Glossary

A deed in which the grantor agrees to protect the grantee against any other claim to title of the property and provides other promises. See warranty deed. This is the best type of deed to receive.

Home loans guaranteed by the U.S. Veterans Administration (VA) under the Servicemen’s Readjustment Act of 1944 and later. Also known as a VA loan. The Veterans Administration guarantees restitution to the lender in the event of default. No down payment is required by most lenders. The VA guarantees 60 percent of the loan, up to $27,500. This allows lenders to be assured of no losses provided the property’s market value decline is less than $27,500, so most lenders do not require a down payment.

A deed for which the consideration is love and affection, and no material consideration is involved. A gift deed frequently is used to transfer real estate to a relative.

A statement that projects some or all settlement expenses based on the best current information. When applying for a loan, the lender is required to provide a good-faith estimate of closing expenses. Because the closing will not occur for several months, exact amounts for all expenses are not known. However, the lender should be able to give a reasonably accurate estimate.

Mortgage loans originated by private lenders with default insurance provided by an agency of the federal government. In most cases, the agency is the Federal Housing Administration (FHA) through the 203(b) program. Insured loans have higher loan-to-value ratios than uninsured loans, meaning that the down payment requirement is lower. In addition to the FHA, private companies insure mortgage loans.

Additional time in which one is allowed to perform an act or make a payment before a default occurs. Many mortgage contracts have a grace period before a late payment is considered a default. It is usually wise to solve the problem before the grace period expires.

Ground level at the foundation. Also, the degree of slope on land; for example, a 2 percent grade means that the elevation rises two feet for every 100 linear feet. The grade of land should be checked to determine whether it suits a planned use for the land.

See graduated lease.

The slope or rate of increase or decrease in elevation of a surface, usually expressed as a percentage. See grade.

A lease that provides for graduated changes in the amount of rent at stated intervals; seldom used in short-term leases. Graduated leases allow rent changes automatically, so there is no need to revise the entire lease just to change the rent. Allows long term leases that suit both landlord and tenant.

A type of mortgage loan that features a payment schedule with low first-year payments that increase each year until they become sufficient to amortize the loan during the remaining term. The increase in payment level is fixed rather than based on an index. These types of loans were created for borrowers who expected their income to rise in the near future, as might be the case of an entry-level professional starting a career. Payments are artificially low for the first few years but eventually stabilize at a higher level than a corresponding level-payment loan.

A technical term used in deeds of conveyance of property to indicate a transfer.

The party to whom the title to real property is conveyed; the buyer.

The person who conveys real estate by deed; the seller or donor.

Graduate of the Realtors Institute, which is affiliated with the National Association of Realtors. The GRI designation indicates that a real estate salesperson or broker has gone beyond the minimum educational requirements.

Total income from property before any expenses are deducted. May be described as potential, which assumes neither vacancy nor collection losses, or effective, which is net of vacancy and collection losses.

A lease of property whereby the landlord (lessor) is responsible for paying all property expenses such as taxes, insurance, utilities and repairs. See net lease. Landlord and tenant agree in writing who pays each operating expense. Otherwise, there is the possibility for disagreement and litigation.

The sales price divided by the rental rate. For example, if the sales price is $40,000 and the gross monthly rent is $400, then the GRM is 100. May also be expressed as the number of years of rent equaling the purchase price. In many investment situations, the price is set based on a multiple of the rent level.

An agreement for the rent of land only, often for a long term, at the expiration of which all of the real estate belongs to the landowner. Sometimes land can be purchased or leased separate from buildings, thus splitting ownership into components that are more desirable. A property buyer or lessee must be mindful of the lease terms and their effect on using or financing the property.

Payment to the owner for the use of land. Ground leases may be net or gross. In a net lease, the tenant pays expenses such as insurance and real estate taxes.

To take financial responsibility for a loan should the borrower default. For example, the Veterans Administration guarantees mortgages and reimburses the lender for all losses when the lender forecloses a loan. The guarantee allows the buyer to borrow an amount equal to a home’s sales price.

One appointed by a court to administer the affairs of an individual who is incapable of such duties. An incompetent cannot enter a valid contract. It is important to deal with the person’s guardian.