Glossary 

Pass the NY State Exam! 

The following key terms will most likely appear on your State exam.   

For that reason, we recommend that you read through this Glossary at least twice! 

Abstract of Title - A summary of all of the recorded instruments and proceedings which the title
to property, arranged in the order in which they were recorded.

Acknowledgement - A formal declaration before a duly authorized officer by a person who has
executed an instrument that such execution is the person’s act and deed.

Acre - A measure of land equaling 43,560 square feet.

Actual Eviction - Actual eviction occurs when the landlord removes the tenant from the
property without aid or control of the court system. Actual eviction is wrongful use of self-help.

Ad Valorem Taxes - according to valuation.

Adjusted Basis - The original cost of a property minus depreciation and sales of portions
thereof plus allowable additions such as capital improvements and certain carrying costs and
assessments.

Adjustable Rate Mortgage (ARM) - A mortgage loan with the interest rate on the note
periodically adjusted based on an index which reflects the cost to the lender of borrowing on the
credit markets.

Advance Consent to Dual Agency - The seller or buyer agrees to dual agency before it occurs
by indicating the same on the agency disclosure form.

Adverse Possession - A means of acquiring title where an occupant has been in actual, open,
notorious, exclusive, and continuous occupancy of property under a claim of right for the
required statutory period.

Agency Disclosure Form - A written explanation, to be signed by a prospective buyer or seller

of real estate, explaining to the client the role that the broker plays in the transaction.

Agent - One who undertakes to transact some business or to manage some affair for another
by authority of the latter.

Americans with Disabilities Act - A wide-ranging civil rights law enacted by the U.S. Congress
in 1990, that prohibits, under certain circumstances, discrimination based on disability.
Amortization - The process by which a loan principal decreases over the life of a loan.

Appraisal - An estimate of a property’s value by an appraiser who is usually presumed to be

expert in his work.

Architectural Review Board - Oversees and upholds the quality and aesthetics of a
neighborhood, town, or city.

Area Variance - Permission to modify or exceed the bulk regulations imposed by local zoning
ordinances.

Article 12-A - The section of the New York Real Property Law pertaining to real estate
salespersons and brokers.

Asbestos - A naturally occurring mineral fiber sometimes found in older homes. It is hazardous
to health when a possibility exists of exposure to inhalable fibers. Homeowners should be alert
for friable asbestos and always seek professional advice in dealing with it.

Asbestosis - A chronic lung disease caused by inhaling asbestos fibers.

Assessed Value - A valuation placed upon property by a public officer or a board, as a basis for
taxation.

Assessment Review Board - An independent tribunal established to hear assessment

appeals.

Assignment - The method or manner by which a right or contract is transferred from one
person to another.

Associate Real Estate Broker - A licensed real estate broker who by choice elects to work
under the name and supervision of another real estate broker.

Beam - A horizontal structural member that supports a floor. Beams are typically wood, cold
formed metal framing or steel.

Blanket Mortgage - A type of loan used to fund the purchase of more than one piece of real
property. A blanket mortgage is often used for subdivision financing.

Blind Ad - An ad that remains anonymous as to who is advertising. Blind ads are illegal.

Blockbusting - The practice of inducing homeowners in a particular neighborhood to sell their

homes quickly, often at below market prices, by creating the fear that the entry of a minority
group or groups into the neighborhood will cause a precipitous decline in property values.

Blueprint - Architectural drawings that describe the layout and construction of a house.

 
Board Package - A series of documents submitted for the review by a cooperative board.

Bridge Loan - A type of short-term loan, typically taken out for a period of 2 weeks to 3 years.

British Thermal Unit (BTU) - The amount of heat energy needed to raise the temperature of
one pound of water by one degree F.

Building Code - Regulations established by state or local governments stating fully that
structural requirements for building.

Building Department - A town or city agency that oversees and reviews building applications
by licensed professionals to ensure compliance with local building code and zoning ordinances.

Bundle of Rights - The premise that the ownership of real estate consists of the ownership of
various rights associated with it. These rights include the right to use and/or occupy, the right to
sell in whole or in part, the right to lease, the right to bequeath and the right to do none of the
foregoing.

Buydown - Obtaining a lower interest rate by paying additional points to the lender.

