Home — Real Estate Dictionary, Easy To Understand

Jean Miélot, from his Miracles de Notre Dame, 15th century, license: public domain Burgundian author and scribe Jean Miélot is writing away and not spending time fooling around with women.

Written by Ricardo Alamo. Published: March, 2016.

A glossary and clavis with terms and definitions for the Real Estate Industry

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Aardvark: A bottom feeder property investor that loves ants and termites. Not something you want to aspire to be.

Absentee Landlord: A term used by an angry tenant to describe the land lord that she possibly thinks is neglecting his duty to maintain the property and do good for the community. It describes an owner who does not live in a property. The owner is primarily involved in the property as an investment to generate cash flow, tax benefits or for price appreciation. It does not have to be a person, but can also be a real estate corporation. It can be property that the owner has gotten cheaply because it is old and neglected. So the owner just rents it out as long as there are any takers. After a while this lack of maintenance starts to bring down the neighborhood. The owner does not see any economic sense to renovate. Since the owner does not live there he does not care that it is turning into a slum. The owner is only looking at the narrow economic picture of the property in isolation and has no reason to do anything that is to the benefit of the community around.

All-Cash Deal: A real estate transaction that does not use any financing and is paid in full by cash at the time of closing. Such a deal will naturally tie up all the money in the property. It is also possible that the buyer will miss out on tax deductions from a mortgage depending on the tax law in the area. The term is often used outside the real estate industry for mergers. It then means that the deal is not paid with stocks, but with cash.

Asbestos: Is a naturally occurring mineral that is very carcinogenic. It can cause lung cancer when inhaled. It was thought to be a miracle substance because it was cheap, insulating and fireproof. It was heavily used for insulation of pipes and in other building materials. Many old houses are filled with it in various forms. It is difficult to identify because it can be mixed into building materials or can be confused with harmless newer insulation. Expertise is required when starting to tear down old building that contains asbestos to avoid the dust being inhaled and spread around. It is still legal to use in some places around the world, some countries have made the sensible choice and banned it. The legal status of asbestos varies from country to country.

C

Chalet: Is a building type originating in the Alpine region in Europe. It is a wooden house built to last with a sloping sturdy roof. The word is often used to lure in ski tourist and then it means a very modest ski hut.

Closing: The closing is the final step in a property transaction when the property is transferred from the seller to the buyer according to the sales agreement. Closing also referred to as closing the sale, it is a sales term that the sale has been made and a sales agreement has been signed.

Collateral: Assets you have to put up as a security for a loan. In the case of default the assets that are the collateral for the loan can be sold to settle repayment of principal and outstanding interest payments. For a mortgage the property being bought is itself being used as collateral. For other loan types extra collateral for a loan can be needed if the item being purchased can not be used as collateral because it is illiquid, has questionable value or is high risk, or the money is being spent for consumption.

Conveyance: Conveyance is the transfer of the title to real property. The word makes me think conveyor belt.

D

Down Payment: It is an percentage of the total sales price you pay in cash. For a mortgage you are possibly asked to make a 10% down payment in cash, and the mortgage loan covers the remaining 90% of the total sales price. The down payment becomes your equity in the property. The down payment makes the loan less risky for the lender since the equity you have put in acts as buffer in case the property values decline. The term may also be used in other types of deals. For example when you are buying property under construction and require a down payment of 10% until you take over the property.

E

Equity: When talking about real estate, equity means market value minus liabilities. The liability is the debt on the property and usually it is just the mortgage. The true market value is not know before selling the property so it is an estimate. Going back to the moment the property was bought and assuming we did not overpay, one can assume what was paid is the market value and then the equity becomes any down payment made on the mortgage.

F

Flipping: To buy a property and possibly do some value enhancing improvements and then quickly selling it for a profit. Basically the American dream of making a quick profit by using the capitalistic forces. The term may involve doing renovations since buying cheap means that there are issues that the current owner is not able to undertake because of lack of knowledge or capital. The renovations needs to be done as cheaply as possible and thus means not involving any skilled professionals such as carpenters. The investor tries to fix things himself haphazardly or he hires immigrants. In a quickly rising market it may not be needed to do any renovation, but instead borrow as much money as possible and hold the property for a while and sell just before the market turns.

Fraud: scams, swindle and deception. The property market is filled to the brink with people running all sorts of scams. And the scammers are working around the clock to come up with new types of scams. Examples of scams are for example to buy into new construction projects and the people run off with the money and put themselves into bankruptcy and never complete their property projects. Also it can be deliberately hiding known flaws with a property, such as termites, mold problems and rotting walls. The scams can also be in the form of time share leasing deals that you can never get out of. Properties in foreign countries are also popular fraudulent traps where the legal framework is different from your home country and the people can be difficult to get in touch with from the other side of the globe. A good property fraud often starts with the opportunity to make a good deal and quick profit and there is usually a catch that something has to be done quickly or the deal can not proceed in a normal way.

G

Gazumper: or Gazumping, is when the seller is trying to raise his asking price after you have agreed to a price, but have not signed the deal. The tactic may be used when the market is strong and the seller has gotten another offer and tries to get the buyer to agree to a higher price to meet the other offer. It is a term from UK, Ireland and Australia. It is consider bad business practice.

