Real Estate Glossary

Real Estate Glossary

A

Addendum
Any provision added to an existing contract without altering the content of the original. Must be signed by all parties.

Agent
One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency

Amendment
A change to the existing content of a contract ( Ie:., if words or provisions are added to or deleted from the body of the contract) Must be initialed by all parties.

Amortized Loan
A loan in which the principle, as well as the interest, is payable in monthly or other periodic installments over the term of the loan.

Annual Percentage Rate
The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth in Lending Act.

Appraisal
An estimate of the quantity, quality, or value of something. The process which conclusions of property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.

Appraisal Report
An opinion of a property's market value given to a lender or client with detailed market information.

Appreciation
An increase in the worth or value of a property due to eceonomic or related causes, which may prove to be either temporary or permanent; opposite of depreciation.

Asbestos
A mineral once used insulation and other materials that can cause respiratory diseases.

Assessed Value
The value set on a property for taxation purposes.

Assessment
The imposition of a tax, charge or levy, usually according to established rates.

Assumption of Mortgage
Acquiring title to property on which there is an existing mortage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments.

B

Balloon Payment
A final payment of a mortgage loan that is considerably larger than the required periodic payments

Beneficiary
The person for whom a trust operates or in whose behalf the income from a trust estate is drawn…..(2) A lender in a deed of trust loan transaction.

Binder
An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser's good faith and intent to complete the transaction.

Brokerage
The bringing together of parties interested in making a real estate transaction

Buyer Representation Agreement
A principle-agent relationship in which the real estate professional acts on behalf of the buyer, usually as an agent, with fiduciary responsibilities to the buyer.

Buyer's Broker
A residential real estate professional who represents prospective buyers exclusively.

C

Carbon Monoxide
A colorless, odorless gas that occurs as a by-product of fuel combustion that may result in death in poorly ventilated areas.

Certificate of Title
A statement of opinion on the status of the title to the parcel of real property based on an examination of specified public records.

Client
The principle in an agency relationship or other form of representation.

Closing
An event where promises made in a sales contract are fulfilled and mortgage loan funds ( if any ) are distributed to the buyer.

Closing Disclosure
The CFPB form that itemizes all charges that are normally paid by a borrower and a seller in connection with settlement, whether by the lender or another party, or paid by the lender or any other person.

Closing Escrow
Process of settlement in which the buyer and the seller never meet; the paperwork is handled by an escrow agent.

Closing Statement
A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction.

Cloud on the title
Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful, usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.

Collateral
Something having value that is given to secure repayment of a debt.

Commission
Payment to a real estate professional for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.

Community Property
A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage.

Comparables
Properties used in an appraisal report that are substantially equivalent to the subject property.

Comparative Market Analysis
( CMA ) A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities.

Computerized Loan Origination
( CLO ) An electronic network for handling loan applications through remote computer terminals linked to various lenders' computers.

Contingencies
Provisions in a contract that require a certain act to be done or a certain event to occur before the contract becomes binding.

Contract
A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy.

Conventional Loan
A loan that requires no federally sponsored insurance or guarantee.

Counteroffer
A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

Covenant
A written agreement between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases, and contracts for deeds.

Covenants
Private agreements that affect land use. They may be enforced by an owner of real estate that benefits from them and can be included in the seller's deed to the buyer.

Credit
On a closing statement, an amount entered in a person's favor either an amount the party has paid or an amount for which the party must be reimbursed.

Customer
The third party or non-represented consumer for whom some level of service is provided.

D

Debit
On a closing statement, an amount charged; that is, an amount that the debited party must pay.

Debt to Income
( DTI ) Information about an applicants gross income and total debt lenders generally look at as a percentage to determine qualifications for a loan.

Deed
A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

Deed in Trust
An instrument that grants a trustee under a land trust full power to sell, mortgage and subdivide a parcel of real estate.

Depreciation
A loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence.

