Real Estate Terms

Glossary of Common Real Estate terms

ADJUSTABLE RATE MORTGAGE (ARM)
Interest rates on this type of mortgage ate periodically adjusted up or down depending on a specified financial index.

AMORTIZATION
A method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed.

AMORTIZED LOAN
A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a Level Payments Loan.

ANNUAL PERCENTAGE RATE (APR)
The actual finance charge for a loan, including points and fees, in addition to the stated interest rate.

APPRAISAL
An expert estimate of value based upon a factual analysis of a property or home.

APPRECIATION
An increase in value of real estate.

ASSESSED VALUE
The value placed on property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value.

ASSUMPTION OF MORTGAGE
The taking of title to property by a grantee, wherein he or she assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property; becoming a co-guarantor for the payment of a mortgage or deed of trust note.

BALLOON PAYMENT
A large principal payment due all at once at the end of some loan terms.

CAP
A limit on how much the interest rate can change in an adjustable rate mortgage.

CERTIFICATE OF TITLE
A document, signed by a title examiner, stating that a seller has an insurable title to the property.

CLOSING
The date on which (or act wherein) a property legally changes hands from seller to buyer.

CLOSING COSTS
See settlement.

COMMISSION
A fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.

COMPARATIVE MARKET ANALYSIS
A survey of attributes and selling process of comparable homes on the market or recently sold; used to help determine a correct pricing strategy for a seller's property.

CONTINGENCY
Condition in a contract that must be met for the contract to be binding.

CONTRACT
A binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property).

CONVENTIONAL MORTGAGE
A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed.

COUNTER-OFFER
A rejection of an offer by a seller along with an agreement to sell the property to the potential buyer on terms differing from the original offer.

DEED
A legal document that formally conveys ownership of property from seller to buyer.

DISCOUNT POINTS
Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent- These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender to approximate the market level.

DOWN PAYMENT
A percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender.

EARNEST MONEY DEPOSIT
Deposit made by a purchaser of real estate as evidence of good faith.

EASEMENT
The right or privilege to use another individual's property.

ENCROACHMENT
A structure, or portion of a structure, built on another individual's property.

EQUITY
The value of the property actually owned by the home owner: purchase price, plus appreciation, plus improvements, less mortgages and liens.

ESCROW
The deposit of instruments and funds with instructions to a third neutral party (Escrow Agent) to carry out the provisions of an agreement or contract.

FEE APPRAISAL
The act or process of estimating values of real estate or any interest therein for a fee.

FHA LOAN
A loan which has been insured by the federal government guaranteeing its payment in case of default by the borrower.

FIXED RATE MORTGAGE
Interest rates on this type of mortgage remain the same over the life of the loan. Compare to "adjustable rate mortgage.

FIXTURE
A recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to property and belongs to the property when it is sold.

HAZARD INSURANCE
Compensates for property damage from specified hazards such as fire and wind.

HOME INSPECTION
A review of the physical condition of a home by an experienced individual.

INTEREST
The cost of borrowing money, usually expressed as a percentage rate.

LAND CONTRACT
A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.

LIEN
A legal claim against a property used to secure the payment of debt related to the property.

LISTING CONTRACT
An agreement whereby an owner engages a real estate company for a specified period of time to sell property, for which, upon the sale, [he age ii t receives a commission.

LOAN RATIO
The ratio, expressed as a percentage, of the amount of a loan to the value or purchase price of real property.

MARKET PRICE
The actual price at which a property sold.

MARKET VALUE
The price that is established by present economic conditions, location and general trends.

MARKETABLE TITLE
Merchantable title; title free and clear of objectionable liens or encumbrances.

MATURITY
a) The termination period of a note
b) The date a note becomes due

MORTGAGE
An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; procedure for foreclosure in event of default is established by statute.

MULTIPLE LISTING SERVICE (MLS)
MLS provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the Service to expose properties to a wider market base.

ORIGINATION FEE
An application fee for processing a proposed mortgage loan.

OWNERSHIP
The rights to the use, enjoyment and alienation of property, to the exclusion of others.

PERSONAL PROPERTY
Any property that is not real property (i.e. money, savings accounts, appliances, boats, etc.)

PITI
Principal, interest, taxes and insurance, forming the basis for monthly mortgage payments.

POINT
One percent of the loan principal.

PREPAYMENT PENALTY
A fee charged in addition to interest and fees. a fee paid by a borrower who pays off the loan before it is due.

PRINCIPAL
One of the parties to a contract; or the amount of money borrowed, for which interest is charged.

PROMISSORY NOTE
Following a loan commitment from the lender the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment.

PRORATE
Divide or assess proportionately.

PURCHASE & SALE AGREEMENT
See contract.

PURCHASE AGREEMENT
An agreement between a buyer and seller for the purchase of real estate.

REAL PROPERTY
Land and whatever by nature or artificial annexation is a part of it.

SETTLEMENT
All financial transactions required to make the contract final.

SPECIAL ASSESSMENT
Legal charge against real estate by a public authority to pay cost of public improvements such as: streetlights, sidewalks, street improvements, etc..

TERM OF MORTGAGE
The period during which a mortgage must be paid.

TITLE
A document that indicates ownership of a specific property.

TITLE SEARCH
Detailed examination of the entire document history of a property title to make sure there are no legal encumbrances.

TRUST ACCOUNT
An account separate and apart and physically segregated from the broker's own funds, in which the broker is required by law to deposit all funds collected for clients.

VA LOAN
A loan guaranteed by the Veteran's Administration insuring payment in case of default by the borrower Available to qualified veterans.

ZONING
A local government's specifications for the use of property.

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