Real Estate Terms
Adjustable rate mortgage - A type of mortgage rate loan that allows the interest rate
to change periodically up or down, usually once or twice a year.
Agency - one who acts with delegated authority.
Agency Disclosure - A law to disclose which party they represent in a transaction and to
allow a party the right to choose or refuse among the various agency relationships. The
purpose of the disclosure is to acknowledge that the disclosure occurred and that the
consumer has been informed of the various relationships which are available in a real
estate transaction.
Agent - A person who acts, or has the power to act for another. A real estate agent acts
on behalf of the principal ( the buyer or seller) and has fiduciary responsibilities
towards the principal.
Agreement of sale - A written agreement or contract in which the seller agrees to sell and
the buyer agrees to buy under specific terms and conditions.
Amenities - Features that enhance and add to the value or desirability of real estate.
Common amenities include a swimming pool, clubhouse and a good view.
Amortization - The reduction of a debt over time by making periodic payments (usually
monthly) a portion of which is interest and a portion of which reduces the outstanding
amount of the debt. The monthly mortgage payments remain the same over the life of the
loan, even though the proportion of principal to interest changes over time. In the early
part of the loan, principal repayment is very small and interest repayment very high; at
the end of the loan, that relationship is reversed.
Appraisal - The act or process of estimating value; an estimate of value.
Appraiser - Someone who practices appraisal. Appraisers' work involves appraisal, review
(the process of critically studying a report prepared by another), or consulting (the
process of providing information, analysis of real estate data, and recommendations on
diversified problems in real estate, other than estimating value).
Balloon mortgage - A mortgage for a fixed term shorter than necessary to fully repay the
debt. As a result, the remaining amount of principal is due at the maturity of the loan.
Bridge loan - A loan, usually short term, that finances the portion of the purchase price
not provided by the mortgage loan and the down payment. A bridge loan is commonly used
when a purchaser has not sold his existing home before he closes on his purchase of a new
home. The bridge loan is paid off when the old home is sold, out of the proceeds of that
sale.
Broker, as in real estate broker -A real estate professional who has acquired a higher
level of training and/or experience than a sales agent. Generally, the legal
representative or proprietor of the office.
Buyer's agent - An agent who represents the buyer and owes fiduciary duties to the buyer.
Capital gain - Income that results from sale of a capital (tangible) asset.
Certified Market Analysis -
Closing - The end of the transaction; when the seller hands over the title to the buyer in
exchange for payment.
Closing costs - Costs the buyer must pay at the time of the closing in addition to the
down payment which may include points, title charges, mortgage insurance premium,
prepayments for property taxes, and homeowners insurance. Closing costs can be as much as
three to four percent of the loan amount.
Comparative Market Analysis - X
Condominium or condo - A condominium, literally, is a home in a shared building or
development. The buyer owns title to his or her unit, shares the common areas with other
unit owners, and pays a maintenance fee to the condominium association to pay for needed
maintenance, repairs and improvements to the property.
Contingency - A condition that must be met before a contract is binding.
Conventional loan - A fixed-rate, fixed-term loan that is made without government
insurance.
Co-operative or co-op - In a residential co-operative, the buyer purchases shares in the
co-op corporation, made up of the residents in the co-op property. The buyer owns the
shares rather than owning real property. In exchange, he has the right to lease and occupy
a co-op unit.
Deed - A legal document by which property title is transferred from one owner to another.
Down payment - The down payment is the percentage of the purchase price that the buyer
must pay in cash and may not borrow from the lender. The down payment amount, in addition
to the mortgage, equals the purchase price of a property.
Dual agency - Representing both parties in a transaction. In virtually all states, it is
unethical and illegal for a broker to represent both buyer and seller in a real estate
transaction without written consent of both. (never agree to dual agency)
Earnest money - The deposit money given to the seller by the potential buyer as evidence
of good faith in purchasing real estate. The seller places the money in an escrow/trust
account until closing, when it becomes part of the down payment.
Equity - The value of the property, less the amount of unpaid mortgages and any
outstanding liens.
Escrow - Money or other valuables given to a third party with directions to deliver them
to another party upon the fulfillment of a specific act or condition.
Exclusive agency listing - A written agreement giving the broker the right to market an
owner's property for a certain period of time, but also allowing the owner to sell the
property during that period without paying a commission to the buyer's agent and/or
seller's agent. This may also be a contract between a buyer and an agent to find a
property for the buyer.
