Legal Terms can be very confusing and sometimes not clear, people may not be familiar with every term.
We came up with a list of the main Real Estate Definitions and legal terms for your review.
Agent - One who represents or has the power to act for another person (called the principal). The authorization may be express, implied, or apparent. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be her or his agent.
Agreement of sale - A written agreement by which the person or an entity agrees to buy certain real estate and the seller agrees to sell, on the terms and conditions set forth in the agreement.
Alienation - The act of transferring property to another. Alienation may be voluntary, such as by sale, or involuntary, such as through eminent domain.
Alienation clause - Clause in a mortgage instrument that does not all the borrower to sell (without lender approval) on assumption or contract-for-deed. If an attempt is made to do so without prior approval, all the mortgaged balance becomes due on the sale of the property.
Amendments - Changes to previously approved and adopted written agreements are amendments.
Amenities - Neighbourhood facilities and services that enhance a property’s value. They are always outside of the property. Swimming pools, three-car garages, decks, etc., that are on the property are called features.
Appraisal – An estimate of the quantity, quality, or value of something. The process through which conclusions about property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.
Appreciation – An increase in the worth or value of a property, due to economic or related causes, which may prove to be either temporary or permanent.
Arbitration - A means of settling a controversy between two parties through the medium of an impartial third party whose decision on the controversy (if agreed upon) will be final and binding.
Assessment – The value assigned to your home by a government tax assessor.
Balloon payment - The final payment of a mortgage loan that is considerably larger than the required periodic payments, because the loan amount was not fully amortized.
Beneficiary - The person for whom a trust operates or in whose behalf the income from a trust estate is drawn.
A lender who lends money of real estate and takes back a note and deed of trust from the borrower.
Breach of contract - The failure, without legal excuse, of one of the parties to a contract to perform according to the contract.
Brokerage Owner - The business owner of buying and selling agency service for another for a commission of the sale.
Broker Agent (Salesperson) – A (license is required in most countries) real estate Agent who represent the Buyer and or the seller in the sale.
Building restrictions - The limitations on the size or type of property improvements established by zoning acts or by deed or lease restrictions. Building restrictions are considered encumbrances and violations render the title unmarketable.
Business plan - A three to five-year blueprint for an organization or individual real estate practitioner.
Capital gain – Total Profit earned from the sale of an asset.
Capital investment - The initial capital and the long-term expenditures made to establish and maintain a business or investment property.
Capitalization - The process of converting into present value (or obtaining the present worth of) a series of anticipated future periodic instalments of net income. In real estate appraisal, it usually takes the form of discounting. The formula is Income/Rate = Value
Capitalization Rate – A rate used to determine property value based on net income typically used for apartment and commercial buildings. Cap Rate is calculated by dividing net income before debt by current market value of the property.
Cash flow - The net income from an investment, determined by deducting all operating and fixed expenses from the gross income. If expenses exceed income, a negative cash flow is the result.
CMA - A comparative market analysis (CMA) is a document that evaluates a seller’s home value based on the prices of similar homes in the area
Collateral - Something of value given or pledged to a lender as a security for a debt or obligation.
Commercial property - A classification of real estate that includes income-producing property, such as office buildings, restaurants, shopping centres, hotels, and stores.
Commercial – A zoning classification for property that refers to property used for business activities such as retail stores, farms, offices, etc.
Commission - The payment made to a broker or Agent for real estate services, such as in the sale or purchase of real property; this is usually a percentage of the selling price of the property.
Comparable Market Analysis – An evaluation of similar, recently sold homes (called comparable) that are near a home intended to be bought or sold. It establishes a price estimate based on current market activity that can be used as a guide for pricing a home. Buyers, sellers, and real estate agents perform a CMA when they are preparing to buy or sell a home.
Comparable (Comps, Sales Comps) – The prices of houses that have recently sold with similar characteristics to the house you are currently valuing.
Closing – This refers to the process where the deed of the property is formally transferred from the seller to the buyer.
Contingencies – Clauses in a contract that allow a buyer to not be forced to purchase a property if certain conditions are unsatisfactory either structurally or financially.
Contract - An agreement entered by two or more legally competent by the terms of which one or more of the parties, for a consideration, undertakes to do or to refrain from doing some legal act or acts. A contract may be either unilateral (where only one party is bound to act) or bilateral (where all parties to the instrument are legally bound to act as prescribed).
Contract for deed - A Sale contract of real estate under which the sale price is paid in periodic instalments by the purchaser, who is in possession and holds equitable title, although actual title is retained by the seller until final payment.
Cost approach - The process of estimating the value of a property by adding the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation, to the estimated land value.
