Real Estate Terms You Should Know

Real Estate Terms You Should Know

abstract of title – The ‘cliff notes” history of a title to a parcel of real estate.

adjustable-rate mortgage (ARM) – A mortgage with a fluctuating interest rate.

agent – The real estate company who represents the buyer or seller.

amortized loan – The way most loans are paid – typically monthly to cover the principal plus interest. Most loans are amortized over 30 years.

annual percentage rate (APR) – The total finance charges associated with a loan.

appraisal – An estimate of a property’s value by a professional appaiser, not a real estate sales person or agent.

appraisal report – The report of a property’s estimated value. Based on most recent sales of homes in the same or nearby neighborhoods of like quality and features.

assessment – A tax, charge, or levy that the government imposes on the property and is paid by the property owner.

balloon payment – A final mortgage payment that is larger than normal to account for full amortization.

broker – One who acts as an intermediary on behalf of others for a fee or commission.

brokerage – The technical name for when a buyer, seller and their representatives execute a transaction.

buyer-agency agreement – An agreement that a broker will represent the buyer. The agent owes the buyer a position of trust.

buyer’s agent – A buyer’s representative or broker. Frequently referred to as an ‘agent.’

buyer’s broker – A broker who only works with buyers.

certificate of title – A certification of the status of the title.

chain of title – A search of all past owners of real estate and how property was conveyed.

Civil Rights Act of 1866 – An act that prohibits racial discrimination in the sale and rental of housing.

client – The principal.

closing – The final meeting of a sales transaction in which all promises and exchange of money are made.

closing statement – An account of all incoming and outgoing funds for both buyer and seller.

commission – The payment made to the broker, usually a percentage of the selling price.

comparables – Homes of comparable location, style and amenities to a listing.

competitive market analysis (CMA) – An analysis of similar homes to the listing to help derive the listing’s value and selling price.

condominium – A wholly owned property in a multi-unit building.

conventional loan – A loan that requires no insurance or guarantee. Conventional loans require a down payment of 20 percent.

counteroffer – A response that rejects the original offer and suggests a new offer. Part of the negotiation process.

deed – A written statement proving ownership or interest in a property.

deed restrictions – Clauses in a deed that impose limitations of use or conditions on a property.

Department of Housing and Urban Development (HUD) – Governmental department that has established rules and regulations that further interpret the practices affected by the law.

discount point – A unit of measurement used for various loan charges; one point equals 1 percent of the amount of the loan.

dual agency – When a broker represents both buyer and seller.

earnest money – Collateral from the buyer to ensure compliance with a contract.

encroachment
– Any part of a home or property that extends onto another property of public right-of-way.

encumbrance – Anything that makes a property not 100% owned by one principal or limits its use.

Equal Credit Opportunity Act (ECOA) – Federal law that prohibits any type of discrimination in issuing credit.

equity – The value of a property less any debts or obligations.

escrow – Funds held by a 3rd party and delivered upon certain condition.

Fair Housing Act – The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, and national origin.

fee simple – The highest interest rate in real estate recognized by the law; the holder is entitled to all rights to the property.

fee simple absolute – The maximum possible estate or right of ownership of real property, continuing forever.

FHA loan – A loan insured by the Federal Housing Administration (FHA) through a lender, usual a bank or mortgage company.

fiduciary – One in whom trust and confidence is placed. Usually the salesperson or broker.

fiduciary relationship – The relationship between a trustee and his or her designated representative. Often used to describe the broker and client relationship.

foreclosure
– A procedure when a house is taken over by the bank or another due to defaulting on the mortgage.

general warranty deed – A deed in which the grantor fully warrants good clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed.

home equity loan
– A line of credit or loan in which a homeowner’s property is used as collateral.

homeowner’s insurance policy – A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability, and other common risks.

interim financing – A short-term loan.

joint tenancy – Ownership by two or more persons. If one owner dies than the other owner receives the deceased person’s interest.

lien – A legal right for a creditor to be paid out of the property value by the debtor.

listing agreement – A contact between a homeowner and a broker to sell the property in exchange for a commission.

listing broker – The broker that lists real estate for sale for the seller. In Indiana, the listing broker may also be the buyer’s broker. This is called dual or limited agency

market value – The likely price of a property.

mortgage
–The pledge of real estate in order to obtain a loan. The mortgage is also a lien on the property.

mortgage banker –The bank or mortgage company that issues the mortgage loan.

mortgage broker – The bank or mortgage company representative.

mortgage lien – The legal right by the mortgage company to require payment by the borrower.

mortgager – A borrower in a mortgage loan transaction.
The person borrowing money from a bank or mortgage company.

multiple listing service (MLS) – An authorized listing service exclusive to its members. In the Indianapolis area the MLS is referred to as the BLC (Broker Listing Cooperative)

offer and acceptance – Required for a valid contract between buyer and seller.

prepaid items – Items already paid by the seller that must be reimbursed by the buyer.

prepayment penalty
– A fee for paying off a debt ahead of schedule.

principal – The amount of money loaned.

private mortgage insurance (PMI) – Insurance paid by a borrower protecting the lender against a loss.

radon – A naturally occurring gas that is suspected of causing lung cancer.

real estate – A piece of property and everything on it such as trees, a house or a lake.

real estate license law – State law enacted to protect the public from fraud, dishonesty, and incompetence in the purchase and sale of real estate.

REALTOR® – A registered trademark term reserved for sole use of active members of local REALTOR® boards affiliated with the National Association of REALTORS®.

recording – When one files paperwork with the county recorder’s office. All real estate must be recorded to protect the owner.

redlining – The illegal practice of a lending institution denying loans or restricting their number for certain areas of a community.

restrictive covenants – A clause that limits how a property can be used.

salesperson – A person who performs real estate activities while employed by or associated with a licensed real estate broker.

steering – The illegal practice of channeling home seekers to particular areas, either to maintain the homogeneity of an area or to change the character of an area, which limits their choices of where they can live.

tax lien – A lien on property created by local government due to not paying property taxes.

title – (1) The right to ownership or the ownership of land. (2) The evidence of ownership of land.

Title insurance – A policy protecting the owner against problems with the title.

title search – Searching public records to learn ownership information.

Truth-in-Lending Act – Federal government regulates the lending practices of mortgage lenders through this act.

VA loan – A mortgage loan available to qualified veterans.

zoning ordinance – Regulation over how a property can be used established by local ordinances.