Glossary of Terms

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

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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

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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.

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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

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Earnest Money

Money given by the buyer to the seller to secure a deal; becomes part of the down payment if offeris 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

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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

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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

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Inspection

See "Home Inspection"

Interest Rate

The percentage rate of a sum of money charged by a lender to a borrower

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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

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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. are 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 ration of the amount of a loan compared to the appraisal value of a property

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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

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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"

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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

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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

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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

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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

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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

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Zoning

Regulations by local government of the size, height, etc. of buildings and the use of land

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