The Real Estate Terms

THE REAL ESTATE TERMS
ABSTRACT OF TITLE – A condensed history of the
title, consisting of the various links in the chain of
title, together with a statement of all liens, charges
or encumbrances affecting a particular property.
ACCELERATION CLAUSE – A clause in a contract
stating that upon the happening of a certain event,
like failure to pay any installment due, shall make
the entire balance immediately due and payable.
ACCEPTANCE – When the seller or agent’s principal
agrees to the terms of the contract of sale and
approves the negotiation on the part of the agent,
and acknowledges receipt of the deposit in
subscribing to the agreement of sale.

ACTUAL USE – In assessment and taxation of real
property, this refers to the present or predominant
utilization of the property.
AD VALOREM – According to valuation.
ADMINISTRATOR – A person appointed by the
probate court to administer the estate of a
deceased person.
ADVERSE CLAIM – A claim of a person on property
owned by another (Good only for 30 days no
second adverse claim is allowed).

ACCESSION – The right of the owner to everything
produced, incorporated or attached thereto
naturally or physically to his property.

ADVERSE POSSESSION – Right of an occupant of
land to acquire title against the real estate owner,
where possession has been actual, continuous,
hostile, visible, distinct and in the concept of owner
for the statutory period. (Note: Statutory period is
30 years, and adverse possession does not apply on
lands titled under the Torrens System)

ACCOUNTING – An act of recording, classifying,
analyzing in a significant manner, transactions or
events which form part of the financial character
and interpreting the results thereof.

AFFIDAVIT – A statement or declaration reduced in
writing sworn to or affirmed before some officer
who has authority to administer an oath or
affirmation.

ACCRETION – An addition to land from natural
causes as, for example, from gradual action of the
ocean or the river waters.

AFFIRM – To confirm, to ratify, to verify.

ACKNOWLEDGMENT – A formal declaration before
a duly authorized officer by a person who has
executed an instrument that such execution is his
act and deed.
ACQUIRED ASSETS – Usually refer to real estate
properties that were previously mortgaged to the
bank, by which because the owner failed to pay the
mortgage, the ownership of the property
transferred to the bank through a judicial
foreclosure proceeding. Acquired Assets are also
called Foreclosed Properties.
ACQUISITION – The act or process by which a
person procures property.

AGENCY, EXCHANGE – The authority given by the
property owner for the broker to exchange his
property with another.
AGENCY, LEASE – The authority given by an ownerlessor for the broker to find a lessee for the
former’s property, or by a prospective lessee for
the broker to find a property for lease.
AGENCY, LOAN – The authority given by the
property owner-borrower for the broker to
negotiate for a loan with a financing company.
AGENCY, PURCHASE – The authority given by a
buyer-client for the broker to look for property that
the former can buy or purchase.
AGENCY, SALES – The authority given by a property
owner-seller for the broker to look for a buyer.

AGENT – One who acts for and has the authority to
represent another who is known as the principal
AGREEMENT OF SALE – A written agreement or
contract between seller and purchaser where they
reach a meeting of the minds on the terms and
conditions of the sale.
AIR RIGHT – The right of the property owner to use,
control, or occupy the air space over his property,
subject to the requirements of air navigation and
government regulation.
ALIENATION – The transfer of property to another;
the transfer of property and possession of lands, or
other things, from one person to another.
ALLUVION – Refers to soil deposited in the process
of accretion.
AMENITIES – Refer to anything that adds to one’s
comfort and convenience.
AMORTIZATION – staggered payment of the thing
purchased. Also known as INSTALLMENT. It refers
to the process of paying off a debt (often from a
loan or mortgage) over time through regular
payments. A portion of each payment is for interest
while the remaining amount is applied towards the
principal balance. An amortization could be in
Equal Payments which has fixed amounts
throughout the loan period. It could also be a
Ballooning Payment wherein the monthly due
increases through time. Given a number of payperiods and interest rate, the amortization amount
is calculated using an Amortization Factor Table.
The liquidation of a financial obligation on
installment basis. (A periodic payment which
includes interest and principal necessary to
liquidate a financial obligation)
ANTICHRESIS – A form of mortgage wherein the
mortgagee takes possession of the mortgaged
property, pays the real estate taxes and receives
the fruits with an obligation to apply them in
payment of the principal and interest.
APPOINTMENT – Appointment is one way of how
an agency relationship is created. It means that the

