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A Glossary of Real Estate Terms
GLOSSARY OF REAL ESTATE TERMS
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Agent-
A person acting on behalf of another, called the principal.
Appraisal-
An expert judgment or estimate of the quality or value
of real estate as of a given date.
Assessed
Value-
The valuation placed upon property by a public tax assessor
as the basis for taxes.
Bill of Sale-
An instrument which transfers title to personal property
(chattels); a "Deed" transfers real property.
CC&R's:
Covenants, conditions and restrictions- A document
that controls the use, requirements and restrictions of
a property.
Certificate
of Reasonable Value (CRV)-
A document that establishes the maximum value and loan
amount for a VA guaranteed mortgage.
Certificate
of Title-
A document signed by a title examiner or attorney stating
that the seller has a good marketable and insurable title.
Closing Statement
(Settlement)-
The computation of financial adjustments between buyer
and seller as of the day of closing a sale to determine
the net amount of money which buyer must pay to seller
to complete purchase of the real estate and seller's net
proceeds. Also, "settlement sheets," "HUD-1."
Commission-
Payment to a real estate broker for services performed.
Condominium-
A form of real estate ownership where the owner receives
title to a particular unit and has a proportionate interest
in certain common areas. The unit itself is generally
a separately owned space whose interior surfaces (walls,
floors and ceilings) serve as its boundaries.
Contingency-
A condition that must be satisfied before a contract is
binding. For instance, a sales agreement may be contingent
upon the buyer obtaining financing.
Deed-
A formal written instrument by which title to real property
is transferred from one owner to another. Also, "conveyance".
Deed of Trust-
Like a mortgage, a security instrument whereby real property
is given as security for a debt. However, in a deed of
trust there are three parties to the instrument; the borrower,
the trustee, and the lender (or beneficiary).
Due-On-Sale
Clause-
An acceleration clause that requires full payment of a
mortgage or deed of trust when the secured property changes
ownership.
Earnest Money-
The portion of the down payment delivered to the seller
or escrow agent by the purchaser with a written offer
as evidence of good faith.
Equity-
The interest or value which owner has in real estate over
and above the debts against it. (Sales Price - Mortgage
Balance - Equity).
Escrow-
A procedure in which a third party acts as a stakeholder
for both the buyer and the seller, carrying out both parties'
instructions and assumes responsibility for handling all
of the paperwork and distribution of funds.
Federal National
Mortgage Association (FNMA)-
Popularly known as Fannie Mae. A privately owned corporation
created by Congress to support the secondary mortgage
market. It purchases and sells residential mortgages insured
by FHA or guaranteed by the VA, as well as conventional
home mortgages.
Fee Simple-
An estate in which the owner has unrestricted power to
dispose of the property as he wishes, including leaving
by will or inheritance. It is the greatest interest a
person can have in real estate.
Fixture-
What was formerly personal property which is now permanently
attached to real property and goes with the property when
it is sold.
Graduated
Payment Mortgage-
A residential mortgage with monthly payments that start
at a low level and increase at a predetermined rate.
Hazard Insurance-
Protects against damages caused to property by fire, windstorms,
and other common hazards.
Home Inspection
Report-
A qualified inspector's report on a property's overall
condition. The report usuallyincludes an evaluation of
both the structure and mechanical systems.
Home Warranty
Plan-
Protection against failure of mechanical systems within
the property. Usually includes plumbing, electrical, heating
systems and installed appliances.
Joint Tenancy-
An equal undivided ownership of property by two or more
persons. Upon the death of any owner, the survivors take
the decedent's interest in the property.
Lien-
A legal hold or claim on property as security for a debt
or charge.
Listing Contract-
Between a home owner (as principal) and a licensed real
estate broker (as agent) by which the broker is employed
to market the real estate within a given time for which
service the owner agrees to pay a commission. Also, "listing
agreement".
Loan Commitment-
A written promise to make a loan for a specified amount
on specified terms.
Loan-To-Value
Ratio-
The relationship between the amount of the mortgage and
the appraised value of the property, expressed as a percentage
of the appraised value.
Market Value-
The highest price which a buyer, ready, willing and able
but not compelled to buy, would pay, and the lowest price
a seller, ready, willing and able but, not compelled to
sell, would accept. Basis for "listing price', or "asking
price".
Mortgage-
A lien or claim against real property given by the buyer
to the lender as security for money borrowed.
Mortgage
Life Insurance-
A type of term life insurance often bought by mortgagors.
The coverage decreases as the mortgage balance declines.
If the borrower dies while the policy is in force, the
debt is automatically covered by insurance proceeds.
Mortgage
Note-
A written agreement to repay a loan. The agreement is
secured by a mortgage, serves as proof of an indebtedness,
and states the manner in which it shall be paid. Also,
"deed of trust note."
Negative
Amortization-
Negative amortization occurs when monthly payments fail
to cover the interest cost. The interest that isn't covered
is added to the unpaid principal balance, which means
that even after several payments you could owe more than
you did at the beginning of the loan. Negative amortization
can occur when an ARM has a payment cap that results in
monthly payments that aren't high enough to cover the
interest.
Origination
Fee- A
fee or charge for work involved in evaluating, preparing,
and submitting a proposed mortgage loan. The fee is limited
to 1 percent of FHA and VA loans.
PITI-
Principal, interest, taxes and insurance.
Planned Unit
Development (PUD)-
A zoning designation for property developed at the same
or slightly greater overall density than conventional
development, sometimes with improvements clustered between
open, common areas. Uses may be residential, commercial
or industrial.
Point-
An amount equal to 1 percent of the principal amount of
the investment or note. The lender assesses loan discount
points at closing to increase the yield on the mortgage
to a position competitive with other types of investments.
Prepayment
Penalty-
A fee charged to a mortgagor who pays a loan before it
is due. Not allowed for FHA or VA loans.
Principal-
This word has several meanings:
- a) to denote
the most important;
- b) a capital
sum lent on interest;
- c) one who
appoints an agent to act on their behalf;
- d) either party
to a contract.
Private Mortgage
Insurance (PMI)-
Insurance written by a private company protecting the
lender against loss if the borrower defaults on the mortgage.
Prorate-
To allocate between seller and buyer their proportionate
share of an obligation paid or due. For example a prorate
on real property taxes, fire insurance, or condominium
fee.
Purchase
Agreement-
A written document in which the purchaser agrees to buy
certain real estate and the seller agrees to sell under
stated terms and conditions. Also called a sales contract,
earnest money contract, or agreement for sale.
Realtor-
A real estate broker or associate active in a local real
estate board affiliated with the National Association
of Realtors®.
Regulation
Z- The
set of rules governing consumer lending issued by the
Federal Reserve Board of Governors in accordance with
the Consumer Protection act.
Survey-
A map or plat made by a licensed surveyor showing the
results of measuring the land with its elevations, improvements,
boundaries, and its relationship to surrounding tracts
of land. A survey is often required by the lender to assure
a building is actually sited on the land according to
its legal description.
Tenancy in
Common-
A type of joint ownership of property by two or more persons
with no right of survivorship.
Title Insurance-
Protects lenders and home owners against loss of their
interest in property due to legal defects in title.
Title Search
or Examination-
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.
Transfer
tax- State
tax, local tax (where applicable) and tax stamps (in some
areas) required by law when title passes from one owner
to another.
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