Counteroffer - An offer made as a reply to an offer received, having the effect of rejecting the original offer. The original offer cannot be accepted thereafter unless revived by the offeror repeating it.
Debt - Something owed to another; an obligation to pay or return something.
Deed – The legal document that determines who has ownership of a property. This is the document transferred from seller to buyer at closing.
Default – Failing to make loan repayments by the required deadline. Defaulting can lead to foreclosure where the lender takes back the property since the owner cannot make payments on time.
Down Payment – The amount of money paid upfront (about 10%) as a deposit for the property.
Earnest Money – The sum of money that is submitted with an offer as an add-on to prove the buyer is serious and not wasting either party’s time.
Endorsement - The act of writing one’s name, either with or without additional words, on a negotiable instrument or on a paper attached to such instrument.
Equity – The financial value above what is owed on the property. As a loan is paid off equity is built so when the property is sold all proceeds pay off the remaining loan balance and the left-over money is equity that goes in the owner’s pocket.
Escrow – A neutral third party or attorney that handles the exchange of money and documents between a buyer and seller once a mutual offer has been accepted and the parties move to closing.
Ethical – Ethical Conduct conforming to professional standards approved by NAR.
Exclusive-agency listing - A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period to sell the property on the owner’s stated terms for a commission. The owner, however, reserves the right to sell without paying anyone a commission by selling to a prospect who has not been introduced or claimed by the broker.
Exclusive right to sell listing - A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property on the owner’s stated terms and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner, or another broker.
Execution - The signing and delivery of an instrument. Also, a legal order directing an official to enforce a judgment against the property of a debtor.
Executor - The person designated in a will to handle the state of the deceased. The probate court must approve any sale of property by the executor.
Expenses - The short-term costs that are deducted from an investment property’s income, such as minor repairs, regular maintenance, and renting costs.
Fixture - An article that was once personal property but has been so affixed to real estate that it has become real property.
Foreclosure – A property that defaulted on loan payments and failed to make them up over the course of the foreclosure process ultimately leading the bank to reclaim the property from the owner.
For Sale By Agent – A property listed for sale by a real estate agent. Upon selling, the agent receives a percentage commission for their services.
For Sale By Owner (FSBO) – A property listed for sale by the owner. This method saves the seller costs associated with hiring a real estate agent but has its positives and negatives as well.
Franchise - A private contractual agreement to run a business using a designated trade name and operating procedures.
Fraud - A misstatement of a material fact made with intent to deceive or made with reckless disregard of the truth and that does deceive.
Freehold estate - An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.
Future interest - A person’s present right to an interest in real property that will not result in possession or enjoyment until sometime in the future, such as a reversion or right of re-entry.
Grantee - A person to whom real estate is conveyed; the buyer.
Grantor - A person who conveys real estate by deed; the seller.
Heir - One who might inherit or succeed to an interest in land under the state law of descent when the owner dies without leaving a valid will.
Highest and best use - The possible use of land that will produce the greatest net income and thus develop the highest land value.
Improvements on land: any structure, usually privately owned, erected on a site to enhance the value of the property;
Improvements to land: usually a publicly owned structure.
Income approach - The process of estimating the value of an income-producing property by capitalization of the annual net income expected to be produced by the property during its remaining useful life.
Independent contractor - One who is retained to perform a certain act but who is subject to the control and direction of another only as to the result, and not as to how he or she performs the act. Unlike an employee, an independent contractor pays all his or her expenses, pays his or her income and Social Security taxes, and receives no employee benefits. Many real estate salespeople are independent contractors.
Industrial property - All land and buildings used or suited for use in the production, storage, or distribution of tangible goods.
Instalment sale - A method of reporting gain received from the sale of real estate when the sale price is paid in two or more instalments over two or more years. If the sale meets certain requirements, a taxpayer can spread recognition of the reportable gain over more than one year, which may result in tax savings.
Interest - A charge made by a lender for the use of money.
Investment - Money directed toward the purchase, improvement, and development of an asset in expectation of income or profits. A good financial investment has the following characteristics: safety, regularity of yield, marketability, acceptable denominations, valuable collateral, acceptable duration, required attention, and potential appreciation.
Joint tenancy - The ownership of real estate by two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, her or his interest passes to the surviving joint tenant or tenants by the right of survivorship.
Joint venture - The joining of two or more people to conduct a specific business enterprise. A joint venture is like a partnership in that it must be created by agreement between the parties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only, rather than for a continuing business relationship.
Judgment - The official and authentic decision of a court on the respective rights and claims of the parties to an action or suit. When a judgment is entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant for a ten-year period.
