Seller References Buyer References Agent References Financing References Relocating References Green References Glossary

Real Estate Glossary A | B | C | D | E | F | G | H | I | J | L | M | N | O | P | R | S | T | V | W | Z A Adjusted Basis – Adjustments (increases or decreases) made to the basis of a home. (The basis is the amount paid if the home was bought or built.) Adjustable Rate Mortgage (ARM) – A loan for which the interest rate is subject to change on a periodic basis (i.e. every 1, 3, or 5 years). Agent – Acts on behalf of another The annual cost of credit over the life of a loan including interest, service charges, points, loan fees, mortgage insurance and other items. representing that person’s interests. Amortization – A payment plan by which a loan is reduced through monthly payments of principal and interest. Annual Percentage Rate (APR) – The annual cost of credit over the life of a loan including interest, service charges, points, loan fees, mortgage insurance and other items. Appraisal – An evaluation to determine the price for which a property would sell in the current marketplace. Appreciation – An increase in the value of a property. Assessment – A tax levied on a property or a value placed on the worth of a property by a taxing authority. Assumable Mortgage – When a home is sold, a mortgage than can be taken over by the buyer at the same interest rate. Assumption – A transaction allowing the buyer to assume responsibility for an existing loan instead of originating a new loan. B Balloon – A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end. Bridge Loan – A loan obtained by a homeowner who has not yet sold an existing property, yet is closing on a new property. Often becomes the source of the down payment. Broker – A real estate professional who has a higher level of training than an agent. A broker is the legal representative and/or manager of the office. The term may also refer to the brokerage under which an agent is licensed. Buyer-agency – A relationship between an agency and a buyer in which the agent represents the interests of the buyer, not the seller. The primary duty of a buyer’s agent is to obtain the best deal for his/her client. Buy Down – A subsidy (usually paid buy a builder or developer) to reduce the monthly payments on a mortgage loan. Buyer Representation – Historically, an agent represented only the seller in a real estate transaction (agents working with buyers were actually "sub-agents" of the seller’s listing agent). Buyers today have the opportunity to be fully represented by an agent and brokerage firm. C Cap – A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan. Closing – The completion of documents that transfer property from a seller to a buyer (also referred to as a settlement). Also used loosely to mean "reaching final agreement." Closing Costs – Charges paid at closing for obtaining a mortgage loan and transferring a real estate title. Commission – The fee paid to a real estate agent/broker for services rendered during the sale or purchase of a home. Usually a percentage of the property’s sale price, averaging 6 to 7 percent on home sales. Comparative Market Analysis (CMA) – A survey of attributes and selling prices of comparable houses listed for sale, recently sold or expired from the market; used to help determine correct pricing strategy for a seller's property. Conditions, Covenants and Restrictions – The standards that define how a property may be used and the protections the developer makes for the benefit of all owners in a subdivision. Condominium (Condo) – Type of real estate ownership where the owner has title to a specific unit and shared interest in common areas. Condo Board – (Also condominium board.) A small group (usually three to seven) of resident-owners elected by a condominium community to serve as a governing board. Responsible for enforcing bylaws and maintaining common property. Contingency – A condition in a contract that must be met for the contract to be binding. Contract – An agreement for the sale of property. Conventional Loan – A mortgage loan made by a lender to a borrower that requires no insurance or guarantee. Conversion Option – The ability to change a loan from an adjustable rate to a fixed rate. Cooperate – A standard of practice in real estate in which brokers/agents agree to work together with other brokers/agents, but only in their client's best interest. Under a cooperative arrangement, there is no obligation to share commissions or fees. Counteroffer – An offer made in response to an offer received. Essentially it rejects the original offer. Credit – A person’s reputation for solvency and integrity, allowing a borrower to receive something of value in exchange for a promise of repayment. Credit History – A record of an individual's current and past debt obligations. Lenders use it when determining a potential borrower's ability to repay debt in a timely manner. Also see Credit Report. Credit Report – A report ordered from a credit bureau that indicates if a borrower is a good credit risk. Credit Score – A statistical methodology for determining a potential borrower's ability repay a loan. The higher the Credit Score, the more likely a borrower can qualify for a loan with a good interest rate. D Debt – Something owed. An obligation to pay something. Debt-To-Income Ratio – A comparison of gross income to expenses (both housing and non-housing). Deed – Legal document that formally conveys