Buyer Agent - An agent who represents the buyer of real property.

By-Laws - The owner’s rights and obligations for a condominium.

Capital Gain - A profit that results from the sale of a property where the amount realized from
the sale exceed the purchase price.

Capital Reserve Budget - Money set aside by a property owner for long-term capital
expenditures to a property.

Capitalization Rate - The percentage which is the sum of the discount rate, the effective tax
rate and the recapture rate representing the relationship between net operating income and
present value.
Formula: Cap Rate = NOI / Value

Cash on Cash Return - A percentage return on money invested in a property by an investor.

Formula: CoC = Cash Flow / Down Payment

Chain of Title - The sequence of historical transfers of title to a property. It runs from the
present owner back to the original owner of the property.

Chattel - Personal property, such as household goods.

Chloro-flouro Carbons (CFCs) - A fluid, containing hydrocarbons, that absorbs heat from a
reservoir at low temperatures and rejects heat at higher temperatures. When emitted into the
atmosphere, CFCs cause depletion of the stratospheric ozone layer.

 
Circuit Breaker - The safety valves for electrical systems. It interrupts an electric circuit when
an unusual condition arises such as lightning and malfunctioning appliances. Unlike a fuse, it
can be reset.

Civil Rights Act of 1866 - A federal law that prohibits all discrimination on the basis of race.

Client - The one by whom a broker is employed.

Commingling - To mingle or mix, for example, a client’s funds in the broker’s personal or
general account.

Comparative Market Analysis - A property evaluation that determines property value by

comparing similar properties sold within the last year.

Condemnation - Taking private property for public use, with fair compensation to the owner;
exercising the right of eminent domain.

Condominium - A form of fee simple ownership of part of a structure having multiple

units. Owners have title to their own units plus a share of the common elements.

Condop - A residential establishment that includes both a condominium and cooperative

ownership structures. Typically the condop refers to the residential portion of a building which is
treated as a single condominium unit owned through a cooperative-ownership structure.

Confidentiality - An agent is obligated to safeguard his/her principal's lawful confidences and

secrets. Therefore, a real estate broker must keep confidential any information that may weaken
a principal's bargaining position. The duty of confidentiality precludes a broker who represents a
seller from disclosing to a buyer that the seller can, or must, sell a property below the listed
price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that
the buyer can, or will, pay more than what has been offered for a property.
The duty of confidentiality does not include an obligation by a broker who represents a seller to
withhold know material facts about the condition of the seller's property from the buyer, or to
misrepresent the property's condition. To do so constitutes misrepresentation and may impose
liability on both the broker and/or the seller.

Construction Mortgage - A loan secured by real estate which is for the purpose of funding the
construction of improvements or building(s) upon the property.

Constructive Eviction - Any disturbance of the tenant’s possession of the leased premises by
the landlord whereby the premises and rendered unfit or unsuitable for the purpose for which
they were leased.

Continuing Education - Post license education required by salespersons and brokers. New
York State demands 22.5 hours of continuing education.

Conveyance - The transfer of the title of land from one to another. The means or medium by
which title of real estate is transferred.

 
Cooperative - A dwelling unit owned by a corporation in which an owner owns stock
commensurate with the value of his or her apartment compared to the value of the building as a
whole. The stockholder has a proprietary lease to the apartment.

Corrective Maintenance - A maintenance task performed to identify, isolate, and rectify a

problem with a property so that the property can be restored to an acceptable condition.

Covenants, Conditions and Restrictions (CCRs) - Limitations and rules on a group of homes
by a builder, developer, neighborhood association and/or homeowner associations; when living
in a building, a buyer gives up certain freedoms to be part of a shared community.

Deed Restriction - A imposed restriction in a deed for the purpose of limiting the use of the
land such as:
1) A restriction against the sale of liquor thereon.
2) A restriction as to the size, type, value or placement of improvements that may be erected
thereon.

Depreciation - A loss of utility and thus value caused by physical deterioration, functional
obsolescence or economic obsolescence or any combination thereof.

Designated Sales Agent - Appointing one or more individual agents in a firm to represent only
the interests of the seller and one or more different individual agents in the firm to represent only
the interests of the buyer when a firm has an "in-house" dual agency situation.