principal gives express authorization to the agent.
Under both common and statutory law, this
requires writing when the sale of real estate is
involved.
APPRAISAL – The act or process of determining the
value of a property as of a specific date for a
specific purpose; an estimate and opinion of value
of a property.
APPRAISER – also known as valuer, refers to a
person who conducts valuation/appraisal;
specifically, one who possesses the necessary
qualifications, ability and experience to execute or
direct the valuation/appraisal of real or personal
property. A Real Estate Appraiser is a duly
registered and licensed natural person who, for a
fee, compensation or other valuable consideration,
performs or renders, or offers to perform services
in estimating and arriving at an opinion of or acts
as an expert on real estate values, such services of
which shall be finally rendered by the preparation
of the report in applicable written form.
APPRECIATION – A rise in value or price due to such
factors as inflation or market conditions.
APPRECIATION/GAINS – Increase in the value of a
property due to economic causes or inflation.
APPURTENANCE – Something annexed to another
thing which may be transferred incident to it; that
which belongs to another thing as a barn, dwelling,
garage or orchard is incident to the land to which it
is attached.
ARTICLE 1385 OF THE CIVIL CODE – The statute of
frauds; a legal provision which requires agreements
for the sale of real estate to be in writing in order
to be enforceable.
ASSESSED/TAXABLE VALUE – The value placed on a
taxable property by the assessor for ad valorem tax
purposes. The assessed value when multiplied by
the tax rate will produce the amount of tax due.
ASSESSMENT – The act or process of determining
the value of the property or proportions thereof

subject to tax including the discovery, listing and
appraisal of properties.

BLANKET MORTGAGE – A mortgage that has two or
more properties pledged as security for a debt.

ASSESSMENT LEVEL – The percentage applied to
the market value to determine the taxable or
assessed value of the property.

BREACH – The breaking of a law, or failure of duty,
either by omission or commission

ASSESSOR – refers to a government official who
conducts appraisal and assessment of real
properties for taxation purposes.
ASSIGNMENT – The transfer of property or rights
and obligations over it, in favor of another. The one
who assigns or transfers the property is called
Assignor, while those to whom property is assigned
are called Assignees or Assigns.
ASSIGNMENT OF LEASE – The lessee assigns or
transfers the lease to a third party. In this case, the
personality of the original lease is extinguished.
The parties to the contract now become the lessor
and the assignee. If the contract is silent as to the
right to assign the lease, the lessee cannot assign
the lease without the consent of the lessor.
AUTOMATIC REDEMPTION CLAUSE – A stipulation
in a mortgage of several properties providing that
when a buyer of one or more lots pays in full the
purchase price, a portion of the payments shall be
applied to the mortgage obligation and the
mortgagee shall correspondingly release said lot or
lots from the mortgage.
BALLOON PAYMENT – Where the final installment
payment on a note is greater than the preceding
installment payments and the payer pays the note
in full, such a final installment is termed a balloon
payment. (Payment in lump sum although not yet
due)
BASE AND MERIDIAN – Imaginary lines used by
surveyors to find and describe the location and
boundaries of a real property
BINDER – A agreement to cover a down payment
for the purchase of real property, as evidence of
good faith on the part of the purchaser.

