Real Estate Terms and Definitions
As you prepare to take a real estate license exam, real estate terms and definitions are probably foremost in your mind. Terms that mean one thing in the real world take on a whole new meaning in the real estate world. For example, dedicating a song to your sweetie is nothing like dedicating property to the government. The following lists contain terms and their context.
Terms for giving up and losing property:
Adverse possession: When someone uses your property, you may end up losing the property or having your rights to the property restricted.
Avulsion: Avulsion is the sudden loss of land by an act of nature like a landslide.
Dedication: When you dedicate property, you essentially give it up voluntarily to the government. An example is a developer giving up streets in a subdivision.
Erosion: A little like avulsion, erosion is the gradual loss of land by an act of nature, like property lost along the bank of a river.
Partition: A partition is a legal proceeding to divide property owned by two or more people.
Public grant: A public grant of land is just the opposite of dedication; the government actually is giving property to private individuals.
Potentially confusing pairs of real estate terms:
Condominium/cooperative: A condominium owner actually owns real estate. This ownership is usually the air space and an interest as a tenant in common of the land. A cooperative owner owns shares in a corporation that owns a building. The shareholder also gets a proprietary lease, which enables the shareholder to occupy a unit.
Foreclosure/forfeiture: Foreclosure is the loss of property to pay off a debt. Forfeiture is losing the property because of disobeying a condition in the deed.
Grantor/grantee: The grantor gives, sells, or transfers the property to the grantee. The grantee receives the property.
Leasehold/leased fee: The leasehold interest is the tenant’s interest in the property. The tenant holds the lease. The leased fee interest is the owner or landlord’s interest.
Mortgagor/mortgagee: The mortgagor is the borrower. The mortgagee is the lender. The borrower gives a mortgage to the lender.
Replacement cost/reproduction cost: These terms are associated with the cost approach to valuing a property. Replacement cost is the cost to produce a structure that is essentially the same as the existing structure but using modern materials and standards. Reproduction cost is an estimate of the cost to produce exactly the same structure with the same materials.
Tax credit/tax deduction: A tax credit is subtracted from taxes due. A tax deduction is subtracted from income. If all things are equal, a tax credit generally is more valuable than a tax deduction of the same amount.