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Glossary of Real Estate Terms & Definitions

 

GLOSSARY OF REAL ESTATE TERMS & DEFINITIONS

 

 

ACCELERATION CLAUSE  

A provision in a mortgage that gives the lender the right to demand immediate payment of the outstanding loan balance under certain circumstances. Usually when the borrower defaults on the loan.

 

ACRE  

43,560 square feet. A measurement of area.

 

ADJUSTMENT DATE  

The date the interest rate changes on an adjustable rate mortgage.

 

AD VAL OREM TAX  

Taxes assessed based on the value of the land and improvements

 

ADJUSTABLE-RATE MORTGAGE (ARM)

A type of mortgage where the interest rate varies based on a particular index, normally the prime lending rate.

 

ADJUSTED SALES PRICE  

An opinion of a property’s sales price, after adjustments have been made to account for differences between it and another comparable property.

 

AGENT  

A person who has been appointed to act on behalf of another for a particular transaction.

 

AMENITY  

Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation.

 

AMORTIZATION SCHEDULE  

The breakdown of individual payments throughout the life of an amortized loan, showing both contribution and debt service (interest) fees.

 

AMORTIZATION TERM  

The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years.

 

ANNUAL PERCENTAGE RATE (APR)

The rate of annual interest charged on a loan.

 

APPRAISED VALUE   

An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals.

 

APPRECIATION   

The natural rise in property value due to market forces.

 

ARMS LENGTH TRANSACTION   

Any transaction in which the two parties are unconnected and have no overt common interests. Such a transaction most often reflects the true market value of a property.

 

ASSESSED VALUE  

The value of a property according to jurisdictional tax assessment.

 

ASSESSMENT  

The function of assigning a value to a property for the purpose of levying taxes.

 

ASSUMABLE MORTGAGE   

A mortgage that can be taken over by the buyer when a home is sold.

 

ASSUMPTION 

When a buyer takes over, or “assumes” the sellers mortgage.

 

ATTACHED HOUSING 

Any number of houses or other dwellings which are physically attached to one another, but are occupied by a number of different people. The individual houses may or may not be owned by separate people as well.

 

BACKFILL 

The slope of the ground around a house.

 

BANKRUPTCY  

When a person or business is unable to pay their debts and seeks protection of the state against creditors. Bankruptcies remain on credit records for up to ten years and can prevent a person from being able to get a loan.

 

BILL OF SALE  

A physical receipt indicating the sale of property.

 

BONA FIDE 

Any genuine offer, made without intent to defraud or deceive.

 

BUFFER ZONE

A segment of land between two disparate municipal zones which acts as a shield to keep one zone from encroaching upon the other. Often used to separate residential districts from commercial areas.

 

BUILT-INS 

Specific items of personal property which are installed in a real estate improvement such that they become part of the building. Built-in microwave ovens and dishwashers are common examples.

 

BUNGALOW 

A one-story, home-style dating from the early twentieth century. Often characterized by a low-pitched roof.

 

CAPE COD COLONIAL

A single-story house style made popular in New England. Often characterized by a steep roof with gables.

 

CAULKING  

A pliable material used to seal cracks or openings such as around windows.

 

CHAIN OF TITLE 

The complete history of ownership of a piece of property.

 

CHATTEL 

Any personal property which is not attached to or an integral part of a property. Chattel is not commonly taken into consideration when appraising the value of real property.

 

CIRCUIT BREAKERS  

Electrical devices which automatically open electrical circuits if they are overloaded.

 

CLEAR TITLE 

Ownership of property that is not encumbered by any counter-claim or lien.

 

CLOSING  

The process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS).

 

CLOSING COSTS 

All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal.

 

CLOSING STATEMENT

The document detailing the final financial arrangement between a buyer and seller and the costs paid by each.

in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.

 

COMMON LAW 

As opposed to statute law. Laws that have been established by custom, usage and courts over many years.

 

COMMISSION  

A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property.

 

COMMON AREA ASSESSMENTS 

Fees which are charged to the tenants or owners of properties to cover the costs of maintaining areas shared with other tenants or owners. Commonly found in condominium, PUD or office spaces.

 

COMMON AREAS   

Any areas, such as entryways, foyers, pools, recreational facilities or the like, which are shared by the tenants or owners of property near by. Commonly found in condominium, PUD or office spaces.

  

COMMUNITY PROPERTY

In many jurisdictions, any property which has been acquired by a married couple. The ownership of the property is considered equal unless stipulated otherwise by both parties.

 

COMPARABLES  

An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property whose value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property..

 

CONCESSIONS  

Additional value granted by a buyer or seller to entice another party to complete a deal.

