Washington Real Estate Glossary

A

Ability-to-Repay rule

The federal requirement that a lender make a reasonable, good-faith, verified determination that a borrower can repay a mortgage.

Acceleration clause

A provision in a mortgage or deed of trust that lets the lender declare the entire unpaid balance immediately due, typically after the borrower defaults.

Acceptance

The grantee's act of taking a delivered deed as their own, the final step that completes a transfer of real property.

Acknowledgment

A signer's formal declaration before a notary public that a signature on a deed or other document is genuine and made voluntarily. It allows the document to be recorded.

Actual authority

Power a principal grants directly to an agent, spoken or in writing, to act on the principal's behalf; it can be broad or narrowly limited to specific tasks.

Actual notice

Knowledge a person gains firsthand: from what they are told, what documents they read, or what they see when inspecting a property.

Ad valorem

A Latin phrase meaning 'according to value.' Taxes charged this way, such as property taxes, are based on the assessed value of what is being taxed.

Addendum

An attachment added to a contract that spells out extra terms or provisions the main form does not cover.

Adjustment

A dollar correction applied to a comparable's sale price for features it has more or less of than the property being valued.

Adjustment period

On a variable-rate loan, the interval that sets when the interest first changes and how often it resets afterward, commonly once a year.

Administrator

A person a court appoints to settle the estate of someone who died without naming an executor in a valid will.

Adverse possession

Gaining legal ownership of land by occupying it openly, exclusively, and without the owner's permission for a set period.

Advertising

Under Washington licensing law, any attempt to induce someone to use a firm's or licensee's services (websites, social posts, email, signs, video included).

Affiliated licensee

A broker or managing broker who is licensed to represent a real estate firm and works under its supervision.

Agency

The legal relationship in which one person, the agent, is authorized to act on behalf of another, the principal, in dealings with third parties.

Agency disclosure

Making clear in writing whom a broker represents in a transaction.

Agency relationship

The professional connection between a real estate firm and a principal (buyer, seller, landlord, or tenant).

Agent

Before 2010, one of Washington's two real estate license levels. An agent could provide brokerage services to clients but could not manage other licensees inside a firm.

Air rights

An owner's legal claim to the usable space above the surface of their land. In practice this claim is limited by government control of navigable airspace for aircraft.

Amortization

The gradual payoff of a loan through regular payments over its term. Each payment covers the interest due and reduces the principal until the balance reaches zero.

Annuity

A series of payments of equal size made at fixed, regular intervals.

Antitrust laws

Federal and state laws that protect competition by prohibiting agreements that restrain trade, such as price fixing, market allocation, and group boycotts.

Appraisal

A professional, supported opinion of a property's value as of a specific date. It is prepared by a licensed or certified appraiser using recognized valuation methods.

Appraiser

A trained professional who estimates the market value of real property.

Appreciation

An increase in a property's value over time, from market forces, improvements, or inflation. It builds the owner's equity without any payment toward the loan.

Appurtenances

Rights, benefits, or attachments that belong to a piece of land and automatically pass with it when it is sold.

Assessed value

The worth the county assessor assigns a property for calculating property tax.

Assessment

The official valuation a county assessor places on property to calculate property tax.

Assignment

The transfer of one party's rights and interests under a contract to another person.

Assumed name

A business name different from the owner's legal name, under which a firm operates and advertises.

Assumption

An arrangement in which a buyer takes over the seller's existing loan and becomes primarily liable for the remaining payments.

Attorney-in-fact

A person authorized by a written power of attorney to act on another's behalf, such as signing documents; this person need not be a lawyer.

B

Balloon payment

A large lump sum that pays off the remaining loan balance in one shot at the end of the term.

Basis

For tax purposes, the amount invested in a property: its purchase price plus settlement and closing costs.

Benchmark

A permanent, marked reference point of known elevation that surveyors use as a starting point for measuring heights tied to a datum. It is often a brass disk set in concrete.

Beneficiary

Under a deed of trust, the lender: the party entitled to repayment.

Bilateral contract

An agreement in which both parties make promises and are each obligated to perform, exchanging one promise for another.

Bill of sale

A written document that transfers ownership of personal property, items that are not real estate, from one party to another.

Blanket mortgage

A single loan secured by two or more separate parcels of real estate.

Blockbusting

The illegal practice of scaring homeowners into selling cheaply so the broker can profit from the turnover.

Branch manager

The person a firm puts in charge of a satellite office and the brokers who work out of it.

Branch office

An additional business location a real estate firm operates apart from its main office.

Breach

The failure to fulfill a promise or obligation in a contract without a legal excuse. It gives the injured party the right to remedies such as damages or specific performance.

Broker

A person licensed to help clients buy, sell, rent, exchange, or manage property on behalf of a real estate firm.

Broker price opinion

A broker's written estimate of a property's probable value, less formal than an appraisal, often ordered by lenders or relocation companies.

Broker's open house

A showing aimed at other real estate brokers, usually held on a weekday, so agents can preview a new listing for their buyers.

Brokerage

The business of facilitating the sale, purchase, rental, or exchange of real estate for others in return for compensation.

Brokerage affiliation

The required association between a licensee and a licensed real estate firm.

Brokerage services

The licensed real estate activities performed for another person for compensation (RCW 18.85.011).

Brokerage services agreement

A written contract between a real estate firm and a client that sets the terms of representation.

Building code

A set of minimum standards for construction methods and materials, meant to protect the public from unsafe or substandard buildings.

