, broker, or business entity.
Lien	A legal right to place a claim or encumbrance on property or have it sold for payment of a debt.
Listing Firm/Licensee	The listing firm is the firm that the seller has employed under a listing contract. The listing licensee is the licensee associated with the listing firm who acquired the listing.
Listing Contract	A written employment agreement that creates an agency relationship between a firm and a seller.
Loan-to-Value Ratio	The relationship between the loan amount and the selling price.
Marital Property	A classification of property ownership recognized in Wisconsin. Each spouse has an undivided one-half interest in each item of marital property.
Market Analysis	A study of a property by a real estate agent or appraiser to establish a likely selling price of the property. It involves a study of recent sales in the market area that are similar to the subject property on the basis of location, terms, physical features, and date of sale.
Market Price	The price a ready, willing, and able buyer actually pays for a property.
Market Value	The price at which a property would sell on the open market to a buyer who is not under duress, not related to the seller, is well-informed about the property, and who has been found within a reasonable amount of time.
Marketable Title	A title that is free from defects and encumbrances and may be transferred to another party.
Material Adverse Fact	An adverse fact that a party indicates is of such significance, or that is generally recognized by a competent licensee as being of such significance to a reasonable party, that it affects the party’s decision to enter into a contract or the terms of a contract.
Material Fact	Any fact that is relevant to a person making a decision. Agents must disclose all material facts to their clients.
Misrepresentation	Any statement of fact by one person to another, either by words or actions, which is not in accordance with the actual facts.
Mortgage	A financial instrument used to purchase property is comprised of the mortgage document and the mortgage note.
Mortgagee	Lender
Mortgage Lien	Lien rights are given to a lender by a borrower in exchange for the loan.
Mortgage Note	A document signed by a borrower that states the loan amount, the interest rate, the time and method of repayment, and the obligation to repay.
Mortgagor	Borrower
Multiple Counter-Proposal	A way for a seller to negotiate with multiple buyers. The seller is not bound to a particular buyer unless the seller accepts the buyer’s approval of the multiple counter-proposals.
Multiple Listing Service (MLS)	A service permitting firms to pool their listings and offer to cooperate and compensate other firms. A voluntary organization where members agree to market their properties and offer a subagency to other agents.
Multiple Representation Relationship	A relationship between a firm and two or more of the firm’s clients where the clients are parties in the same transaction.
Offer to Purchase	A promise made to purchase a seller’s property under certain terms.
One-party Listing	A listing that specifies a particular buyer. The listing firm will earn commission if the named buyer purchases the property.
Open Listing	A listing that gives more than one firm the right to sell a property. The firm that procures a buyer earns the commission.
Option to Purchase	An agreement to keep open, for a set period, an offer to sell or lease real property.
Origination Fee	The dollar amount charged by a lender to cover the time and expenses incurred to arrange a loan. The fee covers the lender’s overhead for processing the loan throughout the loan term.
Personal Property	Property that is portable or unattached to the real estate.
Plat	A map showing the specific location and boundaries of land that has been subdivided into lots.
Points	Prepaid interest that is collected at closing. This money is used to buy down the interest rate of a mortgage.
Private Mortgage Insurance (PMI)	An insurance policy written to insure a portion of a mortgage amount for a borrower.
Property Taxes	Taxes levied by the government against real estate.
Radon	An odorless radioactive gas that can enter a home through cracks in a foundation or drains in the floor.
Real Estate Condition Report (RECR)	A report used by a seller to disclose to a buyer any known adverse facts.
Right of First Refusal	The right of a person to have the first opportunity to purchase or lease real property.
Salesperson	Any individual who is associated with a firm, other than a broker, or a person who is not required to have a license.
Selling Firm/Licensee	The selling firm is the firm that finds the buyer for the seller. The selling licensee is the person, within the selling firm, who found the buyer.
Severalty	Sole ownership of real property.
Single Agency	The practice of representing either the buyer or the seller, but not both, in the same transaction.
Special Assessment	A tax on property owners in the area of an improvement, such as new curbs or gutters.
Subagent	A firm that is engaged by another firm to provide brokerage services in a transaction but is not associated with the firm.
Survey	A process by which the physical boundaries of a property are measured.
Tenant in Common	A form of ownership where two or more people hold title to the same property. Each person’s interest is held in severalty, and each person retains the right to will away the person’s interest.
Time is of the Essence	The specified date in the contract by which agreed-upon acts must be completely performed, or the non-performing party will be in breach of the contract.
Title	The legal right to the possession of property. It implies that the title owner has acquired the property and the bundle of legal rights that accompany ownership.
Title Insurance Policy	An insurance policy that protects the insured against loss or defects that may occur in the title.
Transfer Fee	A state-imposed fee on the sale of property. The fee is 30 cents for each $100 of value that a party transfers.
Veteran’s Administration Loans (VA)	A government-sponsored mortgage assistance program.
Warranty Deed	A deed in which the grantor warrants a clear title to the property.
Zoning	The laws that determine how land may be used so that an area has orderly development and there is a minimization of conflicts between incompatible land users.