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Abstract of
title: A condensed version of the history of title to a
piece of land that lists any transfers in ownership, as well as any
liabilities attached to it, such as mortgages.
Acceptance:
An acceptance is a promise by the offeree to be bound by the exact terms
proposed by the offeror. The acceptance must be communicated to the
offeror.
Acknowledgment:
A declaration made by a person to a notary public, or other public
official authorized to take acknowledgments, that the instrument was
executed by him and that it was his free and voluntary act.
Acre: A
measure of land equal to 43,560 square feet.
Adjustable Rate Mortgage (ARM): A mortgage with rates and
terms that can change. The adjustable rate loan has become commonplace,
with allowable ranges as to time intervals, percentage of increase or
decrease and total increases or decreases likely to change as market
conditions change.
Adjustments:
Money that the buyer and sellers credit each other at the time of
closing. Often includes taxes and down payment.
Agency: A
relationship created when one person, the principal, delegates to
another, the agent, the right to act on his or her behalf in business
transactions and to exercise some degree of discretion while so acting.
An agency gives rise to a fiduciary relationship and imposes on the
agent, as the fiduciary of the principal, certain duties, obligations,
and high standards of good faith and loyalty.
Annual
Percentage Rate (APR): An expression of the relationship
of the total finance charge to the total amount to be financed as
required under the federal Truth-in-Lending Act. Tables available from
any Federal Reserve bank may be used to compute the rate, which must be
calculated to the nearest one-eighth of 1 percent. Use of the APR
permits a standard expression of credit costs, which facilitates easy
comparison of lenders.
Appraisal:
An estimate of the monetary value of a property on the open market; an
estimate of a property's type and condition, its utility for a given
purpose or its highest and best use.
"As-is":
Words in a contract intended to signify that no guarantees, whatsoever,
are given regarding the subject and that it is being purchased exactly
as it is found.
Asking (list) price:
The price placed on a property for sale.
Assessment:
The imposition of a tax, charge or lien, usually according to
established rates.
Assignment:
A transfer of property rights from one person to another, called the
assignee.
Assessor:
Municipal or county official who determines the value of property for
taxation.
B
Balloon mortgage:
A short-term loan, usually at a fixed interest rate, paid back in equal
monthly payments, with a final "balloon" payment for the remaining
balance.
Broker:
Person licensed to represent homebuyers or sellers for a fee.
Brokerage:
For a commission or fee, bringing together parties interested in buying,
selling, exchanging, or leasing real property.
Building
inspection: An overall inspection of a home or building
performed by a qualified contractor or inspector. The inspection usually
covers all major systems including foundation, plumbing, electrical,
roof, heating and air conditioning.
Buyer listing:
An agreement where a buyer agrees to pay a commission if a broker
locates a property that the buyer purchases.
Buyer's agent:
Agent who represents the buyer in the real estate transaction.
Buyer-agency agreement: A principal-agent relationship in
which the broker is the agent for the buyer, with fiduciary
responsibilities to the buyer. The broker represents the buyer under the
law of agency.
Buyer's broker:
A licensee who has declared to represent only the buyer in a
transaction, regardless of whether compensation is paid by the buyer or
the listing broker through a commission split.
C
Cap: The
maximum allowable increase, for either payment or interest rate, for a
specified amount of time on an adjustable rate mortgage.
Closing:
The final transfer of the ownership of a house from the seller to the
buyer, which occurs after both have met all the terms of their contract
and the deed has been recorded.
Closing costs:
Expenses of the sale (or loan refinancing) that must be paid in addition
to the purchase price (in the case of the buyer's expenses) or be
deducted from the proceeds of the sale (in the case of the seller's
expenses). Some closing costs result from legal requirements; others are
a matter of local custom and practice.
Commission:
The compensation paid to a licensed real estate broker or by the broker
to the salesperson for services rendered, usually a percentage of the
selling price of the property.
Comparables:
Houses and properties that are similar in style, appearance,
construction quality, and usefulness to a particular property in a
certain location.