Bundle of rights

The separate legal powers that come with owning real property: to possess, use, lease, mortgage, sell, will, and subdivide it.

Buyer agency

The relationship in which a broker represents only the buyer in a transaction and owes that buyer a broker's statutory duties.

C

CAN-SPAM Act

A 2003 federal law that sets rules for commercial email, such as requiring honest subject lines and a working opt-out, and banning deceptive headers.

Cancellation

The ending of a contract by mutual agreement of the parties, releasing them from further obligations.

Capacity

A borrower's financial ability to repay a loan, which lenders judge from income, employment history, and existing debt.

Capital gain

The profit made when an asset sells for more than its adjusted basis. The gain is roughly the sale price minus what was paid to acquire and improve it, less certain allowed costs.

Case law

Law that comes from published court decisions rather than statutes. Judges' rulings interpret, update, or clarify existing legal rules and guide later similar cases.

Cash to close

The total amount of money a buyer must bring to the settlement table to finish the purchase.

Chain of title

The unbroken sequence of recorded owners of a property, from the earliest records to the present, with each transfer linked to the next.

Changed circumstance

A defined event that lets the lender re-issue a Loan Estimate and reset fee-tolerance baselines.

Clear and conspicuous

Washington's standard for how the firm name must appear in advertising: readily noticed and understood.

Client

A buyer or seller who has entered an agency relationship with a broker and is therefore owed the broker's full representation and duties, unlike a customer.

Closing

The final step of a real estate sale, when funds and signed documents are exchanged and title passes to the buyer.

Closing costs

The fees and charges a buyer and seller owe at settlement beyond the property's purchase price. They include loan fees, title and escrow charges, prepaid taxes, and insurance.

Closing date

The day set in the purchase and sale agreement for the sale to be finalized, when documents are signed and recorded and title passes from seller to buyer.

Closing Disclosure

A five-page federal form itemizing the final loan terms, costs, and credits in a mortgage transaction.

Closing statement

An itemized accounting given to the buyer and seller at the completion of a real estate sale, so each party sees exactly what they pay or receive.

Code of Ethics

The National Association of REALTORS conduct standards binding on REALTOR members.

Collateral

Property a borrower pledges to secure a loan. If the borrower defaults, the lender can take the pledged asset and sell it to recover what it is owed.

Commingling

Illegally mixing money that belongs to clients (such as earnest money held in trust) with a firm's own operating funds.

Commission split

An arrangement in which the earnings from a closed sale are divided between the licensee and the firm by an agreed percentage.

Common law

A body of law built up over time from court decisions and long-standing custom rather than from written statutes. It has roots in early English, French, and Spanish rulings.

Community property

A form of marital ownership used in Washington in which most assets either spouse earns or acquires during the marriage belong equally to both.

Comparables

Recently sold properties similar to the one being valued in location, size, age, and features. Their sale prices are adjusted to estimate the subject property's value.

Comparative market analysis

A broker's estimate of a home's value built by comparing it to similar nearby properties and adjusting the comparables for differences.

Compensation Disclosure

The written statement of compensation sources and amounts a broker in a Washington commercial transaction must give the buyer before an offer is signed.

Compensatory damages

A money award that reimburses the non-breaching party for the actual financial loss caused by a breach of contract.

Comprehensive plan

A local government's long-range policy document setting a community's goals for growth, land use, housing, and public services over many years.

Condemnation

The legal proceeding a government uses to carry out eminent domain. It takes private property for public use and sets the just compensation the owner must be paid.

Condominium

A form of ownership in which a person holds outright title to an individual unit plus a shared interest in the common elements of the larger property.

Confidential information

Client information a Washington broker may not disclose.

Conforming loan

A mortgage that meets the purchase standards set by Fannie Mae and Freddie Mac, including loan-size limits.

Consideration

Something of value that each party gives or promises in a contract, such as money, services, property, or a transfer of rights.

Conspiracy to boycott

An illegal agreement among competitors to refuse to do business with a particular firm or person in order to hurt or eliminate competition. It is a per se antitrust violation.

Construction lag

The delay between deciding to build and finishing a project, which keeps housing supply from responding quickly to rising demand.

Construction lien

In Washington, the statutory claim a contractor, worker, or material supplier can place on a property they improved but were not paid for.

Construction loan

A short-term, interim loan that finances building or development costs and is secured by the property being built.

Constructive notice

Legal notice a person is presumed to have because information is available in the public record or through visible possession.

Consumer Financial Protection Bureau

The federal agency, operating since July 21, 2011 under the Dodd-Frank Act, that writes and enforces the consumer mortgage rules.

Consumer Protection Act

Washington's law (RCW 19.86) banning unfair or deceptive business practices.

Consummation

Under federal lending rules, the moment a borrower becomes contractually obligated on the loan, generally when the note is signed.

Contingency

A condition written into a purchase and sale agreement that must be met before the deal is binding: a satisfactory inspection or loan approval, for example.

Controlling interest

The power to direct a real estate firm's operational or financial decisions, or both.

Conventional loan

Any mortgage that is not insured or guaranteed by a government program such as FHA or VA. Seller financing counts as conventional.

Conversion

Wrongfully taking or using someone else's money or property as if it were your own.

Conveyance

The legal transfer of ownership in real property from one party to another, usually carried out through a deed.

Corporate fee

A percentage of gross commission, commonly 5% to 7%, that a franchise brokerage takes off the top before the agent's split or desk fee is applied.