Exclusive right-to-sell - A written agreement between the agent and the owner, whereby the
owner promises to pay a fee or commission to the broker if his property is sold during the
listing period, regardless of whether the broker is responsible for the sale. This may
also be a contract between a buyer and an agent to find a property for the buyer.
Fannie Mae - Nickname for the Federal National Mortgage Association, FNMA is a public
corporation originally established by the federal government. Fannie Mae purchases
mortgage loans from lenders, and thus, is a major source of funds for mortgage companies.
FHA or Federal Housing Administration - Part of the US Department of Housing and Urban
Development (HUD) -- established in 1934 to encourage improvement in housing standards and
communities. The FHA insures mortgage loans.
FHA mortgage - A mortgage loan insured by the Federal Housing Administration.
Fiduciary - A person who is regarded by law as having a duty toward another arising from a
relationship of trust and confidence.
Home inspection - An examination of the physical structure, systems and condition of a
home.
Homeowners insurance - Insurance that protects the homeowner from "casualty"
(losses or damage to the home or personal property) and from "liability"
(damages to other people or property). Homeowners insurance is required by the lender and
is usually included in the monthly mortgage payment.
HUD or the US Department of Housing and Urban Development - Department of Housing and
Urban Development, a government agency created to make the American dream of home
ownership a real possibility for everyone. HUD has many programs involving home ownership
assistance for low and moderate-income families, community planning and development, fair
housing and equal opportunity, and home improvement loans.
Lien - A hold or a claim on the property of another to satisfy an unpaid debt.
Listing contract - An agreement between a homeowner and a licensed real estate broker
that authorizes the broker to market the property for sale during a given time period.
Loan origination fee - A fee charged by the lender for evaluating, preparing and
submitting a proposed mortgage loan.
Loan-to-value ratio - The ratio of a mortgage loan principal to the property's
appraised value or its sales price, whichever is lower. Loan-to-value ratios vary
depending upon the individual lender's policy.
Lock-in rate - A commitment made by a lender to make a mortgage loan at a specified
rate, pending loan approval, on or prior to a specified date.
Market value - The highest price a buyer will pay for a property and the lowest price
the seller will accept.
Mortgage - A lien on real estate given by the buyer to secure repayment of money
borrowed to purchase the real estate.
Mortgage broker - An individual or company that obtains mortgages for others by finding
lending institutions, insurance companies, or private sources to lend the money; may also
handle collections and disbursements.
Mortgage insurance - A policy that provides protection for the lender in case of
default and/or which guarantees repayment of the loan if the borrower becomes disabled or
dies.
Multiple Listing Service (MLS) - A computer database that is owned by the REALTORSŪ in
a geographic area and is used to match buyers and sellers of property. Seller's Agents
must make a offer of compensation to buyer's agents for producing a ready, willing and
able buyer. REALTORŪS must submit all listings to their local REALTORŪ MLS.
Offer - A proposal to purchase real estate at a particular price and subject to other
specified terms and conditions. Acceptance of the offer by the seller creates a purchase
contract.
Private mortgage insurance or PMI Insurance - Insurance issued to a lender to protect
it against loss on a defaulted mortgage loan. Its use is usually limited to loans with
high loan-to-value ratios (generally in excess of 80%). The borrower pays the premiums.
PITI Payment - A loan payment that combines Principal, Interest, Taxes and Insurance.
Point - An amount equal to one percent of the loan amount paid to a lender for making
the loan. A lender may charge the borrower several points in order to provide the loan.
Principal - One of the parties to a transaction. For example, the buyer and seller are
principals in the purchase of real property.
Referral fee - a fee paid from one to another firm as an incentive to cooperate. The
most real estate transactions now include a referral fee.
Seller's agent - An agent who represents the seller and owes fiduciary duties to the
seller. Usually referred to as the listing agent.
Title - Ownership of real property. Title is transferred from one party to another
through a document called a deed.
Title insurance - Protection for lenders and homeowners against financial loss
resulting from legal defects in or other claims against the property's title.
Trust - A property interest held by one person for the benefit of another.
VA or US Department of Veterans Affairs - A federal agency designed and operated to
help veterans enter the housing market. The VA assists veterans in terms of low or no down
payment, mortgage qualification assistance and low interest rates.
VA loan - A mortgage loan guaranteed by the US Department of Veterans Affairs against
loss to the lender, and made through a private lender.
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