Real Estate Glossary

Real Estate has a language all its own. Here is some of the terminology you’ll be hearing.

Adjustable Mortgage Loans: Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARMs), Flexible Rate Loans, Variable Rate Loans.

Agency: A relationship in which one person (the agent) is authorized to act on behalf of the best interests of another (the principal or client) in business dealings with third persons.

Agent: Under the law of agency, and agent's fiduciary duties to a principal include loyalty, obedience to (lawful) instructions, honesty, and full disclosure and utmost care and diligence in working for the principal's best interests within the scope of business for which he/she has been retained.

Amortization: Payment of a debt in equal installments of principal and interest, rather than interest-only payments.

Annual Percentage Rate (A.P.R.):
The yearly interest percentage of a loan, as expressed by the total finance charge actually paid (interest, loan fees, points). The A.P.R. is disclosed as a requirement of federal truth in lending statutes.

Appraisal: An estimate of the value of a certain property by a qualified, independent individual.

Buydown: A payment to the lender from the seller, buyer, or third party, or some combination of these, that causes the lender to reduce the interest rate during the early years of the loan.

In adjustable rate mortgages, the limit on how much the interest rate or monthly payment can change.

Client: A party to a transaction with whom the broker has entered into a specific written agency agreement to provide services.

Closing: The final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. Closing Statement: The statement which lists the financial settlement between buyer and seller, and also the costs each must pay.

CMA: CMA, or Competitive Market Analysis, is a comparison of homes similar to a seller’s home in terms of size, style, features, and location that have sold recently or are on the market. A CMA is prepared by a real estate agent to help set a home’s listing price.

Condominium: A form of home ownership in which the owner owns the airspace within the walls but doesn't own the actual walls, ceilings, or floors of the home. The owner may also own a percentage of the common areas, such as the swimming pool.

Contingency: Commonly, a stated event which must occur before a contract is binding. For example, a home sale may be contingent upon the buyer obtaining financing.

Conventional mortgage: A type of mortgage made by banks and other lending institutions that is not insured by the Federal Housing Administration (FHA), Farmers Home Administration (FMHA), or Veterans' Administration (VA).

Counteroffer: An offer made by one party that makes changes to the original or latest offer of the other party. Can be made by the seller or the buyer.

Credit report: A report of all of your debt information compiled by an independent agency. The credit report shows all outstanding debt as well as a record of payment on outstanding debts.

Customer: Any party other than a client in a transaction, for whom or to whom a licensee provides services.

Deed: The legal document that conveys the title to a property.

A portion of the down payment given by the buyer to the seller or escrow agent with a written offer to purchase. Shows good faith.

Designated agent: A licensee who has been chosen by such licensee's managing broker to serve as the agent of an actual or prospective party to a transaction, to the exclusion of other licensees employed by or affiliated with such broker.

Down payment: Cash portion of the purchase price paid by a buyer from his own funds as opposed to that portion which is financed.

Dual agent: A situation in which the licensee has agreements to provide services as an agent to more than one (1) party in a specific transaction and in which the interests of such parties are adverse.

Earnest money: A deposit you make when you make an offer on a house.

Easement: A right given by the landowner to use the property. For example, you may have easements on your property for phone lines, utility poles, and so on.

Equity: The financial interest or cash value of your home, minus the current loan balance(s). If selling the home, this would also be minus any costs incurred in selling the home.

Escrow: A procedure in which a third (neutral) party holds all funds, documents, etc. necessary to the sale, with instructions from both buyer and seller as to their use and disposition.

FHA Loan: A loan insured by the Federal Housing Administration, a part of the Department of Housing and Urban Development. FHA insurance enables lenders to loan a very high percentage of the sale price.

Good faith estimate: A lender must give a prospective homebuyer a written estimate of closing costs within three days of submitting a mortgage loan application. It is a good idea to request this estimate before choosing a lender so that you can compare lenders' fees.

Graduated Payment Mortgage: A mortgage initially offering low monthly payments that increase at fixed intervals and at a predetermined rate.

Hazard Insurance: Otherwise known as homeowners’ insurance. This is a usual requirement of a mortgage lender and an advisable safeguard for any homeowner to protect against loss.