Corporation

A business owned by shareholders who hold stock in it.

Cost approach

A valuation method that estimates the price to rebuild the improvements today, subtracts depreciation, then adds land value to reach the property's worth.

Counteroffer

A response to an offer that changes one or more of its terms.

Covenant

A binding promise written into a deed or other agreement, such as a grantor's assurance about the condition of the title being transferred.

Covenant Homeownership Program

Washington's special purpose credit program for first-time buyers descended from those excluded by pre-1968 racial covenants.

Covenant of quiet enjoyment

A warranty-deed promise that the grantee's possession of the property will not be disturbed by a third party's superior legal claim.

Covenants, Conditions, and Restrictions (CC&R)

Recorded private rules that govern how owners may use and maintain their property within a condominium, subdivision, or homeowners association. Buyers take title subject to them.

Credit risk

The chance that a borrower will default and fail to repay, causing the lender a loss. It is inherent in every loan and is what underwriting is designed to measure and price.

Credit score

A number, generally 300 to 850, rating how risky a borrower is based on payment history, amounts owed, history length, new credit, and credit mix.

Credit union

A not-for-profit financial cooperative owned by its members rather than outside investors.

Critical areas

Environmentally sensitive lands that Washington's Growth Management Act requires cities and counties to protect.

Customer

A buyer or seller a broker assists without representing them; the broker owes honesty and fair dealing but not the full duties owed to a client.

D

De facto

Existing in actual practice or reality, even though not formally established by law.

Debits and credits

Accounting entries on a settlement statement: a debit is an amount a party owes, and a credit is an amount applied in a party's favor.

Debt-to-income ratio

A qualifying measure that compares what a borrower owes each month to what they earn, shown as a percentage.

Dedication

The gift of private land or an interest in it, such as an easement or a street, by an owner to a government or the public. It is often a condition of subdividing land.

Deed

A signed written document that transfers ownership of real estate from one party to another.

Deed in lieu of foreclosure

A voluntary transfer of a property's title from the borrower to the lender to satisfy the debt without a forced sale.

Deed of trust

A security instrument for a loan in which the borrower conveys legal title to a neutral third-party trustee, who holds it until the debt is repaid.

Deed restriction

A private limit on how land may be used, written into a deed or recorded covenant and binding on future owners. Also called a restrictive covenant or condition.

Default

Failure to keep the promises made in a contract, also called a breach.

Deficiency judgment

A court order making a borrower personally pay the shortfall when a foreclosure sale brings less than the debt.

Delivery

The grantor's act of handing over a signed deed to the grantee with intent to transfer ownership; it must happen during the grantor's lifetime to be valid.

Department of Financial Institutions

The Washington state agency (DFI) that licenses and regulates lenders, mortgage brokers, loan servicers, and consumer-finance firms.

Department of Licensing

The Washington state agency (DOL) that regulates real estate licensees, sets and enforces licensing standards, and issues and renews licenses.

Depreciation

In appraisal, the loss of a property's value from any cause, measured against its cost when new. Causes include physical wear, outdated design, or negative outside factors.

Descent

The passing of a deceased owner's real property directly to their legal heirs when there is no valid will.

Designated agency

An arrangement in which two brokers at the same firm each represent opposite parties (one the buyer, one the seller) in one transaction.

Designated broker

The person the state holds ultimately accountable for a real estate firm, typically its owner or someone with a controlling interest in the business.

Desk fee

A flat charge, usually paid monthly, that a licensee pays the firm for office space and support instead of giving up a share of each commission.

Devise

A gift of real estate made through a will. The person who receives the property this way is called a devisee.

Director of Licensing

The governor-appointed official who heads Washington's Department of Licensing.

Discount points

An upfront fee a borrower pays the lender, each point equal to one percent of the loan amount, to permanently lower the mortgage interest rate.

Dodd-Frank Act

A 2010 federal law passed after the financial crisis that created the Consumer Financial Protection Bureau (CFPB).

Down payment

Money the borrower puts toward the purchase price from their own funds rather than borrowing it.

Down payment assistance

Help with a buyer's down payment and closing costs, structured in Washington's WSHFC programs as payment-deferred second mortgages, not grants.

Dual agency

One broker or firm representing both buyer and seller in the same sale.

Due-on-sale clause

A loan provision that lets the lender demand immediate payment of the entire remaining balance when the property securing the loan is sold or transferred.

E

Earnest money

A deposit a buyer puts down to show a serious commitment to purchasing a property. It is usually held in a trust account and applied toward the purchase price at closing.

Easement

A legal right to use part of another person's land for a specific purpose, such as a driveway or utility line, without owning it.

Elastic

Describes demand or supply that responds sharply to a change in price: when price shifts, the quantity people want or produce changes by a large amount.

Eminent domain

The constitutional power of government to take private property for public use, even over the owner's objection, as long as it pays just compensation.

Encroachment

A structure or improvement, such as a fence, wall, or roof overhang, that extends across a boundary onto a neighbor's land. It is a physical trespass that can cloud title.

Encumbrance

A claim, right, or liability that another party holds against a property, such as a lien, easement, or deed restriction.

Endorsement

An add-on to a title insurance policy that expands or tailors its coverage to protect against a specific risk the standard policy leaves out.

Equal Credit Opportunity Act

The federal law prohibiting discrimination in any aspect of a credit transaction.

Equitable title

A buyer's financial interest in property before legal ownership transfers, giving the buyer the benefit of any rise in value.

