Abstract of Title: A summary of the public records relating the title to a specific parcel of real estate. An attorney or a title insurance company reviews an abstract of title to determine whether there are any title defects. Any existing defects must be cleared before a buyer can purchase the home with a clear and marketable title.
Acceleration Clause: Condition in a mortgage that may require the balance of the loan to become due, prior to the fixed payment date, if regular mortgage payments are not made.
Acceptance: The date when both seller and buyer have agreed to and completed signing the contract.
Agreement of Sale: A contract in which a seller agrees to buy under certain specific terms and conditions in writing and signed by both parties. Also may be known as Contract to Purchase, Purchase Agreement, or Sales Agreement.
Amortization: A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.
Appraisal: An estimate of real estate value, usually issued to standards of FHA, VA, and FHMA. The most recent comparable sales in the neighborhood are the most important factor in determining value.
Binder or Offer to Purchase: A preliminary agreement, secured by the payment of earnest money, between a buyer and a seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder or offer expressly provides that it is to be refunded.
Broker: See Real Estate Broker
Building Line or Setback: A setback line; Distances from the ends and/or sides of the lot beyond which one may not build any improvement. The building line may be established by a filed plat of subdivision, or by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.
Buyer Agency (Single Agency): Represents the best interest of the Buyer. A Buyers agent will owe the Buyer(s) fiduciary duties. Buyer agents must give the Seller all material facts so that the seller can make an educated decision.
Certificate of Title: A certificate issued by the title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.
Closing Costs: There are numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of property and are items prepaid at dosing.
Closing Day: The day on which the purchase of real estate is concluded. The certificate of title abstract & deed are generally prepared for by the title company or by an attorney and this cost is charged to the buyer. The buyer signs the mortgage documents, and the closing costs and down payment are paid. The final closing merely confirms the original agreement reached in the agreement of sale.
Closing Statement (HUD1): A financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.
Cloud (on the title): An outstanding claim or encumbrance which adversely affects the marketability of the title.
Commission: Money paid to the real estate broker by the seller as compensation for finding a buyer and completing the sale, usually a percentage of sales price.
Condominium: Individual ownership of a dwelling interior within the unit and an individual interest in the common areas and facilities such as the land, parking area, elevators, stairs, exterior structures and so on which serve the multi-unit project.
Condominium Conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Condominium Hotel: A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.
Comparable Sales: The most recent sales of similar characteristics as the subject property in nearby areas and are used to help determine market value of a property for analysis in the appraisal process. Also referred to as “comps”.
Contingency: A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains from a buyer a Contract to Purchase on the property they currently own.
Contract of Purchase: See Agreement of Purchase
Deed: Written instrument, which when properly executed and delivered, conveys title to real property.
Deed of Trust: A legal document whereby real property is given as security for a debt. In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender.
Default: The mortgage is in default when the payment is 30 days late. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. In the event of default, the lender may have the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.
Depreciation: Decline in the value of a house due to wear and tear; adverse changes in the neighborhood, market conditions or any other reason.
Documentary Stamps: A State tax, in the form of stamps, required on deeds and mortgages when real estate title passes from one owner to another.
Down payment: Down payment is the difference between the sales price and the mortgage amount. The amount of cash the buyer will pay at the time of purchase.
Earnest Money: Upon the signing of the agreement of sale, earnest money is given to the seller show good faith that the buyer is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.
Easement: The right to use the land of another.
Easement Rights: A right of way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example. These usually “run with the land”, meaning the easement is permanently granted no forever.
Encroachment: An unauthorized obstruction, building, or part of a building that intrudes beyond a legal boundary onto a neighboring private or public land, or a building extending beyond the building line thus reducing the size and or value of the invaded property.
Encumbrance: A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It could be claims, mortgages, liens, charges, a pending legal action, unpaid taxes, zoning ordinances, easement rights, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search will reveal the existence of such encumbrances. It is up to the buyer to decide whether he wants to purchase the property with the encumbrance, or what can be done to remove it.
Equity: Equity is computed by subtracting market value from the total unpaid mortgage balance along with any outstanding liens against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all leans against the property are paid in full, the homeowner has 100% equity in his property.
Escrow: Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, such as earnest money. When referring to a mortgage escrows, the money is held in a trust fund, provided by the lender for the buyer. Such funds are collected as a part of the closing cost and should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.
Flood insurance: Insurance that is designed to provide coverage for physical property damage resulting from flooding or tidal waves. It is required for properties located in federally designated flood areas.
Foreclosure: A legal procedure whereby property that is used as security for a debt will be sold to satisfy the debt in the event that the mortgage is in default of payment.
General Warranty Deed: A deed which grantor fully warrants a good clear title to the property of the grantee. It also warrants that if the title is defective or has a "cloud" on it; such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it; the grantee may hold the grantor liable. This warranty deed is used most in real estate deed transfers and offers the greatest protection of any deed.
Grantee: The party in the deed who is the buyer or the recipient.
Grantor: The party in the deed who is the seller or the giver.