BREACH OF WARRANTY FOR HIDDEN DEFECT – An
action to procure the return of a part of the
purchase price paid by the vendee to the vendor by
reason of such defect.
BROKER – A Real Estate Broker is a duly registered
and licensed natural person who, for a fee,
commission or other valuable consideration acts as
an agent of a party in a real estate transaction to
offer, advertise, solicit, list, promote, mediate,
negotiate, or effect the meeting of the minds on
the sale, purchase, exchange, mortgage, lease or
joint venture, or other similar transactions on real
estate or any interest therein.
BTCRP – Bureau of Trade Regulation and Consumer
Protection.
BUNDLE OF RIGHTS – The rights of ownership
whereby the owner has the right to enjoy, dispose,
exclude others, and to recover.
BUYER’S MARKET – This exists when there are
many sellers in a particular area as against very few
buyers.
CAPITAL ASSET – Capital asset means property held
by the taxpayer (whether or not connected with his
trade or business), but does not include – (a) Stock
in trade of the taxpayer or other property of a kind
which would properly be included in the inventory
of the taxpayer if on hand at the close of the
taxable year; or (b) Property held by the taxpayer
primarily for sale to customers in the ordinary
course of his trade or business; or (c) Property used
in the trade or business of a character which is
subject to the allowance for depreciation provided
in subsection (F) of Sec. 34 of the Code; or (d) Real
property used in trade or business of the taxpayer.
CAPITAL GAINS TAX – Capital Gains Tax is a tax
imposed on the gains presumed to have been
realized by the seller from the sale, exchange, or

other disposition of capital assets located in the
Philippines, including pacto de retro sales and
other forms of conditional sale.

subject of housing loans for several beneficiaries,
specifically residents of blighted or depressed
areas.

CAPITAL PROPERTY – Property belonging
exclusively to the husband

CONDEMNATION – The taking of public private
(Thank you, JTJ) property for public use with fair
compensation to the owner. An exercise of the
Right of Eminent Domain.

CAVEAT EMPTOR – Means “let the buyer beware”
(The buyer is duty-bound to examine the property
he is purchasing and he assumes conditions which
are readily ascertainable on the face of the title)
CENRO — Community Environment and Natural
Resources Officer of the DENR
CHATTEL MORTGAGE – A contract whereby
personal property is recorded in the chattel
mortgage registry as security for the performance
of the obligation.
CLIENT – A client is a person who empowers
another to act as his or her representative or
agent. Client-Agent relationship is equal to
fiduciary relationship.
CLOSED MORTGAGE – A mortgage which can be
paid off only upon its maturity.
CLOUD ON THE TITLE – Any condition revealed by a
title search which affects the title to property;
usually relatively unimportant items but which
cannot be removed without a quit claim deed or
court action.
CO-OWNERSHIP – This exists whenever the
ownership in an individual thing or right to it
belongs to different persons.
COMMISSION – An agent’s compensation for
performing the duties of his agency; in real estate
practice, a percentage of the selling price of
property, percentage of rentals, etc.
COMMON AREAS – The entire project except all
units separately granted, held, or reserved.
COMMUNITY MORTGAGE – This is a type of
financing under the Unified Home Lending Program
(UHLP) where undivided titles of land are made the

CONDEMNATION VALUE – Just compensation; the
money paid by the State when a public agency
takes private property and converts it for public
use.
CONDOMINIUM – An interest in real property
consisting of a separate interest in a unit in a
residential, industrial, or commercial building and
an undivided interest in common areas; sometimes
referred to as vertical subdivision.
CONJUGAL PROPERTY – property owned in
common by the husband and wife.
CONSULTANT – A Real Estate Consultant is a duly
registered and licensed natural person who, for a
fee, compensation or other valuable consideration,
offers or renders professional advice and judgment
on: (i) the acquisition, enhancement, preservation,
utilization or disposition of lands or improvements
thereon; and (ii) the conception, planning,
management and development of real estate
projects.
CONTRACT OF SALE – An agreement between a
buyer and a seller whereby there is transmission of
ownership on the object of the contract
CONTRACT TO SELL – An agreement whereby the
seller promises to sell a thing in consideration of
the buyer’s compliance to the terms and conditions
of the contract and that only after the buyer’s
compliance will the seller be obligated to transfer
or convey the ownership of the thing or subject of
the contract.
CONVEYANCE – The means by which title to real
estate is transferred

CORNER INFLUENCE – The added desirability or
utility of a property due to its frontage to two
streets, which for residential use provides better
ventilation and as to commercial or industrial use,
it provides better access, display and
transportation convenience.

partial payment of the purchase and it must be
deducted therefrom. (see also BINDER)

COUNTER OFFER – It is a qualified or conditional
acceptance

ECA – Environmentally Critical Area is an area that
is environmentally sensitive.

CUL DE SAC – A passageway with one outlet; a
blind alley.