 

CONDOMINIUM

A development where individual units are owned, but common areas and amenities are shared equally by all owners.

 

CONTRACT 

A legally binding agreement, oral or written, between two parties.

 

CONVENTIONAL MORTGAGE   

A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.)..

 

CREDIT REPORT  

A detailed report of an individuals credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.

 

CUL-DE-SAC  

A dead-end street. One with only one entrance/exit.

 

DEBT 

An obligation to repay some amount owed. This may or may not be monetary.

 

DEED

A document indicating the ownership of a property..

 

DEED OF TRUST 

A document which transfers title in a property to a trustee, whose obligations and powers are stipulated. Often used in mortgage transactions.

 

DEPRECIATION

The natural decline in property value due to market forces or depletion of resources.

 

DETACHED SINGLE-FAMILY HOME  

A single building improvement intended to serve as a home for one family.

 

DISCOUNT POINTS  

Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.

 

DISTRESSED PROPERTY  

A mortgaged property which has been foreclosed on.

 

DOWN PAYMENT 

An amount paid in cash for a property, with the intent to mortgage the remaining amount due.

 

EARNEST MONEY DEPOSIT  

A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.

 

EASEMENT  

The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines.

 

ENCROACHMENT 

A building or other improvement on one property which invades another property or restricts its usage.

 

ENCUMBRANCE  

A claim against a property. Examples are mortgages, liens and easements.

 

ENERGY EFFICIENCY RATIO   

An efficiency rating system for air conditioning units that corresponds to the number of BTU’s output per watt of electricity used.

 

EQUAL CREDIT OPPORTUNITY ACT (ECOA)  

U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex etc

  

ESCROW

An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property.

 

ESCROW ACCOUNT

An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that go into the escrow account each month.

 

ESCROW DISBURSEMENTS

The payout of funds from an escrow account to pay property expenses such as taxes and insurance.

 

FAIR CREDIT REPORTING ACT  

A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history.

 

FAIR MARKET VALUE   

The price at which two unrelated parties, under no duress, are willing to transact business.

 

FANNIE MAE  

A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation’s largest source of financing for home mortgages.

 

FEDERAL HOUSING ADMINISTRATION (FHA)

A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930’s to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders.

 

FEE SIMPLE   

A complete, unencumbered ownership right in a piece of property.

 

FHA MORTGAGE  

A mortgage that is insured by the Federal Housing Administration (FHA).

 

FIRST MORTGAGE

The primary loan or mortgage secured by a piece of property.

 

FIXED-RATE MORTGAGE (FRM)

A mortgage which has a fixed rate of interest over the life of the loan

 

FIXTURE 

Any piece of personal property which becomes permanently affixed to a piece of real property.

 

FLOOD INSURANCE

Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones.

 

FORECLOSURE  

The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.

 

GRANTEE 

Any person who is given ownership of a piece of property.

 

GRANTOR 

Any person who gives away ownership of a piece of property.

 

HAZARD INSURANCE 

Insurance covering damage to a property caused by hazards such as fire, wind and accident.

 

HEIGHT ZONING  

A municipal restriction on the maximum height of any building or other structure.

  

HOME INSPECTION  

A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value.

 

HOMEOWNER’S ASSOCIATION

An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants.

 

HOMEOWNER’S INSURANCE 

A policy which covers a home owner for any loss of property due to accident, intrusion or hazard.

 

INTEREST RATE

A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

 

INVESTMENT PROPERTY 

Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time.

 

JOINT TENANCY 

A situation where two or more parties own a piece of property together. Each of the owners has an equal share, and may not dispose of or alter that share without the consent of the other owners.

 

JUDGMENT

An official court decision. If the judgment requires payment from one party to another, the court may put a lien against the payee’s property as collateral.

 

LATE CHARGE 

An extra charge, or penalty added to a regular mortgage payment when the payment is made late by an amount of time specified in the original loan document.

 

LEGAL DESCRIPTION 

The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.

 

LENDER 

The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts.

 

LIEN 

Any claim against a piece of property resulting from a debt or other obligation.

 

LOAN 

Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan.

 

LOAN OFFICER 

A person that “sells” loans, representing the lender to the borrower, and the borrower to the lender.

 

LOAN-TO-VALUE RATIO (LTV) 

The comparison of the amount owed on a mortgaged property to its fair market value.

 

LOCK-IN  

An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.

 

MASTER ASSOCIATION  

An umbrella organization that is made up of multiple, smaller home owner’s associations. Often found in very large developments or condominium projects.

 

MATURITY  

The date on which the principal balance of a financial instrument becomes due and payable.