Hazard Insurance: Typically required on all properties that have liens attached to them. Protects properties against damages caused to property by fire, windstorms, and other common hazards.
Home Inspection: A thorough inspection by a professional that evaluates the condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
Homeowner's Insurance: An insurance policy that offers personal liability and hazard insurance coverage for a dwelling and the contents within.
HUD: U.S. department of Housing and Urban Development. Office of Housing / Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.
Joint Tenants: An interest in real estate owned by two or more persons with rights of survivorship.
Homeowners Association: A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
Homeowner's Warranty: A type of insurance that may be purchased extra that will cover repairs to certain items, such as heating or water heater, should they break down within the coverage period. The buyer can request the seller to pay for this coverage as a condition of the sale if the seller hasn’t offered it, but either party can pay.
Lease Purchase Agreement: Buyer leases the property for a specific time frame with the option to purchase the property once the lease has ended. All deposits typically go towards the purchase of the property.
Legal Description: The property description that is acceptable by the courts of the state in which the property is located. A legal description is used on documents such as deeds, mortgages, and assignment of leases.
Marketable Title: A title that is free and clear of objectionable liens, clouds, or other title defects.
Mortgagee: The lender in a mortgage agreement. (See more on mortgages here Financing Library) ***create a hidden link to Financing Library
Mortgagor: The borrower in a mortgage agreement. (See more on mortgages here Financing Library) ***create a hidden link to Financing Library
Plat: A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land and easements.
Pre-Qualification: A loan officers written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The loan officer may or may not have reviewed a credit report on the borrower.
Public Auction: A meeting in an announced public location to sell a piece of property that is in default.
Planned Unit Development (PUD): A project or subdivision designed to produce a high density of dwellings and maximum use of open space.
Principal: The capital sum before tax, insurance and interest.
Promissory Note: A written contract containing a promise to pay a specified amount of money at a definite future date.
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: Sometimes called a release deed. This type of deed makes no warranties as to the title, it only transfers to the buyer whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Often times, this is used between close relatives. An example might be one spouse will quitclaim a deed to the other spouse due to a divorce settlement.
Real Property: The earth’s surface, the ground below and the air above, including anything of a permanent nature such as structures, fences, improvements, trees, minerals, and the interest, benefits, and inherent rights thereof.
Real Estate Agent: A licensed sales agent working for a licensed Broker. In some states, agent is required to have a broker’s license, in others, only a sales agent license is required. Check with a state’s Board of Realtors for their requirements.
Real Estate Broker: In many states, a Broker is a manager over sales agents. A Broker may still represent a Buyer or a Seller and has more training in state and federal law then a real Estate Agent also known as Broker Associate.
Realtor: A member of local and state real estate boards, which are affiliated with the National Association of Realtors (NAR).
Restrictive Covenants: A private agreement placing restrictions on the use and occupancy of real property. Such restrictive covenants may "run with the land," binding all subsequent purchasers of the land, their heirs and or assigns. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title.
Sale-leaseback: A technique in which a seller sells the property to a buyer for a consideration and the buyer simultaneously leases the property back to the seller.
Sales Agreement: See agreement of sale.
Sale Consideration: Anything of value offered to another to enter into a contract, i.e., money, services, a promise (promissory note)
Severalty Ownership: Sole Ownership. There is only one person on the contract and title.
Short sale: When the lender accepts less money for the property than what is owed. The lender at times will decide to cut their losses early on rather than foreclosing on a property.
Special Assessments: A tax or levy imposed on real property, individual lots or all property in the immediate area for public improvements, i.e.; road construction, sidewalks, sewers, street lights, etc.
Special Warranty Deed: A deed in which the grantor agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose only during the period the grantor held title to the property. Home builders typically convey title with this type of deed to the buyer. This type of deed is sometimes used when one spouse conveys property to the other spouse as part of a divorce settlement.
State Stamps: See documentary stamps.
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 him that a building is actually sited on the land according to its legal description.
Sweat Equity: Contribution to the construction or rehabilitation of a property in the form of labor or services from the buyer rather than cash.
Tenancy in Common: Ownership by two or more persons who hold an undivided interest without right of survivorship. (In event of the death of one owner, his/her share will pass to his/her heirs.)
Title Insurance: An insurance policy which protects the purchaser or lender against loss arising from legal defects in the title.
Title Search or Examination: A examination of public 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 or outstanding restrictive covenants filed in the record, which would adversely affect the marketability of title.
Transaction Broker: Agent represents both the Buyer and the Seller equally. The agent’s objective is to get a mutually satisfactory agreement among all parties. Agent gives all options to the Buyer and Seller. Depending on the local market, all parties may be present at the presentation of the contract and is allowed to negotiate on their own behalf. All of the parties have confidentiality. Agent may do nothing to the sway either the Buyer or the Seller. Before making any decisions, both parties have the right to seek family, financial, legal or religious counsel.
Trustee: One who is held legally responsible to hold property "for the benefit of" another. The trustee is one placed in a position of responsibility for another, enforceable in a court of law. (See deed of trust.)
Zoning Ordinances: The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage. |
