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REAL ESTATE GLOSSARY
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A
Abstract
of Title
- A summary of public records in regard to the title on a piece
of property. Abstracts must be consulted to be certain there are
no liens or other claims outstanding against the property before
the buyer can purchase it.
Acceleration Clause - A provision in a mortgage that allows
the lender to request the remaining balance of the loan if payments
are not made on time.
Acceptance - A written document that the seller of a property
has accepted the offer from a potential buyer.
Addendum - An addition or change to an existing contract.
Sometimes known as a rider.
Agency - A written contract that states that a specific person
(usually a real estate agent) has authority to act on behalf of
someone else (usually either the buyer or seller).
Agent - A man or woman who has been licensed to buy or sell
real estate.
Amendment - A change to a specific section of a legal document
without altering the rest of it.
Annual Percentage Rate (APR) - The total yearly cost of a
mortgage or a loan, including interest, points, and other fees.
Appraisal - A report from an independent third party detailing
the estimated value of real estate.
Assessment - A local tax placed on a property in addition
to its existing taxes. Assessments are generally used by local governments
to improve the neighborhood.
Assets - Items of positive value, such as stocks, real estate,
and cash.
B
Backup Offer - A bid that a
seller will accept if their first choice offer falls through.
Bankruptcy - A stipulation of Federal Law that allows an
insolvent debtor to receive relief from creditors. A Trustee is
assigned to sell off the debtors assets in order to repay the debts.
Bankruptcy appears on your credit report for seven years after the
initial declaration.
Binder - A document from a title insurance company stating
that they will insure a property under a specific set of guidelines.
Breach of Contract - Failure to follow the regulations set
up in a contract or covenant.
Broker - One who acts as an intermediary on behalf of other
for a fee or commission.
Buyer Broker - A real estate agent who represents buyers
exclusively.
By-Laws - Rules and regulations that govern a corporation
or an association. Usually seen with co-ops and condominiums.
C
Cancellation
Clause - A mortgage provision that
details how the interested parties may cancel the document.
Cashier's Check - A check made out from a bank's own account.
Caveat Emptor - Latin for "let the buyer beware." Always
a sound principle when purchasing real estate.
Certificate of Occupancy - A certificate that states a particular
property is suitable to be lived in.
Chattel - Personal property.
Closing - Also called "settlement." A meeting of all parties
involved in a property transaction during which the transaction
is consummated.
Condominium - The absolute ownership of a unit in a multi
unit building.
Contract - A legally enforceable promise or set of promises
that must be performed and for which, if a breach of the promise
occurs, the law provides a remedy.
Commitment - Also called "binder." A document issued by a
title insurance company that contains the conditions under which
a policy of title insurance will be issued.
Co-op - Abbreviation for "cooperative," a portion of a large
property whose owner has purchased exclusive rights to its use by
buying a share of the corporation that owns the large property
Credit report - Used by lenders to determine a potential
borrower's credit worthiness. Independent sources compile the report,
which lists the borrower's debts, liabilities and assets.
D
Deed -
A legal paper which transfers the ownership of a property from one
party to another. The person transferring the interest is the "grantor,"
and the one acquiring the interest is the "grantee."
Default - Failure to meet the conditions set forth in a legal
document (i.e., not making monthly mortgage payments).
Deposit - An initial cash outlay towards the purchase/rent
of a property.
Down payment - A sum of money paid by buyers out of their
own resources when the agreement of sale is issued.
Dual Agency - A real estate agency that represents both the
seller and buyer in a transaction
Duplex - A property spread over two floors.
E
Easement
- The temporary or permanent right for a third party to use a property
for a specific purpose (i.e., power lines).
Eminent Domain - The right of the government to take over
private property for public use, with monetary compensation to be
made to the owner.
Encroachment - A physical portion of a property that extends
onto another property (i.e., a driveway).
Encumbrance - A lien or other claim against a property.
Equity - The current value of a property to its owner, minus
outstanding mortgage payments or other debts.
Escrow - A method of closing a real estate transaction in
which all required documents and funds are placed with a third party
for processing and disbursement.
Escrow Account - An account opened for a buyer to deposit
money to cover expenses such as property taxes or homeowners insurance.
Estate - Total assets of a person who is recently deceased.
Exclusive Agency - The practice of representing either the
buyer or the seller in a transaction. Owes Fiduciary Duties to the
party that agent represents.
Exclusive Listing - A property that is being shown by one
particular real estate agent or agency.
F
Fair Housing
Act - A federal law that makes
it illegal to refuse to sell a property based on a potential buyer's
race, religion, national origin, family status, color, or disability.
Fannie Mae - The Federal National Mortgage Association. The
association buys mortgages from lenders and sells them on the secondary
mortgage market.
Federal Housing Administration (FHA) - A government agency
that provides mortgages to qualified buyers for a small down payment.
First Mortgage - The primary mortgage, which must be paid
off before all other property debts.