Direct Cost - The cost of labor and materials.

Dual Agency - Representing both principals (seller and buyer) to a transaction.

Earnest Money Deposit - Down payment made by a purchaser of real estate as evidence of
good faith.

Easement - A right that may be exercised by the public or individuals on, over or through the
lands of others.

Easement by Implication - An easement that is not created by express statements between

the parties; but as a result of surrounding circumstances that dictate that an easement must
have been intended by the parties.

Easement by Necessity - Parcels without access to a public way may have an easement of
access over adjacent land if crossing that land is absolutely necessary to reach the landlocked
parcel and there has been some original intent to provide the lot with access.

Easement by Prescription - Implied easements granted after the dominant estate has used
the property in a hostile, continuous, and open manner for a statutorily prescribed number of
years.

 
Eminent Domain - A right of the government to acquire property for necessary public use by
condemnation; the owner must be fairly compensated.

Encroachment - A building, part of a building, or obstruction which intrudes upon or invades a

highway or sidewalk or trespasses upon the property of another.

Encumbrance - Any right to or interest in the land interfering with its use or transfer, or
subjecting it to an obligation.

Escheat - The reversion to the State of property in event the owner thereof abandons it or dies,
without leaving a will and has no distributees to whom the property may pass by lawful
descent.

Escrow - A written agreement between two or more parties providing that certain instruments or
property be placed with a third party to be delivered to a designated person upon the fulfillment
or performance of some act or condition.

Estate for Years - A leasehold estate for any specific period of time. An estate for years is not
automatically renewed.

Exclusive Right to Sell - An agreement of employment by a broker under which the exclusive
right to sell for a specified period is granted to the broker; if a sale during the term of the
agreement is made by the owner or by any other broker, the broker holding such exclusive right
to sell is nevertheless entitled to compensation.

Fair Housing Act of 1968 - A federal prohibition that protects buyer/renter of a dwelling from
seller/landlord discrimination with regards to race, color, religion, gender, or national origin.

Fascia - Architectural term for a band running horizontally and situated vertically under a roof
edge, or which forms the outer surface of a cornice, visible to an observer. Typically consisting
of a wooden board or sheet metal.

Fee Simple Estate - Absolute ownership of real property; a person has this type of estate
where the person is entitled to the entire property with unconditional power of disposition during
the person’s life and descending to the person’s heirs or distributees.

Fiduciary - A person who on behalf of or for the benefit of another transacts business or
handles money or property not the person’s own; such relationship implies great confidence and
trust.

Fiduciary Duties - The legal duty of a fiduciary to act in the best interests of the
beneficiary. One common duty includes confidentiality.

First Substantive Contact - The first contact or meeting by a licensee when some detail and
information about the property is shared with parties who express some interest in the real
estate transaction.

 
Fixture - Personal property so attached to the land or improvements as to become part of the
real property.

Flashing - Sheet metal used at wall and roof junctions and around chimneys to prevent water
entry.

Footing - Concrete set in the soil (foundation bed) that support the foundation of the house.

Foundation Walls - The part of the structure, typically below grade, upon which all other
construction is built.

Full Covenant and Warranty Deed - A type of deed where the grantor guarantees that he or
she holds clear title to a piece of real estate and has a right to sell it to the grantee. This type of
deed contains the strongest guarantee of title.

Fuse - A device used in electrical systems to protect against excessive current.

General Agent - An agent with the full authority over one property of the principal, such as a
property manager.

Graduated Lease - A lease which provides for a graduated change at stated intervals in the
amount of the rent to be paid; used largely in long-term leases.

Graduated Payment Mortgage - A type of fixed-rate mortgage in which the payment increases
gradually from an initial low base level to a desired, final level.

Grantee - The buyer in a transaction.

Grantor - The seller in a transaction.

Gross Lease - A lease of property whereby the lessor is to meet all property charges regularly
incurred through ownership.

Ground Lease - An agreement in which a tenant is permitted to develop a piece of property

during the lease period, after which the land and all improvements are turned over to the
property owner.

Habendum Clause - A clause in a deed or lease that defines the type of interest and rights to
be enjoyed by the grantee or lessee. Also known as the “to have and to hold’” clause.