Gazunder: It is trying to lower the bid after you have agreed to a price, but have not signed the deal. The tactic may be used when the market is weak and the seller needs to sell and don't have any other offers. It is a term from UK, Ireland and Australia. It is consider bad business practice.

Gentrification: Is a process of urban transformation. An area becomes popular and trendy and thus driving property prices up with the negative side effects of drives out lower income families. The word comes from gentry which means somebody from the upper class. The process can start in an old run down part of the city. Young people, maybe artist, musicians and other interesting people move there because of low prices. Slowly the part of town becomes trendy even if it is a bit run down. A combination of trendiness and economic activity gets the ball rolling. Then property speculators and developers starts to buy, renovate and build new housing in the area. More and more yuppies move in. More and more trendy shops start up. Suddenly prices are sky high and the lower class people that are renting there must move out since they can't afford the rents anymore.

Ghetto: is a part of the city that has a consentration of a particular group of people. This segregation can be based on race, religion, economic status. The area is often dilapidated and has high crime rates. The term dates back to Venice in 1516 where the Jews were segregated at the time. During World War 2 the Nazis segregated the Jews in Ghettos before transporting them to the concentration camps. In Northern Ireland the ghettos has been based on religion (Protestant and Catholic) and political lines. In the U.S. the term has been used for racially segregated areas where mostly black people lived.

H

Hedge: It is a practice of reducing risk often by offsetting two types of investment strategies of disproportionate return profiles against each others. In the real estate market an example of a hedge would be if you are buying one property and at the same time you make a contractual agreement to sell a similar property maybe down the same street for a fixed sum of money. The two deals combined are not adding any extra risk to you portfolio. The reason to make such a deal could be to limit exposure to the market, but at the same time be able to make a buy that was really good.

L

Landlord: The term used to describe a person who owns any type of building or land that is rented out to others. The word traces back in history to the feudal times in Europe. In that period the King and the Church owned most of the land, but some land was given or lent out cheaply to the nobility for goodwill and protection. And that person would actually be a Lord which is a title of in the nobility class. The Lord would then have poor peasants live and cultivate the land in brutal conditions. The Lord would often be required to pay taxes to the King for the land, but in practicality the Lord was more of a tax collector on the peasants for the King.

Loan Officer: A clerk in a financial institution that prepares paperwork for customers that wants to get a mortgage. Can also be for other types of loans not just mortgage.

M

McMansion: A pejorative term in the U.S. for a mass produced somewhat big house in the suburbs. The Mc. is a reference to McDonalds and the junk food they sell. The distaste for this type of house is that it usually don't blend in with the rest of the neighborhood. It is usually big houses and suppose to have a luxury upscale feel about it, but lacking in material quality. It is a term originating from the mid 1980s.

Mortgage: It is a type of loan used for real estate purchase. The loan is secured by the property being purchased. The lender has a legal right to take possession of the property and sell it if the terms of the loan are broken. Such as the borrower defaults (stops paying on the loan). The terms can vary with regards to interest, repayment length and payment amount and many things written in fine prints.

Ninja Loan: A slang term used to describe a loan to a person with "no income, no job and no assets". This is a sub prime loan where borrower is given a loan without any the verification process of the financial status. It is a calculated risk that many of these loans will end bad. The hope is that the property market will rise and the lender will be able to refinance based on the increased value the house he bought. If the interest rates rise or the property value falls the ninja loans will go bad very quickly. This relaxed lending standards was a big problem of sub prime crisis of 2008.

R

Real Estate Agent: Somebody that makes a living showing properties to buyers and filling out a few documents. Gets paid by sales commission and can eat and drink well. Usually gets paid a percentage of 1% to 5% of the value of the transaction. A man that has his hair combed backwards, nice shoes and a suit, basically a gigolo car salesman. If it is a woman she always wear a smart little outfit, and spends time to make her hair look nice, get her nails done and put on make up.

Risk: The uncertainty that an investment will not make the expected returns. Government bonds are often thought of as risk free return, but the returns are very small. Some risk must be taken in order to be able to make a profit, but it also opens up for possible losses.

S

Slumlord: is a derogatory term for a real estate investor with a lot of properties in a bad state. He is usually maximizing his cash flow by not spending a lot of money on upkeep.

T

Trailer Park: is an area where people live in mobile homes instead of regular houses. The area provide a cheap place to live for people who are often below the poverty line. Because of the low status the people are often called derogatory terms such as trailer park trash. It is popular way to live for poor people in the U.S. and this type of housing is often placed in hurricane stricken places. When the hurricane comes through the mobile homes are blown to pieces.

U

Urban decay: Is when the infrastructure and buildings in a city or part of a city slowly degrades and disintegrates because of lack of maintenance. Also known as urban rot and urban blight. The reason for this is lack of economic viability of the area. Factories close down and people are unemployed. When the economy stops it drives out cash flows for maintenance and new projects. When the decay progresses a certain time the trends may become self-enforcing so that people only wants to get away from such a place with a lot of crime and slum.

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