Additional Principal Payment Extra money included in the monthly payment to help reduce the principal and shorten the length of the loan.
Adverse Possession The acquisition of title to property through possession without the owner’s consent for a certain time frame.
Affidavit A written statement or declaration sworn to before an authorized person, such as a notary public.
Appraisal The estimation of the value of a legal interest in land.
Appreciation The amount by which real property (or any other asset) has increased in value.
Asset An item of economic value owned by a person or corporation; especially that which could be converted to cash (such as cash, a house, a car).
Assignment The transfer of rights from one individual or firm (assignor) to another individual or firm (assignee).
Assignor A person who transfers the rights and interests of a property.
Assumable Mortgage A mortgage that can be transferred to another borrower.
Back-to-Back/Double Closing When both the investor and the tenant/buyer close on the house; the investor buys it from the seller and the tenant/buyer buys the house from the investor on the same day.
Backdoor Offer A secondary bid for a property that the seller will accept if the first offer fails.
Balloon Payment Any payment of principal over and above the regular payment.
Basic Holdback This refers to what the lienee can hold back in a construction lien agreement.10 % of the price of the construction services (labour and materials) can be withheld by the owner.
Bilateral Both parties are obligated to uphold their end of the deal.
Binding Binding simply means that something works, or that it is legal. If a contract is binding, it means it is legal. There are various reasons why a contract would not be binding: if one party does not sign, for instance, or if one party is under legal age.
Blanket Mortgage A mortgage that covers more than one property owned by the same borrower.
Buy and Flip A person assigns his/her rights under a lease option to another person, giving them the rights you had.
Buy-Down Mortgage A home loan in which the lender receives a premium as an inducement to reduce the interest rate during the early years of the mortgage.
Chain of Title This is basically just the history of what a particular title of property has been through.
Cloud on the Title This is an outstanding claim or unfulfilled condition that would affect the owner’s title of property.
Comparative Method An appraisal method that bases the value of the subject property on the price of similar properties that have sold recently. Also named the Market Method.
Conditional Contract The contract will be fulfilled only when one party fulfills certain conditions.
Consideration The value, asset, service, information etc. which is offered to another party in a contract in exchange for that party’s agreeing to enter the contract. A contract is not binding if each party does not offer at least some consideration to the other party(ies).
Construction Lien This is the same as the general lien except that the legal right or claim that is filed against a property is done so by an individual or a corporation based on construction services (labour or materials), rather than just outright money.
Contract A contract is a legally binding agreement that two or more parties sign, thereby obligating them to conditions that they have agreed upon. Because two or more parties are involved it is therefore considered a “bilateral” greement. It is therefore a legally enforceable agreement.
Corporate Entity Rather than using your own name in lease option transactions you can incorporate yourself under a business name. The advantage of doing this is that it will protect you from personal liability. If anything were to go wrong with the transaction then only your corporation would be held legally liable. In other words, the courts could not go after your personal property, such as your own house, car, etc. (nothing not registered to the corporation).
Covenant Agreements written into deeds or other instruments that promise the performance or non-performance of certain acts or restrictions on a property.
Deed A written instrument that conveys title to real property.
Deed Restriction An imposed restriction on a particular deed that limits the use of the land/property.
Default Failure to fulfill a duty, such as to pay a loan instalment.
Deposit Money given by the buyer with an offer to purchase property. Also called earnest money.
Discounting The process of expressing expected future income in terms of a present value.
Down Payment The amount of money provided by the Purchaser toward the total price of the property (not including legal fees or other acquisition costs). In general, down payment plus mortgage equals purchase price.
Earnest Money A down payment made by a buyer as evidence of good faith. It is non-refundable.
Easement A right that may be exercised by the public, or individuals on, over or through the property of others.
Eminent Domain A right of the government to acquire a property for public use; the owner of the property would be fairly compensated.
Encumbrance A claim or lien that complicates title process.
Equitable Interest or Equity “Equitable” or “equity” refer to the difference between the value of something, such as a property, and whatever loans are still owing on that value. In other words, equity is the amount that someone actually owns. For instance, if you own a property that is worth $200,000 and you have a mortgage of $150,000 on the property, then your equity or equitable interest in the property is $50,000 ($200,000 – $150,000). Someone can have equitable interest on a property with a very little amount as well. If for the same example your mortgage is $195,000 you would still have equitable interest in the property worth $5,000.
Equity The difference between the value of a property and the amount owned on it. This can also be called the owner’s interest.