Equity

The share of a property's value the owner actually holds, found by subtracting the loan balance from the current market value.

Errors and omissions insurance

Professional liability insurance for a real estate licensee or firm.

Escalation addendum

A contract attachment that automatically raises a buyer's offer in set increments to beat competing bids, up to a stated ceiling.

Escalation clause

A clause in a buyer's purchase offer that automatically raises the price a set amount above the highest verified competing offer, up to a stated cap.

Escheat

The reversion of a person's real estate to the state government when they die without a will and without any heirs to inherit it.

Escrow

A process in which a neutral third party holds money and documents and releases them only when both sides of a contract have met the agreed terms.

Escrow instructions

Written directions that authorize a neutral third party to complete a transaction according to the terms the parties agreed on.

Escrow officer

The licensed individual who conducts a real estate closing.

Estate

The nature and extent of a person's ownership or possessory interest in land, deciding who may control or occupy it, now or in the future.

Estate at sufferance

The lowest-ranking tenancy, arising when a tenant stays on after the lease ends without the landlord's permission.

Estate at will

A tenancy with no fixed end date that either the landlord or the tenant may end at any time, usually with proper notice.

Estate for years

A lease that runs for a fixed, definite period with set start and end dates, such as a one-year lease.

Exclusive agency listing agreement

A contract giving one firm the sole right to market a property. The seller can avoid paying the listing commission if the seller personally finds the buyer without the firm's help.

Exclusive right to sell listing

A listing under which the firm earns its commission no matter who procures the buyer, even the seller. The most commonly used listing form because it protects the commission.

Exclusive right-to-sell listing agreement

A contract under which the firm earns the agreed listing-side commission when the property sells during the term. It does not matter who finds the buyer, even the seller.

Executor

The person named in a will to carry out its instructions.

Executory contract

An agreement in which one or more terms, obligations, or promises have not yet been carried out. A real estate purchase agreement is one until closing completes the sale.

Express contract

An agreement whose terms are stated directly in words, either written or spoken, so each party's promises are spelled out rather than inferred from conduct.

F

FAA Part 107

The federal rule governing commercial drone flight.

Fair Housing Act

The 1968 federal law that bans discrimination in the sale, rental, financing, and advertising of housing.

Fair housing poster

A notice that HUD requires real estate offices and housing providers to display where clients can see it.

Familial status

A protected class covering households with one or more children under 18, plus pregnant people and those securing custody of a child.

Fannie Mae

The Federal National Mortgage Association, a government-sponsored enterprise that buys mortgages from lenders and packages them for investors.

Farming

Prospecting a chosen neighborhood or contact list repeatedly over time, so the broker becomes the area's known real estate resource and earns its listings.

Fee simple

The highest and most complete form of property ownership, holding the entire bundle of rights indefinitely and freely passing to the owner's heirs.

Fee simple determinable

A form of ownership that lasts only as long as a stated condition holds true and ends automatically the moment it is violated.

Fee simple subject to condition subsequent

A form of ownership that continues even after a stated restriction is broken, ending only when the grantor actively steps in to take the property back.

Fiduciary relationship

A relationship of trust in which one party must act with loyalty, good faith, and full disclosure for another's benefit.

Financial instruments

Documents that carry monetary value or record a money transaction, for example promissory notes, checks, drafts, and bonds. Each represents a legally enforceable right to payment.

FIRPTA

A federal tax law requiring the buyer to withhold part of the sale price when the seller is a foreign person. It exists so U.S. capital-gains tax on the sale can be collected.

First position

The top spot in the order of claims against a property, giving that lender the right to be paid first from a foreclosure sale before any junior lienholder.

Fixed-rate mortgage

A home loan whose interest rate stays the same for the entire term, so the principal-and-interest payment never changes.

Fixture

An item once personal property that has been permanently attached to land or a building, so it is now treated as part of the real estate. It normally stays when the property sells.

Foreclosure

The legal process a lender uses to take and sell a property when the borrower defaults on the loan, applying the sale proceeds to the unpaid debt.

Form 17

Washington's mandatory Seller Disclosure Statement, which the seller of most residential property must complete and deliver to the buyer (RCW 64.06).

Freddie Mac

The Federal Home Loan Mortgage Corporation, a government-sponsored enterprise.

Freehold estate

An ownership interest in land that lasts for an indefinite period, giving the holder the exclusive right to use and enjoy the property without a set end date.

G

General agent

An agent authorized to handle a range of a principal's affairs on a continuing basis, such as a property manager, but not every matter the principal has.

General lien

A claim that attaches to a debtor's property generally rather than to one specific parcel, such as a judgment lien or an unpaid tax lien.

Good faith estimate

A now-retired disclosure form that estimated a borrower's settlement costs and listed the required service providers.

Government survey

A method of describing land by a grid of numbered townships, ranges, and sections tied to principal meridians and baselines. Also called the rectangular survey system.

Graduated payment mortgage

A fixed-rate loan whose payments start low and step up on a set schedule to a higher final level.

Grantee

The party who receives the property in a deed (the buyer in a sale). The deed transfers the seller's interest to this person, whose name is listed as the one taking title.

Grantor

The party who transfers or conveys the property in a deed, typically the seller. This person signs the deed and gives up whatever interest they held to the buyer.

Gross misdemeanor

Under Washington law, a mid-level criminal offense that is more serious than a petty offense but less serious than a felony. It carries heavier maximum jail time and fines.

