Glossary

A charge levied upon persons or things by a government. Many different taxes affect real estate. Most local governments levy an ad valorem tax based on property value. The federal government and many states have an income tax, but rental property owners may claim operating expense, interest and depreciation expense to reduce their taxable income.

The amount charged the owner of property for ad valorem taxes. The annual assessment is based on an appraisal of the property’s value, the tax rate (sometimes called the millage rate) and any exemptions the property owner may be entitled to claim. The property owner should receive an advance notice of the valuation. The owner may challenge the estimate before the tax district’s appraisal review board to protest the amount if it seems unfair or unrealistic.

Special income tax deductions available to homeowners. These include: itemized deduction of mortgage interest and property taxes, deferred capital gains when a home is sold and another purchased within two years and a one-time exemption of $125,000 in deferred capital gains for persons older than 55. Tax benefits effectively reduce the cost of owning a home and offer an incentive to become a homeowner.

Documents purchased for a fee at closing that provide assurance that taxes by a new or previous owner will be paid when due.

An expert in tax law and methods to reduce tax liability.

The sale of property after a period of nonpayment of taxes. See redemptive rights. Unpaid taxes become a lien. Property may be sold for the nonpayment of taxes.

Investment that produces negative after-tax income that can be used to reduce taxes on income from sources other than the investment.

An unusually low interest rate offered for the first few months or year of a mortgage loan; used as an enticement to potential borrowers. When comparing interest rates on loans offered, one should determine future rate adjustments because the initial rate might be discovered to be a teaser.

Tenancy established when a lawful tenant remains in possession of property after a lease expires. The tenant at sufferance has no estate or title; the landlord may oust the tenant at any time.

A license to use or occupy lands and tenements at the will of the owner. There is no fixed length of possession. The tenant may lease or may be put out at any time.

An estate that exists only between husband and wife with equal right of possession and enjoyment during their joint lives and with the right of survivorship; when one dies, the property goes to the surviving tenant.

An ownership of realty by two or more persons, each of whom has an undivided interest, without the right of survivorship. Upon the death of one of the owners, his or her ownership share is inherited by the party or parties designated in his or her will.

One who is given possession of real estate for a fixed period or at will. See lease.

Everything of a permanent nature attached to the soil that may be held in ownership. In common usage, a tenement is a run-down apartment building.

A kind of insect that bores into wood and destroys it. Termite inspections by reputable pest control companies are often required in a real estate transaction.

Conditions and arrangements specified in a contract. Anything lawful may be included in a contract and become part of its terms.

A will.

Having made a valid will. See intestate.

A man who makes a will.

A woman who makes a will.

Evidence that the owner of land is in lawful possession thereof; evidence of ownership. Often clarified or qualified by an adjective such as absolute, good, clear, marketable, defective or legal.

See abstract of title.

A company that offers title insurance and other settlement services. Title companies commonly administer the closing process for most real estate transactions. The company conducts the title search upon which the title policy is based, alerts the seller of any problems with the title, schedules the closing meeting, prepares for and conducts the meeting.

An insurance policy that protects the holder from any loss resulting from defects in the title. The premium is paid once and is good only until ownership changes.

An examination of the public records to determine the ownership and encumbrances affecting real property. A title search typically is performed before a title policy is issued. If the search shows a title risk, the policy might contain an exclusion or not be issued.

The state of the surface of the land; may be rolling, rough, flat or so on. Topography may affect the way land can be developed, including potential uses.

A title registration system used in some states, in which the condition of the title easily can be discovered without resorting to title search.

A wrongful act that is not a crime but that renders the perpetrator liable to the victim for damages.

A six-mile-square tract delineated by government survey.

Recording fees collected at closing. These fees cover the costs of recording the deed conveying the property and mortgage established at the time of purchase. See expenses.

Unlawful entry or possession of property.

A bank account separate and apart and physically segregated from a broker’s own funds, in which the broker is required by state law to deposit all money collected for clients. Called an escrow account in Texas.

A conveyance of real estate to a third person to be held for the benefit of another. Commonly used in Texas in place of mortgages that conditionally convey title to the lender.

One who holds property in trust for another to secure performance of an obligation; the neutral party in a trust deed transaction.

A standardized disclosure that must be provided to a borrower when a mortgage loan application is submitted. The statement clearly indicates the contract interest rate on the loan, the amount of monthly payment required to cover principal and interest, and the annual percentage rate for the loan. This document is designed to provide the information needed to compare loans available in the market.