Real Estate Glossary

Some Commonly Used Real Estate and Financing Term




A relationship in which one party (the principal) authorizes another party (the agent) to act as the principal’s representative in dealing with third parties.


One who acts for and in place of a principal for the purpose of affecting the principal’s legal relations with third persons.


The repayment of a financial obligation over a period of time in a series of periodic installments. In a level-payment mortgage, this is the portion of the debt service that reduces the principal.

Amortized Loan

A financial debt that is paid off over a period of time by a series of periodic payments. A loan can be fully amortized or partially amortized requiring a balloon payment to satisfy the debt at the end of the term.

Annual Percentage Rate (APR)

The yearly cost of credit. Interest Rate plus finance charge.


An opinion or estimate of value performed by a person licensed to do so.


An increase in value.

As is

A phrase which disclaims any promises or warranties. A person purchasing real estate “as is” takes it in exactly the condition in which it is found. Seller cannot hide latent defects.

Assessed Value

The value placed on property, by the tax assessor, for the purpose of determining the property tax.

Attorney in Fact

A person given the authority to act on behalf of another under a power of attorney.

Balloon Payment

The remaining balance, at maturity, on a loan that has not been completely repaid through periodic payments. Once paid, the outstanding balance is zero. Partially amortized loan.

Certificate of Title

A document given by the title examiner stating the quality of title the seller possesses.

Closing Costs

The expenses incurred and paid at the time of settlement in the transferring of property.


Property which has been pledged as security for a loan.


Comparable property recently sold which is used in the market data approach.

Comparative Analysis

A method of determining the value of property in which the selling prices of similar properties are used as the basis for estimating the value of the subject property.


An agreement resulting from the objective expression of mutual assent by competent parties, which the law recognizes in some way as a duty, and the breach of which the law gives a remedy.


A rejection of an offer to buy or sell, by a seller or buyer, with a simultaneous substitute offer.


The rights that a husband acquires in the wife’s property upon her death.


A written instrument, usually under seal, which contains an agreement to transfer some property interest from a grantor to a grantee.


A decrease in value due to physical deterioration, functional or economic obsolescence.

Discount Points

A fee charged by the lender at settlement that results in increasing the lender’s effective yield on the money borrowed. One discount point equals one percent of the loan amount.


The rights that a wife acquires in her husband’s fee simple property.

Down Payment

The amount paid by the purchaser, which when added to the mortgage amount, equals the total sales price. At time of closing this is referred to as equity.

Earnest Money

A sum of money given to bind an offer or agreement.


value of real estate less any liens against it.


The deposit of funds with a neutral third party who is instructed to carry out the provisions of an agreement.


A person appointed in the will to carry out the instructions of the testator, pay the debts of the estate, and dispose of the property as instructed.

Fair Market Value

The price negotiated for a parcel of real estate in a competitive market where both buyer and seller are free to act and under no undue pressure.

First Mortgage

A mortgage on real estate in which the lender’s rights are superior to the rights of subsequent lenders. (Recorded first)


A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the note.

Gross Income

The actual income received from property before the deduction for any expenses.


(1) the sum paid for the use of money (2) the degree of rights in the ownership of land.

Interest Rate

The cost of using money expressed as a percent per period.

Land Contract

The seller accepts a down payment on a parcel of land but title to the property does not pass until the last principal payment has been received. This is referred to as an installment sales contract or a contract for a deed.


An agreement by which a landlord gives the right to a tenant to use, and to have exclusive possession, but not ownership of realty, for a specified period of time, in consideration for the payment of rent.

Legal Description

A written description of a parcel of land which locates it precisely and will hold up in court. (Does not include address.)


A legally recognized right to enforce a claim or charge on the property of another for payment of some debt, duty or obligation.


The ease with which an asset may be converted into cash.

Listing Contract

An employment agreement between an owner and broker defining the duties and rights of both parties.

Market Value

The price at which a willing buyer and a willing seller will agree upon, where neither is under any undue pressure, and both are negotiating at arms length with complete knowledge of the market.


A legal document used to secure the performance of an obligation, in which the borrower or mortgagor agrees to pledge property to secure the debt represented by the promissory note. (A contract).

Mortgage Banker

A financial middleman who, in addition to bringing the borrower and the lender together, makes loans, packages them, and sells the packages to both primary and secondary investors. Also services loans.

Mortgage Broker

A person who brings together the user of capital (borrower) and the supplier of capital (lender). For this service, a finder’s fee is usually paid by the borrower.

Offer and Acceptance

The necessary elements of mutual assent; for example, an agreement of one party to buy and another party to sell.


Private Mortgage Insurance.


1% of loan.

Quitclaim Deed

Only conveys what present interest a person may have in a particular property but makes no representations or warranties of title.

Real Estate

Land and all man-made improvements both on and to the land, plus all tangible interest in the real property. Surface, subsurface and air rights.


A registered trademark of the NATIONAL ASSOCIATION OF REALTORS. It is used by brokers and salespersons who hold active membership in the association.


A description of an extension of the existing financing either through the same lender or through a new financial arrangement.

Sales Contract

An agreement in which the buyer and seller agree to the terms and conditions of the sale of property.


The legally recognized evidence of a person’s right to possess property.


A legal relationship under which title to property is transferred to a person, called a trustee, who has control over the property, and must manage it for some other person — called a beneficiary.

Variable Interest Rate Mortgage (VRM)

The interest rate charged by the lender varies according to some index not controlled by the lender.

Warranty Deed

A deed in which the grantor makes formal assurance as to quality of title.

Howard Hanna Real Estate Services

Dearborn Birmingham Ann Arbor
22374 Garrison Street 800 N  Old Woodward Ave.
1898 West Stadium Blvd.
Dearborn,MI 48124 Birmingham, MI 48009
Ann Arbor, MI 48103
Suite 210