Guarantee

A promise by a builder or seller to perform a specific act for the purchaser (replace a roof, repair a handrail).

H

HB 1110

A 2023 Washington law requiring larger cities to allow middle housing, such as duplexes and fourplexes, on most residential lots.

HB 1337

A 2023 Washington law requiring cities and counties to allow at least two accessory dwelling units (ADUs) per residential lot in urban growth areas.

Highest and best use

The legally permitted, physically possible, financially feasible, and most profitable way a property can be developed.

Home Advantage

WSHFC's flagship 30-year fixed first-mortgage program, available statewide through Commission-trained lenders with a single statewide income cap.

Home equity loan

A loan for a fixed lump sum, secured by the value an owner holds in their house and repaid on a set schedule.

Home inspector

A professional who performs a non-invasive, visual examination of a property and reports on the condition of its systems and structure.

Homestead exemption

A law protecting part of the equity in a person's primary home from forced sale by most unsecured creditors.

House Key Opportunity

WSHFC's first-mortgage program for lower-income, first-time buyers, with county-based income limits and access to specialized down-payment assistance.

Housing cooperative

A corporation that owns an entire residential building and sells shares to its members.

HUD

The U.S. Department of Housing and Urban Development, the federal agency that administers housing programs and enforces the Fair Housing Act.

HUD-1 Settlement Statement

A pre-2015 itemized closing form listing every charge to buyer and seller in a mortgage transaction. It was replaced for most loans by the Closing Disclosure under the TRID rule.

Hybrid ARM

An adjustable-rate mortgage whose interest rate is fixed for an initial period, then adjusts periodically after that.

I

Imbalanced commission splits

A one-sided or exploitive division of a shared commission between cooperating brokers.

Implied agency

An agency relationship that arises from the parties' conduct rather than any spoken or written agreement. It forms when they act as though the broker represents the principal.

Implied contract

An agreement created by the parties' conduct rather than by spoken or written words. It is recognized when denying it would unfairly enrich one party at another's expense.

Imputed knowledge

The presumption that one person knows what an associate knows because of their relationship.

Independent contractor

A worker who provides services under the terms of a written agreement rather than as an employee. They control how the work gets done and handle their own taxes.

Index

A published market interest rate that rises and falls with general economic conditions.

Inelastic

Describes demand or supply that barely responds to price changes.

Initial escrow account statement

The itemization of the first year's escrow activity that RESPA requires at settlement or within 45 days after. It covers deposits, tax and insurance disbursements, and the cushion.

Installment contract

A financing arrangement in which the buyer pays the seller directly over time and takes possession, but the seller keeps legal title until the final payment.

Interest rate cap

A ceiling on how much the interest on an adjustable loan can climb.

Interest-only loan

A loan whose early payments go entirely toward the finance cost, leaving the principal untouched so the balance does not fall.

Intestate

Describes a person who dies without leaving a valid will, so state law decides how their property is distributed to heirs.

Involuntary alienation

Transfer of title by operation of law without the owner's consent.

J

Joint tenancy

A form of co-ownership in which two or more people hold equal shares with the right of survivorship.

Joint venture

A business arrangement in which two or more parties pool their resources for a single project or transaction, rather than to run an ongoing business together.

Judgment

A court's final decision that resolves a lawsuit and fixes the rights and obligations of the parties, including any money one party must pay another.

Judgment lien

An involuntary general claim that attaches to a debtor's real estate once a court money judgment is recorded. It lets the winning party collect from the property.

Judicial foreclosure

A court-supervised way of forcing the sale of a mortgaged property to repay a defaulted loan; the lender begins it by filing a lawsuit.

Just compensation

The payment a government must give a property owner when it takes private property through eminent domain, as required by the Constitution.

K

Kickback

A fee or thing of value exchanged for referring settlement-service business, prohibited by RESPA Section 8 along with fee splits for work not performed.

L

Land contract

A seller-financed sale in which the buyer pays the price in installments and takes possession, while the seller keeps legal title until the balance is paid.

Law of Real Estate Agency Pamphlet

The required Washington disclosure booklet explaining broker duties, agency relationships, limited dual agency, compensation, and short sales.

Lawful objective

The requirement that a contract's purpose be legal. An agreement that requires a party to knowingly break the law is usually void and cannot be enforced.

Lease agreement

A contract in which a property owner, the landlord or lessor, lets a tenant, the lessee, use property for a set period in exchange for rent.

Lease option

A rental contract that gives the tenant the right, but not the obligation, to buy the property at a set price during or at the end of the term.

Legal description

A precise written identification of a parcel's boundaries, using a recognized survey method, exact enough to transfer the land in a deed. It is not the same as a street address.

Legal title

Ownership of property that is enforceable in court and shown in the public record. Under a land contract it stays with the seller until the buyer completes payment.

Legally competent parties

The requirement that everyone entering a contract have the legal capacity to do so, meaning they are of sound mind and at least 18 years old.

Lessee

The party who holds the right to use and occupy a property under a lease; the tenant. This person pays rent to the property owner in exchange for possession.

Lessor

The property owner who grants the right to use and occupy the property under a lease; the landlord. This party receives rent in exchange for giving up possession.

Leverage

The use of borrowed money, rather than one's own cash, to fund an investment.

License

Permission to use another person's land for a specific purpose while the owner keeps control. It can be given orally, is revocable at any time, and is not an interest in the land.

Lien

A monetary claim recorded against property to secure payment of a debt, letting the creditor force a sale if the debt goes unpaid. It is a type of financial encumbrance.

