Welcome to the Lexicon of Real Estate Terms
Navigating the world of real estate can be daunting, especially with the myriad of terminology that pervades the industry. Our Lexicon of Real Estate Terms is here to simplify your experience, providing you with more than 3,300 terms and definitions and 33,000 Quizes to help you feel comfortable using modern real estate language.
This comprehensive guide serves as a quick reference for various audiences, whether you are a home buyer or seller, a real estate professional, a business student, an investor, or an attorney. We understand that mastery of the language is crucial in making informed decisions in the real estate market, and our lexicon is designed to empower you.
What You’ll Find in Our Lexicon:
Our lexicon includes detailed definitions for real estate topics from A to Z. Whether you’re looking to understand key concepts for personal knowledge or to enhance your professional repertoire, you’ll find terms related to:
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Appraisal: Learn about the process of determining a property’s market value.
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Architecture: Explore different styles and terminologies that define building design.
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Brokerage: Understand the role of real estate brokers and the services they provide.
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Construction: Familiarize yourself with the terms used in the building process.
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Debenture: Discover financial instruments that could impact real estate investments.
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Flood Plain: Understand the risks and regulations associated with properties in flood-prone areas.
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Negative Amortization: Get insights into loan types that increase in balance over time.
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Security Instrument: Learn about the agreements that secure a loan against a property.
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Subprime Loan: Understand the implications of loans given to borrowers with poor credit.
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Underlying Mortgage: Familiarize yourself with the financial obligations tied to a property.
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Zoning: Get to grips with laws that define how land can be used.
In addition to these definitions, our lexicon provides a wealth of resources, including:
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Common abbreviations used in real estate communications.
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Mathematical formulas essential for calculating mortgage payments, investment returns, and more.
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Charts and diagrams to visually represent complex concepts and processes.
Why Use Our Lexicon?
By utilizing this resource, you’ll gain confidence in your understanding of real estate terminology. Whether you’re conducting research, preparing for a transaction, or simply looking to expand your knowledge base, our lexicon ensures you have access to the information you need at your fingertips.
Join us in diving into the intricate world of real estate language, and empower yourself with the terminology that shapes the industry. Feel free to explore and reference frequently; your journey into mastering real estate has just begun!
Predatory lending refers to unfair, deceptive, or fraudulent practices of some lenders during the loan origination process. These practices take advantage of borrowers' lack of knowledge and often result in borrowers being burdened with loans they cannot afford, high interest rates, and excessive fees.
Preexisting Use refers to properties or structures whose existing use does not align with current zoning regulations but were legally established under previous zoning rules.
Prefabricated construction involves assembling building components in a factory before delivering and installing them on-site. This method often reduces construction time and costs while ensuring consistent quality.
Preleasing involves obtaining lease commitments for a property prior to its availability for occupancy, often required for securing permanent mortgage financing.
A Preliminary Plat is a detailed planning document used in real estate development to illustrate how a tract of land can potentially be subdivided into lots and outline infrastructural elements before final plat approval.
A preliminary title report is a report issued by a title company before a real estate transaction, stating a willingness to insure the title upon closing. It identifies any encumbrances, liens, or legal impediments on the property.
The term 'premises' in real estate refers to land and tenements; an estate; the subject matter of a conveyance.
Premium has multiple meanings in real estate: it refers to the cost of an insurance policy, the value of a mortgage or bond in excess of its face amount, and the amount over market value paid for some exceptional quality or feature.
Prepaid expenses refer to amounts that are paid in advance for goods or services to be received in the future. These expenses are recorded as assets until they are consumed, at which point they are expensed on the income statement.
Prepaid interest refers to interest that is paid in advance of the time it is earned. It's typically associated with mortgage loans where borrowers pay interest upfront to reduce future interest payments.
Prepaids at closing refer to the upfront payments required by a lender to fund an escrow account for future payments of property-related expenses such as hazard insurance, property taxes, and private mortgage insurance (PMI). They might also cover interest accruing from the closing date until the end of the month.
Prepaying a mortgage involves retiring the principal balance, either in full or partially, before the scheduled due date according to the mortgage contract. This action can release the borrower from future interest payments and may lead to early ownership of the property.
A prepayment clause permits a borrower to pay off a loan before its maturity date, sometimes incurring a penalty for the privilege of early payment.
Prepayment penalty is a fee that some lenders impose on borrowers who pay off a loan early, helping the lender recover some of the interest they would have earned if the loan went the full term.
Prepayment Privilege refers to the right of a borrower to retire a loan before its maturity date without incurring any prepayment penalty. This feature provides borrowers with the flexibility to pay off loans faster, potentially saving on interest costs over the life of the loan.
