The real estate industry has a language of its very own. Below is a glossary to help you better understand the process of buying and selling property.
Abstract of Title
A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer
to the present.
Adjustable Rate Mortgage (ARM)
Also known as a variable-rate loan, an ARM is one in which the interest rate changes over time.
Agent
The licensed real estate salesperson or broker who represents buyers or sellers.
Agreement of Sale
Also known as a purchase agreement, contract of purchase or sales agreement according to location. A contract in which a seller and buyer
agree to transact under certain terms spelled out in writing and signed by both parties.
Amortization
The process of reducing the principal debt through a schedule of fixed payments at regular intervals of time, with an interest rate specified in a
loan document.
Appraisal
A professional appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Assessed Value (Tax Assessment)
The value placed on a home by municipal assessors for the purpose of determining property taxes.
“As Is”
A contract or listing clause stating that the seller will not repair or correct any problems with the property.
Back up offer
When an offer is accepted contingent on the fall through or voiding of an accepted first offer on a property.
Brokerage
A firm engaged in buying and selling real estate for clients, using brokers and real estate agents to handle the deal.
Broker’s Tour
A Set time and day when real estate sales agents come to view listings by multiple brokerages in the market.
Buyer’s Agent
The agent who shows the buyers the property and negotiates the contract for the buyer through closing.
Buyer’s Market
A market condition characterized by low prices and a supply of properties that exceed demand.
Capital Gain
Profit earned from the sale which is above the original purchase price.
Closing
The final steps in the transfer of property ownership. On the Closing Date as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. Also referred to as Settlement.
Closing Costs
The costs to complete a real estate transaction in addition to the price of the home, may include; points, taxes, title insurance, appraisal fees, and legal fees.
Closing Statement
A detailed cash accounting of a real estate transaction showing all the cash received, all charges and credits made and all cash paid out.
Commission
The compensation paid to the listing brokerage by the seller for selling the property, a percentage of which is also paid to the buyer’s agent.
Commission Split
The percentage of commission which is split between the real estate sales agent or broker.
Comparable
A property used in an appraisal or comparative market analysis (CMA) report that is equivalent to the seller’s property.
Competitive Market Analysis – (CMA)
A comparison of the prices of recently sold or listed homes that are similar to a seller’s property in terms of location, style and amenities. This sis usually prepared by a listing agent for the property’s seller.
Contingency
A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both the buyer and seller before the contract is binding.
Counter-Offer
An offer; made in response to a previous offer that rejects all or part of it while enabling negotiations to continue towards a mutually acceptable sales contract.
Conventional Mortgage
A mortgage that is not insured or guaranteed by the federal government.
Debt-to-Income Ratio
A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments (including mortgages) by income.
Days on Market (DOM)
The number of days that a property has been for sale on the market.
Depreciation
A loss of value in property due to physical or functional deterioration.
Disclosures
Federal, state, county and local requirements of disclosure that the seller provides and the buyer acknowledges.
Down Payment
The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Smaller down payments, less than 20%, usually require mortgage insurance.
Dual Agent
A state-licensed individual who represents the seller and the buyer in a single real estate transaction.
Earnest Money
A deposit given by the buyer to bind a purchase offer and which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Equity
The value of the property, less the loan balance and any outstanding liens or other debts against the property.
Easements
Legal right of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Escrow
Funds held by a neutral third party (the escrow agent) until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan servicers to pay property taxes and homeowner’s insurance.
Expired listing
A property listing that has expired per the terms of the listing agreement.
Fiduciary relationship
A relationship of trust and confidence between the real estate agent and client, as under the terms of a listing contract or buyer agency agreement.
Fixed Rate Mortgage
A type of mortgage loan in which the interest rate does not change during the entire term of the loan.
Flat fee
A predetermined amount of compensation received or paid for a specific service in a real estate transaction.
For sale by owner (FSBO)
A property that is for sale by the property owner and not represented by a real estate agent.
Home Inspection
Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.
Homeowners Insurance
A policy that protects you and the lender from fire or flood a liability such as a visitors injury, or damage to your personal property.
Inclusions – Fixtures or personal property included in a contract or offer to purchase.
Installment sales contract
A sales contract in which the buyer takes possession of the property and pays the purchase price in periodic installments, even though the title is retained by the seller until the loan is paid off. The same as Contract for deed.
Lease option
When a lease gives the tenant the right to purchase the property during the lease term.
Lien
A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
List date
Actual date the property was listed with the current broker.
List price
The price of a property through a listing agreement.
Listing agreement
A contract between an owner-seller and a real estate broker to have the broker find a buyer for the owner’s real estate in exchange for the owner paying a commission.
Lockbox
A device with a combination which stores keys to the property for sale.
Market Value
The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Mortgage Insurance
Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down) Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers. (PMI).
National Association of Realtors (NAR)
The national association of real estate agents.
Net listing
A listing contract between the seller and the seller’s broker which sets a baseline price for a property; the broker nets any funds above that price when it sells.
Open listing
A listing contract under which the broker’s commission is contingent upon the broker bringing in a buyer before the property is sold by the seller or another broker.
Parcel Identification Number
A county of city tracking number for a property.
Pending
The status of real estate under an accepted contract that has not yet closed its transaction.
Preview Appointment
When a buyer’s agent views a property alone to see if it meets his or her buyer’s needs.
Possession Date
The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs within a couple days of the closing date.
Pre-Approval Letter
A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount. It also shows a home seller that you are a serious buyer Principal – The amount of money borrowed from a lender to buy a home, or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase Offer
A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally-binding contract.
Quitclaim Deed
A document that releases the grantor/seller from whatever interest he/she has in the real estate.
Real estate agent
An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or the seller.
REALTOR
A registered trademark of the National Association of Realtors that can only be used to refer to its members.
Re-list
Property listed by a broker that was formerly listed with another broker.
Severalty
Ownership of real property by one person only, also called sole ownership.
Staging
Preparing a home for sale through the neutral but appealing placement of furniture and accessories.
Survey
The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.
Title
The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects.
Title Insurance
Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.
Truth-in Lending Act (TILA)
Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost or credit.
Title Search
A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.
Transaction
The purchase process from offer to closing or escrow.
Walkthrough
A showing before closing that permits the buyers one final tour of the property.
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