HomeSaleDIY: Buyer & Seller FSBO Info

 

Real Estate Terms

 

Abstract of Title - A short history of a piece of property, tracing its chain of ownership (title) through the years, plus a record of all liens, taxes, judgments or other encumbrances that may impair the title.

 

Acceleration Clause - A provision in a mortgage or trust deed that may require the unpaid balance of the mortgage loan to become due immediately if the regular mortgage payments are not made, or if other terms of the mortgage are not met.

 

Access Right - The right of an owner or lessee to freely go to and from his or her property.

 

Acknowledgment - A declaration before a person qualified under the law to administer oaths, to the effect that a document or a deed is the act of the person who signed it.

 

Acre - A piece of land measuring 43,560 square feet.

 

Act of God - An accident which could not have been foreseen or prevented, such as those caused by earthquake, severe storms, and the like.

 

Ad Valorem - A latin phrase meaning "according to value."

 

Affidavit - A written statement, sworn to before a notary public or other officer authorized to administer oaths.

 

Agreement of Sale - A contract between seller and purchaser stating the terms and conditions of sale. (See also Purchase Agreement)

 

Alienation - The transfer of property from one person to another.

 

Amortization - A method of paying off the principal owed on a loan in regular installments (as opposed to making the entire payment in one lump sum on a certain date).

 

Appraisal - An estimate of the market value of a home¡Xthat is what it would sell for under normal conditions.

 

Appraiser - A professional who charges to estimate the market or replacement value of a house.

 

Assessed Value - The value of a property as determined by the tax assessor for the purpose of collecting property taxes. The assessed value is usually a fixed percentage of either the market value or the most recent purchase price.

 

Assessment - A special tax due for a special purpose and charged to a specific group of homeowners who are benefiting from a municipal improvement (for example, sewer tax, street tax, etc.)

 

Assumption of Mortgage - The promise by the buyer of property to be legally responsible for the payment of an existing mortgage. The purchaser's name is substituted for the original mortgagor's (borrower's) name on the mortgage note and the original mortgagor is released from the responsibility of making the mortgage payments. Usually the lender must agree to an assumption.

 

Attachment - The seizure of property by court order.

 

Balloon Payment - When the final payment on an installment loan is larger than the preceding payments and it pays the debt in full, it is called a balloon payment.

 

Binder - A simple contract between a buyer and a seller which states the basic terms of an offer to purchase property. It is usually good only for a limited period of time, until a more formal purchase agreement is prepared and signed by both parties.

 

Catastrophe - example: flood, hurricane, earthquake, fire, and other natural disaster.

 

Carrying Charges - What it actually costs for a homeowner to maintain his home -- including the mortgage payments, taxes, and general maintenance.

 

Certificate of Title - A written opinion by an attorney that his examination of land records has established a clear ownership of property.

 

Chattels - Goods, or any other type of property, which are not real property (real property generally includes land, and whatever is erected or growing upon it).

 

Closing - The final step in the sale and purchase of a property, when the title is transferred from the seller to the buyer; the buyer signs the mortgage, pays the settlement costs, and any money due the seller or buyer is handed over.

 

Closing Costs - The various expenses, over and above the actual sale price of the property, involved in arranging a real estate transfer.

 

Community Property - In some states, a forma of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

 

Condominium - Individual ownership of an apartment in a multi-unit project or development, and a proportionate interest in the common areas outside the apartment.

 

Conventional Loan - A mortgage loan which is not insured by FHA or guaranteed by VA.

 

Conveyance - The transfer of the title (evidence of ownership) of property by deed from one person to another.

 

Covenant - A promise or agreement between two parties usually applied to specific promises in a deed.

 

Credit Rating - A rating or evaluation made of one's financial standing by a person or company (such as a Credit Bureau), based on one's present financial condition and past credit history.

 

Credit Report - A report usually ordered by a lender from a credit bureau to help determine a borrower's credit rating.

 

Deed - A written document by which the ownership of property is transferred from the seller (the grantor) to the buyer (the grantee).

 

Deed of Trust - It transfers title of the property to a third party (the trustee) who holds the title until the debt or mortgage loan is fully repaid to the lender, at which time the title (ownership) passes to the borrower. If the borrower defaults (fails to make payments), the trustee may sell the property at a public sale to pay off the loan.

 

Default - Failure to make mortgage payments on time, as agreed to in the mortgage note or deed of trust.

 

Defect of Record - Any lien or encumbrance upon a title which is part of the public record.

 

Delinquency - The state of a mortgage payment being past due.

 

Deposit - A sum of money given to bind a sale of real estate¡Xalso called 'earnest money'.

 

Down Payment - The money a buyer must pay in cash on a house before being granted a loan.

