Real Estate Glossary

 

The Evaluation and Purchase of Your Home

 

Appraisal – An evaluation to determine the price for which a property would sell in the current marketplace.

 

Appreciation – An increase in the value of a property.

 

Assessment – A tax levied on a property or a value placed on the worth of a property by a taxing authority.

 

Comparative Market Analysis (CMA) – A survey of attributes and selling prices of comparable houses listed for sale, recently sold or expired from the market; used to help determine correct pricing strategy for a seller’s property.

 

Conditions, Covenants and Restrictions – The standards that define how a property may be used and the protections the developer makes for the benefit of all owners in a subdivision.

 

Easement – The right-of-way granted to a person or company authorizing access to the owner’s land; for example, a utility company may be granted an easement to install pipes or wires.  An owner may voluntarily grant an easement, or can be ordered to grant one by a local jurisdiction.

 

Fixture – A recognizable object (such as a chandelier, kitchen cabinet, or light unit) that is permanently attached to property and belongs to the property when it is sold, unless otherwise specified in the sale agreement.

 

Market Value – The price that is established by present economic conditions, location and general trends.

 

Property Survey – A survey to determine the boundaries of your property.  The cost depends on the complexity of the survey.

 

R-Value – The resistance of insulation material (including windows) to heat passing through it.  The higher the number, the greater the insulating value. 

 

Walk-Through – A final inspection of a home before title transfer to search for problems that need to be corrected before ownership changes.

 

Zoning – Regulations established by local governments regarding the location and use for any given price of property within a specific area.

 

The Representation

 

Agent – Acts on behalf or another, representing that person’s interests.

 

Broker – A real estate professional who has a higher level of training than an agent.  A broker is the legal representative and/or manager of the office; the term may also refer to the brokerage under which an agent is licensed.

 

Buyer Representation – Historically, an agent represented only the seller in a real estate transaction (agents working with buyers were actually “sub-agents” of the seller’s listing agent).  Buyers today have the opportunity to be fully represented by an agent and brokerage firm.

 

Fiduciary Duties – Obligations owed by an anent/broker to a client (buyer or seller).  In real estate, these include loyalty, obedience, full disclosure, skill, care, diligence, and accounting of all monies.

 

Multiple Listing Service (MLS) – A system that provides to its members detailed information about properties for sale.

 

Realtor® - Registered trade name which may be used only by members of state and local real estate boards affiliated with (and subscribing to the Code of Ethics of ) the National Association of REALTORS®.

 

The Transaction Process

 

Closing – The completion of documents that transfer property from a seller to a buyer (also referred to as a settlement).  Also used loosely to mean “reaching final agreement.”

 

Closing Costs – Charges paid at closing for obtaining a mortgage loan, transferring title, and miscellaneous fees (inspections, reports, etc.).

Contingency – A condition in a contract that must be met for the contract to be binding.

 

Deed – Legal document that formally conveys ownership of property from seller to buyer.

 

Down Payment – The difference between the sale price and the mortgage amount.  A down payment is usually paid at closing.

 

Earnest Money – A sum deposited with the broker at the time an offer is presented to show that a potential purchaser is serious about buying.

 

Escrow – The handling of funds or documents by a third party on behalf of the buyer and/or seller.

 

Listing Contract – Agreement whereby an owner engages a real estate company for a specified period to market a property, for which (upon sale) the broker receives a commission.

 

Possession Date – The day on which a property’s new owner is actually entitled to occupy that property.

 

Recording Fee – A charge for recording the transfer of a property, paid to a city, county, or other appropriate branch of government.

 

Real Estate Settlement Procedures Act (RESPA) – A federal law requiring lenders to provide homebuyers with information about known or estimated settlement costs.

 

Sales Contract – An agreement between a buyer and seller that should explain in detail exactly what the purchase includes, if there are any warranties, when the buyer may move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot obtain a mortgage commitment at the agreed-upon terms.

 

Title – (usually in the form of a certificate or deed) of a person’s legal right to ownership of a property.