Judgment clause - A provision that may be included in notes, leases, and contracts by which the debtor, lessee, or obligor authorizes any attorney to go into court to confess a judgment against him or her for a default in payment. Also called a cognovit.
Inspection – A thorough inspection of a home by a licensed inspector to discover any issues or repairs that need to be made before buying the home.
Land - The earth’s surface extending downward to the centre of the earth and upward infinitely into space.
Lease - A contract between a landlord (the lessor) and a tenant (the lessee) transferring the right to exclusive possession and use of the landlord’s real property to the lessee for a specified period and for a stated consideration (rent). By state law, leases for longer than a certain period (generally one year) must be in writing to be enforceable.
Leasehold estate - A tenant’s right to occupy real estate during the term of a lease, generally considered to be a personal property interest.
Lessee - The tenant who leases a property.
Lessor - One who leases property to a tenant
Loan – Borrowing money from another person or institution to pay for the property.
Lien – a right to keep possession of property belonging to another person until a debt owed by that person is discharged.
Listing – A term for the property, or land being put up for sale for others to see.
Listing agreement - A contract between a landowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed as agent to list and sell real estate on the owner’s terms within a given time, for which service the landowner agrees to pay a commission.
Management agreement - A contract between the owner of income property and a management firm or individual property manager outlining the scope of the manager’s authority.
Market/data approach - A method of appraising or evaluating real property based on the proposition that an informed purchaser would pay no more for a property than the cost to him or her of acquiring an existing property with the same utility. This approach is applicable when an active market provides enough quantities of reliable data that can be verified from authoritative sources. The approach is relatively unreliable in an inactive market or in estimating the value of properties for which no real comparable sales data are available. It also is questionable when sales data cannot be verified with principals to the transaction. Also referred to as the market comparison or direct sales comparison approach.
Market price - The actual selling price of a property.
Market value - The most profitable price a property will bring in a competitive and open market under all condition’s requisite to a fair sale. The price at which a buyer would buy, and a seller would sell, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Mortgage – the charging of real (or personal) property by a debtor to a creditor as security for a debt (especially one incurred by the purchase of the property), on the condition that it shall be returned on payment of the debt within a certain period.
Mortgage lien - A lien or charge on a mortgagor’s property that secures the underlying debt obligations.
Multi-Family – A type of home or building with multiple units owned by one or more parties such as an apartment complex or condominium complex.
Multiple Listing Service (MLS) – The MLS is a local or regional service that compiles available real estate for sale by member brokers along with detailed information brokers and agents can access online.
Negligence - Carelessness and inattentiveness resulting in violation of trust. Failure to do what is required.
Net operating income - The gross income of the property minus vacancy, collection losses, and operating expenses (not including debt service).
Net lease - A lease requiring the tenant to pay not only rent but also costs incurred in maintaining the property, including taxes, insurance, utilities, repairs. If the tenant pays for everything, it is referred to as a triple net lease.
Notary public - A public official authorized to certify and attest to documents, take affidavits, take acknowledgments, administer oaths, and perform other such acts.
Novation - Acceptance by parties to an agreement to replace an old debtor with a new one. A novation releases liability.
Net Income – The amount of income left over after operating expenses have been subtracted from revenues. Some people use net income as income before debt is subtracted while others subtract debt as an expense and then come up with the final net income.
Open listing - A listing contract under which the broker’s commission is contingent on the broker producing a “ready, willing, and able” buyer before the property is sold by the seller or another broker; the principal (owner) reserves the right to list the property with other brokers.
Option - The right to purchase property within a definite time at a specified price. No obligation to purchase exists, but the seller is obligated to sell if the option holder exercises the right to purchase.
Ownership - The exclusive right to hold, possess or control, and dispose of a tangible or intangible thing. Ownerships may be held by a person, corporation, or governmental entity.
Partnership - Two or more individuals or entities who agrees to own a business for profit as co-owners. a partnership is regarded as a Ltd Company.
Power of attorney - A written instrument authorizing a person (the attorney-in-fact) to act on behalf of the maker to the extent indicated in the instrument.
Premises - The specific section of a deed that states the names of the parties, recital of consideration, operative words of conveyance, legal property description, and appurtenance provisions.
Prepayment clause - In a mortgage, the statement of the terms on which the mortgagor may pay the entire or stated amount of the mortgage principal at some time prior to the due date.
Prepayment penalty - A charge imposed on a borrower by a lender for early payment of the loan principal to compensate the lender for interest and other charges that would otherwise be lost.
A sum lent or employed as a fund or investment, as distinguished from its income or profits.
The original amount (as in a loan) of the total due and payable at a certain date.
A main party to a transaction – the person for whom the agent works.
