Real Estate Glossary

This list is provided for reference only. Each state has it's own real estate laws, terms and regulations for Realtors. In Arizona, your Realtor and Title Company handle most real estate transaction activities that involve attorneys in many other states. However, you have the right to seek the advice of an attorney or other professional counsel in any real estate transaction.

Calendar Year - A year which uses the actual number of days in each month for a total of 365 days in a year (366 days in a leap year).

Cap - A limit on how much the interest rate or monthly payment of an Adjustable Rate Mortgage - (ARM) can change, either at each adjustment or during the life of the mortgage.

Capital - Accumulated wealth. A portion of wealth which is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.

Capital Gain - Taxable profit on the sale of an appreciated asset.

Capitalization - The estimation of the value of income producing property by dividing the annual net income by the Capitalization Rate.

Capitalization Rate - The rate of expected return on investment property. A ratio of income to value.

Cash Out - Receiving money back when refinancing your present mortgage.

Caveat Emptor - A legal term meaning "let the buyer beware".

Ceiling - The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Certificate of Eligibility - A certificate obtained by a veteran from a Veteran's Administration office which states that the veteran is eligible for a V.A. insured loan.

Certificate of Occupancy - Document issued by a local governmental agency that states a property meets the local building standards for occupancy.

Certificate of Reasonable Value(CRV) - An appraisal of property for the purpose of insurance by the Veteran's Administration.

Certificate of Title - A certification issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the public records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Certified Copy - A true copy, attested to be true by the officer holding the original.

Cestui que trust - One having an equitable interest in property, legal title being vested in trustee.

Chain of Title - A history of conveyances and encumbrances of a property from some starting point, whereby the present owner derives title.

Channeling - The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status; Steering. See Fair Housing - .

Chattel - Personal property.

Clear Title - A land title that doesn't have any liens (including a mortgage) against it.

Client - Person (or other entity such as a company) who employs the agent. Typically the seller is a client of the listing agent. The buyer can be a client (buyer's broker) or customer (seller's broker). A Client is also known as the Principal - .

Closing - The conclusion of the sales transaction when the seller transfers title to the buyer in exchange for consideration. These proceedings are usually held at a Title Company - or an Attorney's office.

Closing Costs - Extra expenses beyond the purchase price that are paid at closing. This includes legal fees and mortgage fees.

Closing Statement - A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits made, and all cash received and paid out.

Cloud on Title - A claim or encumbrance that may effect title to land.

Collateral - Something of value deposited with a lender as a pledge to secure repayment of a loan.

Co-Maker - Equally responsible for repayment as the borrower.

Commingling - The illegal practice of combining or mixing client's funds with the agent's own funds.

Commission - The compensation paid to a licensed real estate broker or by the broker to the salesman for services rendered. Usually a percentage of the selling price of the property.

Commitment - A written promise to make or insure a loan for a specified amount and on specified items.

Community Reinvestment Act (CRA) - The federal law which requires federally regulated lenders to describe the geographical market area they serve. Deposits from that area are to be reinvested in that area whenever practical.

Comparables - Properties which are similar to a particular property and are used to compare and establish a value for that property.

Compound Interest - Interest which is computed on the principal and any unpaid accumulated interest. Also see Simple Interest - .

Condemnation - The act of taking private property for public use, through due process under the right of Eminent Domain - , with compensation to the owner.

Condominium - A form of real estate, usually a dwelling with individual ownership of separate portions of the building plus shared ownership of the common areas.

Confidentiality - An agent is obligated to safeguard his/her principal's lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. The duty of confidentiality precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must, sell a property below the listed price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more than what has been offered for a property.

The duty of confidentiality does not include an obligation by a broker who represents a seller to withhold know material facts about the condition of the seller's property from the buyer, or to misrepresent the property's condition. To do so constitutes misrepresentation and impose liability on both the broker and the seller.

Consideration - The price or subject matter which induces a contract; may be in money, commodity, exchange, or a transfer of personal effort.

Construction Loan - Short term financing of real estate construction. Generally followed by the long term financing called a "take out" loan, issued upon completion of improvements.

Contingency - The dependence upon a stated event which must occur before a contract is binding. The most common contingency is a clause stating that the buyer must sell their present home before the contract becomes binding. If the buyers home does not sell within the time specified in the contract, the contract is cancelled.

Contingent Fee - Any fee that is earned upon the occurence of some specified event. Example: Listing contracts usually specify that the listing agent will be paid a fee at closing - .

Contract - A legally enforceable agreement to do, or not to do, a particular thing for a consideration - .

Contract for Deed - A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, conditional sales contract, or installment contract.

Contract for Exchange of Real Estate - A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash.

Contract of Sale - The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer. Sometimes called Land Contract, Contract of Purchase, Purchase Agreement, or Earnest Money Contract.

Contract Sales Price - The full purchase price as stated in the contract.

Conventional Loan - A real estate loan which is not insured by the FHA or guaranteed by the VA.

Conversion Clause - A provision in some ARM's that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually the conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed-rate mortgages. The conversion feature may be available at extra cost.

Convertible ARMs - ARMs - that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

Conveyance - Written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from one person to another.

Cooperating Agent - A real estate agent who sells a property. The selling agent may be (1) the subagent or listing agent of the seller; (2) a buyer's agent; or (3) a dual agent. Also called a selling agent - or participating agent - .

Cooperative Housing - An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or porperty owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Cost Approach to Value - An estimate of value based on current construction costs, less depreciation, plus land value. Also see the Income Approach to Value - and the Market Data Approach to Value - .

Cost Basis - Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns over the years.

Cost Plus Contract - A building contract setting the builder's profit as a set percentage of the actual cost of labor and materials.

Counter Offer - An offer made in response to a previous bid.

County - A division within a state, usually encompassing one or more cities or towns. In Louisiana this division is known as a Parish - .

Covenenant - A written agreement or restriction on the use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants - even if there is no homeowner's association.

Credit Limit - The maximum amount that you can borrow under a home equity plan.

Cul-de-Sac - A dead end street which widens sufficiently at the end to permit an automobile to make a "U" turn.

Customer - A buyer who is working with an agent who represents the seller. The term may also define a seller who is working with an agent who represents the buyer. CAUTION: If you are a Customer the agent is obligated to work for the benefit of the other party. You should always insist on being a Client - whether you are buying or selling.