Glossary of Real Estate Terms
A
Acre
A measurement of land equal to 43,560 feet in any shape
Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate is changeable; it usually has a cap
Addendum
Details that are added onto a document
Agency Agreement
A written or oral contract in which the principal authorizes an agent to act on behalf of the principal in dealing with a third party
Agent
A person who is authorized to represent another person
Agreement of Sale
A written purchase and sale agreement
Amortization
The act of paying off a mortgage with periodic payments of principal and interest
Annual Percentage Rate (APR)
A yearly rate of interest that includes all the costs of acquiring the loan
Appraisal
The estimated fair market value of a house by an authorized person
Appraiser
The authorized person who estimates the fair market value of a house
Appraisal Value
The fair market value of a property as determined by an authorized person
Asbestos
One of several materials linked to cancer; often found in insulation materials, house shingles, etc.
Assessed Value
The value of a house for tax purposes
"As Is" Condition
The condition of a house including all its defects
Assessment
An estimate of a property's value for tax purposes
Assessed Value
The official valuation of a property for tax purposes
B
Balloon Mortgage
A mortgage amortized over a period of years but whose final payment is due after a set number of payments
Balloon Payment
The final payment of a balloon mortgage
Bill of Sale
A written instrument proving the transfer of property from the seller to the buyer
Binder
An agreement between a buyer and a seller which sets forth the conditions of a sale; shows the good faith of both to have an attorney draw up a sale and purchase contract
Breach of Contract
A failure to execute the terms of a contract
Bridge Loan
A loan that covers the period between the end of one loan and the beginning of another
Broker
A person licensed to deal in real estate matters
Broom Clean
The relatively clean condition of a house when given to a buyer
Building Code
A set of laws to be followed in the construction and building business
Building Permit
Permission of local government to build on a property
Buyer's Agent
A person authorized to work on behalf of the buyer of a property
C
Capital Gain
The increase in value of an asset; the profit from the sale of property
Clear Title
A title to a piece of property that is free of liens or legal problems
Closing
The final step in a real estate deal; money is given to the seller and title is given to the buyer
Closing Costs
Costs associated with the transfer of ownership of a piece of property; includes many different fees
Closing Statement
The document that lists all financial data at time of closing
Cloud on Title
A claim on a piece of property that affects the title; can be settled by various actions
Commitment Letter
A promise in writing by a lender for a specific amount of money over a specific period of time with specific terms (e.g., interest rate)
Commission
A fee paid to a broker for transacting a real estate deal
Comparables
Properties similar in value to a property being sold; used for appraisal purposes
Competitive Market Analysis (CMA)
A comparison of recently sold homes that are roughly similar to each other in location, selling price, etc., also known as comparative market analysis
Contingency
A condition that must be met before a transaction is binding; for example, a house inspection must be acceptable before a deal is binding
Contract
A legally binding contract between a buyer and a seller
Conventional Mortgage
A type of financial loan made by an institution such as a bank without any government underwriting
Counteroffer
An offer made by a buyer to a seller for real property, usually a lower offer than the asking price. For ex., A rejects B's price and offers a lower price which is a counteroffer
Covenant
A binding agreement between two parties
Credit Report
A report citing all debts and their repayments
Cul-de-Sac
A street closed at one end
Curb Appeal
The appearance of a house from the outside; for ex., attractive landscaping, decorated door, etc.
D
Debt-to-Income Ratio
A percentage comparing expenses to income; for ex., housing expenses might be 30% of income
Deed
A signed and executed document conveying title to a piece of property
Deposit
Money given by the buyer to the seller to create a binding sale
Disclosure
The act of revealing any problems with a piece of real estate
Down Payment
The difference between a mortgage amount and purchase price given to the seller by the buyer
Discount Brokers
Licensed brokers who usually settle for a lower commission and may offer fewer services than full-service brokers
E
Earnest Money
Money given by the buyer to the seller to secure a deal; becomes part of the down payment if offer is accepted
Easement
An interest or right to land owned by another for a specified purpose. For ex., a utility may have an easement to a portion of your property
Equity
The value of a house in excess of the mortgage. For ex., Max owes $50,000 on a mortgage with a fair market value of $200,000; his equity is $150,000
Escrow
Usually money held in trust by a third party until a specific transaction has been completed
F
Fair Housing Act
Bans discrimination (race, color, sexual orientation, religion, etc.) in the sale or rental of real estate
Fannie Mae
Federal National Mortgage Association, the largest supplier of home mortgage loans
Fixture
Personal property attached to real property that is passed on with the sale of the house unless specifically excluded in the sale
Financing Costs
Any fees incurred in borrowing money for a real estate transaction. For ex., interest, points, etc.
Foreclosure
A legal proceeding by which a property owner loses interest in a mortgaged property through default on a loan
FSBO
For Sale By Owner
G
H
Home Inspection
A structural and mechanical assessment of a house prior to the closing, generally by a licensed inspector
Home Owners Association
A group of homeowners who, through the collection of association fees, manage the common areas
Home Warranty
A home warranty is a guarantee of the quality of construction offered by the builder or homeowner to a buyer; may be underwritten by an insurance policy that will detail the specific areas that are covered, e.g. HVAC, major appliances, etc.