Fixed Rate Mortgage - A mortgage having a rate of interest
that remains the same for the life of the mortgage.
Flat Fee - A set fee charged by a real estate agent in lieu
of a percentage of a property's sale value.
Foreclosure - A legal procedure whereby property used as
security for a debt is sold to satisfy the debt.
G
General Contractor
- The contractor in charge of hiring subcontractors and suppliers
during any construction process.
Gift - A monetary sum given by a buyer's relative or other
source for purchasing a property that does not need to be repaid.
Good Faith Estimate - An estimate of costs a mortgage lender
gives to a potential buyer which includes all foreseen fees.
Grace Period - The time in which a mortgage payment can be
made after its due date without incurring a late fee.
Grantee - A person receiving an interest in a property
Grantor - The person giving up interest in a property.
Guardian - A person appointed by the court to oversee the
affairs of a minor.
H
Hazard Insurance -
Insurance that protects against common hazards such as fire or winds.
It is generally required by all lenders before a mortgage is approved.
High-Rise - A building over six stories tall. Usually with
an elevator.
Home Equity Loan - A loan that allows property owners to
borrow against their property's equity. This loan is paid out in
one lump sum, and is usually repaid in installments.
Housing Discrimination - Denying a person the right to own
property based on their race, color, religion, sex, national origin,
family status or disability.
I
Indemnity
- Protection against a specific event that allows for compensation
should the event occur.
Index - Any financial table used to set the interest rate
on adjustable rate mortgages
Insurance - Any policy that provides compensation against
a specific type of loss.
Interest - A fee property buyers must pay in order to receive
a mortgage, usually expressed as a percentage of the mortgage.
Interest Rate - The value charged by the lender for the use
of the lender's money. Expressed as a percentage.
J
Joint Liability
- When two or more people are liable
for the terms of a mortgage.
Joint Tenancy - Property ownership between two or more people,
all of whom live on the property. The property automatically passes
onto the co-owner(s) if one of the others is deceased.
Judgment Lien - A lien placed on a property by a court of
law.
Jumbo Loan - A loan higher than those insured by such organizations
as Fannie Mae.
Junior Mortgage - Any mortgage that is of lesser priority
than the first mortgage.
K
L
Landscape
- A property's exterior surroundings.
Lease - A contract between a landlord and a tenant conveying
the use and/or occupation of the landlord's property.
Leasehold Estate - A long-term agreement that allows a tenant
property rights under the provision of a lease.
Lender - Any bank or similar institution that offers mortgages
and other loans.
Legal Description - A description of a property recognized
by a court of law.
Liability Insurance - An insurance policy that protects property
owners from personal injury and other liability lawsuits.
Lien - A claim laid against a property. Liens must be removed
from a property's title before it can be sold.
Life Estate - The right of a person to own a property for
their entire life.
Liquid Assets - Any asset that can be converted into cash
in a short period of time.
Listing agreement - A contract between an owner and a real
estate broker by which the broker is employed as agent to find a
buyer for the owner's real estate.
Lock-In - A guarantee that a mortgage's interest rate will
be the same at the end of the loan approval process as it was in
the beginning. Especially sought after when interest rates are fluctuating.
M
Margin
- The amount in percentage points that a mortgage lender adds to
an adjustable rate mortgage.
Market Value - The value of a property given the current
market conditions.
Metes and Bounds - A method of describing a property by distances
and directions.
Mortgage - A legal document that states that a certain amount
of money is being used to purchase a property. If the loan is not
paid back according to the terms set forth in the document, the
loan is forfeit, and the property may be seized in order to pay
it back.
Mortgage Banker - Originates mortgage loans, loaning you
their funds and closing the loan in their name.
Mortgage Broker - One who, for a fee, brings together a borrower
and lender, and handles the necessary applications for the borrower
to obtain a loan against real property by giving a mortgage or deed
of trust as security. Also known as a loan broker.
Multi-Dwelling Property - Any property with one mortgage
that contains several dwellings (i.e., an apartment building).
Multiple Listing Service (MLS) - A marketing organization
composed of member brokers, who agree to share their listing agreements
with one another in the hope of finding the buyers for their properties
more quickly. Remember Manhattan Real Estate market is not organized
in a Multiple Listing Service.
N
Negative
Amortization - Monthly mortgage
payments that are not large enough to pay off accrued interest,
which actually increases the mortgage's principal.
Notary Public - Any person authorized by law to certify signatures
and documents
Note - A legal document signed by a buyer to repay the stated
amount of a loan by a certain date
Notice of Default - A legal document that states that a mortgagor
is in default, and that further legal action is most likely forthcoming.
O
Offer
- A monetary proposal for a property, usually from the buyer to
seller.
Open House - A property open to be viewed by the general
public.
Open listing - A listing contract under which the broker's
commission is contingent on the broker's producing ready, willing
and able buyer before the property is sold by the seller or another
broker.