 

'Due on Sale' Clause - A provision often stipulated in a mortgage loan contract, which gives the lender the right and option to require full and immediate repayment of the entire balance you still owed on the loan¡Xat any future time when you ever sell or transfer the property.

 

Earnest Money - (See Deposit)

 

Easement - The right to use land owned by another. For instance, the electric company has easement rights to allow their power lines to cross another's property.

 

ECOA - Equal Credit Opportunity Act¡Xa federal law that requires lenders to loan without discrimination based on race, color, religion, national origin, sex, marital status, or income from public assistance programs.

 

Eminent Domain - The government's right to acquire property for necessary public or quasi-public use.

 

Enroachment - The building of a structure or improvements which trespass on the property of another person.

 

Encumbrance - Anything that limits the interest in a title to property, such as a mortgage, a lien, an easement, a deed restriction, or unpaid taxes.

 

Equity - A buyer's initial ownership interest in a house and the increases thereof as he pays off a mortgage loan. When the mortgage is fully paid, the owner has 100% equity in his house.

 

Equity of Redemption - The right of an owner to regain his or her property during a foreclosure action for nonpayment.

 

Escrow - Money or documents held by a neutral third party until all or certain specified conditions of a contract are met.

 

Escrow Agent - The third party responsible to the buyer and the seller or to the lender and borrower for holding the money or documents until the terms of a purchase agreement are met.

 

Escrow Payment - That part of a borrower's monthly payment held by the lender to pay for taxes, hazard insurance, mortgage insurance, and other items until they become due.

 

Fee Simple - The most complete ownership of land, one without any known limitations on the owner's right to dispose of the property as he or she chooses.

 

FHA - Federal Housing Administration¡Xa division of the U.S. Department of Housing and Urban Development (HUD). Its main activity is to insure home mortgage loans made by private lenders.

 

Finance Charge - The total of all charges one must pay in order to get a loan.

 

Foreclosure - The legal process by which a lender forces payment of a loan (under a mortgage or deed of trust) by taking the property from the owner (mortgagor) and selling it to pay off the debt.

 

Grantee - That party in the deed who is the buyer.

 

Grantor - That party in the deed who is the seller.

 

Guaranty - A promise by one person to pay the debt of another if that other person fails to do so.

 

Hazard Insurance - Insurance which protects against damage caused to property by fire, windstorm, or other common hazard. Required by many lenders to be carried in an amount at lest equal to the mortgage.

 

HUD - The U.S. Department of Housing and Urban Development

 

Impound - Also known as 'Escrow Payment'

 

Installment - The regular payment that a borrower agrees to make to a lender on or by specified dates.

 

Insured Loan - A loan insured by FHA or a private mortgage insurance company.

 

Joint Tenancy - An equal, undivided ownership or property by two or more persons. Should one of the parties die, his share of the ownership would pass to the surviving owners (right of survivorship).

 

Lien - A hold or claim which someone has on the property of another as security for a debt or charge; if a lien is not removed (if debt is not paid), the property may be sold to pay off the lien.

 

Life Estate - Taking ownership of property for the lifetime of a given person (a 'life estate'), after which the property goes, after the first person dies, to another designated person; an estate (property) meant for the use or enjoyment of the designated beneficiary only for the lifetime of the person.

 

Loan Disclosure Note - Document spelling out all the terms involved in obtaining and paying off a loan.

 

Market Value - The amount of money that serious prospective buyers are likely to offer to pay for a piece of property at a given time.

 

Marketable Title - A title clear of any encumbrance or objectionable lien that might adversely affect an owner's ability to sell.

 

Mortgage - A loan given especially for the purpose of buying real property; a lien on real property which home owner (borrower) gives his lender as security for the borrowed money.

 

Mortgage Origination Fee - A charge by the lender for the work involved in the preparation and servicing of a mortgage request.

 

Mortgagee - The lender who makes a mortgage loan.

 

Multiple Listing - A system in which a group of brokers have a right to sell a property which has been exclusively listed with them. The broker who had the original right to sell receives a portion of the commission if one of the others sells the property.

 

Net Listing - A listing arrangement which allows a broker to keep as compensation all sums received above a net price.

 

Offset Statement - A statement by an owner of property listing the present status of all liens against that property.

 

Open-end Mortgage - A mortgage which allows a borrower to borrow additional money at a later time without paying the usual financing charges.

 

Open Listing - An arrangement which gives a broker the non-exclusive right to sell an owner's property. Open listings may be given to several agents and only the agent that sells the home is entitled to a commission.

 

Perfecting Title - The elimination of all claims against a title by payment or court judgment.

 

PITI - Principal, interest, taxes, and insurance (In FHA and VA loans paid to the bank each month).

 

Plat (or Plot) - A map of a piece of land showing its boundaries, length, width and any easements.