Priority - The order of position or time. The priority of liens generally is determined by the chronological order in which the lien documents are recorded; tax liens (like special assessments), however, have priority, even over previously recorded liens.
Property management - The operation of the property of another for compensation. Includes marketing space; advertising and rental activities; collecting, recording, and remitting rents; maintaining the property; tenant relations; hiring employees; keeping proper accounts; and rendering periodic reports to the owner.
Property Tax – An annual or semi-annual tax paid to one or more government agencies based on the property value assessment.
“Ready, willing, and able” buyer - One who is prepared to buy property on the seller’s terms and is ready to take positive steps to consummate the transaction.
Real estate - Land; a portion of the earth’s surface extending downward to the centre of the earth and upward infinitely into space, including all things permanently attached thereto, whether by nature or by man.
Real estate broker - Any person, partnership, association, or corporation that sells (or offers to sell), buys (or offers to buy), or negotiates the purchase, sale, or exchange of real estate, or that leases (or offers to lease) or rents (or offers to rent) any real estate or the improvements thereon for others and for a compensation or valuable consideration. A real estate broker may not conduct business without a real estate broker’s license.
REALTOR® - A registered trademark term reserved for the sole use of active members of local REALTORS® boards affiliated with the National Association of REALTORS®.
Rent - A fixed, periodic payment made by a tenant of a property to the owner for possession and use; usually by prior agreement of the parties.
Rent schedule - A statement of proposed rental rates, determined by the owner or the property manager or both, based on a building’s estimated expenses, market supply and demand, and the owner’s long-range goals for the property.
Replacement cost - The cost of construction at current prices of a building having utility equivalent to the building being appraised but built with modern materials and according to current standards, designs, and layout.
Real Estate Broker – A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction. A real estate broker gets paid a commission. Most real estate brokers also have agents working for them. Licensing for a broker and an agent are different in case you are confused.
Real Estate Purchase/Sale Agreement – A legal document that obligates a buyer to buy and a seller to sell. This contract between a buyer and seller details the property being sold, contingencies, purchase price, and more.
Residential – used as a residence or by residents.
Sales contract - A contract containing the complete terms of the agreement between buyer and seller for the sale of a parcel or parcels of real estate.
Salesperson - A person who performs real estate activities while employed by or associated with a licensed real estate broker.
Short sale / Fire Sale - A sale of secured property that produces less money than is owed to the lender, but in order to expedite the sale and avoid foreclosure expense, the lender releases its interest so the property can be sold.
Subletting - The leasing of premises by a lessee to a third party for part of the lessee’s remaining term
Substitution - An appraisal principle stating that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, if no costly delay is encountered in making the substitution.
Single Family – A single independent property that is used by a single family for living such as a house. In simple terms, the property is used by one family only.
Stamp Duty: The stamp duty in Thailand for the transaction is 0,5% of the sale price of the property. The seller in the transaction normally pays for the Stamp Duty in Thailand. Note that if Specific Business Tax then the Stamp Duty is not payable. It is one or the other which gets paid.
Survey - The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and positions of buildings on a lot, including the determination of any existing encroachments or easements.
Specific Business Tax – 3.3% payable of either the sale price of the property or the appraised price of the property whichever is the higher
Tenant - One who holds or possesses lands or tenements by any kind of right of title.
Termination (lease) - The cancellation of a lease by the action of either party. A lease may be terminated by expiration of the term, surrender and acceptance, constructive eviction by lessor, or option, when provided in the lease for breach of covenants.
Termination (listing) - The cancellation of a broker-principal employment contract. A listing may be terminated by death or insanity of either party, expiration of listing period, mutual agreement, enough written notice, or the completion of performance under the agreement.
“Time is of the essence” - A phrase in a contract that requires the performance of a certain act within a stated period
Title – A legal document listing the history of ownership of the home. Buyers get a preliminary title report from an escrow agent or attorney within a week after they reach mutual acceptance on an offer.
Title Insurance – Title insurance protects against losses resulting from problems with the title.
Transfer Fee - a percentage fee of the appraised value of the property being transferred. The transfer fees in Thailand for property is 2% of the property value.
Value - The present worth of future benefits arising from the ownership of real property. To have value, a property must have utility, scarcity, effective demand, and transferability.
Withholding Tax - If the seller is a company the withholding tax is fixed at 1% of the registered sale value or appraised value whichever is higher. If the seller is a person withholding tax is calculated at a progressive rate based on the appraised value of the property.
Zoning – Laws that govern how a real estate can be used. Properties can be zoned for residential, commercial or industrial usage or a combination of two or more uses.
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Last Updated - 14/01/2021