LAND SOLUTIONS

Real Estate Terminology

---

On this Page we will walk you through the Real Estate and Land Investing A – Z

Although it might be overwhelming at the beginning it is crucial to understand the Terminology in the Land Investing / Real Estate World.

Arm’s Length Transaction	A transaction where both parties act independently without prior connections, ensuring a fair market value for the property.
Non-Arm’s Length Transaction	This type of transaction involves parties with a pre-existing relationship, such as family ties or business partnerships, which could affect fairness.
ALTA/NSPS Land Title Survey	A detailed boundary survey for high-value properties following the standards set by the American Land and Title Association (ALTA) and the National Society of Professional Surveyors (NSPS).
Acquisition	The process of buying property, involving steps from initial interest to final purchase.
Absentee Owner	A property owner who does not reside on or actively manage the property, often relying on a third party for management.
Appraisal	An impartial, professional assessment of a property’s market value, supported by data for accuracy.
Bidding War	Occurs when multiple buyers place competitive bids, often raising the property’s sale price due to high demand.
Blue Ocean Strategy	A business approach that targets an uncontested market through innovation, reducing competition and increasing profitability.
Comparables (Comps)	Properties similar in size, location, and features used to evaluate a subject property’s market value.
Carrying Costs	Ongoing expenses an owner pays while holding onto a property, such as taxes, insurance, and maintenance.
Cash Flow	The net amount of cash generated or expended in property investment, often from tenant rental payments.
Capital	Financial resources, such as funds or assets, used by a business or investor to operate and grow.
Capital Gains	Profit from selling an asset, like property, at a price higher than the purchase cost, subject to taxes.
Curb Appeal	The attractiveness of a property’s exterior as viewed from the street, which can impact buyer interest.
Delinquency	When payments, such as mortgage or tax, are overdue by more than 30 days, indicating a financial default.
Direct Mail	A physical marketing method that sends promotional materials directly to potential buyers or investors via mail.
Dispositions	The sale or transfer of a property by an owner, often involving an exit strategy for an investment.
DBA (Doing Business As)	A registered name that a business uses publicly, different from its legal name.
Easement	A legal right allowing someone other than the owner limited use of a property for a specific purpose, like access.
Economies of Scale	Cost savings achieved by increased production or operational efficiency, benefiting larger property operations.
Equity	The value of a property minus any debts or liabilities tied to it.
Equitable Interest	The right to use, enjoy, and potentially own a property, even without holding the official title, often through a signed purchase agreement.
Fair Market Value (FMV)	The agreed-upon price for a property in an open market where both buyer and seller act independently.
Fixed Costs	Costs that remain constant, regardless of changes in production or operational scale.
Flood Zone	A designated area with an elevated risk of flooding, often impacting insurance rates and building regulations.
Freedom of Information Act (FOIA)	A U.S. federal law granting the public access to records from government agencies.
Geographic Information System (GIS)	A computer system that captures, displays, and analyzes geographic and spatial data, often used in real estate for mapping property boundaries and features.
Good Faith Estimate (GFE)	A document that provides buyers with a breakdown of estimated costs associated with a real estate transaction, required by law in some cases.
Grant Deed	A deed used to transfer property ownership, ensuring the title is clear but not guaranteeing against future claims.
Highest and Best Use	The most profitable, feasible, and legally permissible use of a property, which may increase its value.
Homeowners Association (HOA)	An organization that oversees and enforces rules within a residential community, often collecting fees for maintenance and amenities.
Income Property	Real estate purchased primarily for generating rental income or capital appreciation.
Installment Sale	A property sale agreement allowing the buyer to make periodic payments over time, rather than paying the full amount upfront.
Interest Rate	The percentage charged on a loan, impacting monthly payments and the total cost of financing.
Joint Tenancy	A form of ownership where two or more people share equal interest in a property with rights of survivorship.
Land Contract	A financing agreement where the buyer makes payments directly to the seller until the full purchase price is paid, at which point they gain full ownership.
Leasehold Estate	A property interest granted through a lease agreement, giving the tenant the right to use the property for a specified time.
Lien	A legal claim placed on a property, often as security for a debt, which must be resolved before the property can be sold.
Loan-to-Value Ratio (LTV)	The ratio of a loan amount to the appraised value or purchase price of a property, used to assess risk in financing.
Market Value	The estimated price a property could sell for on the open market, given current conditions.
Mortgage	A loan specifically for purchasing property, where the property itself serves as collateral.
Multiple Listing Service (MLS)	A database of property listings maintained by real estate professionals to facilitate the buying and selling of real estate.
Net Operating Income (NOI)	The income generated by a property after operating expenses are deducted, excluding taxes and financing costs.
Option to Buy	A contract granting a buyer the exclusive right to purchase a property within a specified period, often with set terms and conditions.
Owner Financing	When the seller of a property provides financing to the buyer, often allowing for more flexible terms compared to traditional loans.
Parcel	A defined piece of land that is considered a single unit for property ownership, taxation, and legal purposes.
Percolation Test (Perc Test)	A soil test conducted to determine the land’s ability to absorb water, typically needed for septic system installation.
Plat Map	A detailed map outlining property boundaries, subdivisions, and features, often used for planning and development purposes.
Power of Attorney (POA)	A legal document allowing one person to act on behalf of another in legal or financial matters, often used in real estate transactions.
Probate	The legal process of distributing a deceased person’s assets, including real estate, according to their will or state laws.
Property Tax	A tax imposed on property owners, calculated based on the assessed value of the property and typically paid annually.