 

Point(s) - An amount equal to 1% of the principal amount of a loan. Points are a one-time charge collected by the lender at closing to increase his return on the loan. In FHA or VA loans, the borrower himself is allowed to pay only a limited and designated number of points.

 

Prepayment Penalty - A charge made by the lender if a mortgage loan is paid off before the due date. FHA does not permit such a penalty on its FHA-insured loans.

 

Purchase Agreement - A written document in which a seller agrees to sell, and a buyer agrees to buy a piece of property, with certain conditions and terms of the sale spelled out, such as sales price, date of closing, condition of property, etc. The agreement is secured by a deposit or down payment of earnest money.

 

Quiet Title - A court action taken to establish title, often used to remove a cloud on the title.

 

Real Estate - Land and the structure erected or growing upon it. Also anything of a permanent nature such as trees, minerals, and the interest and rights in these items.

 

Real Estate Agent - An individual who can show property for sale on behalf of a seller, but who may not have a license to transact the sale and collect the sales commission.

 

Real Estate Broker - A person licensed by the state to arrange the purchase or sale of land or real property, acting as intermediary between buyer and seller, and often between buyer and lender. Also known as a real estate agent.

 

Realtor - A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

 

Recording Fees - The charge payable to a local or county land registry to put on public record the details of legal documents such as a deed or mortgage.

 

Redemption - Buying back one's property after a court-ordered sale.

 

Refinancing - The process of paying off one loan with the money (proceeds) from another loan.

 

RESPA - Real Estate Settlement Procedures Act¡XA federal law that requires lenders to send to the home mortgage borrower (within 3 business days) an estimate of the closing (settlement) costs. RESPA also limits the amount lenders may hold in an escrow account for real estate taxes and insurance, and requires the disclosure of settlement costs to both buyers and sellers at least 24 hours before the closing.

 

Right of Rescission - That section of the Truth-in-Lending Law which allows a customer the right to change his/her mind and cancel a contract within 3 days after signing it. This right to cancel is in force if the contract would involve obtaining a loan, and if the loan would place a lien on the property.

 

Right of Way - An easement on property, where the property owner gives another person the right to pass over his land.

 

Sales Agreement - (See Purchase Agreement)

 

Sale-Leaseback - An arrangement in which the owner of a piece of property sells his land to another but retains the right to continue occupancy as a tenant under a lease.

 

Secondary Financing - A loan secured by a second mortgage or trust deed.

 

Section - A piece of land in a government survey which contains 640 acres.

 

Settlement Costs - (See Closing Costs)

 

Severalty Ownership - Owned by one person only; the sole owner.

 

Sheriff's Deed - A deed granted by a court as part of the forced sale of property (foreclosure) to satisfy a judgment.

 

Subordination Clause - A clause in a second lien which recognizes the priority of prior (first) liens.

 

Surety - One who guarantees the performance of another: a guarantor.

 

Survey - A map or plat made by a licensed surveyor showing the measurements of a piece of land; its location, dimensions, and the location and dimensions of any improvements on the land.

 

Tax Sale - The sale of property for non-payment of taxes.

 

Tenancy-by-the-Entirety - The joint ownership of property by a husband and wife in such a manner that if either one dies, his or her share of ownership goes to the remaining survivor.

 

Tenancy-in-Common - When property is owned by two or more persons with the terms creating a joint tenancy, but in such a manner that in the event one of the owners dies, his share of the property would not go to the other surviving owner automatically, but rather to his (the decedent's own) heirs.

 

Title - The rights of ownership of a particular property, and the documents which prove that ownership (commonly a deed).

 

Title Defects - An outstanding claim or encumbrance on property which affects its marketability (whether or not it can be freely sold).

 

Title Insurance - Special insurance which usually protects lenders against loss of their interest in property due to legal defects in the title. An owner can protect his interest by purchasing separate coverage.

 

Title Search - An examination of public records to uncover any past or current facts regarding the ownership of a piece of property. A title search is intended to make sure the title is marketable and free from defects.

 

Truth-in-Lending - A federal law which provides that the terms of a loan (including all the finance charges) must be disclosed to the borrower before the loan is signed. It also contains a provision for the Right of Rescission.

 

Trustee - One who holds property in trust for another to secure the performance of an obligation.

 

Trustor - One who deeds his property to a trustee.

 

VA - Veterans Administration¡XThe VA guarantees a certain proportion of a mortgage loan made to a veteran by a private lender. Sometimes called GI loans, these usually require very low down payments and permit long repayment terms.

 

Vendee - A buyer

 

Vendor - A seller

 

Void - To have not effect; something that is unenforceable.

 

Waive - To relinquish a right to enforce or require something.

 

Zoning - The legal power of a local municipal government (city or town) to regulate the use of property within the municipality.