 

Ownership

 

Condominium (Condo) – A type of real estate ownership where the owner has title to a specific unit and shared interest in common areas.

 

Joint Tenancy – A form of ownership in which the tenants own a property equally.  If one dies, the other would inherit the entire property.

 

Tenancy in Common – A form of ownership in which the tenants own separate but equal parts.  To inherit the property, a surviving tenant would either have to be mentioned in the will or, in the absence of a will, be eligible through state inheritance laws.

 

Adjustable Rate Mortgage (ARM) – A loan for which t

 

Amortization – A payment plan by which a loan is reduced through monthly payments of principal and interest.

 

Annual Percentage Rate (APR) – The annual cost of credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance and other items.

 

Assumption – A transaction allowing the buyer to assume responsibility for an existing loan instead of originating a new loan.

 

Balloon – A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end.

 

BuyDown – A subside to reduce the monthly payments on a mortgage loan.

 

Cap – A limit to the amount an interest rate or monthly payment can increase for an adjustable rate loan either during an adjustment period or the loan.

 

Conventional Loan – A mortgage loan not insured by a government agency. FHA and VA loans are insured by the government.

 

Credit Report – A report ordered from a credit bureau that indicates if a borrower is a good credit risk.

 

Default – A breach of a mortgage contract (i.e., not making the required payment).

 

Due-On-Sale – A clause in a mortgage contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the property.

 

Equity – The difference between the value of a home and what is owed on it.

 

Federal Housing Administration (FNMA, called “Fanny Mae”) – A privately owned corporation created by Congress that buys mortgage notes from local lenders and is responsible for the guidelines a majority of lenders use to quality borrowers.

 

Finance Charge – The total cost, including all fees, points, and interest payment a borrower pay to obtain credit.

 

Fixed-Rate Mortgage – A mortgage with an interest rate that remains constant over the live of a loan.

 

Hazard Insurance – Protection against damage caused by fire, wind or other common hazards.  Most lenders require borrowers to carry it in an amount at least equal to the mortgage.

 

Housing Finance Agency – A state agency that offers below-market-rate home financing for low- and moderate-income households.

 

Index – The interest rate or adjustment standard that determines the changes in monthly payments for an adjustable rate loan.

 

Lien – Security claim on property until a debt is satisfied.

 

Mortgage Broker – A broker who represents numerous lenders and helps consumers find affordable mortgages, the broker charges a fee only if the consumer finds a loan.

 

Mortgage Commitment – A formal written communication by a lender, agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions.

 

Mortgage Company – A company that borrows money from a bank, lends it to consumers to buy homes, then sells the loans to investors.

 

Mortgage Loan – A contract in which the borrower’s property is pledged as collateral.  It is repaid in installments.  The mortgagor (buyer) promises to repay principal and interest, keep the home insured, pay all taxes and keep the property in good condition.

 

Negative Amortization – An increase in the outstanding amount when a monthly payment does not cover the monthly interest due.

 

Note – A formal document showing the existence of a debt and stating the terms of repayment.

 

Origination Fee – A charge for the work involved in preparing and servicing a mortgage application (usually one percent of the loan amount)

 

P.I.T.I. – Principal, interest, taxes and insurance.  The four major components of monthly housing payments.

 

Point – A one-time charge paid by a borrower at closing to receive a lower rate.  Each point is one percent of the mortgage amount.

 

Pre-Approval – A mortgage approval obtained before negotiating a contract on a specific home.

 

Pre-Payment – Payment of a debt prior to maturity.

 

Pre-Qualification – An informal estimate of how much financing a potential borrower might expect to obtain.

 

Principal – The amount borrowed, excluding interest and other charges.

 

Private Mortgage Insurance (PMI) – Insurance required on most conventional loans with less than 20% down payment to protect the lender against default.

 

Veterans Administration (VA) – A federal agency that guarantees mortgage loans for honorably discharged veterans and their surviving  spouses.  Down payment requirements are very liberal.  Borrowers may make little or no down payment.