Definition of Terms

Absorption Rate – It is a term used on the percentage of available real estate properties to the market which had been successfully sold or being anticipated to be sold for a certain period of time.
Adjustable Rate Mortgage (ARM) – A type of mortgage that its rate of interest will be adjusted on specified period based on certain condition.  It is also known as renegotiable or variable rate mortgage.


Adjustment Interval – It is a specified length of time as specified in the mortgage contract wherein the rate of interest on the mortgage will be adjusted, such as, monthly, quarterly semi-annual or annually.


Agreement of Sale – It is a legal document between the seller and the buyer of the real property in which the terms and conditions of the sale are stipulated.


Amortization – A term used in banking and finance as a process of decreasing the amount of debt by making a periodic repayment.
Annual Percentage Rate (APR) – It is a yearly cost of money borrowed from a lender in the form of interest.

– Is a professional opinion of determining the value of a particular real property.
Assumption – In an agreement of sale, when the property, which is the object of the contract, is under a certain obligation from an existing lender, the buyer will agree that he will assume the monetary obligation of the seller to his lender.
Base Rent – It is the original amount of rent in leasehold agreement that is generally the basis in computing the incremental rental payments in the future.
Broker – A person or entity who acts between the buyer and seller to come into an agreement on the purchase of real property.

Buyer’s Market –
In sales, it is a condition that the price of certain commodities is dictated or set by the buyer on the reason that the supply exceeds the demand.  
Certificate of Title – A legal document vesting ownership to a person whose name appears thereat.


Closing – In the agreement of sale, it is the time when the seller legally transfers the rights and ownership of the property to the buyer and the later to actually pay the amount of sale to the buyer.
Closing Costs – Are those expenses necessary for the transfer of rights and ownership of the seller to the buyer that may include such as, notary public fees, transfer tax and other taxes that is required under the law and any other expenses as may have agreed the parties.
Collateral – Is a term used on the property being pledged as a security for a loan that in case of the failure of the debtor to pay that debt, the property can be seized by the lender as a payment of the debt.
Commission – A stipend paid to a real estate agent or broker in his effort of finding a buyer and/or tenant.


Common Area – An area of a private property or living quarters, such as condominiums, town-houses, apartments, etc., that is intended for the general and common use of its occupants or renters and their guests.
Condominium – Individual fee simple ownership of a certain unit and the undivided interest in the common areas and facilities of a multi-unit living structure.
Credit Scoring System – A statistical system usually numerical or alphanumeric symbols or code used to rate the credit worthiness of an individual based on his credit history.
Deed – A legal written instrument that bound the parties by its stipulation and give notice to another person on such stipulations.
Deed of Release – It is an instrument that the lender certifies that the particular indebtedness has been fully paid and cancels the mortgage.
Deed Restriction – A condition set by a statute/law on the right of the owner to transfer or mortgage the property or set certain conditions on the limitation of the right of use of said property.


Default – A term used on the failure to repay the loan on the specified date of the loan agreement.


Delinquency – Is a state of the loan that becomes due by reason of nonpayment.


Department of Housing and Urban Development (HUD) An agency of the government that administers and regulates housing and urban development programs.
Depreciation The decrease in the value of the house over time due to wear and tear or by any negative changes in the neighborhood or for any other reason.

Direct Costs – Refers to the cost of labor and materials directly put into the construction of a new house or an improvement thereto.
Disclosures – Refers to any information required by law or by usual business practices to be known to the other party of the financial transactions.


Documentary Stamps – A state tax in the form of a stamp that is required to be affixed to certain documents.


Down Payment – The amount of money initially paid by the buyer representing his own equity in the purchase price of the property, which usually runs from 15 to 20 percent of the total purchase price.
Earnest Money – A money paid by the buyer in advance to the seller as part of the purchase price as a warranty that the buyer will purchase the real property in due time and his failure to make good on his commitment to purchase, said money will be forfeited in favor of the seller and at the same time, the seller is bound not to sell the property to another buyer.


Easement Refers to the specific interest of another person or entity to use some portion of private property like the interest of an electric utility company, water and sewage utility company, etc.


Economic Life – It is an estimated period of time on the usefulness of the house to the owner usually presented on the number of years.


Encroachment – A physical obstruction, usually a part of a building or fence that intrudes to the property of another.

Equity – Refers to the portion of the fair market value of the property in which the buyer had paid out of his own pocket in contrast to his outstanding indebtedness against the property.

Exclusive Right To Sell A right granted to the listing agent to collect a commission on the sold property regardless of who have brokered or made an effort for the actual sale.


First Mortgage – It is a mortgage that superior over any other indebtedness by the lender.


Foreclosure – A legal procedure wherein the lender takes the legal possession of the collateral and sells the same to satisfy the defaulted loan.
Grantee – Is a person who is a recipient of the specific rights and privileges over the property.
Grantor – A person who grants some specific rights and privileges to another person.

Infrastructure Refers to the basic necessary needs of the community, such as support and services provided by the government or private companies for safe, better and convenient living.

Installment Contract Refers to a written contract of sale that the buyer will pay the seller a periodic specified amount for a certain period of time.

Judgment A judicial pronouncement that creates an obligation to a person or lien on his property as a result of a lawsuit.

Just Compensation It is the amount of money given to the owner by the government in the exercise of its power to eminent domain as fair compensation for the property.


Leasee Refers to a person who has been granted the right to use the property of another through a contract. In some country, it is popularly referred to as tenants.
Leasehold Refers to the right to use the property of another person by virtue of an agreement.


Leasehold Improvements An improvements made by the tenant on the leased property.


Lessor A person or company that vests the right to another the right to occupy or use the property.


Lien – A legal claim by another person against real estate property of another.


Margin – Refers to the profit added by the lender to the actual amount of money he lends to another.
Market Value – The probable value of the property based on the current market trend in the area, wherein the seller is willing to depart his property and the buyer is willing to pay for the property.
Mortgage – Is a lien against a real estate property that was made as collateral on borrowed money from the lender.

Mortgage Note – A written agreement wherein the borrower promises to pay the lender for borrowed money including the interest and other charges thereon on a specified date.


Mortgagee – A person who lends money for the purchase of property, usually a real estate property.


Mortgagor – A person who borrows money for purposes of buying a home.

Prepayment – A condition in a mortgage agreement that allowed the lender to pay the loan or a portion of the loan earlier than its due date.

Prepayment Penalty – An additional charge made by the lender to its borrower who has paid his debt earlier than the specified date.

Principal – The actual amount of the money borrowed exclusive of interest and other normal charges.

Refinancing – A financial system that the old loan will be paid off from the proceeds of a new loan.

Sublease –
An agreement that gives another person the right to occupy or use the property rented by the tenant in his own name.


Tenancy – Is the right of a person vested by the lease agreement.

A legal document evidencing ownership of certain real property.

– A person who had been given an authority to take care of the property of another for the best interest of the owner.