Prepayment risk is the probability that a fixed-income security will be retired before its term ends, typically caused by a borrower's provision to prepay the loan balance at any time without penalty, impacting the expected returns for investors.
Prepayments in real estate refer to advance payments of expenses like insurance and taxes, which are often funneled into an escrow account.
The preplanning stage of real estate development involves seeking financing and obtaining government approvals prior to beginning architectural drawings.
Prequalifying is an essential step in the home-buying process. It helps buyers estimate the maximum home price they can afford based on their income and liquid assets. While prequalifying does not promise or commit specific financing, it provides an outline of potential affordability.
A presale involves selling properties that are yet to be constructed, such as condominiums. It allows developers to secure financing and gauge market demand before actual construction begins.
Prescription is the process by which certain rights are acquired through long-term, continuous, and open use of a property, particularly in cases of adverse possession. This legal doctrine allows an individual to gain a right or an easement after meeting specific statutory requirements.
Present Value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. PV calculations are fundamental in finance and real estate as they determine what a future amount of money is worth today.
The Present Value of Annuity (PVA) represents the current value of a series of future equal payments, discounted at a specific interest rate, over a set period.
The Present Value of One (PV1) calculates the current worth of a future amount, discounted at a specific interest rate. This concept is pivotal in finance and real estate for determining the value of future cash flows in today's terms.
A preservation district is a zoning designation covering environmentally sensitive areas, parkland, scenic areas, or historic districts, imposing strict limitations on land use to maintain the essential character of these sites.
Pretax income refers to the amount of income that a business or individual earns before any income taxes are deducted. This figure is crucial for determining the net profitability of operations and for financial analysis.
In real estate, 'Price' refers to the amount of money that buyers and sellers agree upon for the exchange of property. While it represents the transactional amount, it can often differ significantly from 'Value,' which is an estimate or opinion of worth provided by an appraiser.
Price fixing is an illegal practice where competing businesses agree to maintain uniform prices for goods or services, including real estate commissions. This anti-competitive behavior is regulated by antitrust laws to ensure fair market practices.
A loan typically used outside the United States, whose payments are adjusted according to the rate of inflation, making payments predictable in terms of real value.
Pride of ownership refers to the sense of well-being, accomplishment, and pleasure derived from owning a home or other real property. It embodies an intangible benefit of homeownership correlated with social status, financial accomplishment, and a commitment to the local community.
A Primary Lease is an agreement between a property owner (landlord) and a tenant that may be partially or wholly subleased to another tenant.
The Primary Market Area (PMA) is a defined geographic region from which a business, such as a retail store or real estate development, expects to draw the majority of its customers or tenants. Identifying and understanding the PMA helps businesses to gauge market demand, optimize marketing strategies, and make more accurate financial projections.
Primary Market Population refers to the population located within a shopping center’s primary trade area. It often forms the majority of the customer base for the shopping center.
The primary mortgage market is where borrowers and lenders come together to originate mortgages. This market includes various institutional lenders such as savings and loan associations, banks, and mortgage bankers and brokers.
A primary residence, often referred to as a principal residence, is the main home where an individual resides most of the time. This contrasts with a second home or vacation home.
A Prime Contractor, also known as a General Contractor, is primarily responsible for the overall coordination of a construction project. This role includes hiring and managing subcontractors, securing necessary permits, ensuring compliance with building codes, and overseeing the project to completion.
The prime rate is the lowest commercial interest rate charged by banks on short-term loans to their most creditworthy customers. It significantly influences other rates, including those for mortgages and consumer loans.
A prime tenant in real estate is the tenant who occupies the most space within a shopping center or office building. These tenants are considered creditworthy and are essential in attracting additional customers or traffic.
The term 'Principal' in real estate can refer to the owner or user of the property, the client of an agent or broker, or the amount of money borrowed in a mortgage, excluding interest.
Principal and Interest Payment (P&I) refers to a periodic payment, usually made monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance, commonly seen with amortizing loans.
The amount owed on a debt, whether it is the original face amount or the remaining unpaid debt on a loan that has been partially amortized.
A Principal Broker is the licensed individual responsible for the overall management and operations of a real estate brokerage firm. They typically receive compensation in the form of profits, a salary, or a percentage of transaction commissions.
The designated city within a Metropolitan Statistical Area (MSA) or Micropolitan Statistical Area (µSA) that serves as the primary city or city center. This designation is used for demographic, economic, and planning purposes.
Principal Meridian is a fundamental concept in the Government Rectangular Survey method of land description used to locate range lines accurately.
In real estate, a principal residence is the main home where a person lives most of the time. Principal residences qualify for specific tax benefits, such as rollover tax treatments.
