Real Estate Definitions
Here you will find definitions of key terms that you will most likely encounter while buying or selling your real estate property.
A
Abstract of Title
A document detailing the legal ownership history of an individual property from the first recorded transfer of ownership to present day.
Acceptance
Agreement to accept a purchase offer and enter a contract of sale
Adjustable Rate Mortgage
Known as an ARM, a mortgage whose interest rate changes periodically depending on stipulations agreed to
Agency
A legally binding relationship between the seller or buyer and their broker who will assist of a real estate transaction
Amortization
The repayment of a mortgage as installments over a period of time
Annual Percentage Rate ( APR)
The finance charges including interest and points as a percentage of the total loan/mortgage amount
Appraisal
The determination of value of a property conducted by a licensed home appraiser
Appreciation
An increase in property value for a given period of time
Assessed Value
The value of a piece of real estate as determined by a tax assessor for the basis of calculating your property taxes
Assumption of Mortgage
A legal agreement between a buyer and seller, where the buyer takes responsibility for mortgage payments on behalf of the seller. The liability to the lender still rests with the seller
B
Broker (Real Estate)
Also known as a realtor or real estate agent, is a licensed firm ( or individual) that charges a sales commission to the seller (or splits the commission with the seller broker, thus there is no cost to the buyer for acquiring the services of a real estate agent) for the mediation of their real estate transaction
C
Comparables
A report of sales activity of a property similar in size and other attributes in order to estimate the value of a property in question
Contingency
A scenario or condition that must be completed before a sales contract become legally binding.
Contract
A legally binding agreement of a property sale between two parties.
Conventional Mortgage
A mortgage for a predetermined period of time, with a fixed interest rate and a predetermined schedule of payments.
Counter Offer
A rejection of a section of a purchase offer and the subsequent submission of more acceptable terms by the seller in an effort to reach contract terms that would satisfy both parties.
D
Deed
A legally document declaring the title of a real estate property to a particular individual ( or group)
Disclosure
Federal and State laws that require the disclosure of certain property attributes that are of material to the value of the property such as structural defects or the property’s location in a flood zone.
E
Easement
A right to use the real estate property of another for a given predetermined purpose.
Encroachment
A scenario where one property owner violates the rights of another property owner by usually building something on the injured party’s property.
Equity Mortgage (Equity Loan)
A mortgage that utilizes a borrower’s home equity as collateral
Escrow
Funds or securities deposited with a neutral party such as a real estate attorney for safekeeping until the fulfillment of conditions established in legally binding contract
F
Fair Housing Act
A federal law that forbids the discrimination based on race, religion, sex, or disability on all aspect of the home buying or selling process.
Fixed Rate Mortgage
A mortgage for a predetermined period of time, with a fixed interest rate and a predetermined schedule of payments.
Foreclosure
The process by which a lender assumes ownership of the collateral real estate property for the purposes of selling it to fulfill the debt owed to it by the borrower/homeowner
G
Graduated Payment Mortgage
A mortgage that usually starts out with low monthly payments which are increased over a period of time at a previously agreed upon rate.
Growing Equity Mortgage
A mortgage whose payments gradually increase at a predetermined rate with the extra monies applied to the principal balance. This mortgage is designed to increase an owner’s equity stake in their property at an accelerated rate.
H
HUD1 Statement
Also known as the closing statement, it clearly itemizes all closing costs including sales commissions, fees, and points. It must be given to the mortgage borrower at closing.
I
J
K
L
Lease Purchase Agreement
An agreement for an individual to acquire a property at a future date with the right to lease it until that time arrives
Lien
A legally enforceable claim such as unpaid property taxes against a particular property that must be satisfied before that property can be sold.
Loan to Value Ratio
A proposed mortgage amount divided by the appraised value of a property used by lenders as one of the factors in determining the deliverance or rejection of a mortgage request.
M
Market Value
The value of a particular property established as the highest price a buyer is willing to purchase the property for
Mortgage
A loan which uses the real estate property as collateral/security in event of default. There are many different variations based on payment schedules or other various attributes.
Mortgage Broker
A firm or individual that assists in the acquisition of a mortgage on behalf of a buyer by locating willing lenders and assisting in processing the necessary paperwork to the satisfaction of the lender.
Multiple Listing Service (MLS)
A digital database of properties for sale listings in a designated region to which all members of that MLS have access to.
N
Negative Amortization
A mortgage with an increased outstanding principal balance because of the failure of the periodic payment to cover the interest. The interest amount not covered by the periodic payment is added to the total principal resulting in more money owed in the long run.
O
Origination Fee
A fee charged for the services of a mortgage broker involved in the preparation and submission of a potential mortgage proposal to the lender on behalf of the borrower
P
Power of Attorney
A legal document authorizing another individual to act on your behalf on pre-specified processes
Prepayment Fee
A pre-arranged fee paid to the lender for full payment of the outstanding mortgage principal ahead of the predetermined payment schedule.
Pre-Qualification
The process by which a lender determines the largest amount an individual can borrow based on a review of the individuals specific financial situation and credit worthiness. Most sellers are unwilling to accept offer from buyers who are not pre-qualified. Pre-Qualification does not guarantee that a loan will be issued, but is a very good indicator it most likely would be.
Q
Qualifying Ratio(s)
A set of various mathematical ratios/criteria that serve as guidelines by lenders in determining the amount a borrow may borrow from them.
R
Real Estate Settlement Procedures Act
A federal law requiring lenders to clearly disclose certain pieces of information to the borrow in an attempt to protect borrowers from abuses
Realtor
A member of the National Association of Realtors who practices its established code of ethics in the course of their service as a real estate agent.
S
Settlement Statement (Closing Statement)
See HUD1 Statement
Shared Equity Mortgage
A mortgage in which another investor is granted a portion of the property equity assuring the investor a share of proceeds from the sale of that property.
T
Title
A legal document that serves as evidence that a particular individual is the rightful owner of a particular piece of real estate
Title Insurance
Insurance for property owners and lenders against any defects in the title
Truth in Lending
A federal law requiring a lender to give full disclosure of all fees and conditions associated with a mortgage
Two Step Mortgage
A mortgage that has one interest rate for a pre-specified first term and another interest for the remaining term
U
V
W
Walkthrough
A final inspection of the listed property by the buyer to assure that any pre-arranged contingencies such as repairs have been satisfied and that the property to be delivered is at the agreed upon state. The closing may then proceed.
X
Y
Z
Zoning
Local laws that regulate the size and usage of property lots.