Life estate

An ownership interest that lasts only for the lifetime of a named person.

Limited dual agency

One broker representing both the buyer and the seller in the same transaction, allowed in Washington only with both parties' written consent.

Liquidated damages

An amount both parties agree to in advance as the payment owed if one side breaches the contract.

Liquidity

How quickly and easily an asset can be turned into cash without losing much value. Real estate is considered a low-liquidity asset because selling it takes time.

Listing agreement

A contract between a seller and a real estate firm authorizing the firm to market a property and find a buyer. It works much like an employment contract for the firm's services.

Listing broker

In Washington, the broker who represents the seller in a transaction, also called the listing agent.

Loan Estimate

A three-page federal form a lender must give a mortgage applicant within three business days of application. It lays out the loan's key terms, projected costs, and risks.

Loan-to-value ratio

How big a mortgage is compared with the price or worth of the property securing it, shown as a percentage (LTV).

M

Managing broker

A senior real estate license level in Washington that permits both serving clients directly and supervising other licensees within a firm.

Manufactured home

A dwelling built almost entirely in a factory on a permanent steel chassis, then transported to the site. It is constructed to the federal HUD code.

Margin

The fixed percentage a lender adds on top of the index to set the rate on an adjustable loan. It stays the same for the life of the loan and represents the lender's markup.

Market value

The most probable price a property should bring in a competitive, open sale. It assumes both a willing buyer and a willing seller act knowledgeably and free of undue pressure.

Marketable title

Ownership so free of doubts, liens, and defects that a reasonable buyer would accept it without objection and a court would compel the sale to close.

Material fact

Information important enough that it could affect a reasonable buyer's decision or the property's value, such as a structural problem or a lien.

Metes and bounds

A way of describing land by tracing its perimeter from a point of beginning, then returning to the start to close the boundary.

Modular home

A dwelling built in large factory-made sections (modules) that are trucked to the lot and assembled on a permanent foundation.

Mortgage banker

A lender that uses its own funds to make home loans, then either keeps and services those loans or sells them to investors.

Mortgage broker

A financing intermediary who does not lend money directly but shops a borrower's loan request among many lenders, banks, investors, and others.

Multiple listing service

A shared database, run by cooperating firms, where members post properties for sale so other brokers and the public can see them (MLS).

Mutual acceptance

The point at which a buyer and seller have agreed to all terms of an offer, forming a binding contract. Many purchase timelines are counted from this date.

Mutual agreement

The shared consent of all parties to a contract and its terms, with each acknowledging that a deal has been made. It is one of the essential elements of a valid contract.

N

NAR Settlement

A 2024 legal agreement resolving antitrust claims against the National Association of Realtors.

Negative amortization

A situation where a loan's monthly payment is too small to cover the interest owed. The unpaid interest is added to the principal, so the balance grows instead of shrinking.

Net listing

An arrangement where the seller sets a minimum amount to pocket and the broker keeps the rest as commission.

Net proceeds

The amount a seller receives at closing after paying off the mortgage balance, commissions, excise tax, title and escrow fees, and other closing costs.

Non-agency

A working relationship in which a broker helps a buyer or seller without representing either one, treating that person as a customer rather than a client.

Novation

The replacement of an existing contract or party with a new one, with all sides agreeing. The old obligation is discharged and the new agreement takes its place.

O

Open house

A scheduled period, usually on a weekend, when the public may walk through a listed property without an appointment.

Open listing

A non-exclusive arrangement in which a seller may hire several brokers at once. The seller owes a commission only to the one who actually finds the buyer (the procuring cause).

Open-end mortgage

A loan that a borrower can draw on repeatedly up to a set limit, rather than receiving a single lump sum.

Optionee

The party who holds the right created by an option, such as the chance to buy property at a set price, but who has no obligation to exercise it.

Origination charges

The amount a lender or mortgage broker collects to process and create a new loan, often expressed as points.

P

Payment cap

A limit, stated in dollars, on how much the monthly payment on an adjustable-rate loan can rise at each adjustment.

Periodic tenancy

A rental that automatically renews for successive periods, such as month to month, with no fixed end date.

Personal property

Movable belongings that are not permanently attached to land, which the owner may take along when the real estate is sold. Also called chattels or personalty.

Personal representative

The person appointed to administer a deceased owner's estate, named in the will or by the court.

Point

A fee equal to one percent of the loan amount, paid to the lender at closing. On a $700,000 loan, one point costs $7,000; borrowers may pay points to lower the interest rate.

Police power

Government's authority to make and enforce laws protecting public health, safety, and welfare.

Possession

Physical occupancy and control of a property.

Power of attorney

A signed legal document that authorizes one person (the agent, or attorney-in-fact) to act on another's behalf.

Pre-approval letter

A lender's conditional commitment to a maximum loan amount after a completed application, credit pull, and documentation of income, debts, and funds.

Prepayment penalty

A fee charged when a borrower pays off a loan earlier than the schedule allows.

Primary market

Where lenders originate real estate loans directly with borrowers. It is the place a mortgage is first created before it may be sold to investors in the secondary market.

Principal

The person who authorizes an agent to act on their behalf; in real estate, the buyer or seller who has engaged a broker to represent them.

Principle of substitution

The core appraisal idea that a buyer will pay no more for a property than the cost of acquiring an equally desirable alternative. It underlies all three approaches to value.

Probate

The court-supervised process of settling a deceased person's estate through a personal representative.

