Glossary

The replacement of excavated earth into a hole or against a structure.

An offer to purchase a property that already is under contract for sale. Backup contracts are accepted while a sale is pending. If the original transaction is cancelled or the buyers fail to secure financing, the seller may accept the secondary offer without putting the property back on the market. In markets where there are more buyers than homes for sale, backup contracts are common.

The final payment on a loan, when that payment is greater than the preceding installment payments and pays the note in full. An example is a debt requiring interest-only payments annually for five years, at the end of which time the principal balance (a balloon payment) is due. If a balloon is involved in real estate financing, the borrower will need to plan for the large balance that comes due.

A legal declaration of insolvency, that is, the inability to pay debts. Bankruptcy offers a legal refuge to those who are unable to pay money owed to their creditors. There are several types of bankruptcy, but the method used by individuals provides a court-enforced plan for satisfying action of existing debts, usually calling for extended payment schedules and, possibly, the forgiveness of some debt.

A deed that conveys real estate, generally lacking a warranty. The grantor will thus claim to have ownership but will not defend against all claims. Sometimes a property owner does not wish to offer a warranty deed but will give more assurance than is offered by a quitclaim deed. A bargain and sale deed is a compromise between those two.

Part of the rectangular survey or government survey method of land description. The base line is the major east-west line to which all north-south measurements refer.

The person who receives or is to receive the benefits resulting from certain acts.

To give or hand down personal property through a will.

That personal property given in the terms of a will.

Recorded restrictions affecting a subdivision and a part of all deeds to lots therein.

A written instrument that passes title of personal property from a seller to a buyer. A real estate sales agreement in Texas is prepared on an earnest money contract. A bill of sale is used when furniture and portable appliances are sold.

An agreement, accompanied by an earnest money deposit, for the purchase of real estate, to evidence good faith on the part of the purchaser. Binders seldom are used in Texas because of general agreement and requirements on brokers to use promulgated earnest money contracts. A title binder is offered by title insurance companies prior to closing to demonstrate their willingness to insure title.

A specialized mortgage loan in which a payment is made every two weeks and is equal to one-half of a normal monthly payment. This plan was devised for borrowers who wish to retire their mortgage early. The payment schedule provides the equivalent of 13 months of payments each year, with the additional payment going to retire principal. The result is faster amortization and a shorter term for the loan.

A single mortgage that includes more than one parcel of real estate as security. When one piece of property is insufficient collateral for a loan, the borrower might be able to satisfy the requirement by putting up more property as security. It is a good idea to negotiate release clauses whereby each parcel can be released from the mortgage without paying off the entire loan.

Portion of city where housing and commercial buildings are substandard, and residents tend to live in poverty.

A set of plans for construction of a home or other structure. The blueprint shows the floor plan for the building. Blueprints are used by contractors to coordinate the efforts of the various construction crews and to estimate the quantity of materials needed for the job.

Description of contracts that use standard terminology. In Texas, residential earnest money contracts promulgated by the Texas Real Estate Commission may be described as boiler plate.

In good faith; without fraud. Examples include a purchaser who pays for property without knowledge of any title defects. A bona fide sale is one in which the seller accepts consideration without notice of any reason against the sale. An act in good faith is open, sincere and honest.

A certificate that serves as evidence of a debt. See mortgage. Many types of bonds are used in real estate. A mortgage bond is one secured by a mortgage on property. A completion bond (also called performance bond) usually is issued by a bonding company to assure completion of construction if a contractor fails.

One who is obligated to repay a loan; a mortgagor. Legal documents involved with a mortgage loan refer to the person who applies for a loan or the person who actually gets the loan as the borrower. The borrower is legally obligated under the terms of the mortgage contract.

One who is licensed by a state to act for principals in real estate transactions, within the scope of state law. In most states, including Texas, one must be licensed as a broker to act in a real estate transaction for another. A licensed real estate salesperson must be sponsored by a broker who accepts responsibility for the salesperson’s acts. A broker is regulated by the law of agency, which requires the broker to act in the best interest of the principal.

The business of being a broker. Brokerage brings parties together in a real estate transaction, such as a sale, lease, rental or exchange.

Regulations established by local governments describing the minimum structural requirements for buildings. They include foundation, roofing, plumbing, electrical and other specifications for safety and sanitation. Work on real estate must be in compliance with the building codes or it will not pass the required inspections.

Businesses that inspect buildings on the behalf of buyers and identify any defects. The buyer has the right to hire an inspector prior to closing. The sales contract may allow the buyer to void the sale and to recover earnest money based on an unsatisfactory inspection. The seller often is required to make repairs up to a dollar limit in response to a professional inspection.

A line fixed a certain distance from the boundaries of a lot beyond which the building may not project. The building line is frequently set by the municipality in which the property lies, or by deed restrictions. When situating improvements on a lot, it is important to observe the building line. Often, one must ascertain from the city their exact location.

See construction loan.

Permission granted by a city or other municipal authority to erect or modify a structure.

The theory that ownership of realty implies rights such as occupancy, use and enjoyment, and the right to sell, bequeath, give or lease all or part of these rights. In a real estate transaction, one must know what one has or is acquiring because some of the bundle of rights may be missing.

Payment of discount points at loan origination in order to secure a lower interest rate; the reduced rate may apply to all or a portion of the loan term. When offered low rate financing on property being bought, one should determine whether the buy down applies to just the first few years or the full term of the loan.

In a sales contract, the person that arranges to meet the sales price and takes ownership of the property.

A real estate licensee who represents the buyer in a transaction. Often the agent who helps a buyer find a home is working as an agent or subagent of the seller. Some agents contract directly with the buyer to find a suitable property and to negotiate on the buyer’s behalf.

Rules adopted by an organization. The bylaws of a condominium owners association, for example, state how common areas are used, whether pets are allowed, amount of the monthly membership fee and other requirements residents must meet. Owners associations have the legal right to enforce the bylaws and collect fees of residents.