Index or Rate Index: A measure of interest rate changes used to adjust the interest rate of an Adjustable Mortgage Loan. Example: the change in U.S. Treasury securities (T-bills) with a 1-year maturity, based upon their weekly average yield.

Lien: A legal claim or charge on property as security for payment of a debt or for the discharge of an obligation.

Loan origination fee: A fee charged by the lender - usually 1 percent of the loan amount.

Loan-to-Value Ratio: The ratio – expressed as a percentage – of the amount of a mortgage loan to the appraised value or selling price of the property.

Lock box: A key storage system placed on a home entrance that is accessible only by active, licensed real estate agents who must abide by a strict set of guidelines when showing a seller’s home.

Margin: In Adjustable Mortgage Loans, the number of percentage points the lender adds to the index rate to determine the new interest rate at each adjustment.

Material: Any statement, representation or fact relative to a transaction that would affect a reasonable person's decision to enter into an agreement and which has been identified by such person as being of significant to a particular party.

MLS: MLS stands for multiple listing service, by which member brokers cooperate in the sale of each other’s listings. Sellers may choose not to allow their property into multiple listing, if they wish.

PITI (Principal, Interest, Taxes, and Insurance): Used to indicate the four major items included in a monthly mortgage payment.

Points: A fee charged by a lender as a service charge or as an amount needed to make the yield on a mortgage competitive with other types of investments. Each point represents 1% of the loan amount.

Pre-approved: Meeting with a lender and providing all the financial details to get pre-approved for a loan. When you are pre-approved, you have a definite commitment from a lender. Compare this to pre-qualify.

Pre-qualify: Meeting or talking with a lender informally, providing the lender with your financial information, and then having the lender qualify you for a loan for a certain amount. When you are pre-qualified, the lender gives you an estimate but does not formally commit to giving you a loan. Compare this to pre-approved.

Price Trend Analysis: A tool developed and used exclusively by American Trust Realty LLC, Realtors to help set a home's listing price by projecting local trends. Used in conjunction with a CMA, or Competitive Market Analysis. Because home values appreciate over time, a Price Trend Analysis maximizes listing prices.

Principal: Amount of debt, not including interest; the face value of a loan.

Private Mortgage Insurance: Insurance issued by a private company against a loss by a lender in the event of default. Private mortgage insurance is generally required for conventional financing whenever less than 20% is put down.

Proration: The division of certain fees. If the sellers have paid for taxes six months in advance, for example, they may want a portion of that payment back for the months you are living in the house.

Real Estate Settlement Procedures Act (RESPA): This act requires the lender to disclose certain information about a loan, including the estimated closing costs and APR.

Sales Contract: The contract you draw up when you want to make an offer on a home. Sometimes called the purchase agreement.

Second Mortgage: A mortgage which ranks after the first mortgage lien in priority.

Settlement: Same definition as closing.

Survey: An examination of a property's boundaries to determine the quantity of land, location of improvements, and other information. Usually the surveyor creates a map or drawing of the legal boundaries of the property.

Title Insurance: Insurance against loss resulting from defects of title of public record.

Transaction: The purchase, sale, rental, or option of an interest in real estate or business opportunity.

Transaction/facilitator broker: Any licensee (A) who assists one (1) or more parties to a transaction who has not entered into a specific written agency agreement to represent one (1) or more of the parties; or (B) whose specific written agency agreement provides that if the licensee or someone associated with the same licensee also represents another party to the same transaction.

VA Loans: Loans partially guaranteed by the Veteran’s Administration, enabling veterans to buy a home with little or no down payment.


Buyer's Guide

Tips for First Time Buyers

Buyer Frequently Asked Questions

10 Things Buyers Should Avoid

What To Do First: Buy or Sell?

Making an Offer


Simplify the Home Buying Process

Relieving the Stress of Packing

Land Buying Advice

Real Estate Glossary

Facts About Easements

Facts about Radon & Radon Testing

Lead Based Paint Facts & Disclosures

Mold in the Home

Saying "I Do" to First Homes

What is a CMA and Why Do You Need One?

How to Negotiate with Sellers



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