ownership of property from seller to buyer. Deed Restrictions – Legally binding rules for the building and maintenance of homes and properties. Default – A breach of a mortgage contract (i.e., not making the required payments). Discount Points – A fee paid to a mortgage lender by a borrower to get a lower interest rate on the mortgage loan. One point equals one percent of the loan amount. Down Payment – The difference between the sale price and the mortgage amount. A down payment is usually paid at closing. Due–On–Sale – A clause in a mortgage contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the property. E Earnest Money – A sum deposited with the broker at the time an offer is presented to show that a potential purchaser is serious about buying. Easement – The right-of-way granted to a person or company authorizing access to the owner's land; for example, a utility company may be granted an easement to install pipes or wires. An owner may voluntarily grant an easement, or can be ordered to grant one by a local jurisdiction. Equity – The difference between the value of a home and what is owed on it. Escrow – The handling of funds or documents by a third party on behalf of the buyer and/or seller. Exclusive Agency Agreement – A contract that gives a real estate agency the right to market and sell a home. F Fair Market Value – The price of a home based on the highest price a buyer would pay as well as the lowest price a seller would accept. FHA – The Federal Housing Administration. It insures loans made by an approved lender, as long as the loan is in accordance with FHA regulations. Fiduciary Duties – Obligations owed by an agent/broker to a client (buyer or seller). In real estate, these include loyalty, obedience, full disclosure, skill, care, diligence, and accounting of all monies. Finance Charge – The total cost, including all fees, points, and interest payments a borrower pays to obtain credit. Fixed–Rate Mortgage – A mortgage with an interest rate that remains constant over the life of a loan. Fixture – A recognizable object (such as a chandelier, kitchen cabinet, or light unit) that is permanently attached to property and belongs to the property when it is sold, unless otherwise specified in the sale agreement. G Grace Period – A specified amount of time during which a loan payment may be made after its due date without incurring a late penalty. Each mortgage lender sets its own Grace Period policies. Gross Income – A tax term meaning all income earned before expenses are deducted. H Hazard Insurance – Protection against damage cause by fire, wind or other common hazards. Most lenders require borrowers to carry it in an amount at least equal to the mortgage. Home Equity Loan – A loan secured by the equity built up in a home. Such a loan is often used to pay for repairs and home improvements. May be a fixed or variable loan rate. Housing Finance Agency – A state agency that offers below-market-rate home financing for low- and moderate-income households. I In Contract – A condition when a buyer and a seller have agreed on price, terms and conditions for the sale of the home and have signed a Purchase Agreement. Income – An amount of money received for something such as labor, services rendered, or sale of property or possessions. Index – The interest rate or adjustment standard that determines the changes in monthly payments for an adjustable rate loan. J Joint Tenancy – A form of ownership in which the tenants own a property equally. If one dies, the other would inherit the entire property. L Level Payment Mortgage – A mortgage with identical monthly payments over the life of the loan. Lien – Security claim on property until a debt is satisfied. List Price – Also called the asking price. The price of the home as determined by the seller and his/her agent. The list price is often negotiable. Listing Contract – Agreement whereby an owner engages a real estate company for a specified period to market a property for which (upon sale) the broker receives a commission. M Market Value – The price that is established by present economic conditions, location and general trends. Mortgage Broker – A broker who represents numerous lenders and helps consumers find affordable mortgages, the broker charges a fee only if the consumer finds a loan. Mortgage Commitment – A formal written communication by a lender, agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions. Mortgage Company – A company that borrows money from a bank, lends it to consumers to buy homes, then sells the loans to investors. Mortgage Lien – A legal claim against a mortgaged property that must be paid when the property is sold. Mortgage Loan – A contract in which the borrower's property is pledged as collateral. It is repaid in installments. The mortgagor (buyer) promises to repay principal and interest, keep the home insured, pay all taxes and keep the property in good condition. Multiple Listing Service (MLS) – A system that provides to its members detailed information about properties for sale. N National Association of Realtors (NAR) – A national trade organization of more than one million real estate agents and brokers. Members may call themselves Realtors®. Negative Amortization – An increase in the outstanding amount when a monthly payment does not cover the monthly interest due. Non-conforming Loan – A loan that doesn't comply with Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) underwriting guidelines. Usually