Principal, Interest, Taxes, and Insurance (PITI) are the four components typically included in a single monthly mortgage payment on an amortizing loan.
Principle (Appraisal) refers to basic economic facts that underpin the theory of valuation in real estate. Key principles include substitution, contribution, anticipation, and highest and best use, which assist in accurately determining a property's market value.
The principle of substitution posits that the value of a property is directly influenced by the availability and prices of comparable properties, assuming that a typical buyer finds similar properties interchangeable.
A prior lien is a legally enforceable claim or hold on a property that takes precedence over other liens. It is established before any subsequent liens and typically has higher priority in the event of default.
In real estate, 'Priority' refers to the order in which creditors will be repaid in the event of a foreclosure. This can significantly impact which stakeholders are paid first and who might not receive any repayment if funds are exhausted.
Private covenants, often referred to as deed restrictions, are legal obligations imposed in a deed that restrict the use or activities that may be conducted on property. These covenants are designed to maintain a certain level of standard or uniformity within a development area or neighborhood.
Private Mortgage Insurance (PMI) is a type of insurance specifically designed to protect lenders in case a borrower defaults on a mortgage. It is often required for homebuyers who seek a conventional loan with a down payment of less than 20%.
Understanding the conditions and implications of a Private Mortgage Insurance (PMI) default can prevent homeowners from stakeholders from encountering unwanted financial hardships. Private Mortgage Insurance (PMI) is an insurance provided by private companies on conventional loans, ensuring lender protection in case of borrower default, especially when higher loan-to-value ratios are involved.
Private placement is an investment approach where a security is sold directly to a small group of private investors, generally under exemptions to registration provided by the Securities and Exchange Commission (SEC) and state securities laws.
The Private Sector encompasses all economic activities that are not under government control or management, including businesses, individuals, and organizations that operate for profit.
PRIZM (Potential Rating Index for Zip Markets) is a market segmentation tool utilized by marketers to identify target demographics for various products and services. Developed by Claritas, it categorizes populations based on socioeconomic data, housing, and lifestyle attributes.
Pro rata is a Latin term meaning 'in proportion' or 'according to the rate.' In a real estate context, it refers to the equitable distribution of costs, profits, or liabilities based on the share of ownership or participation.
A pro-forma statement is a financial document that projects future income and expenses for a property, enabling investors and developers to make informed decisions based on estimated financial performance.
Probate is the judicial process through which a will is validated and executed to ensure the legal transfer of the deceased's estate to the rightful beneficiaries.
Proceeds from resale refer to the total amount of money received from selling a property, after accounting for any associated costs and expenses.
Procuring cause is a legal term used primarily in real estate to determine if a broker is entitled to a commission. It signifies the actions of a broker that ultimately lead to the creation of a transaction or agreement.
In the realm of real estate, a production builder constructs homes based on pre-designed plans and specifications, often creating multiple houses using an assembly-line process. This method contrasts with custom builders, who craft unique homes tailored to individual needs.
Progress payments are partial payments made to a contractor or builder as specific stages of a construction project are completed. These payments are contingent on the fulfillment of predefined milestones, ensuring that the contractor receives payment for the work completed to date without having to wait until the entire project is finished.
Progressive taxation is a tax system where the tax rate increases as the taxable amount increases. This taxation method aims to distribute the tax burden more equitably, making wealthier individuals or entities pay a higher portion of their income or assets.
A depiction of the future based on a specific set of assumptions, commonly used in real estate for anticipating financial performance, market conditions, and project outcomes.
The projection period refers to the time duration over which future cash flows and resale proceeds from a proposed real estate investment are estimated. It plays a crucial role in evaluating the potential profitability and financial viability of real estate ventures.
A promissory note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money, either on demand or at a specified future date.
Property refers to the legal rights an individual or entity has over certain resources, including real estate and personal belongings. These rights allow the owner to use, enjoy, and dispose of their property as they see fit, subject to certain restrictions enforced by law.
A Property Condition Addendum or Clause is a section within a real estate contract detailing the state of the property being sold and setting the terms under which repairs and maintenance should be completed.
A property description provides a detailed summary of the features, boundaries, and legal status of a particular real estate property. It ensures accurate identification and transference of property rights.
The defined boundary which delineates the edge of a plot of land, typically legally recognized and recorded in public land records.
Property management encompasses the oversight and operations necessary to maintain real estate properties, including rent collection, maintenance, and financial management.
A Property Report is a mandatory document for the sale of subdivisions of 50 lots or more, as required by the Interstate Land Sales Full Disclosure Act (ILSA). This report must be filed with the Office of Interstate Land Sales Registration (OILSR) under the U.S. Department of Housing and Urban Development (HUD).