Comparative Market Analysis (CMA): Realistic estimate of
a home's current market value based on the most salient points of the
local real estate market.
contingency:
A provision in a contract that requires a certain act to be done or a
certain event to occur before the contract becomes binding.
contract:
A legally enforceable agreement to do, or not to do, a particular thing
for a consideration.
contract of sale:
The agreement between the buyer and seller on the purchase price, terms,
and conditions necessary to both parties to convey the title to the
buyer.
Conventional
mortgage: Mortgage not FHA-insured or guaranteed by the
VA, known by this name because it is the most popular home financing
method.
Counter-offer:
Offer made by the buyer or seller in response to the other's bid.
Curb appeal:
Common term for everything prospective buyers can see from the street
that might make them want to take a closer look at a house for sale.
D
Deed: A
written instrument, when executed and delivered, conveys title to or an
interest in real estate.
Down payment:
Buyer's payment to the sellers at time of closing for that percentage of
the purchase price required by the buyer's mortgage loan.
Dual agency:
Representing both the buyer and the seller in the same real estate
transaction. By law, all states require that dual agency be disclosed to
all parties in the transaction.
E
Earnest money:
Money paid by the buyer, at the time of making an offer or entering into
a contract to purchase, which is intended to show the buyer's good-faith
intention to complete the purchase. Generally, earnest money is applied
against the purchase price, but may be forfeited if the buyer fails to
complete the purchase.
Equity: The
interest or value that an owner has in a property over and above any
indebtedness.
Escrow: The
process by which money and/or documents are held by a disinterested
third person (a stakeholder) until satisfaction of the terms and
conditions of the escrow instructions (as prepared by the parties to the
escrow) have been achieved. Once these terms have been satisfied,
delivery and transfer of the escrowed funds and documents takes place.
Escrow account:
The trust account established under the provisions of the license law
for the purpose of holding funds on behalf of the principal or some
other person until the consummation or termination of a transaction.
Exclusive Agency
(EA): A written listing agreement giving a sole agent the
right to sell a property for a specified time, but reserving to the
owner the right to sell the property himself without owing a commission.
The exclusive agent is entitled to a commission if he or she personally
sells the property or if it is sold by anyone other than the seller. It
is exclusive in the sense that the property is listed with only one
broker. The multiple-listing service must accept exclusive-agency
listings submitted by participating brokers.
Exclusive
right to sell (ERS): A listing agreement which gives the
listing agent the right to sell the property for a specified time, with
the right to collect a commission if the property is sold by anyone,
including the owner, during the listing period.
F
Fiduciary:
The relationship of trust, honesty and confidence between agent and
principal; the faithful relationship owed by an agent to the principal.
Fair market
value: highest price an informed buyer will pay, assuming
there is not unusual pressure to complete the purchase.
FHA: The
Federal Housing Administration which insures mortgage loans made by
approved lenders, in accordance with FHA regulations.
FHA-insured
mortgage: A mortgage with low down payment requirements,
insured by the Federal Housing Administration and made available through
banks and other lenders.
Fixed rate
mortgage: A mortgage with an interest rate that doesn't
vary for the term of the loan.
For Sale By
Owner (FSBO): Some owners choose to sell their own
property without the aid of a real estate broker. "For Sale By Owner"
properties can be a source of listings when the owner is unsuccessful in
selling their property.
H
Home equity loan:
A loan (sometimes called a line of credit) under which a property owner
uses his or her residence as collateral and can then draw funds up to a
prearranged amount against the property.
Homeowners'
insurance: A type of insurance policy designed to protect
homeowners from financial losses related the ownership of real property.
In addition to covering losses due to vandalism, fire, hail, etc., most
policies also provide theft and liability coverage. Flood related damage
requires a separate flood insurance policy or rider.
Home warranty:
A policy purchased by a buyer or seller as an assurance against
unexpected home repair costs.
House closing:
The final transfer of the ownership of a house from the seller to the
buyer, which occurs after both have met all the terms of their contract
and the deed has been recorded. Also known as just "closing".
I
Impound account:
Also known as an escrow account.
Inspection:
A formal survey of a home's structure and systems, often performed by a
licensed professional.
Inspection
clause: A stipulation in an offer to purchase that makes
the sale contingent on the findings of a home inspector.
Interest:
A charge paid to a lender for borrowed money.
