Glossary of Real Estate Terms & Expressions
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- Abstract of Title:
- A summary of the public records relating to the
title to a particular piece of land. An attorney or title insurance company
reviews an abstract of title to determine whether there are any title defects
which must be cleared before a buyer can purchase clear, marketable, and
insurable title.
- Acceleration Clause
- Condition in a mortgage that may require the balance of the loan to become due immediately, if
regular mortgage payments are not made or for breach of other conditions of the mortgage.
- Adjustable Mortgage Loans:
- Mortgage loans under which the interest rate is periodically adjusted to more
closely coincide with current rates. The amounts and times of
adjustment are agreed to at the inception of the loan. Also called:
Adjustable Rate Loans, Adjustable Rate Mortgages (ARMs),
Flexible Rate Loans, Variable Rate Loans.
- Agreement of Sale:
- Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or
jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to
buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
- Amortization:
- Payment of a debt in equal installments of principal and interest, rather than interest-only
payments.
- A.P.R.:
- Annual Percentage Rate. The yearly interest percentage of a loan, as expressed by the total
finance charge actually paid (interest, loan fees, points). The
A.P.R. is disclosed as a requirement of federal truth in lending
statutes.
- Appraisal:
- An expert judgment or estimate of the quality or value of real estate as of a given date.
- Assumption of Mortgage:
- An obligation undertaken by the purchaser of property to be personally liable for payment of
an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor
in the mortgage instrument and the original mortgagor is to be released from further
liability in the assumption, the mortgagee's consent is usually required.
- Binder:
- an "Offer to Purchase." A preliminary agreement, secured by the payment of earnest money,
between a buyer and seller as an offer to purchase real estate. A binder secures the right to
purchase real estate upon agreed terms for a limited period of time. If the buyer changes his
mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides
that it is to be refunded.
- Building Line or Setback:
- Distances from the ends and/or sides of the lot beyond which construction may not extend. The
building line may be established by a filed plat of subdivision, by restrictive covenants in deeds
or leases, by building codes, or by zoning ordinances.
- Buydown:
- A payment to the lender from the seller, buyer, or third party, or some combination of these, that
causes the lender to reduce the interest rate during the early years of the loan.
- Cap:
- In adjustable rate mortgages, the limit on how much the interest rate or monthly payment
can change.
- Certificate of Title:
- A certificate issued by a title company or a written opinion rendered by an attorney that the
seller has good marketable and insurable title to the property which he is offering for sale. A
certificate of title offers no protection against any hidden defects in the title which an
examination of the records could not reveal. The issuer of a certificate of title is liable only
for damages due to negligence. The protection offered a homeowner under a certificate of title is
not as great as that offered in a title insurance policy.
- Closing:
- The final procedure during which documents are executed and/or recorded, and the sale (or loan)
is completed. .
- Closing Costs:
- The numerous expenses which buyers and sellers normally incur to complete a transaction in the
transfer of ownership of real estate. These costs are in addition to price of the property and
are items prepaid at the closing day. This is a typical list:
| BUYER'S EXPENSES | SELLER'S EXPENSES |
| Documentary Stamps on Notes | Documentary Stamps on Deed |
| Recording Deed and Mortgage | Recording Mortgage |
| Escrow Fees | Escrow Fees |
| Attorney's Fee | Attorney's Fee |
| Survey Charge | Survey Charge |
| Appraisal and Inspection | Real Estate Commission |
| Title Insurance | |
The agreement of sale negotiated previously between the buyer and the
seller may state in writing who will pay each of the above costs.
- Closing Statement:
- The statement which lists the financial settlement between buyer and seller, and also the costs
each must pay
- CMA:
- CMA, or Competitive Market Analysis, is a comparison of homes similar to a seller's home in
terms of size, style, features, and location that have sold recently or are on the market.
A CMA is prepared by a real estate agent to help set a home's listing price.
- Condominium:
- Individual ownership of a dwelling unit and an individual interest in the common areas and
facilities which serve the multi-unit project.
- Contingency:
- Commonly, a stated event which must occur before a contract is binding. For example, a
home sale may be contingent upon the buyer obtaining financing.
- Conventional Mortgage:
- A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject
to conditions established by the lending institution and State statutes. The mortgage rates
may vary with different institutions and between States. (States have various
interest limits.)
- Co-op or Cooperative Housing:
- An apartment building or a group of dwellings owned by a corporation, the stockholders of which
are the residents of the dwellings. It is operated for their benefit by their elected board of
directors. In a cooperative, the corporation or association owns title to the real estate.
A resident purchases stock in the corporation which entitles him to occupy a unit in the building or
property owned by the cooperative. While the resident does not own his unit, he has an absolute
right to occupy his unit for as long as he owns the stock.
- Deed:
- A formal written instrument by which title to real property is transferred from one owner to
another. The deed should contain an accurate description of the property being conveyed, should
be signed and witnessed according to the laws of the State where the property is located, and
should be delivered to the purchaser at closing day. There are two parties to a deed: the
grantor and the grantee.
- Deposit:
- A portion of the down payment given by the buyer to the seller or escrow agent with a
written offer to purchase. Shows good faith.