Purchase Agreement	A contract between buyer and seller outlining the terms of a real estate transaction, including the purchase price, contingencies, and closing date.
Quiet Title Action	A legal process to resolve disputes or clear claims against a property title, often used to establish clear ownership.
Real Estate Investment Trust (REIT)	A company that owns, operates, or finances income-generating real estate, allowing investors to pool funds for real estate investment.
Right of First Refusal	A contractual right giving someone the opportunity to buy a property before the owner offers it to other buyers, usually under specified terms.
Right-of-Way	A legal right allowing passage over another person’s property, often for utilities or access to adjoining properties.
Riparian Rights	The legal rights of property owners whose land borders a body of water, allowing for reasonable use of the water.
Setback	A required distance between a property boundary and any structure, often mandated by zoning or building codes to ensure safety and privacy.
Survey	A professional measurement and mapping of property boundaries, structures, and features, often required in property transactions to verify land details.
Tax Lien	A legal claim placed by the government on a property due to unpaid taxes, which must be resolved before the property can be sold.
Tenancy in Common	A form of ownership where two or more people hold individual interests in a property, which can be passed to heirs upon death.
Title	A legal document proving property ownership, outlining the rights of the owner.
Title Insurance	An insurance policy protecting against financial loss from title defects or claims against the property.
Title Search	A thorough examination of public records to confirm the legal ownership of a property and uncover any liens or claims.
Underwriting	The process where a lender assesses a borrower’s risk to determine whether to approve a mortgage or loan.
Variance	An exception to zoning laws granted to a property owner, allowing for different land use than typically permitted.
Warranty Deed	A deed guaranteeing the property title is clear of any liens or encumbrances, providing the most protection to the buyer.
Zoning	Local government regulations dictating how property in specific areas can be used, such as for residential, commercial, or industrial purposes.
Assessed Value	The value assigned to a property by a government assessor, used to determine property tax obligations.
Balloon Payment	A large final payment due at the end of a loan term, typically used in short-term or interest-only loans.
Buyer’s Market	A real estate market condition where supply exceeds demand, often leading to lower property prices and more favorable conditions for buyers.
Seller’s Market	A market condition where demand exceeds supply, resulting in higher prices and favorable terms for sellers.
Closing Costs	Fees and expenses paid at the completion of a real estate transaction, including title insurance, recording fees, and loan origination fees.
Deed in Lieu of Foreclosure	A transaction where a borrower voluntarily transfers property ownership to the lender to avoid foreclosure.
Earnest Money	A deposit made by a buyer to demonstrate their commitment to purchasing the property, which is applied to the purchase price upon closing.
Equity Stripping	The process of reducing the amount of equity in a property, often by borrowing against it, which may be done to avoid creditor claims.
Escrow	A neutral third-party account used to hold funds and documents during a real estate transaction, ensuring all terms are met before the property changes hands.
Foreclosure	The legal process by which a lender repossesses a property due to the borrower’s failure to make mortgage payments.
Land Use	The management and modification of natural land for human activities such as agriculture, residential areas, commercial buildings, and more.
Lease Option	A contract allowing a tenant to lease a property with the option to purchase it later, typically at a pre-agreed price.
Marketable Title	A clear title free of liens or legal questions, making it easily transferable to a buyer without risk of dispute.
Mechanic’s Lien	A claim placed on a property by contractors or suppliers who have not been paid for labor or materials used to improve the property.
Mixed-Use Development	A real estate project that combines residential, commercial, and sometimes industrial spaces, creating a versatile environment within a single area.
Quitclaim Deed	A deed transferring the seller’s ownership interest in a property without any guarantee of title or ownership rights, often used to transfer property between family members.
Resale Deed	A deed used to transfer ownership from one private owner to another, typically when reselling the property.
Tax Deed	A deed transferring ownership of a property sold by the government due to unpaid property taxes, often sold at auction.
Triple Net Lease	A lease agreement where the tenant pays for property taxes, insurance, and maintenance costs in addition to rent.
Unimproved Land	Land without infrastructure, buildings, or utilities, often requiring development before it can be used for residential or commercial purposes.
Utility Easement	A legal right allowing utility companies to access a specific portion of private property to install and maintain utility lines or infrastructure.
Voluntary Lien	A lien willingly placed on a property by the owner, typically for financing purposes, such as a mortgage.
Wraparound Mortgage	A financing method where a seller retains an existing mortgage on the property and creates a new loan for the buyer that “wraps around” it.
Yield Spread	The difference between interest rates of loans with similar characteristics, often reflecting the risk or profitability of an investment.
Zoning Ordinance	Local regulations that govern how specific parcels of land can be used, including restrictions on building types and purposes.
Adverse Possession	A legal principle allowing someone to claim ownership of land if they have occupied it openly and continuously without the owner’s permission for a specified period.
Benchmark	A reference point used in land surveying to establish elevations, commonly marked by a fixed physical object such as a metal rod.
Buildable Lot	A parcel of land meeting local zoning and building codes, making it suitable for construction.
Certificate of Occupancy (CO)	An official document confirming a building complies with local codes and is suitable for occupancy, typically issued after a final inspection.
Construction Loan	A short-term loan used to finance the building or renovation of a property, often converted into a mortgage upon project completion.
Depreciation	The gradual decrease in a property’s value over time due to wear and tear, age, or other factors, used as a tax deduction in real estate investments.