Historic Preservation / Landmark Commissions - Established to review proposed projects

within historic districts for compliance with standards established for new development or
alteration or improvement of historic buildings and landmarks.

House Rules - Rules in a cooperative that cover common issues including garbage disposal,
maintenance, noise, and conflict resolution.

 
Independent Contractor - A person that provides services to another under terms specified in
a contract or within a verbal agreement. An independent contractor is not an employee.

Indirect Cost - Costs that support a construction project, such as legal or architectural fees.

Inflation - The rate at which the general level of prices for goods and services is rising, and,
subsequently, purchasing power is falling.

Joint Tenancy - Ownership of realty by two or more persons, each of whom has an undivided
interest with the “right of survivorship”.

Joists - Horizontal beams supporting a floor.

Land Lease - A land lease--also called a ground lease--is a lease agreement that permits the
tenant to use a piece of land owned by the landlord in exchange for rent.

Lease - A contract whereby, for a consideration, usually termed rent, one who is entitled to the
possession of real property transfers such rights to another for life, for a term of years, or at
will.

Lease Escalation Clause - A contract provision allowing for one to pass an increase in costs to
another party. Escalation clauses are usually related to influences beyond both parties control,
such as inflation.

Leasehold Estate - The interest or estate which a lessee of real estate has therein by virtue of
the lessee’s lease.

Leverage - The use of borrowed capital (mortgage) to increase the potential return of an
investment.

Lien - A legal right or claim upon a specific property which attaches to the property until a debt
is satisfied.

Life Estate - The conveyance of title property for the duration of the life of the grantee.

Listing Agreement - An employment contract between principal and agent, authorizing the
agent to perform services for the principle involving the latter’s property.

Littoral Rights - The right of a property owner whose land borders on a body of water, such as
a lake, ocean or sea, to reasonable use and enjoyment of the shore and water the property
borders on.

Loan To Value ratio (LTV) - A financial term used by lenders to express the ratio of a loan to
the value of an asset (property) purchased.

Lot and Block - Method of identifying legal description of property.

 
Loyalty - An agent’s duty to place the client’s interest above those of all others, including the
agent’s own self-interest.

Management Agreement - A contract between the owner of a property and someone who
agrees to manage it.

Market Price - The actual selling price of a property.

Market Value - The most probable price that a property should bring if exposed for sale in the
open market for a reasonable period of time, with both the buyer and seller aware of current
market conditions, neither being under duress.

Mechanic's Lien - A security interest in the title to property for the benefit of those who have
supplied labor or materials that improve the property.

Misdemeanor - A crime punishable by up to a year in prison and/or a $1,000 fine.

Misrepresentation - Making an intentionally false statement to induce someone to contract.

Mortgage Broker Dual Agency Disclosure Form - A banking department form required when
a person is acting as a mortgage broker and a real estate broker in the same transaction.

Mortgagee - The lender or bank who provides a loan to the borrower or homeowner.

Mortgagor - the borrower, typically a home owner.

Negative Amortization - Occurs whenever the loan payment for any period is less than the
interest charged over that period so that the outstanding balance of the loan increases.

Net Lease - A lease that requires the tenant to pay, in addition to rent, some or all of the
property expenses that normally would be paid by the property owner. These include expenses
such as real estate taxes, insurance, maintenance, repairs, utilities, and other items.

Net Listing - A price below which an owner will not sell the property, and at which price a
broker will not receive a commission; the broker receives the excess over and above the net
listing as the broker’s commission.

Net Operating Income - Equal to the Gross income minus expenses (and sometimes debt
service). Also referred to as cash flow.

Non-Conforming Use - Utilization of a use that does not comply with local zoning for a
particular parcel.

Novation - The act of either:

1) replacing an obligation to perform with a new obligation; or
2) adding an obligation to perform; or
3) replacing a party to an agreement with a new party.

 
Obedience - The fiduciary relationship obligates the agent to act in good faith at all times,
obeying the client’s instructions in accordance with the contract.

Open Listing - A listing given to any number of brokers without liability to compensate any
except the one who first secures a buyer ready, willing and able to meet the terms of the listing,
or secures the acceptance by the seller of a satisfactory offer; the sale of the property
automatically terminates the listing.