L
Lease-purchase agreement: An agreement between a tenant
and landlord that a portion of monthly rent may be credited toward
eventual purchase of the rental property.
Lease purchase:
A contract in which an owner leases his house (usually for one to five
years) to a tenant for an increased monthly rent, and which gives the
tenant the right to buy the house at the end of the lease period for a
price established in advance, with the incremental rent increase being
used to form a down payment. Buyers should be wary of this type of
contract since they may lose their extra rent/down payment money should
the owner suffer financial setbacks before the purchase has been
completed.
Lender's agent:
A person who represents the lender holding the mortgage at closing.
Listing: A
contract in which the seller agrees to pay a commission to the agent who
finds a purchaser who can meet the specified terms.
Listing
agreement: A written employment agreement between a
property owner and a real estate broker authorizing the broker to find a
buyer or a tenant for certain real property. Listing can take the form
of open listings, net listings, exclusive-agency listings, or
exclusive-right-to-sell listings. The most common form is the
exclusive-right-to-sell listing.
Listing broker:
The broker in a multiple-listing situation from whose office a listing
agreement is initiated, as opposed to the cooperating broker, from whose
office negotiations leading up to a sale are initiated. The listing
broker and the cooperating broker may be the same person.
M
Market: A
place where goods can be bought and sold and a price established.
Market analysis:
A regional and neighborhood study of economic, demographic and other
factors made to determine supply and demand, market trends, and other
factors important to buying/leasing and selling real property.
Market value:
The price that a willing buyer and a willing seller, both given full
information, and neither under pressure to act, would agree upon. Also
known as Fair Market Value.
Mortgage:
A contract providing security for the repayment of a loan, registered
against property, with stated rights and remedies in the event of
default. Lenders consider both the property and financial worth of the
borrower in deciding on a mortgage loan.
Mortgage
broker/company: A person or firm that acts as an
intermediary between borrower and lender; one who, for compensation or
gain, negotiates, sells or arranges loans and sometimes continues to
service the loans; also called a loan broker. Loans originated by the
mortgage broker are closed in the lender's name and are usually serviced
by the lender. This is in contrast to mortgage bankers, who not only
close loans in their own names but continue to service them as well.
Mortgage
insurance: A kind of insurance policy that will pay off
the mortgage balance in the event of death, and in some policies,
disability. Premiums are paid with the regular monthly mortgage payment.
Mortgage loan:
A loan which utilizes real estate as security or collateral to provide
for repayment should you default on the terms of your loan. The mortgage
or deed of trust is your agreement to pledge your home or other real
estate as security.
Mortgage note:
A signed promise to repay a mortgage loan in regular monthly payments.
Multiple-Listing Service (MLS): A marketing organization
composed of member brokers who agree to share their listing agreements
with one another in the hope of procuring ready, willing and able buyers
for their properties more quickly than they could on their own.
O
Offer: A
proposal to enter into an agreement with another person. An offer must
express the intent of the person making the offer to form a contract,
must contain some essential terms — including the price and subject
matter of the contract — and must be communicated by the person making
the offer. A legally valid acceptance of the offer will create a binding
contract.
offeree:
The person to whom an offer is made — usually the owner.
offeror:
The party who makes an offer — usually the buyer.
Open house:
The common real estate practice of showing listed homes to the public
during established hours.
Open listing:
A listing given to any number of brokers who can work simultaneously to
sell the owner's property. The first broker to secure a buyer who is
ready, willing and able to purchase at the terms of the listing earns
the commission. In the case of a sale, the seller is not obligated to
notify any of the brokers that the property has been sold.
Origination fee:
A fee charged by lenders, in addition to interest, for services in
connection with granting of a loan. Usually a percentage of the loan
amount.
Over-improvement:
An addition or improvement in which the cost is greater than the
increased value of the house.
P
Payment cap:
protective device included in some adjustable-rate mortgages that sets a
maximum amount monthly payment may rise in any given year.
PITI:
Principal, Interest, Taxes, and Insurance, the four main parts of a
monthly mortgage payment.
PMI: Private
Mortgage Insurance, which protects the lender in case of default by the
borrower. PMI is often used to allow buyers to obtain financing with
less than a 20 percent down payment.