The Property Residual Technique in appraisal is a method used to estimate the value of a property based on its potential future income and the reversionary value of the building and land.
A government levy based on the market value of privately owned property, commonly referred to as ad valorem tax or real estate tax.
A property tax deduction allows homeowners to deduct property taxes assessed on their real estate holdings from their annual income taxes, reducing overall tax liability.
Proportional taxation, also known as a flat tax, is a tax system where the tax rate remains constant regardless of the individual's income level. Unlike progressive or regressive tax systems, proportional taxation applies an equal tax rate to every taxpayer.
A proprietary lease in a cooperative apartment building is an agreement granted by the corporation to its stockholders, which entitles them to rent or use a specific apartment unit upon meeting the conditions outlined.
Proprietorship refers to the ownership of a business, including income-producing real estate, by an individual, as opposed to a partnership or corporation. This ownership structure allows for direct control of property and income but comes with specific risks and benefits.
Prorate refers to the process of dividing or distributing an amount proportionately between parties, commonly used in real estate for allocating property taxes, insurance, or other periodic charges between the seller and buyer.
Proration refers to the division of expenses or income proportionally based on the time used or the amount consumed between parties in a real estate transaction. This ensures fair allocation of costs such as property taxes, utilities, and homeowner association fees based on the agreed terms.
A prospect in real estate is an individual or entity considered likely to purchase a property. Prospects are typically leads who have shown interest in a property by requesting further information or visiting a listing.
A professionally derived estimate of property value based on some expected future event, commonly used in real estate development and financing.
A prospectus is a formal document that offers detailed information about a business or investment for potential investors, typically involved in securities trading.
In the context of U.S. federal anti-discrimination laws, 'protected class' refers to certain minority subgroups of the population that must be treated fairly and without discrimination, particularly in matters related to housing, employment, and public accommodations.
A Protection Clause, also known as a Broker Protection Clause, is an agreement within a listing contract that ensures a real estate broker will be paid their commission if a property is sold to certain individuals, even after the expiration of the listing agreement.
A proxy is an individual authorized to act on behalf of another person, primarily in meetings or legal proceedings. The term also refers to the document granting this authority.
A public auction is a sale in which property or merchandise is sold via a competitive bidding process that is open to the general public. It is often used in real estate to expedite the selling process, especially in cases of foreclosure or hardware sales.
Public housing comprises government-owned housing units that are made available to low-income individuals and families. These units are either provided at no cost or for nominal rental rates.
Public lands are tracts of land owned by the government (federal, state, or local) and are held for the purposes of conservation, recreation, resource management, and other public benefits. These lands are typically undeveloped and may be used for various regulated activities including grazing, wildlife management, recreation, timbering, mineral development, water development, and hunting.
A public offering is the sale of investment units to the general public, typically requiring approval from regulatory authorities like the SEC or state securities agencies. It's an essential method for companies to raise capital by offering their securities to a wide array of potential investors. This should be contrasted with private offerings, which target a limited group of investors.
Public Purpose is the justification that the government must establish in its powers of Eminent Domain to acquire private property, demonstrating that the property will be used for the public good.
A public record refers to official documents relating to real estate transactions that are maintained by a government office, typically a county courthouse. These records are accessible to the public and provide constructive notice regarding the existence of these documents.
A public sale refers to an auction sale of property with notice to the general public, usually carried out after foreclosure or other legal proceedings.
The public sector refers to the portion of the economy that is controlled and operated by the government at various levels, encompassing federal, state, and local authorities. This segment includes government-owned or operated institutions like public schools, libraries, courthouses, public housing, and subsidized rental properties.
A PUD or Planned Unit Development is a type of real estate development designed to maximize land use efficiency by integrating residential, commercial, and sometimes industrial units within a single community. PUDs often feature a variety of property types, such as single-family homes, townhomes, apartments, and commercial spaces, along with shared amenities and open spaces.
A Pueblo or Adobe House is an architectural style that relies on adobe brick or simulated materials to create structures resembling those found in early 20th century Southwestern U.S. These houses often feature characteristic projecting roof beams known as vigas.
Puffing refers to the practice of making exaggerated or overly enthusiastic statements about the characteristics or benefits of a property, which are generally understood to be subjective opinions rather than factual representations.
A punch list is an enumeration of items requiring correction prior to the completion or sale of a construction project. It ensures all agreed-upon work is finished to satisfactory standards.
Pur Autre Vie refers to a life estate in property held by one person (the grantee), but measured by the life of another person (the cestui que vie). This property interest is often used in specific legal, financial, and estate planning contexts.