 

MINERAL RIGHTS  

The legal right to exploit and enjoy the benefits of any minerals located below the surface of a parcel of land.

 

MORTGAGEE

The entity that lends money in a real estate transaction.

 

MORTGAGE INSURANCE 

A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.

 

MORTGAGE INSURANCE PREMIUM (MIP)

A fee that is often included in mortgage payments that pays for mortgage insurance coverage.

 

NATURAL VACANCY RATE

The percentage of vacant properties in a given area that is the result of natural turnover and market forces.

 

NEIGHBORHOOD  

A subsection of a municipality that has been designated by a developer, economic forces or physical formations.

 

NO-COST LOAN

Many lenders offer loans that you can obtain at “no cost.” You should inquire whether this means there are no “lender” costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a “no-point” loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

 

NON-CONFORMING USE   

The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use.

 

NOTE 

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time..

 

OCCUPANCY 

A physical presence within and control of a property.

 

ON-SITE IMPROVEMENTS 

Buildings, structures or other amenities that are erected on a piece of property and contribute to its value.

 

PERSONAL PROPERTY 

Owned items which are not permanently affixed to the land.

 

PERSONAL RESIDENCE  

The primary domicile of a person or family.

 

PLANNED UNIT DEVELOPMENT (PUD) 

A coordinated, real estate development where common areas are shared and maintained by an owner’s association or other entity.

 

PLAT 

A plan or chart of a piece of land which lays out existing or planned streets, lots or other improvements.

 

POINT  

A percentage of a mortgage amount (one point = 1 percent).

 

PRE-APPROVAL 

The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.

 

PRE-QUALIFICATION 

Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.

 

PRINCIPAL 

The amount owed on a mortgage which does not include interest or other fees.

 

PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI) 

The most common constituents of a monthly mortgage payment.

 

PRIVATE MORTGAGE INSURANCE (PMI)

A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.

 

PROPERTY  

Any item which is owned or possessed.

 

PURCHASE AGREEMENT  

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

 

QUITCLAIM DEED  

A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear.

 

REAL ESTATE  

A piece of land and any improvements or fixtures located on that land.

 

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)  

A federal law requiring lenders to give full disclosure of closing costs to borrowers.

 

REAL PROPERTY  

Land, improvements and appurtenances, and the interest and benefits thereof.

 

REALTOR®  

A real estate agent or broker who is a member of the NATIONAL ASSOCIATION of REALTORS®

 

RECORDER  

A local government employee whose role it is to keep records of all real estate transactions within the jurisdiction.

 

RECORDING  

The filing of a real estate transaction with the appropriate government agent (normally the RECORDER). A real estate transaction is considered final when it is recorded.

 

REFINANCE TRANSACTION    

A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.

 

RESIDENTIAL PROPERTY  

A piece of property whose highest and best use is the maintenance of a residence.

 

SALE PRICE

The actual price a property sells for, exclusive of any special financing concessions.

 

SALES COMPARISON APPROACH   

An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently.

 

SERVICING  

The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc. Typically carried out by the company you make payments to. 

 

SINGLE-FAMILY PROPERTY   

A property designed and built to support the habitation of one family.

 

STUCCO  

A textured plaster exterior (and occasionally interior) wall finish.

 

SUBDIVISION  

A residential development that is created from a piece of land which has been subdivided into individual lots.

 

SUBJECT PROPERTY  

A term which indicates a property which is being appraised.

 

TENANCY  

The right to occupy a building or unit.

 

TENANCY IN COMMON 

A form of holding title, whereby there are two or more people on title to a property, ownership does not pass on to the others upon the death of one individual.

 

TITLE  

A specific document which serves as proof of ownership.

 

TITLE COMPANY  

An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction.

 

TITLE INSURANCE  

A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise.

 

TITLE SEARCH  

The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist.

 

TRANSFER OF OWNERSHIP  

Any means by which the ownership of a property changes hands.

 

TRANSFER OF TAX  

Taxes payable when title passes from one owner to another.

 

TRUSTEE  

A fiduciary that holds or controls property for the benefit of another.

 

TRUTH IN LENDING  

A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.

 

VESTED  

Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund.

 

WALK-THROUGH INSPECTION  

A process whereby an appraiser examines a property in preparation for estimating its value. Also, the process of inspecting a property for any damage prior to that property being bought or sold.

 

WARRANTY  

An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue.

 

WEAR AND TEAR  

A term used to indicate the normal damage inflicted on a property through every-day use.

 

WEEP HOLE  

Drainage hole that allows water to escape.

 

ZERO LOT LINE  

A municipal zoning category wherein a building or other fixture may abut the property line.

 

 

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