House Flyer
A printed brochure listing the details of a property (size, features, cost, etc.) as well as photos
HVAC
Heating, ventilation and air conditioning
I
Inspection
See "Home Inspection"
Interest Rate
The percentage rate of a sum of money charged by a lender to a borrower
J
Jumbo Loan
A loan of usually more than $250,000; not all lenders engage in jumbo loans; interest rates for such a loan may be higher than the usual rates
K
L
Lead paint disclosure
The disclosure of the possibility of the presence of lead paint in a structure; lead paint is hazardous to health and may be present in buildings constructed prior to 1978
Lease option
A lease in which the tenant has the right to purchase real property as stipulated in the terms of the lease
Legal description
A description of the exact boundaries of a piece of real property; it is a description recognized by law and is used to locate a specific parcel of land
Lien
A legal claim against a real property; security until an obligation such as taxes, debts, etc. is paid off
Loan
Money which is borrowed and usually repaid with interest over a specified period of time
Lot and block system
A system of identifying real property by lot and block numbers on a recorded subdivision map
Lot and block
A numbered method of identifying a parcel of land
Loan-to-value
The ratio of the amount of a loan compared to the appraisal value of a property
M
Marketable title
A clear, saleable title to a piece of real property
Mechanic's Lien
A lien enforceable by legal proceedings favorable to contractors, engineers, laborers, etc. insuring payment for their work and/or materials
Metes-and-bounds description
An accurate description of land boundaries (metes = length; bounds = boundaries)
Mill
A unit of measure (one-tenth of 1%) used in determining the amount of annual taxes due on real property
Mortgage
A legal document whereby a parcel of real property is used as security for the repayment of a debt
Mortgage Broker
An agent who brings together a borrower and lender for the purpose of earning a commission
Multiple-listing service (MLS)
A service that lists for its members all properties for sale; provides wide market exposure; gives all agents the opportunity to sell a property and share in the commission
N
O
Offer
A presentation of a price by a buyer to a seller for acceptance
Open House
A specified time during which a house is open to prospective buyers without an appointment
Origination Fee
A fee charged by the lender for the preparation of a mortgage; usually called "points"
P
Personal Property
Any property which is not real property (that is, whatever is not attached to the property itself)
Preapproved
A method (usually an authorization letter) by which the buyer can show the agent and/or seller that he can qualify for a specific loan amount
Point or Points
Money paid to a lender for making a loan. Each point is equal to 1% of the loan amount
Power of Attorney
A legal document whereby a person gives another the authority to act on his/her behalf
Prepayment clause
A stipulation in a contract that allows the borrower to make a loan payment in advance of the due date
Prepayment Penalty
A fee payable to the lender by the borrower for prepayment of a loan prior to a specific date contained in the lending document
Prequalified
An assessment of a buyer's ability to secure a loan
Principle
The amount of money borrowed or the amount due on a mortgage
Private Mortgage Insurance (PMI)
Insurance required by a lender when the down payment on a mortgage is less than 20%
Property Tax
A government tax on privately owned property based on market value
Purchase Agreement
A contract between a buyer and a seller setting forth the sale and purchase conditions of real property
Purchase Money Mortgage
Mortgage given by the seller to the buyer as part of the purchase price
Q
R
Radon
A naturally occurring, radioactive, odorless gas sometimes found in a house which can be harmful to health
Rate Lock
A lender's commitment to a borrower for a specific amount of a loan and any associated fees for a specific period of time
Realtor
A licensee who is either a broker or salesperson and who is a member of local, state and National Association of Realtors
Recission
Cancellation
Release
A legal instrument releasing a property from any liens
S
Sales Contract
A contract agreement between a buyer and a seller specifying all the terms and conditions of the sale of real estate
Sales Comparison Approach
One of several appraisal methods which estimates the value of a house by comparing it to recently sold comparable properties
Security
Real estate pledged as collateral for a loan
Septic System
A sewage system using pipes to drain waste into a below-ground septic tank within the property
Septic Tank
A below-ground tank into which sewage flows which is then reduced to a liquid
Seller Financing
A financial arrangement whereby a seller provides financing for the buyer
Seller's disclosure
A seller's accurate and honest disclosure of the condition of the real property
Settlement Statement
A statement of all costs of a real estate sale; generally given at the closing
Sign-in Sheets
A listing of interested buyers at an open house
Single-family Home
A house or dwelling designed for use by a single family
T
Time is of the Essence
A contract clause specifying that a condition be met within a specified period of time
Title
Evidence to the right of ownership of a piece of real estate
Title Insurance
Insurance against loss from title problems or claims against the property
Title Search
A search of all records to determine the ownership of a real property
U
V
W
Walk-through inspection
An inspection of the premises being bought, usually on the day of closing, to make sure all is in working order according to the terms of the sale
X
Y
Z
Zoning
Regulations by local government of the size, height, etc. of buildings and the use of land
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