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Guide to the ABC’s of

REALTORS GLOSSARY

Adjustable-Rate Mortgage (ARM): A loan agent: Presides over the closing; : A written instrument that, when characterized by a fluctuating interest rate, works on the buyer’s behalf to transfer executed and delivered, conveys title to or an usually one tied to a bank or savings and loan and ownership from the seller to the buyer. interest in real estate. association cost-of-funds index. Closing costs: Expenses (over and above the Default: Failure to make mortgage payments Agent: Like brokers, real estate agents price of the ) incurred by buyers and on a timely basis or to comply with other (REALTORS®, sales associates, licensees, etc.) sellers in transferring ownership of a property. conditions of the mortgage. are trained and licensed to conduct real estate transactions. Agents, however, must operate Closing statement: A detailed cash Discount point: A unit of measurement used under the supervision of a broker, and their accounting of a for various loan charges; one point equals one training is not as extensive. showing all cash received, all charges and percent of the amount of the loan. credits made and all cash paid out in the Amortized loan: A loan in which the principal transaction. Down payment investment: Part of the as well as the interest is payable in monthly or purchase price which the buyer pays in cash other periodic installments over the term of Cloud on title: Any document, claim, and does not finance with a mortgage. the loan. unreleased lien or that may impair the title to or make the Earnest money: Money deposited by a buyer Appraisal: An estimate of the quantity, quality title doubtful; usually revealed by a under the terms of a contract, to be forfeited if or value of something. The process through and removed by either a quitclaim deed or the buyer defaults but applied to the purchase which conclusions of property value are suit to quiet title. price if the sale is closed. obtained; also refers to the report that sets Easement: A right to use the land of another forth the process of estimation and conclusion : Property pledged as security for for a specific purpose, such as for a right-of- of value. a debt, such as the real estate pledged as security for a mortgage. way or utilities. Appreciation: An increase in the worth Equity: The interest or value that an of value of a property due to economic Commission: Payment to a broker for services owner has in property over and above any or related causes, which may prove to be rendered, such as in the sale or purchase of indebtedness. either temporary or permanent; opposite of real property; usually a percentage of the selling price of the property. depreciation. Escrow account: The trust account established by a broker under the provisions Assessed value: The valuation placed upon Competitive Market Analysis (CMA): A of the law for the purpose of holding property by a public tax assessor for the comparison of the prices of recently sold funds on behalf of the broker’s principal or purposes of taxation. homes that are similar to a seller’s home in terms of location, style and amenities. some other person until the consummation or Broker: A real estate broker is a person termination of a transaction. licensed to carry out real estate transactions Contingency: A condition that must be met Evidence of title: Proof of ownership of and receive a fee for these activities. before a contract is legally binding. property; commonly a certificate of title, an Brokerage: The bringing together of parties Conventional loan: A loan that requires no abstract of title with ’s opinion or title interested in making a real estate transaction. or guarantee. insurance.

Chain of title: The succession of conveyances, Counteroffer: A new offer made in response Federal Housing Administration (FHA) from some accepted starting point, whereby to an offer received. It has the effect of Loan: A loan insured by the Federal Housing the present holder of real property derives rejecting the original offer which cannot be Administration and made by an approved title. accepted thereafter unless revived by the lender in accordance with the FHA’s offeror. regulations. Closing: The occasion when a sale is finalized; the buyer signs the mortgage and closing Debt-to-income ratio: The ratio used costs are paid. to qualify potential borrowers for a loan. Compares total monthly housing expense and other debt with total monthly income.

REALTORS : A legal procedure whereby Mortgage: A conditional transfer or pledge Rate cap: The limit on the amount the interest property used as security for a debt is sold of real estate as security for the payment of a rate can be increased at each adjustment to satisfy the debt in the event of default in debt. Also, the document creating a mortgage period in an adjustable-rate loan. The cap may payment of the mortgage not or default of lien. also set the maximum interest rate that can be other terms in the mortgage document. The charge during the life of the loan. foreclosure procedure brings the rights of all Mortgage lien: A lien or charge on the parties to a conclusion and passes the title in property of a borrower that secures the Real estate: Land; a portion of the earth’s the mortgaged property to either the holder underlying debt obligations. surface extending downward to the center of of the mortgage or a third party who may the earth and upward indefinitely into space, Broker’s Listing Cooperative (BLC): A purchase the realty at the foreclosure sale. including all things permanently attached to marketing organization composed of member it, whether naturally or artificially. Homeowner’s insurance policy: A brokers who agree to share their listing standardized package insurance policy that agreements with one another in the hope of Realtist: Members of the National Association covers a residential real estate owner against procuring ready, willing and able buyers for of Real Estate Brokers use the term Realtist. financial loss from fire, theft, public liability and their more quickly than they could REALTOR®: Members of the National other common risks. on their own. Association of REALTORS® use the term Housing expense ratio: The relationship : Payment terms REALTOR. between the monthly payments made for under which the borrower’s monthly Survey: The process by which boundaries are housing costs and monthly income. payments do not cover the interest due; as a result, the loan balance increases. measured and land areas are determined; the HUD 1 Statement: An itemized statement on-site measurement of lot lines, dimensions of all charges that will be collected at closing, Payment cap: The limit on the amount the and position of a on a lot, including the whether they are required by the lender or a monthly payment can be increased on an determination of any existing encroachments third party. adjustable-rate mortgage when the interest or easements. Surveys prepared from public rate is adjusted. records are called location surveys. Surveys Leverage: The use of borrowed money to prepared on-site by a professional surveyor are finance an investment. Prepaid items: On a closing statement, items called stake surveys. that have been paid in advance by the seller, Lien: The right given by law to certain such as insurance premiums and some real Title: (1) The right to or ownership of land. (2) creditors to have their debts paid out of the estate taxes, for which he or she must be The evidence of ownership of land. property of a defaulting debtor, usually by reimbursed by the buyer. means of a court sale. : A policy insuring the owner Prepayment penalty: A charge imposed on or borrower against loss by reason of defects Limited agency: Representing both parties in a borrower who pays off the loan principal in the title to a parcel of real estate, other a transaction where both parties agree to it. early. This penalty compensates the lender than , defects and matters for interest and other charges that would specifically excluded by the policy. Loan origination fee: A fee charged to otherwise be lost. the borrower by the lender for making a Veterans Affairs (VA) loan: A mortgage . The fee is usually computed as Principal: The original amount (as in a loan) of loan on approved property made to a a percentage of the loan amount. the total due and payable at a certain date. qualified veteran by an authorized lender and guaranteed by the Department of Veterans Loan-to-value ratio: The relationship Private (PMI): Affairs in order to limit the lender’s possible between the amount of the mortgage loan Insurance provided by private carrier that loss. and the value of the real estate being pledged protects a lender against a loss in the event of as collateral. a foreclosure or deficiency. : The division of a city or county by legislative regulations into areas (zones), Prorations: Expenses, either prepaid or paid specifying the uses allowable for the property in arrears, that are divided or distributed in those areas. Buyers are encouraged to between buyer and seller at closing. investigate any zoning issues directly with the appropriate city or county division.

REALTORS