Glossary of Real Estate Terms

• AGENT
-- A person acting on behalf of another, called the principal.


• AGREEMENT OF SALE
-- Known by various names, such as “contract of purchase”, “purchase agreement”, “sales agreement”, or “binder”, according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.


• AMORTIZED LOAN
-- A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a Level Payments Loan.


• ANNUAL PERCENTAGE RATE (APR)
-- Includes quoted interest rate on the loan plus all additional service and finance charges associated with the loan. Includes all costs of financing; those paid at the time of closing and those paid over the term of the loan. The APR is usually slightly higher than the note rate.


• APPRAISAL
-- An expert judgment or estimate of the quality or value of real estate as of a given date.


• APPRECIATION
-- An increase in value of real estate.


• ASSESSED VALUE
-- The valuation placed upon property by a public tax assessor as the basis for taxes.


• ASSUMPTION OF MORTGAGE
-- The taking of title to property by a grantee, wherein he or she assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property; becoming a co-guarantor for the payment of a mortgage or deed of trust note.


• BILL OF SALE
-- An instrument which transfers title to personal property (chattels); a “Deed” transfers real property.


• CERTIFICATE OF TITLE
-- A document signed by a title examiner or attorney, stating that the seller has a good marketable and insurable title.


• CLOSING
-- The date on which a property legally changes hands from seller to buyer.


• CLOSING STATEMENT (Settlement)
-- The computation of financial adjustments between the buyer and seller as of the day of closing a sale to determine the net amount of money which the buyer must pay to the seller to complete your purchase of the real estate and seller’s net proceeds. Also, “Settlement Sheets”.


• COMMISSION
-- Payment of money or valuable consideration to a real estate broker for services performed.


• CONVENTIONAL MORTGAGE
-- A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed.


• CONVEY
-- To deed or transfer title of property from one person to another.


• COUNTER-OFFER
-- A rejection of an offer by a seller along with an agreement to sell the property to the potential buyer on terms differing from the original offer.


• 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.


• EARNEST MONEY
-- The money given to the seller by the potential buyer (usually held in escrow) upon the signing of the agreement of sale to show that buyer is serious about buying the house. Also, “Deposit”.


• EARNEST MONEY DEPOSIT
-- Deposit made by a purchaser of real estate as evidence of good faith.


• EASEMENT
-- The right or privilege to use another individual's property.


• ENCROACHMENT
-- A structure or portion of a structure built on another individual's property.


• EQUITY
-- The interest or value which the owner has in real estate over and above the debts against it. (Sales Price – Mortgage Balance = Equity.)


• ESCROW
-- FUNDS, property or other things of value left in trust to a third party. The escrow may be released upon the fulfillment of certain conditions or by agreement of the parties.


• EXPOSURE
-- The degree to which a property for sale is made noticeable to potential buyers, through advertising, multiple listing services, etc.


• FEE APPRAISAL
-- The act or process of estimating values of real estate or any interest therein for a fee.


• FHA LOAN
-- A loan which has been insured by the federal government guaranteeing its payment in case of default by the borrower.


• FIXTURE
-- What was formerly personal property which is now permanently attached to real property and goes with the property when it is sold.


• HAZARD INSURANCE
-- Protects against damages caused to property by fire, windstorms, and other common hazards.


• HOME INSPECTION
-- A review of the physical condition of a home by an experienced individual.


• LAND CONTRACT
-- A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer..


• LIEN
-- A legal claim against a property used to secure the payment of debt related to the property.


• LISTING CONTRACT
-- Between a homeowner (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 RATIO
-- The ratio, expressed as a percentage, of the amount of a loan to the value or purchase price of real property.


• MARKET PRICE
-- The actual amount for which a piece of property is sold. Also, “Sales Price”, “Purchase Price”.


• 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”.


• MARKETABLE TITLE
-- Merchantable title; title free and clear of objectionable liens or encumbrances.


• MORTGAGE
-- A lien or claim against real property given by the buyer to the lender as security for money borrowed.


• 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”.


• MRIS
-- Metropolitan Regional Information Systems, Inc. (our local MLS system).


• MULTIPLE LISTING
-- Multiple Listing is the name given a service performed by the Local Board of Realtors (Multiple Listing Service). MLS provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the Service to expose properties to a wider market base.


• PERSONAL PROPERTY
-- Any property which is not real property (i.e. money, savings accounts, appliances, boats, etc.).


• Principal, interest, taxes, and insurance (P.I.T.I.)
-- Most residential mortgage payments include the above and are therefore referred to as P.I.T.I. Also, “Carrying Charges”.


• POINTS
-- Sometimes called “Discount Points”, a point is one percent of the amount of the mortgage loan.


• PREPAYMENT PENALTY
-- Penalty for the payment of a mortgage note or deed of trust note before it actually becomes due.


• 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 for and in principal’s stead;
(D) either party to a contract.


• PROMISSORY NOTE
-- Following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment.


• PROPERTY MANAGEMENT
-- The operation of real property, including the leasing of space, collection of rents, selection of tenants, and the repair and renovation of the buildings and grounds.


• PRORATE
-- To allocate between the seller and buyer their proportionate share of an obligation paid or due. For example, a prorate of real property taxes, fire insurance, or condominium fee.


• PURCHASE AGREEMENT
-- An agreement between a buyer and seller for the purchase of real estate.


• REAL PROPERTY
-- Land and whatever by nature or artificial annexation is a part of it.


• SALES ASSOCIATE
-- A person with a real estate license and associated with a specific real estate broker.


• SPECIAL ASSESSMENT
-- Legal charge against real estate by a public authority to pay cost of public improvements such as: street lights, sidewalks, street improvements, etc.


• 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.


• TITLE
-- As generally used, a document that indicates rights of ownership and possession of particular property.


• TITLE ABSTRACT
-- A summary of the public records relating to the title to a particular piece of land. An attorney or title company reviews an abstract or title to determine whether there are any title defects.


• Title Insurance
-- Protects lenders and homeowners 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/RECORDATION TAX
-- State tax, local tax (where applicable), and tax stamps (in some areas) required by law when title passes from one owner to another.


• TRUST ACCOUNT
-- An account separate and apart and physically segregated from broker's own funds, in which broker is required by law to deposit all funds collected for clients.


• VA LOAN
-- A loan guaranteed by the Veteran's Administration insuring payment in case of default by the borrower. Available to qualified veterans.


• VAPOR BARRIER
-- The material used to prevent moisture from penetrating walls or floors.


• WARRANTY DEED
-- A deed used to convey real property which contains warranties of title and quiet possession, and the grantor agrees to defend the premises against the lawful claims of third persons.