Operating Budget - An amount of money set aside by the owner for a specific period for the
property manager to manage the property effectively.

Passive Activity Income - Earnings an individual derives from a rental property in which he or
she is not actively involved.

Percentage Lease - A lease of property in which the rental is based upon the percentage of the
volume of sales made upon the leased premises, usually provides for minimal rental.

Percolation Rate - The rate, usually expressed as inches per hour or inches per day, at which
water moves through soil.

Periodic Lease - Also known as a tenancy from year to year, month to month, or week to week,
is an estate that exists for some period of time determined by the term of the payment of rent.

Personal Property - Any property which is not real property.

Pitch - Also known as the slope. Typically used in describing the slope of a roof, driveway,
sidewalk, etc.

Planning Board - A local elected or appointed government board charged with recommending
to the local town or city council the boundaries of the various zoning districts and appropriate
regulations to be enforced therein.

Platform Construction - Wood frame construction commonly found in residential construction

in which floors are supported by joists, beams, and bearing walls.

Pocket Card - A card issued by the Department of State to each licensee which contains the
photo, name and business address of the licensee, and, in the case of a real estate
salesperson, the name and business address of the broker with whom he or she is associated
and shall certify that the person whose name appears thereon is a licensed real estate broker or
salesperson.

Point - Equal to 1 percent of a loan amount. For example, 1 point on a $100,000 is equal to
$1,000.

Preventative Maintenance - Keeping property and equipment in a good state of repair so as to

minimize the need for more costly major repair work or replacement.

 
Primary Mortgage Market - The market where borrowers and mortgage originators come
together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, mortgage
bankers, credit unions and banks are all part of the primary mortgage market.

Principal - (1) The employer of an agent or broker; the broker’s or agent’s client. (2) A sum of
money lent or invested on which interest is paid.

Pro-Forma Statement - An accounting statement that forecasts income and expenses for a
period of time, typically five or more years. Pro-forma statements are typically used by investors
to estimate their rate of return for a particular property.

Proprietary Lease - A lease given by a corporation to another. It is often used in a co-op

context, where the owner is given a certain number of shares in the co-op, along with a
proprietary lease for one of the residences in the building.

Proration - Allocation of closing costs and credits to buyers and sellers.

R-Value - A measurement of the ability of insulation to slow the transfer of heat or cold. The
higher the R value, the greater the insulation power.

Radon - A colorless, odorless gas that is emitted from soils, rocks and water as a result of
radioactive decay in certain areas of the country. Radon is known to cause cancer. Homes
should be tested for radon. The local environmental agency should be consulted on its handling,
removal and any applicable laws.

Real Estate / Real Property - Land, and generally whatever is erected upon or affixed thereto.

Real Estate Broker - A licensed individual or firm that charges a fee to serve as the mediator
between the buyer and seller. Mortgage brokers are individuals in the business of arranging
funding or negotiating contracts for a client, but who does not loan the money. A real estate
broker is someone who helps find a house.

Real Estate Salesperson - An individual who is licensed to negotiate and arrange real estate
sales; works for a real estate broker.

Real Estate Settlement Procedures Act (RESPA) - A consumer protection statute, first
passed in 1974. The purpose of RESPA are:
1) To help consumers become better shoppers for settlement services and
2) To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain
settlement services.

Reasonable Care - The degree of caution and concern for the safety of himself/herself and
others an ordinarily prudent and rational person would use in the circumstances. This is a
subjective test of determining if a person is negligent, meaning he/she did not exercise
reasonable care.

 
Red-Lining - The refusal to lend money within a specific area for various reasons. This practice
is illegal.

Regulation Z - The Truth in Lending Act of 1968 is United States federal law designated to
promote the informed use of consumer credit, by requiring disclosures about its terms and cost
to standardize the manner in which costs associated with borrowing are calculated and
disclosed.

Right of First Refusal - A contractual right that gives its holder the option to enter a business
transaction with the owner of something, according to specified terms, before he owner is
entitled to enter into the transaction with a third party.

Right of Survivorship - Right of the surviving joint owner to succeed to the interests of the
deceased joint owner, distinguishing feature of a joint tenancy or tenancy by entirety.