Equity (in mortgage financing) The difference between a property’s market value or purchase price and the debt incurred to purchase the property.
Escrow A written agreement between two or more parties stipulating that certain instruments pertaining to a property be placed with a third party and that the third party is to deliver such documents to a particular person on the fulfillment of certain requirements (that the parties agreed to beforehand).
Extent of an owner’s interest in property.
Estate for years Estate limited to a term of years a “lease” after term is over, the property goes back to the former owner.
Fee simple Largest interest you can have in property; full ownership.
Fiduciary Someone who transacts business of handles money or property on behalf of someone else.
Forbearance A course of action a lender might pursue to delay foreclosure or legal action against a delinquent borrower.
Foreclosure A legal action taken by a mortgagee to obtain possession of a property, by reason of the mortgagor’s default in payment of the principal and/or interest of the mortgage debt.
FSBO For Sale By Owner; the owner sells his/her house without using a realtor.
Grantee The party to whom the title to a property is conveyed: the buyer.
Grantor The person who conveys property by deed: the seller.
Inflation This event occurs when there is more money available than there are goods and services to be purchased.
Instrument A written legal document.
Joint Tenancy Ownership of property by two or more persons, each of whom has undivided interest.
Land Contract A land contract is a promise to pay; that is, if you buy a property under a land contract, you promise to pay a certain amount on or before a specific date. Once the terms are fulfilled the seller will deed the property over to the buyer.
Land Trust A means of taking control of a property anonymously. The only name that will appear on public records is the name of the trust and usually the name of the trustee. This provides some asset protection because the records are hard to find.
Landlord One who rents a property to another party, generally referred to as a tenant.
Lease A lease is a contract between a landlord (lessor) and a tenant (lessee) stating that the tenant can use the landlord’s property for a certain amount of time and for a certain amount of money (rent). The contract is a legal document that lists the responsibilities of each party and their obligations to one another. A lease can be verbal or written, as well as either express or implied. “Express” refers to a precise instruction that has been given in the lease, such as “No Pets”, “Implied” refers to assumptions given the continuous use of the property that are not clearly written or stated.
Lease option A lease contract that allows the optionee the right to purchase the property during the period of the lease. Payments under the lease may be credited (in whole or in part) against the purchase price.
Leasehold The interest given to a lessee of real estate by a lease.
Legal Liability This simply refers to responsibility or accountability. If you are held ally liable for something that means that you are legally responsible for it. There is both personal liability, which means that an individual person is held accountable and their personal possessions could be confiscated in order to pay back a loan, for instance; and then there is corporate liability, which means that a corporation is held responsible and only the corporation�s possessions could be confiscated if need be.
Lessee A person to whom property is rented to under a lease.
Lessor One who rents property to another under a lease.
Lien A legal right or claim against a property until a debt is paid. The lien is usually in the form of an agreement between two parties between the one who owes the money (lienor) and the one to whom the money is owed (lienee). The lien could also be a statutory provision given out by the government; this would occur in the case of a tax lien, where the lienor owes the government taxes.
Life Estate The conveyance of title to a property for the duration of the life of the grantee.
LisPendens A legal document filed in the office of the country clerk giving notice that an action or proceeding is pending in court affecting the title of a certain property.
Market Value The price that a piece of property sells for a particular point in time.
Marketable Title A title that the court considers to be so free from defect that it will enforce its acceptance by the buyer.
Memorandum A message or a communication that changes or modifies an agreement. To make a memorandum legally binding it would have to be signed as an affidavit.
Monthly Credits A portion of the monthly payments in either a rent-to-own situation or a lease option that is applied to the down payment of the house if the house is bought at the end of the term. This has been referred to in the past as rent credit.
Monthly Payment The amount agreed upon by optionor and optionee that is due monthly during the term of the lease option agreement. This has been referred to in the past as rent.
Moratorium An emergency act by a legislative body that will suspend the legal enforcement of contractual obligations.
Mortgage A mortgage is basically a loan, wherein the lender (mortgagee) loans out money for the borrower (mortgagor) to purchase real estate property. While the property is owned by the mortgagee until the mortgagor can pay off the loan, the mortgagee is able to live and use the property as if it was his/her own.
Motivated Seller Any seller with a strong incentive to make the deal.
Non-Qualifying Assumption A mortgage or deed of trust that does not contain a due-on-sale clause thereby allowing transfer of title freely without permission of the lender.
Note The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.