ECC – Environmental Compliance Certificate is the
document issued by the DENR Secretary or the
Regional Executive Director certifying that based
on the representation of the proponent and the
preparers, as reviewed and validated by the EIARC,
the proposed project or undertaking will not cause
a significant negative environmental impact; that
the proponent has complied with all the
requirements of the EIS System, and that the
proponent is committed to implement its approved
EMP in the EIS or mitigation measures in IEE.

CUSTOMER – A customer generally refers to a
person without representation involved in the
transaction. All agents and brokers have a duty to
treat customers fairly.
DACION EN PAGO – Payment in kind. Payment of
the debt or obligation with a property
DEED – A written instrument which, when properly
executed and delivered, conveys title.
DEFAULT – The failure to fulfill a duty or promise or
to discharge an obligation; an omission or failure to
perform any act.
DEFEASANCE CLAUSE – The clause in a mortgage
that gives the mortgagor the right to redeem his
property upon the payment of his obligations to
the mortgagee
DEFICIENCY JUDGMENT – It is a judgment for the
mortgagor to pay the balance of the obligation if
the proceeds of the foreclosure sale are not
sufficient to cover the principal obligation.
DEPRECIATION – Loss in value brought about by
deterioration through ordinary wear and tear and
action of the elements, functional or economic
obsolescence.
EARNEST MONEY – A sum of money tendered by a
buyer to the seller which, if accepted by the seller,
shall form part of the purchase price and as proof
of the perfection of the contract. It is a sign of good
faith on the part of the buyer. Actually, it is a

EASEMENT – The right, advantage or privilege
which an individual has in the land of another, such
as a right of way

ECONOMIC LIFE – The period over which a
property will yield a return on the investment.
ECONOMIC RENT – The potential rent which a
property can command, considering rental of
similar or comparable properties in the
neighborhood.
ECP – Environmentally Critical Project is a project
that has a high potential for significant negative
environmental impact.
EIS –Environmental Impact Statement refers to the
documents or studies on the environmental
impacts of a project including the discussions on
direct and indirect consequences upon human
welfare and ecological and environmental integrity.
EMB – Environmental Management and Protected
Areas Sector of the DENR
EMINENT DOMAIN – The right of the government
to acquire property for necessary public or quasipublic use
EMP – Environmental Management Plan is a
section of the EIS that details the prevention,

mitigation, contingency and monitoring measures
to enhance positive impacts and minimize negative
impacts of a proposed project or undertaking.
ENCROACHMENT – A building, part of building, or
obstruction which intrudes upon or invades a
highway or sidewalk or trespasses upon property of
another.
ENCUMBRANCE – Anything which affects or limits
the fee simple title to property, such as mortgages,
easements, or restrictions of any kind. Liens are
money encumbrances which make the property
security for the payment of a debt or obligations,
such as mortgages and taxes.
ESCHEAT — It is the reservation or automatic
conveyance of real property to the State upon the
owner’s death due to the absence of heirs or other
legal claimants, to the title, or when the owner fails
to pay the real estate taxes.
ESTOPPEL — One way of creating an agency
relationship. It means that if the principal makes
third persons believe that someone is his agent and
that third party deals with the agent, then the
principal cannot deny the agency relationship even
though it did not exist in fact.
EQUITY OF REDEMPTION – Right of the original
owner to reclaim property sold through judicial
foreclosure proceedings by payment of debt,
interest, and cost.
EQUITY – The interest or value which an owner has
in real estate over and above the mortgage against
it.
ESCALATION CLAUSE – A provision in a contract
providing for periodic proportional upward or
downward adjustment of price or consideration
ESCHEAT – Reversion of property to the state
owing to lack of any heirs capable of inheriting; or
due to other causes provided by law
ESCROW – An agreement entrusted to a third
person to be held by him until the performance or
fulfillment of some act or condition