Option - A right exercised by a buyer to keep an offer to
purchase a property open for a certain amount of time.
Oral Agreement - Any agreement not made in writing. Oral
agreements are not usually considered legally binding.
Owner Financing - A property transaction in which the owner
agrees to finance some or all of the purchase price
P
Parcel
- Any officially designated plot of land
Personal Property - Any item in a dwelling not considered
a fixture.
Point - A fee charged by a mortgage lender, typically at
closing. Each point is worth one percent of a loan's total principal
(i.e., a point on a $150,00 loan would $1,500).
Power of Attorney - A document stating that a certain individual
is an attorney in fact, and may act on behalf of someone else.
Pre-approval - A process whereby a potential home buyer secures
a guaranteed mortgage approval before making an offer on a house.
A lending institution guarantees in writing to grant a loan for
a specified amount. Not to be confused with pre-qualification.
Prepayment - Paying off all or part of the mortgage before
the scheduled date.
Prepayment Penalty - A fee paid to the lending institution
for paying a loan prior to the scheduled maturity date.
Principal - The base amount of a mortgage, minus interest.
Promissory Note - A note that promises payment of a specific
amount on demand, which can be transferred much like a check.
Property Line - The official boundary line of a property.
Purchase Money Mortgage (PMM) - A mortgage given from buyer
to seller as part of a property's purchase price.
Q
Qualifying
Ratio - A ratio used by a mortgage
lender to determine how much a buyer can afford to borrow.
Quiet Title - A lawsuit brought to remove a lien or other
claim from a property title.
Quit-Claim Deed - A document releasing a person from any
interest they may hold in a property.
R
Real Estate
- Land and anything physically attached to it (i.e., an apartment
building, a barn, etc.).
Real Estate Agent - A person who has a state license to assist
buyers and sellers in property transaction and is generally paid
by commission.
Real Estate Settlement Procedures Act (RESPA) - The federal
law that allows buyers and sellers to be aware of the various settlement
charges associated with buying a property
Realtor - Any real estate agent or broker who is a member
of the National Association of Real Estate Realtors.
Recission - The cancellation of a mortgage or other contract
by law or the mutual consent of those involved.
Recording - Filing a document with the proper government
agency.
Refinancing - Replacing an old mortgage or loan with one
that has more favorable terms.
Regulation Z - A provision in the federal Truth-in-Lending
Act that requires a property buyer to be informed in writing of
all the costs associated with acquiring credit.
Right to Recission - A provision in the Truth-in-Lending
Act that allows a buyer to cancel a mortgage or other loan within
three days of signing it.
S
Sales Contract
- A contract that details the terms of a property sale.
Second Mortgage - A mortgage taken out after a first mortgage
that ranks second in payment priority.
Seller's Market - A market advantageous to sellers, with
not many properties for sale and many buyers.
Settlement Statement - A statement that documents exactly
what has been paid and by whom.
Specific Performance - A legal action filed in order to insure
the complete performance of a contract.
Statute of Limitations - The time in which a law suit can
be legally filed.
T
Tax Lien
- A lien placed on a property for
non-payment of back taxes.
Tenants in Common - Two or more people who own a property
without an established right of survivorship. Occasionally, if one
partner dies, their interest may not be given to the co-owner(s).
Title - A legal document that provides proof of property
ownership.
Title Insurance - An insurance policy that protects a buyer
should someone else claim title to a property.
Title Search - An examination of local records to provide
proof positive of a title's owner, and to be certain that there
are no liens or other claims against the property.
Townhouse - A dwelling unit usually with two to four floors,
and shared walls. It can be individually owned, a condominium, a
cooperative, or rental property.
Trust - A right to a property held by another, either written
or implied.
Truth-in-Lending Act - A federal law that requires a mortgage
lender to disclose the annual percentage rate to a prospective buyer
after they have applied for the loan.
U
Underwriting
- A process by which mortgage lenders assess the risk of a potential
property buyer, and adjust their loan terms accordingly.
Unrecorded Deed - A deed that has been transferred from seller
to buyer without being noted in the public records.
Unsecured Loan - A mortgage not backed by collateral
Usury - Charging interest on a mortgage or other loan higher
than is allowed by law.
V
VA Loan
- A Department of Veterans Affairs program that allows qualified
veterans to secure a mortgage with little or no down payment.
Variable Rate - An interest rate that is subject to fluctuation.
Verification of Employment (VOE) - A document signed by a
potential property buyer's employer that verifies the buyer's employment
and salary.
W
Waiver
- The voluntary relinquishment of a right.
Warranty - A legal document assuring a specified action in
the future
Will - A legal document that specifies how a person's estate
is to be handled after their death.
Wraparound Mortgage - A mortgage that contains not only the
amount to be loaned to purchase a property, but also the remaining
balance of that property's previous mortgage.
X
Y
Z
Zoning
- The local regulation of land usage.
Zoning Variance - A one-time change in an area's zoning law.
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