Notice Of Default A lender’s initial action when a mortgage payment is late, and attempts to reconcile the issues out of court.
Option An option essentially means exactly what you would think: a choice or a selection. When it comes to a contract you can essentially choose or select a certain option. An option differs from a condition in the sense that a condition implies that a particular party must make an effort to satisfy the condition in order for the contract to be binding. With an option, though, there are no obligations that have to be fulfilled in order for the agreement to be binding. An option is therefore unilateral in the sense that only one party can make use of it. Generally, though, when dealing with an option in a contract, both parties will impose certain conditions before the option is allowable. An option can either be exercised, which means it is used and the option contract (in this case the purchase and sales agreement) therefore becomes a binding bilateral agreement, or it can be forfeited.
Option Deposit Also referred to as Option Money. This may be exchanged from an optionee to an optionor as a deposit at the beginning of a lease option agreement. This money may be credited back (in whole or a portion) by the optionor to the optionee should the optionee exercise the option to purchase the property as part of the down payment.
Optionee The party that is occupying the property and making monthly payments to the optionor in a lease option arrangement. They have the option to purchase the property or walk away from the agreement at the end of the agreement term.
Optionor The party that is offering a property in a lease option. Generally they are the home owner. They must sell the property to the optionee if the optionee exercises their option to purchase during the term of a lease option agreement.
Periodic tenancy Week-to-week or month-to-month estate.
PITI Principal, Interest, Taxes, Insurance. When a buyer applies for a loan, the lender will calculate the PITI. The figure designed to represent the borrower’s actual monthly mortgage-related expenses.
Promissory Note A document signed by a borrower promising to repay a loan under agreed-upon terms.
Property Property is divided into either personal property or real property. Personal property refers to anything that is moveable, such as a car or a piece of furniture; real property refers to the ownership of land, including both the tangible elements, such as the walls of the house, the garage, etc. and the intangible elements, such as the rights of ownership, such as the right to occupy or to sell, etc.)
Purchase and Sales Agreement A Purchase and Sales Agreement is the contract used between a seller and a buyer in the transaction of selling and buying a property; that is where the seller passes the title of the property over to the buyer.
Quitclaim Deed A deed that conveys only the grantor’s rights or interest in real estate; this is generally considered inadequate except when interests are being passed from one spouse to another.
Real Estate The land and any improvements, such as a house, on it.
Realtor A real estate agent/representative.
Record When you record a document it means you are filing it in the public records of your community. This means that anyone can view your document. It also means that if you need proof of a certain transaction for whatever reason, you will have it too.
Recourse The right to claim against an owner or a property or note.
Refinancing The process of replacing an older loan with a new mortgage that has better terms.
Rent-to-Own An agreement in which a tenant pays rent for a specified period of time and at the end, buys the house.
REO (Real Estate Owned) Property acquired by a lender through foreclosure and is held in inventory.
Sandwich Lease An arrangement whereby an investor leases a property with an option to buy from a homeowner, then subleases the property to a third party.
Specific Performance A remedy in a court of equity compelling a defendant to carry out the terms of an agreement.
Statute of Frauds A law requiring certain contracts to be made in writing or partially complied with in order to be legally enforceable.
Sublet/Sublease A rental contract between a tenant and someone who rents from the tenant.
Survey The blueprint of a property showing measurements, boundaries and area.
Tenancy at Will A license to use or occupy lands and tenements at the will of the owner.
Tenancy by the Entirety An estate that exists only between husband and wife with equal right of possession and enjoyment during their joint lives.
Tenancy in Common An ownership of property by two or more parties, each of whom has an undivided interest.
Title The lawful ownership of property.
Title Company A firm that examines title to real estate and/or issues title insurance.
Title Report A document that indicates the current state of a title, such as easements, covenants, liens and any other defects. It may not describe the chain of title.
Title Search An examination of public records to determine the ownership of a property.
Trust Deed Conveyance of real estate to a third party to be held for the benefit of another.
Trustee One who holds legal title of a property in trust for the benefit of another person; he/she is required to carry out specific duties with regards to the property, or he/she might just have the power in terms of the disposition of property for another’s benefit. Anyone who acts as a guardian or fiduciary in relationship to another person, such as a public officer toward his/her constituents, etc.
Trustor One who creates a trust; often called the settlor.
Undivided Interest Ownership of real estate by joint tenants or tenants in common under the same title.
Unilateral Only one party has to uphold his/her end of the deal.
Warranty Deed A conveyance of land in which the grantor guarantees the title to the grantee.