Designated Agency
Process that accommodates an in-house sale in which two different agents are involved. The broker designates one agent to represent the seller and one agent to represent the buyer.

Designated Agent
A real Estate professional authorized by a broker to act as the agent for a specific principal in a particular transaction; also may be called assigned agent

Discharge
The act of terminating a contract or agreement; this may be done when it has been completely performed for by another party's breach or default.

Disclaimer
A statement indicating no legal responsibility for information; no warranties or representations have been made.

Disclosure
Relevant information or facts that are known or should have been known.

Discount Point
A unit of measurement used for various loan charges; one point equal 1% of the amount of the loan.

Discount Rate
The interest rate set by the Federal Reserve that member banks are charged when they borrow money through the Fed.

Do Not Call Registry
A national registry, managed by the Federal Trade Commision, that lists the phone numbers of consumers who have indicated their preference to limit the telemarketing

Dual Agency
Representing both parties to a transaction. This is unethical unless both parties agree to it, and it is illegal in some states.

E

Earnest Money
Money deposited by a buyer under the terms of the contract, to be forfeited if the buyer defaults but to be applied to the purchase price if the sale is closed.

Easement Appurtenant
An easement that follows along with the land.

Easement
A right to use the land of another for a specific purpose, such as for a right.

Electronic Contracting
A process of integrating information electronically in a Real Estate transaction between clients, lender, and title and closing agents.

Equal Credit Opportunity Act
(ECOA ) The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, marital status, or receipt of public assistance.

Equity Build Up
That portion of the loan payment directed toward the principle rather than the interest, plus any gain in property value due to appreciation.

Equity
The interest or value that an owner has in property over and above any indebtedness.

Escrow Account
The trust account established by a real estate professional under the provisions of the license law for the purpose of holding funds on behalf of the real estate professional's principle until the consummation or termination of a transaction.

Escrow
The closing of a transaction through a third party called an escrow agent who receives certain funds and documents to be delivered upon the performance of conditions outlined in the escrow instructions.

Estate Tax
Federal tax on a decendant's real and personal property.

Evidence of title
Proof of ownership of property; commonly a certificate of title, an abstract of title with lawyer's opinion, title insurance, or a Torrens registration certificate.

Executed Contract
A contract in which all parties have fulfilled their promises and thus performed the contract.

F

Fair Housing Act
The federal law that prohibits discrimination in housing based on race, color, religion, sex, disability, familial status, and national origin.

Federal Funds Rate
The rate recommended by the Federal Reserve for the member banks to charge each other on short.

FHA
Insured loan

Fiduciary relationship
A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principle and agent.

Financing
The business of providing the funds that make real estate transactions possible.

First Mortgage
A mortgage that has priority over all other mortgages.

Fraud
Deception intended to cause a person to give up property or a lawful right.

Frontage
The length of property along the street or waterfront.

Fully Amortized Loan
A loan consisting of equal, regular payments satisfying the total payment of principle and interest by the due date.

G

General Agent
One who is authorized by a principle to represent the principle in a specific range of matters.

General Lien
The right of a creditor to have all of a debtor's property.

Good and indefeasible title
A title that cannot be annulled or rendered void.

Good Faith Estimate
( GFE ) An estimate of all closing fees that was formerly provided to a borrower within three days of the loan application was required by the Real Estate.

H

Home Equity Loan
A loan under which a property owner uses the property as collateral and can then draw funds up to a prearranged amount against the property. Also called a home equity line of credit or HELOC.

Home Inspection
A thorough visual survey of a property's structure, systems, and site conditions conducted by a professional.

Homeowner's Insurance
Insurance that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

I

Index
An objective economic indicator to which the interest rate is tied.

Inflation
The gradual reduction of the purchasing power of the dollar, usually related directly to increases in the money supply by the federal government.

Interest
A charge made by a lender for the use of money.

Interest Only Loan
A loan that only requires the payment of interest for a stated period of time with the principle due at the end of the term.