Procuring cause

The broker whose actions set in motion the unbroken chain of events leading to a completed sale, making that broker the one entitled to the commission.

Promissory note

A signed written pledge by which one person (the maker) agrees to pay a set sum to another, at a future date or in installments, often with interest.

Property management agreement

A contract between a rental owner and a manager for running the rental day to day. It spells out the manager's duties, authority, and pay, along with the owner's responsibilities.

Proration

Dividing an expense between buyer and seller by days of ownership at closing (property taxes, insurance, interest).

Prospecting

The ongoing work of finding potential clients, paired with a follow-up system so leads become clients.

Protected class

A group the law shields from discrimination based on a shared trait.

Public offering statement

The disclosure document a developer must give each buyer of a new Washington condominium before the purchase contract is signed.

Purchase and sale agreement

The written contract in which a buyer and seller set the price, closing date, contingencies, and other terms for transferring a piece of real estate.

Purchase-money mortgage

A loan the seller extends directly to the buyer to help fund the sale, instead of the buyer borrowing the full amount from a bank. The seller effectively becomes the lender.

Q

Qualified fee estate

An ownership interest that is complete but limited by a stated condition or event. If the condition is violated, the holder can lose title or it reverts to the grantor.

Qualified Mortgage

A loan meeting CFPB criteria that gives the lender a presumption of ability-to-repay compliance.

Quiet enjoyment

The right of an owner or tenant to use and possess a property in peace, free from interference by the seller, landlord, or anyone claiming a superior title.

Quitclaim deed

A conveyance that transfers only whatever interest the grantor happens to hold, with no promise that the title is good or even that the grantor owns anything.

R

Radon

A naturally occurring radioactive gas that is odorless, tasteless, and invisible, detectable only by testing.

Ready, willing, and able buyer

A prospect who is prepared to buy on the seller's terms and has the financial means to close.

Real Estate Brokerage Relationships Act

Washington's agency statute (chapter 18.86 RCW) defining broker duties, agency creation, and compensation rules.

Real estate excise tax (REET)

Washington's tax on the sale of real property, figured as a graduated percentage of the selling price and normally paid by the seller.

Real Estate Settlement Procedures Act

The 1974 federal law protecting consumers in federally related mortgage closings.

Real property

Land plus everything permanently attached to it (buildings, fixtures, and growing things). It also includes the legal rights and privileges that come with owning the land.

Reconciliation

The final step of an appraisal, in which the appraiser weighs the value indications from the different approaches.

Reconveyance

The act of returning legal title to a borrower after a deed-of-trust loan is paid in full.

Recording

The act of entering a deed, mortgage, or other document into the county's public land records.

Redlining

The illegal practice of denying or pricing loans, insurance, or other services worse for properties in a neighborhood.

Referral fee

A portion of a commission paid to a broker for sending a client to another broker; it is paid brokerage to brokerage, not to an unlicensed person.

Regulation X

The CFPB regulation implementing RESPA: settlement-cost disclosures, servicing rules, escrow limits, and the anti-kickback provisions.

Regulation Z

The federal rule that carries out the Truth in Lending Act, requiring lenders to disclose credit terms and costs.

Rescission

The canceling of a contract that returns both parties to the positions they held before it was made, as if the agreement never existed.

Residential Landlord-Tenant Act

Washington's set of statutes, RCW 59.18, that governs the rights and duties between a residential landlord and tenant.

Residual income

The dollars left each month after housing costs, debts, taxes, and maintenance.

Restrictive covenant

A private, recorded condition in a deed or subdivision rules that limits how an owner may use or transfer land.

Reverse mortgage

A loan for homeowners age 62 or older that converts home equity into cash, with the lender paying the borrower instead of the reverse.

Rezoning

A change to a property's official zoning classification, such as from residential to commercial, approved by the local governing body.

Right of rescission

A borrower's three-business-day right under the Truth in Lending Act to cancel certain home loans. It covers loans such as a refinance or home equity loan on a primary residence.

S

Sale and leaseback

A single transaction in which an owner sells a property and at once becomes its tenant, leasing it back from the new buyer.

Secondary mortgage market

Where existing loans are bought and sold by investors and institutions that did not originate them. Selling loans here frees up lenders' funds to make new loans.

Section

In the government survey system, a block of land one mile square and containing 640 acres. Thirty-six of them make up a township.

Security deposit

Money a tenant pays at move-in that the landlord may keep to cover unpaid rent or damage beyond normal wear.

Security instrument

A document that pledges real property as collateral for a debt, giving the lender rights against the property if the borrower defaults.

Seller agency

The relationship in which a broker represents only the seller in a transaction and owes that seller a broker's statutory duties.

Seller concession

Money the property's owner agrees to credit the buyer at closing, paid out of the sale proceeds.

Selling broker

In Washington, the broker who represents the buyer in a transaction, despite a name that sounds like the seller's side.

Setback

A zoning requirement that a building sit a minimum distance from the property line, at the front, side, or rear.

Short sale

A sale in which the lender agrees to accept less than the balance owed on the mortgage. The seller may still owe the shortfall afterward unless the lender forgives it.

Simple interest

A charge figured only on the original principal, ignoring compounding. You calculate it by multiplying the starting balance by the annual rate and the time in years.

Site

Land that is improved so that it is ready to be used for a specific purpose, such as a lot with road access, utilities, and grading in place. Raw land has no such improvements.

Source of income

The lawful money a tenant uses to pay rent: wages, benefits, or housing vouchers like Section 8.