Points:
Where one point equals one percent of the total mortgage loan amount.
Buyers often pay lenders a supplemental fee, calculated in points, to
get a better mortgage interest rate.
Pre-approval:
An actual decision on a home loan, involving the obtaining of a credit
approval and an agreement to finance a home, with specifics on the total
mortgage amount available to the buyer.
Prepayment:
Paying off all or part of the mortgage before the scheduled date.
Pre-qualification: An informal determination by a lender
or broker of how large a mortgage a buyer can afford.
Principal:
Money borrowed from a lender, not including any fees or interest.
Purchase offer:
A document that lists the price, terms and conditions under which a
buyer is willing to purchase a property.
Q
Qualify:
The ability to meet a lender's mortgage approval requirements.
R
Rate cap:
A protective device in some ARMs that sets a maximum amount that
interest rates may rise or decrease annually over the life of the loan.
Real estate:
The physical land at, above and below the earth's surface with all
appurtenances, including any structures; any and every interest in land
whether corporeal or incorporeal, freehold or nonfreehold; for all
practical purposes, the term real estate is synonymous with real
property.
Real estate
agent: A person licensed to negotiate and transact the
sale of real estate on behalf of the property owner.
Real estate
brokerage: A Real Estate Brokerage is a business in which
real estate license-related activities are performed under the authority
of a real estate broker.
REALTOR®: A
registered trade name that may be used only by members of the state and
local real estate boards affiliated with the National Association of
REALTORS® (NAR). The term REALTOR® designates a professional who
subscribes to associations of REALTORS® to govern real estate practices
of members of the board. The use of the name REALTOR® and the
distinctive seal in advertising is strictly governed by the rules and
regulations of the national association.
Referral:
One agent's recommendation of a potential buyer or seller to another
cooperating agent.
Refinance:
To obtain a new loan to pay off an existing loan, or to pay off one loan
with the proceeds from another. Properties are frequently refinanced
when interest rates drop and/or the property has appreciated in value.
Return on
investment: The net annual income divided by the original
cash investment equals a percentage return on investment.
S
Sales contract:
A real estate sales contract contains the complete agreement between a
buyer of a parcel of real estate and the seller. Depending on the area,
this agreement may be known as an offer to purchase, a contract of
purchase and sale, a purchase agreement, an earnest money agreement or a
deposit receipt.
Sales
professional: A licensed representative who assists
buyers and sellers with information, advice, and assessment of current
market conditions.
Seller's agent:
An agent who represents the seller of real property.
Settlement disclosure statement: A list giving a complete
breakdown of costs involved in a real estate transaction, prepared by
the lender's agent at closing.
T
Title: The
right of ownership and possession of a property
Title insurance:
Protection for lenders or homeowners against financial loss resulting
from legal defects in the title.
U
Underwriting:
The process of evaluating a mortgage loan applicant's credit, collateral
value and the risks in making a loan.
V
VA loan: A
government-sponsored mortgage assistance program administered by the
Department of Veterans Affairs. Under the Servicemen's Readjustment Act
of 1944, eligible veterans and widows or widowers (who have not
re-married) of veterans who died in service or from service-connected
causes may obtain partially guaranteed loans for the purchase or
construction of a house or to refinance existing mortgage debt.
W
Walk-through:
A final inspection of a property just before closing. This assures the
buyer that the property has been vacated, that no damage has occurred
and that the seller has not taken or substituted any property contrary
to the terms of the sales agreement. If damage has occurred, the buyer
might ask that funds be withheld at the closing to pay for the repairs.
Warranty:
A promise that certain stated facts are true. A guarantee by the seller,
covering the title as well as the physical condition of the property. A
warranty is different from a representation in that a representation is
a statement made in the course of negotiations leading up to the sale,
but not incorporated into the contract. A warranty, on the other hand,
is a statement in the contract asserting the truth of certain things
about the property.
Z
Zoning: The
regulation of structures and uses of property within designated
districts or zones. Zoning regulates and affects such things as use of
the land, lot sizes, types of structure permitted, building heights,
setbacks and density (the ratio of land area to improvement area).
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