incur a rate and origination fee premium. Note – A formal document showing the existence of a debt and stating the terms of repayment. O Open-ended – Allows you to borrow in the future for home improvements or other purposes, up to the amount of principal you've paid off. Origination Fee – A charge for the work involved in preparing and servicing a mortgage application (usually one percent of the loan amount). Owner-assisted Loan – A loan in which the seller agrees to finance all or part of the purchase. P P.I.T.I – Principal, interest, taxes, and insurance -the four major components of monthly housing payments. Point – A one-time charge paid by a borrower at closing to receive a lower rate. Each point is one percent of the mortgage amount. Pre-Approval – A mortgage approval obtained before negotiating a contract on a specific home. Pre-Paid Items – Money to cover anticipated costs such as property taxes, interest and mortgage and hazard insurance. Prepayment – Payment of a debt prior to maturity. Pre–Qualification – An informal estimate of how much financing a potential borrower might expect to obtain. Principal – The amount borrowed, excluding interest and other charges. Private Mortgage Insurance (PMI) – Insurance required on most conventional loans with less than 20 percent down payment to protect the lender against default. Possession Date – The day on which a property's new owner is actually entitled to occupy that property. Prepayment Penalty – An extra fee for paying off a mortgage loan before maturity. About 80 percent of all loans in the United States are paid off early. Property Survey – A survey to determine the boundaries of your property. The cost depends on the complexity of the survey. Property Tax – A local tax assessed on property owned, such as a home or other real estate. Based on the estimated value of the home. Purchase Agreement – Also called a Sales Agreement. A contract for the sale of a home between a buyer and a seller that outlines the price, terms and conditions of the transaction. R R-Value – The resistance of insulation material (including windows) to heat passing through it. The higher the number, the greater the insulating value. Realized Amount – The selling price of a home, less selling expenses. Realtor® – Registered trade name which may be used only by members of state and local real estate boards affiliated with (and subscribing to the Code of Ethics of) the National Association of REALTORS®. Recording Fee – A charge for recording the transfer of a property, paid to a city, county, or other appropriate branch of government. Reserves – A lender-specified amount that the borrower must have in reserve. The funds are in addition to the down payment and closing costs and are usually equal to a lender-specified number of monthly mortgage payments. Real Estate Settlement Procedures Act (RESPA) – A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs. Reverse Mortgage – A loan that enables elderly homeowners to borrow against the equity in their house without selling it or moving from it. Repayment only occurs at the time of the sale of the property. S Sales Agreement – Also called a Purchase Agreement. A contract for the sale of a home between a buyer and a seller that outlines the price, terms and conditions of the transaction. Sales Contract – An agreement between a buyer and seller that should be explain, in detail, exactly what the purchase includes, if there are any warranties, when the buyer can move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot obtain a mortgage commitment at the agreed-upon terms. Second Mortgage – A loan that uses the equity in a home as collateral. Secondary Mortgage Market – The buying or selling of an existing mortgage. Service Guarantee – A formal agreement, usually in writing, that a service will conform to specified standards for a particular period of time. Settlement Sheets – Also called a Closing Statement. Forms provided at closing that show the disbursements resulting from a real estate transaction. T Tenancy in Common – A form of ownership in which the tenants own separate but equal parts. To inherit the property, a surviving tenant would either have to be mentioned in the will or, in the absence of a will, be eligible through state inheritance laws. Terms and Conditions – The negotiated details of the sale outlined in the purchase agreement. May include such items as inspections, warranties, and closing and moving dates, among other details. Terms and conditions of all agreements should be carefully read and understood by all parties involved prior to closing the negotiation. Title – Evidence (usually in the form of a certificate or deed) of a person's legal right to ownership of a property. Title Insurance – Provides coverage against losses resulting from a defect in the title. Transfer Taxes – Taxes levied on the transfer of property or on real estate loans by state and/or local jurisdiction. V VA – Veterans Administration. A government agency that guarantees mortgage loans for eligible veterans of the military (including National Guard and Reserves). The guarantee protects the lender, which encourages lenders to provide mortgages. W Walk–Through – A final inspection of a home before title transfer to search for problems that need to be corrected before ownership changes. Z Zoning – Regulations established by local governments regarding the location and use for any given piece of property within a specific area.