- Down payment:
- Cash portion of the purchase price paid by a buyer from his own funds as opposed to
that portion which is financed.
- Earnest Money:
- The deposit money given to the seller or his agent by the potential buyer upon the signing of
the agreement of sale to show that he is serious about buying the house. If the sale goes through,
the earnest money is applied against the downpayment. If the sale does not go through, the earnest
money will be forfeited or lost unless the binder or offer to purchase expressly
provides that it is refundable.
- Easement Rights:
- A right-of-way granted to a person or company authorizing access to or over the owner's land.
An electric company obtaining a right-of-way across private property is a common example.
- Encroachment
- An obstruction, building, or part of a building that intrudes beyond a legal boundary onto
neighboring private or public land, or a building extending beyond the building line.
- Encumbrance:
- A legal right or interest in land that affects a good or clear title, and diminishes the land's
value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages,
liens, charges, a pending legal action, unpaid taxes, or restrictive convenants. An encumbrance
does not legally prevent transfer of the property to another. A title search is all that is
usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine
whether he wants to purchase with the encumbrance, or what can be done to remove it.
- Equity:
- The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting
from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or
other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the
property appreciates in value. When the mortgage and all other debts against the property are paid in full
the homeowner has 100% equity in his property.
- Escrow:
- A procedure in which a third (neutral) party holds all funds, documents, etc. necessary to the
sale, with instructions from both buyer and seller as to their use and disposition.
- FHA Loan:
- A loan insured by the Federal Housing Administration, a part of the Department of Housing and
Urban Development. FHA insurance enables lenders to loan a very high percentage of the sale price.
- Foreclosure:
- A legal term applied to any of the various methods of
enforcing payment of the debt secured by a mortgage, or deed of trust, by taking
and selling the mortgaged property, and depriving the mortgagor of possession.
- General Warranty Deed
- A deed which conveys not only all the grantor's
interests in and title to the property to the grantee, but also warrants that if
the title is defective or has a "cloud" on it (such as mortgage claims, tax
liens, title claims, judgments, or mechanic's liens against it) the grantee may
hold the grantor liable.
- Grantee:
- That party in the deed who is the buyer or recipient.
- Graduated Payment Mortgage:
- A mortgage initially offering low monthly payments that increase at
fixed intervals and at a predetermined rate.
- Grantor:
- That party in the deed who is the seller or giver.
- Hazard Insurance:
- Otherwise known as homeowners' insurance. Protects against damages caused to property by
fire, windstorms, and other common hazards. This is a usual requirement of a
mortgage lender and an advisable safeguard for any homeowner to protect against loss.
- HUD
- U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration
within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.
- Index or Rate Index:
- A measure of interest rate changes used to adjust the interest rate of an
Adjustable Mortgage Loan. Example: the change in U.S. Treasury securities
(T-bills) with a 1-year maturity, based upon their weekly average yield.
- Lien:
- A legal claim or charge by one person on property of another as security for payment of a debt or
for the discharge of an obligation. Such claims may include obligations not met or satisfied, judgments,
unpaid taxes,labor, or materials.
- Loan-to-Value Ratio:
- The ratio expressed as a percentage, of the amount of a mortgage loan to
the appraised value or selling price of the property.
- Lock box:
- A key storage system placed on a home entrance that is accessible only by active,
licensed real estate agents who must abide by a strict set of guidelines
when showing a seller's home.
- Margin:
- In Adjustable Mortgage Loans, the number of percentage points the lender adds to the index
rate to determine the new interest rate at each adjustment.
- MLS:
- MLS stands for Multiple Listing Service, by which member brokers cooperate in the
sale of each other's listings. Sellers may choose not to allow their
property into multiple listing, if they wish.
- PITI:
- Principal, Interest, Taxes, and Insurance. Used to indicate the four major items included
in a monthly mortgage payment.
- Points:
- A fee charged by a lender as a service charge or as an amount needed to make the yield on
a mortgage competitive with other types of investments. Each point represents 1% of the loan amount.
- Principal:
- Amount of debt, not including interest; the face value of a loan.
- Private Mortgage Insurance:
- Insurance issued by a private company against a loss by a lender in the event of default.
Private mortgage insurance is generally required for conventional financing whenever less than 20%
is put down.
- Realtor®:
- A collective mark for a real-estate agent affiliated witn the National Association of Realtors. Read more
- Second Mortgage:
- A mortgage which ranks after the first mortgage lien in priority.
- Settlement:
- Same definition as closing.
- Title:
- As generally used, the rights of ownership and possession of
particular property. In real estate usage, title may refer to the instruments or
documents by which a right of ownership is established (title documents), or it
may refer to the ownership interest one has in the real estate.
- Title Insurance:
- Insurance against loss resulting from defects of title of public record.
- Title Search:
- A check of the title records, generally at the local courthouse, to make sure the buyer is
purchasing a house from the legal owner and there are no liens, overdue special assessments, or
other claims or outstanding restrictive convenants filed in the record, which would adversely
affect the marketability or value of title.
- VA Loans:
- Loans partially guaranteed by the Veteran's Administration, enabling veterans to buy
a home with little or no down payment.
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