Glossary of housing and land terms
Reference · definitions
These are plain-language definitions of terms that recur across this notebook. They are written to be read in isolation, so several of them repeat a little of each other, and each links back to the explainer where the idea is developed at length.
The list is alphabetical by the sense of the term rather than strictly by first letter, and every entry has its own anchor so it can be linked to directly.
Terms
- Amortisation
- The process by which a constant loan payment retires a debt over time. Each payment covers the interest accrued since the last one, and whatever remains reduces the balance. See mortgages in plain terms.
- Appraisal
- An opinion of value. The word covers two different exercises: an individual valuation produced for a transaction or a lender, and a mass valuation produced by a public office for tax purposes. They use different methods and routinely produce different figures.
- Appraisal district
- The public office responsible for valuing every property in its jurisdiction each year for tax purposes. It sets values; it does not set tax rates and does not collect tax.
- Assessed value
- The value on which tax is calculated, derived from the appraised market value after any applicable exemptions and limitations are applied. It is frequently lower than the market value shown on the same notice.
- Chain of title
- The sequence of recorded transfers of a property from one owner to the next. A title examination reads this chain backwards looking for breaks, unreleased claims and anything that would limit the ability to convey.
- Closing
- The event at which the documents transferring a property are executed. It is not necessarily the same moment as funding, when money actually moves.
- Comparable
- A recently completed sale of a similar property nearby, used as evidence of value. What makes a sale comparable is similarity in location, size, age, condition and date, and adjustments are made for the ways it differs.
- Contingency
- A condition in an agreement that must be satisfied before the parties are bound to complete. Common ones concern the building's condition, the availability of financing and the outcome of a valuation.
- Days on market
- The number of days a property has been available since it was listed. It is a useful indicator but easily reset, because withdrawing and re-entering a listing usually restarts the count.
- Deed
- The recorded instrument by which ownership of real property is transferred. Recording it puts the transfer on the public record, which is what makes it discoverable by anyone examining title later.
- Easement
- A right held by someone other than the owner to use part of a property for a defined purpose, such as running utility lines or crossing to reach another parcel. The owner keeps the land but cannot obstruct the purpose.
- Encroachment
- A structure that crosses a boundary onto adjoining land or into an easement. Fences, driveways and outbuildings are the usual culprits, and a boundary survey is what reveals them.
- Escrow
- An arrangement in which money is held by a third party. In lending it usually refers to the account into which property tax and insurance are collected monthly and from which they are paid annually.
- Exemption
- A provision removing part of a property's value from taxation, typically for an owner's principal residence and sometimes additionally for particular categories of owner.
- Fixed-rate loan
- A loan whose interest rate is set at the outset and does not change, so the loan payment is knowable for the full term. The certainty is priced into the rate offered.
- Adjustable-rate loan
- A loan whose rate is fixed for an initial period and then periodically reset by reference to a published index plus a margin, usually within stated limits on movement per reset and in total.
- Inventory
- The count of homes available for sale at a given moment. Expressed against the rate at which they are being absorbed, it becomes months of supply.
- Lien
- A recorded claim against a property securing a debt. A mortgage creates one; so can unpaid taxes and unpaid contractors. Liens must generally be resolved before clear title can pass.
- Metes and bounds
- A method of describing land by a written sequence of bearings and distances that walks the boundary from a defined point and returns to it. Used where land was never platted into numbered lots.
- Months of supply
- Available homes divided by the number selling each month, giving a figure in time. It describes how fast decisions are being made better than any price series does. See how the market works.
- Origination
- The process of creating a loan, and the costs charged for doing so. Some are proportional to the sum borrowed and some are fixed.
- Plat
- A recorded drawing dividing a tract of land into numbered lots and blocks, showing streets, alleys and easements. Once recorded, properties within it can be described by lot and block.
- Points
- An upfront payment made in exchange for a lower interest rate. Whether it is worthwhile depends on how long the loan is actually held, since the saving accrues monthly and the cost is paid once.
- Principal
- The outstanding balance of a debt, as distinct from the interest charged on it. The portion of a payment that reduces principal grows over the life of an amortising loan.
- Prorate
- To divide a periodic cost between buyer and seller according to the part of the period each owned the property. Property tax and association charges are commonly prorated at closing.
- Recorded restriction
- A private limitation recorded against land, often created when a subdivision was laid out, governing what may be built or done there. It runs with the land and is independent of public zoning.
- Setback
- A line, usually measured inward from a boundary, inside which building is permitted. It restricts the owner's own use of their own land, unlike an easement, which grants a right to someone else.
- Survey
- A measured drawing establishing where the recorded boundaries fall on the ground and showing what stands in relation to them, including setbacks, easements and anything crossing a line.
- Title search
- An examination of the recorded history of a property to establish who may convey it and subject to what. See what a survey and a title search check.
- Under contract
- A property for which an offer has been accepted but which has not yet completed. Counting these against available listings is one of the more reliable ways to read a market's direction.
- Walk-through
- A final visit before completion to confirm the property's condition, that included items remain, and that agreed work was carried out.
- Withdrawal
- A listing removed without a sale. A high rate of withdrawals indicates that sellers and buyers disagree about value and that sellers can afford to wait.