ETHICS – That branch of moral science, idealism,
justness, and fairness, which speaks of the duties
that a member of a profession or craft owes to the
public, to his clients or patron, and to his
professional brethren or members.
FAIR MARKET VALUE – The price which a willing
seller will sell and a willing buyer will buy, neither
being under abnormal pressure.
FEE SIMPLE – Largest estate of ownership in real
property in which the owner holds all rights not
reserved by society. Absolute ownership.
FIDUCIARY – A person in a position of trust and
confidence, as between a principal and a broker;
the broker as fiduciary owes certain loyalty which
cannot be breached under rules of agency.
FORECLOSURE – A procedure where by property
pledged as security for a debt is sold to pay the
debt in the event of default in payments or terms.
It is a process instituted by a mortgagee by which
the mortgaged property is sold at public auction to
satisfy the principal obligation which the debtor
failed to fulfill. The property that has been
transferred to the bank through a foreclosure
proceeding is called a Foreclosed Property, which is
also known as Bank Acquired Asset.
FORFEITURE – The loss of money or anything of
value, due to failure to perform, such as under an
agreement to purchase
HIGHEST AND BEST USE PRINCIPLE – The use for a
property which will bring the optimum or highest
returns or advantage as of a certain time
HOLD-OVER CLAUSE – A provision in a listing
agreement which entitles the broker to
commission even when the sale was closed after
the period of the authority provided that the buyer
was registered by him with the seller and with
whom he has negotiated during the period of his
authority
IN-HOUSE FINANCING – Also known as VENDOR
FINANCING, is real estate buying on installment

basis, wherein the mortgage agreement is between
the property developer and the buyer. When the
buyer fails to fulfill the obligation to pay, the
ownership of the property reverts back to the
developer. In-house financing packages usually
have higher interest rates compared to bank loans.
What is bad in in-house financing is that the seller
only issues a Contract-to-Sell. In Bank Financing,
the seller issues an Absolute Deed of Sale to the
name of the buyer, and then automatically
mortgages the property to the bank.
KEY LOT – A lot adjoining a corner, at right angle to
it and fronting an intersecting street.
LACHES – Delay or negligence in asserting one’s
legal right
LIEN – A hold or claim which one person has upon a
property of another as security for a debt or
charge, judgments, mortgages
LIS PENDENS – An annotation in the title which
serves as notice that the property is subject to a
pending litigation. Lis pendens is Latin for “suit
pending.” This may refer to any pending lawsuit or
to a specific situation with a public notice of
litigation that has been recorded in the same
location where the title of real property has been
recorded.
LISTING – The broker’s “stock in trade” or the
property being handled by the broker: it can be
referred to also as the contract between the owner
and broker: or the authority of the broker to
negotiate the transaction of a property for a
commission.
MARKET ANALYSIS – The study of current supply
and demand conditions in a particular area for a
specific type of property.

furnished materials in the erection or repair of a
building
METES AND BOUNDS – Measurements and
boundaries. A term used in describing the
boundary lines of land, setting forth all the
boundary lines, together with their terminal points
and angles.
MULTIPLE LISTING – An arrangement among a
group of real estate brokers to share its listings
with a pre-arranged agreement especially on
commission sharing
OBSOLESCENCE – Impairment of desirability and
usefulness brought by physical, economic,
functional deterioration, or other causes. Loss in
value due to reduced desirability and usefulness of
a structure because its design and construction
becomes obsolete; loss due to becoming oldfashioned and not in keeping with modern needs
with consequent loss of income.
OPEN MORTGAGE – A mortgage which can be paid
off at any time even before its maturity.
OPEN-END MORTGAGE – A mortgage containing a
clause which permits the mortgagor to borrow
additional money after the loan has been reduced,
without re-writing the mortgage
OPTION – The right to purchase or lease a property
at a certain price for a certain designated period,
for which right a consideration is paid
OPTION MONEY – The amount paid to a property
owner in consideration of giving a prospective
buyer or lessee the exclusive right to buy or lease
his property within a specified period at the agreed
price and term. (Within the option period, the
owner cannot sell or lease except to the person
who paid the option money).

MASTER DEED – A document executed by a
property owner which creates or converts his
properly into a condominium pursuant to Rep. Act.
4726

ORDINARY ASSET – Ordinary asset refers to all
properties specifically excluded from the definition
of capital assets under Sec. 39 (A)(1) of the NIRC.