Special assessment taxes

Charges levied only on the properties that directly benefit from a local public improvement, to help pay for that specific project.

Specific lien

A claim that attaches to a single identified parcel rather than to all of the owner's property. Mortgages, property tax liens, and construction liens are examples.

Specific performance

A court order requiring a breaching party to carry out a contract as promised instead of simply paying damages.

Statute of Frauds

A rule requiring certain contracts, including those for the sale of real estate, to be in a signed writing to be enforceable.

Statute of limitations

A deadline for filing a lawsuit, counted from when a claim arises.

Steering

The illegal practice of guiding home seekers toward or away from particular neighborhoods, rather than letting them choose freely among available homes.

Subagent

An agent who works under and is authorized by another agent rather than directly by the principal. An example is a broker acting under the firm's designated broker.

Subdivision

The division of a parcel of land into smaller lots for sale or development.

Subject to

A transfer in which the buyer takes over the seller's existing loan payments but does not assume personal liability for the debt.

Subsurface rights

An owner's claim to everything underground beneath a parcel, including the minerals, oil, and gas found there. These can be sold or leased separately from the land above.

Survey

A measurement of a parcel that locates and maps its exact boundaries and features. A licensed surveyor performs it, often driving stakes to mark the property lines on the ground.

T

Tenancy in common

A form of co-ownership in which two or more people each hold a separate, undivided share of the same property.

Term of the loan

The length of time a borrower has to repay the full debt, such as 15 or 30 years. Also called the repayment period, it affects both the monthly payment and the total interest paid.

Testate

Describes a person who has died leaving a valid will that directs how their property is distributed. The opposite is intestate, which means dying without a will.

Time is of the essence

A contract clause making the stated dates and deadlines strictly mandatory, so that missing one is a material breach rather than a minor, excusable delay.

Title

The bundle of legal rights that establishes who owns a piece of property and may sell or use it. It shows the extent of a person's ownership or other interest in the real estate.

Title company

An insurance company that examines whether the ownership rights being transferred are actually transferable.

Title insurance

A one-time-premium policy that reimburses the holder for losses caused by defects in a property's ownership history.

Transaction fee

A set amount a licensee pays the firm to process each closed deal, charged on top of any commission split to cover administrative paperwork.

Transaction file

The complete record a Washington firm must keep for each transaction: agreements, receipts, closing statements, disclosures, and material correspondence.

Treble damages

A court award of three times the amount of a plaintiff's actual losses, allowed by certain statutes to punish and deter wrongdoing.

TRID

The disclosure regime, effective October 3, 2015, that merged the old TILA and RESPA mortgage forms into the Loan Estimate and Closing Disclosure.

Trust account

A separate, DOL-regulated fund a firm keeps to hold money belonging to others (earnest money and deposits) apart from its own operating cash.

Trustee

A neutral third party who holds or manages property or assets for someone else's benefit.

Truth in Lending Act

The 1968 federal law requiring meaningful disclosure of credit terms so consumers can compare offers.

U

Unauthorized practice of law

Doing work reserved for licensed attorneys (drafting contract clauses or advising on legal rights) without a law license.

Unilateral contract

A contract in which only one party makes an enforceable promise, becoming binding only when the other party actually performs the requested act. A reward offer is a common example.

Unlawful detainer

A tenant's wrongful holding of possession after a valid termination or eviction notice has expired.

Unlicensed assistant

A support worker who helps a broker with tasks that do not require a license, such as clerical work or scheduling.

Unsecured debt

A debt backed only by the borrower's promise to repay, with no collateral pledged.

Usury

The practice of charging an illegally high rate of interest on a loan.

V

VA loan

A home mortgage guaranteed by the U.S. Department of Veterans Affairs and available to eligible veterans and service members.

Vacancy rate

The percentage of a property's units or space sitting empty at a given time; unlike the vacancy factor, it does not include losses from unpaid rent.

Valid contract

An agreement that contains every required element and is therefore fully enforceable in court.

Variance

Local permission to deviate from a zoning rule, such as a setback or height limit, granted when strict enforcement would cause the owner an unusual hardship.

Vicarious liability

Responsibility one party bears for another's wrongful acts due to their relationship, such as a principal for an agent.

W

Washington Law Against Discrimination

The state civil-rights statute, codified at RCW 49.60, that bars bias in housing and real estate.

Washington State Housing Finance Commission

The self-supporting state agency, created in 1983, that finances affordable homeownership through participating private lenders and does not lend directly.

Washington State Human Rights Commission

The Washington state agency (WSHRC) that enforces the state's anti-discrimination laws and handles most fair-housing complaints filed in Washington.

Washington State Real Estate Commission

An advisory body of six members appointed by the governor and chaired by the Department of Licensing director.

Water rights

The legal rules that decide how a property owner may draw on and use the lakes, streams, or underground sources tied to their land.

Wetland

Ground that is saturated with water either seasonally or year-round, such as a marsh, swamp, or bog. It is the most common type of protected environmentally sensitive area.

Will

A written, witnessed document that directs how a person's property and assets are to be distributed after death. It also names who should carry out those instructions.

Written services agreement

The contract Washington law requires between a real estate firm and its principal before the firm can receive compensation.

Y

Yield

The rate of return an investor requires on the money put into a property, expressed as a percentage; it is used to convert future income into present value.

Z

Zoning

Local government rules that divide land into districts and control what may be built and how each parcel may be used.