Riparian Rights - The right of a property owner whose land borders a natural water course,
such as a river, to reasonable use and enjoyment of the water that flows past the
property. Riparian literally means “riverbank”.

Sales Comparison Approach - Valuation method which compares a subject property’s

characteristics with those of comparable properties which have recently sold in similar
transactions.

Secondary Mortgage Market - The market where mortgage loans and servicing rights are
bought and sold between mortgage originators, mortgage aggregators (securitizers) and
investors. The secondary mortgage market is extremely large and liquid.

Seller's Agent - An agent who represents the seller of real property.

Severalty - Ownership by only a single individual.

Sheathing - Panels that cover the exterior wall. Typically made of plywood or exterior grade
gypsum board.

Siding - A veneer cover found on the side of residential construction. Typically made of wood
boards (horizontal), vinyl, or aluminum.

Sill Plates - The bottom member of wood frame stud wall.

Soffit - The underside of a roof overhang.

Special Assessment - An assessment made against a property to pay for a public

improvement by which the assessed property is supposed to be especially benefited.

Specifications - A document provided by Architects that describe the quality of construction.

Steering - The practice in which real estate brokers guide prospective home buyers towards or

 
away from certain neighborhoods based on their race. Steering is highly illegal.

Straight Mortgage - A non-amortizing mortgage under which the principal is paid in its entirety
upon the maturity date.

Straight-Line Depreciation - A method of calculating the depreciation of an asset which

assumes the asset will lose an equal amount of value each year.

Studs - Vertical framing members found in wall construction. Typically placed 12”, 16” or 24” on
center.

Sublease - An arrangement in which the lessee (tenant) in a lease assigns the lease to a third
party, thereby making the old lessee the sublessor, and the new lessee the sublessee, or
subtenant.

Survey - The process by which a parcel of land is measured and its area ascertained; also the
blueprint showing the measurements, boundaries and area.

Tenancy in Common - An ownership of realty by two or more persons, each of whom has an
undivided interest, without the “right of survivorship”.

Testers - Volunteers from state or private agencies who enforce fair housing by claiming to be
home seekers, thereby finding out if brokers deal fairly with all clients/customers.

Time Value of Money (TMV) - The idea that money available at the present time is worth more
than the same amount in the future due to its potential earning capacity.

Title - Legal term for a bundle of rights in a piece of property in which a party may own either a
legal interest or equitable interest.

Triple Net Lease - A lease in which the tenant or lessee is responsible for paying a portion of or
all of the common expenses related to real estate ownership, in addition to base rent.

Umbrella Policy - Insurance policy that covers amounts above those covered under one or
more other primary policies, and which does not pay until the losses exceed a certain
sum. Also called excess insurance.

Unities of Interest, Possession, Time and Title - Describes the conditions that must exist in
order for certain kinds of property interests to be created. In order for two or more people to
own property as joint tenants with right of survivorship, or for a married couple to own property
as tenants by the entirety, they must have the four unities (Interest, Possession, Time, and
Time).

Urea Formaldehyde Foam Insulation (UFFI) - A type of foamed in-place insulation that
releases formaldehyde gas. It was banned by the Consumer Public Safety Commission in 1982
from use in residences and schools. Holding that the risks had not been proven, a Federal Court
lifted the ban in 1983. The local consumer and/or environmental protection agency should be

 
consulted for additional information on this type of insulation.

Use Variance - Permission to use or develop land other than that permitted by local zoning
ordinances.

Useable (usable) Square Footage - Space that can be used or occupied by a

tenant. Typically does not include elevators, stairs, mechanical spaces, etc.

Usury - On a loan, claiming a rate of interest greater than that permitted by law.

Variance - The authorization to improve or develop a particular property in a manner not

authorized by zoning.

Vicarious Liability - A situation in which one party is held partly responsible for the unlawful
actions of a third party.

Wrap-around Mortgage - A form of secondary financing for the purchase of real property. The
seller extends to the buyer a junior mortgage which wraps around the exits in addition to any
superior mortgages already secured by the property.

Zoning Board of Appeals - A local appointed board that has the power to review administrative
rulings made by the planning board or another legislative body.

Zoning Ordinance - Act of city or country of other authorities specifying type and use to which
property may be put in specific areas.