MECHANICS LIEN – A lien created by law which
exists in favor of persons who have performed or

OVER-IMPROVEMENT – The improvement which
does not produce an adequate return for the

amount invested on a building or property. An
improvement which is not suitable to the site on
which it is placed due to excessive size or cost.
PACTO DE RETRO SALE – A contract of sale with the
stipulation that the vendor shall have the right to
buy back the property within the agreed period
PACTUM COMMISSORIUM – A stipulation which
authorizes the mortgagee to appropriate the
property as his own upon failure of the debtor to
fulfill the principal obligation
PACTUM DE NON ALIENDO – A stipulation which
prohibits the mortgagor from alienating the
property within the period of the mortgage
PARAPHERNAL PROPERTY – Property exclusively
owned by the wife
PENRO — Provincial Environment and Natural
Resources Officer of the DENR
PERCENTAGE LEASE – A lease of a property in
which the rental is based upon the volume of sales
made upon the leased property
POLICE POWER – The right of the state to enact
laws and enforce them for the order, safety,
health, morals and general welfare of the public
PRINCIPAL – A principal is commonly known as the
person who engages the agent for representation.

property which the grantor may have had a protest
or adverse claim.
RATIFICATION — Ratification is one way of how an
agency relationship is created. It means that if a
person having no authority whatsoever purports to
act as an agent and the purported principal later
adopts the acts of that agent, an agency
relationship has retroactively been created.
REAL ESTATE – Refers to the land and all those
items which are attached to the land. It is the
physical, tangible entity which can be seen and
touched, together with all the addition on, above
or below the ground.
REAL ESTATE DEVELOPMENT PROJECT – The
development of land for residential, commercial,
industrial, agricultural, institutional and
recreational purposes, or any combination of such
including, but not limited to, tourist, resorts,
reclamation projects, building or housing projects,
whether for individual or condominium ownership,
memorial parks and others of similar nature.
REAL PROPERTY – includes all the rights and
benefits related to the ownership of real estate.
REAL ESTATE SERVICE PRACTITIONERS – shall refer
to and shall consist of Real Estate Salesperson, Real
Estate Broker, Real Estate Appraiser, and Real
Estate Consultant.
RED – Regional Executive Director of DENR

PRINCIPLE OF CONFORMITY – The principle of real
property values that maximum value is realized
when a reasonable degree of homogeneity is
present, sociological as well as economic.
PROBATE – The proof or act of proving at a court
that a last will and testament is actually that of the
deceased person
PROCURING CAUSE – The act of a broker leading to
the meeting of minds between the parties to a
transaction or the consummation of a transaction.
QUITCLAIM – A deed of release or renunciation of a
legal right. A deed to relinquish any interest in

SALESPERSON – A Real Estate Salesperson is a duly
accredited natural person who performs service
for, and in behalf of, a real estate broker who is
registered and licensed by the Professional
Regulatory Board of Real Estate Service for or in
expectation of a share in the commission,
professional fee, compensation or other valuable
consideration.
TACITA RECONDUCTA – It means that if, at the end
of the period of lease, the lessee continues to
enjoy the thing leased with the acquiescence of the
lessor, it is understood that there is an implied new
lease.

TIE LINE — An imaginary line connecting from the
known geographic position (tie point) to the corner
of the titled property. This term is used in Map
Reading.
TIE POINT — is a reference point with known
geographic position established by the Bureau of
Lands. This term is used in Map Reading.
UNDER IMPROVEMENTS – That improvement
which does not sufficiently improve the land to
produce the highest and best value of return of
which the land is capable.
UNEARNED INCREMENT – A value added to land
for which the owner is in no way responsible, like
the increase of population
VALUE IN EXCHANGE – Objective Value. Property’s
value to an impartial buyer who represents the
market.
VALUE IN USE – Subjective Value. The property’s
value to its occupants or users.
WARRANTY DEED – A deed used to convey real
property which contains warranties of title and
quiet possessions. In a warranty deed, the grantor
is to defend the premises against the lawful claims
of the third person.
WRIT OF EXECUTION – Authorizes and directs the
proper officer of the court, usually the sheriff, to
carry into effect a judgment or decree of the court.
ZONING ORDINANCE – The exercise of police
power by the municipality or city and regulating
and controlling the character and use of property.