Investment
Money directed toward the purchase, improvement, and development of an asset in expectation of income or profits.

L

Lead-Based Paint Hazard Reduction Act
( LBPHRA )Federal legislation requiring disclosure of the presence of any known lead-based paint hazards to potential buyers or renters.

Listing Agreement
A contract between an owner ( as principle ) and a real estate professional ( as representative of the owner ) by which the real estate professional is employed to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission or other form of compensation.

Listing Broker
The broker from whose office a listing agreement is initiated.

Loan Origination Fee
A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.

Loan to value ratio (LTV )
The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.

M

Market Value
The most probable price that a property would bring in an arm's length transaction under normal conditions on the open market.

Mortgage
A conditional transfer or pledge of real estate as security for the payment of the debt. Also, the document creating the mortgage lien.

Multiple Listing Service ( MLS )
A marketing organization composed of member real estate professionals 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.

N

National Association of Realtors ( NAR )
The largest real estate organization in the world; NAR members subscribe to a strict code of ethics. Active members are allowed to use the trademarked designation, REALTOR.

O

Owner Financing
The seller is the primary lender, securing the property by means of a deed, note and mortgage, deed of trust, or contract for deed. In it's traditional form the buyer takes possession of the property and the seller retains legal title until paid in full, but some states have softened this outcome to provide that the buyer is entitled to legal title after a specific period of successful loan payments.

P

PITI
The basic costs of owning a home mortgage principle and interest, real estate taxes, and hazard insurance.

Point
A term used for a percentage of the principle loan amount charged by the lender. Each point is equal to 1% of the loan amount.

Power of Attorney
A written instrument authorizing a person, the attorney to act on behalf of another.

Prepaid Items
On a closing statement, items that have been paid in advance by the seller, such as fuel costs and some real estate taxes, for which the seller must be reimbursed by the buyer.

Prepayment penalty
A charge imposed on a borrower who pays off the loan principle early. This penalty compensates the lender for interest and other charges that otherwise would be lost.

Principle
The original amount( as in a loan ) of the total due and payable at a certain date.

Prorations
Expenses, either prepaid or paid in arrears, that are divided or distributed between the buyer and the seller at the closing.

Q

Quitclaim Deed
A conveyance that transfers whatever interest the grantor has in the specified real estate, without warranties or obligations.

R

Radon
A naturally occurring gas that is suspected of causing lung cancer.

Real Estate Broker
A person licensed to arrange the buying, selling, leasing, or exchange of real property for a fee.

Representation
The role of a real estate professional acting on behalf of a client in a real estate transaction.

Rescission
The practice of one party canceling or terminating a contract, which has the effect of returning the parties to their original positions before the contract was made.

S

Safe Drinking Water Act
An act to protect public health by authorizing the EPA to set national health-based standards for drinking water.

Subject to
A clause in a contract specifying exceptions or contingencies of a purchase.

Supply and Demand
The appraisal principle that follows the interrelationship of the supply of and demand for real estate. Because appraising is based on economic concepts, this principle recognizes that real property is subject to the influences of the marketplace as with any other commodity.

T

Tax Lien
A charge against property, created by operation of law. Tax liens and assessments take priority over all other liens.

Title
(1) The right to ownership or the ownership of land. ( 2 ) The evidence of ownership of land.

Title Insurance
A policy insuring a property owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters specifically excluded by the policy.

Title Search
The examination of public records relating to real estate to determine the current state of the ownership.

Truth in Lending Act ( TILA )
Federal government regulates the lending practices of mortgage lenders through this act.

V

Valid Contract
A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.

Title Search
The examination of public records relating to real estate to determine the current state of the ownership.

Truth in Lending Act ( TILA )
Federal government regulates the lending practices of mortgage lenders through this act.

Z

Zoning
A regulatory tool that helps communities regulate and control how land is used.

Zoning Ordinance
An exercise of police power by a municipality to regulate and control the character and use of property.