Real Estate 101

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These real estate terms and definitions are provided by Wisconsin Realty Solutions to educate and assist real estate consumers in buying and selling properties. Enjoy!

Acre - A measurement of land equal to 43,560 square feet.

Addendum - Addition or change to a contract between two or more parties.

Annual Percentage Rate - The total finance charges related to a loan. This must be disclosed to borrowers by lenders under the Truth In Lending Act.

Amortized Loan - A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.

Appraisal - An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested parties of suitable qualifications.

Appreciation - An increase in the worth or value of a property due to economic or related courses, which may prove to be either temporary or permanent; opposite of depreciation.

Abestos - A specific insulation that utilized a unique mineral that is now connected with certain respiratory diseases.

Arable - Land that is able to be cultivated or farmed.

Assessment - The imposition of a tax charge or levy usually according to established rates.

Balloon Payment - A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.

Brokerage - The bringing together of parties interested in making a real estate transaction.

Bridge loan - Short-term loan for borrowers who require more time to find a permanent financing solution.

Buyer's Agent - A broker or salesperson who represents the prospective purchaser in a transaction. The buyer's agent owes the buyer the common-law or statutory agency duties.

Capital Gain - Profit earned from the sale of an asset.

Capitalization Rate - Rate of return a property will produce on the owner's investment.

Cash Flow - Actual cash the investor will receive after deducting operating expenses and loan expenses from the gross income.

Causeway - Raised road bed above lowlands

Contingency - A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.

Counteroffer - A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

Cost Recovery - IRS ( Internal Revenue Service ) term for depreciation.

Cultura - Land which can be cultivated.

Deed - A written instrument that conveys title to an interest in real estate.

Descent - Acquisition of an estate by inheritance in which an heir succeeds to the property by operation of law.

Dual Agency - Representing both parties to a transaction. This is unethical unless both parties agree to it and illegal in many states.

Easement - Right to use the land of another for a specific purpose, such as a right of way or utilities.

Economic Life - The number of years during which an improvement will add value to the land.

Encumbrance - Anything such as mortgage, tax, or judgment lien, an easement, a restriction on the use of land or an outstanding dower right that may diminish the value of the property.

Equity - The interest of value that an owner has in property over and above the indebtness.

Exclusive Agency Listing - A listing contract in which the owner appoints a real estate broker as his or her exclusive agent for a predetermined period of time to sell the property on the owners behalf.

Fair Housing Act - Federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, or national origin.

Fannie Mae - Quasi-governmental agency established to purchase any kind of mortgage loans in the secondary mortgage market from primary lenders.

Fixture - An item of personal property that has been converted to real property because it has been permanently attached to the property.

Freddie Mac - A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market.

Homestead - Property that is owned and occupied as the family home. In many states a portion of the area or value of this land is protected or exempt from judgments or debt.

Interest - A charge made by a lender for the use of money.

Interior Trim - Moldings on the inside walls of buildings.

Investment - Money directed toward the purchase, improvement, and development of an asset with the expectation of income or profit.

Joint Tenancy - Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants.

Junior Lien - An obligation, such as second mortgage, that is subordinate in right or lien priority to an existing lien on the same realty.

Land - The surface of the earth extending downward to the center of the earth and upward infinitely into space.

Liquid Assets - Cash or other assets that can be immediately converted to cash.

Liquidity - Refers to the speed an asset can be converted to cash.

Listing Agreement - A contract between a property owner and a real estate broker in which the broker is employed as agent to find a buyer for the owner's property on the owner's terms, for which service the property owner agrees to pay a commission in order to sell a property.

Market Value - The most probable price a given property would bring within a local market area and under normal conditions.

Mortgage - A conditional transfer or pledge or real estate as security for the payment of a debt.

Multiple Listing Service (MLS) - A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing, and able buyers for the listed property more quickly. Commission for these sales is then split between the listing agent, buyer's agent, and the brokers involved.

Net Operating Income - The income projected for an income-producing property after deducting losses for vacancy and collection and operating expenses.

Over Improved property - A property that can't be sold at a price high enough to make up for the improvement costs.

Plat Map - Map of a town or section of land revealing the location and boundries of individual properties in that particular part of the state.

Principle - The original loan amount of the total due and payable at a certain date.

Procuring Cause - The effort that brings about the desired result. The broker who is the procuring cause receives a commission.

Real Property - The interests, benefits, and rights inherent in real estate ownership.

Replacement Cost - The construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original.

Reproduction Cost - The construction cost at current prices of an exact duplicate of the subject property.

Satisfaction of Mortgage - A document acknowledging the payment of a mortgage debt.

Section - One square mile of land or 640 acres.

Special Assessment - A tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement such as a street or sewer.

Steering - The illegal practice of directing home seekers to particular areas either to maintain the homogeneity of an area or to change the character of an area, which limits where they can live.

Stigmatized Property - Property that has acquired an undesirable reputation due to an event that occurred on or near it such as death, illness, or person tragedy.

Survey - The process by which boundaries are measured and land areas are determined.

Syndicate - A combination of people or firms formed to accomplish a business venture of mutual interest by pooling resources.

Tax Exchange (1031) - Section 1031 of the Internal Revenue Service code outlines the tax status of like kind real estate exchanges. These like kind exchanges provide a deferral of capital gain's taxes that would otherwise be due upon the sale of a piece of real property. This is often referred to as a "1031 Tax Exchange".

Title Insurance - A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than incumbrances, defects, and matters specifically excluded by the policy.

Variance - Permission obtained from zoning authorities to build a structure or conduct a use that is expressly prohibited by the current zoning laws; an exception from the zoning ordinances.

Water Rights - Common law right held by owners of land adjacent to rivers, lakes, or oceans, and includes restrictions on those rights and land ownership.

Zero Lot Line - Building directly on the boundry line of a lot.

Zoning Ordinance - An exercise of police power by a municipality to regulate and control the character and use of property.

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