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Real Estate Glossary

 A - B - C - D - E - F - G - H - I - J - K - L - M - N - O
 P - Q - R - S - T - U - V - W - X - Y - Z

    ABR (Accredited Buyer Representative): The Real Estate Buyer´s Agent Council, the nation´s oldest and largest association of real estate practitioners addressing all aspects of consumer representation in the real estate transaction, has established a criterion for excellence in buyer representation. To attain this designation, real estate practitioners must complete an extensive classroom training program on buyer agency practices and procedures, pass a written examination and submit evidence of practical experience as a buyer´s representative.

    Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

    Adjustment Period: The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.

    Agent: A person who acts, or has the power to act for another. A real estate agent acts on behalf of the principal (the buyer or seller) and has fiduciary responsibilities towards the principal. See Buyer´s agent or Seller´s agent below.

    Agreement of Sale: A written agreement or contract in which the seller agrees to sell and the buyer agrees to buy under specific terms and conditions.

    Amenities: Features that enhance and add to the value or desirability of real estate. Common amenities include a swimming pool, clubhouse and a good view.

    Amortization: Repayment of a loan in installments of principal and interest, rather than interest-only payments.

    Annual Percentage Rate (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.

    Appraisal: The act or process of estimating value; an estimate of value.

    Appraiser: Someone who practices appraisal. Appraiser´s work involves appraisal (see above), review (the process of critically studying a report prepared by another), or consulting (the process of providing information, analysis of real estate data, and recommendations on diversified problems in real estate, other than estimating value).

    Assumption of Mortgage: A buyer´s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.    Top

    Balloon Payment: A lump sum principal payment due at the end of some mortgages or other long-term loans.

    Bridge Loan: A loan, usually short term, that finances the portion of the purchase price not provided by the mortgage loan and down payment. A bridge loan is commonly used when a purchaser has not sold his existing home before he closes on his purchase of a new home. The bridge loan is paid off when the old home is sold, out of the proceeds of that sale.

    Broker, as in real estate broker: A real estate professional who has acquired a higher level of training and/or experience than a sales agent. Generally, the legal representative or proprietor of the office.

    Buyer´s Agent: An agent who represents the buyer and owes fiduciary duties to the buyer.     Top

    Cap: The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

    Capital Gain: Income that results from sale of capital (tangible) asset.

    CC&R´s: Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.

    Certificate of Reasonable Value : A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.

    Closing: The point at which real estate formally changes ownership.

    Closing Costs: Costs the buyer and seller must pay at the time of the closing in addition to the down payment which may include points, title charges, mortgage insurance premium, prepayments for property taxes, and homeowners insurance. Closing costs for the buyer can be as much as three to four percent of the loan amount.

    Closing Statement: The financial disclosure statement that accounts for all the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.

    CMA (Competitive Market Analysis): A method of determining the value of a property by comparing the prices paid for similar properties.

    Condominium: A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors and ceilings) serve as its boundaries.

    Contingency: A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

    Conventional Loan: A fixed-rate, fixed-term loan that is made without government insurance.

    Conversion Clause: A provision in some ARMs that enables you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed-rate mortgages. This conversion feature may cost extra.

    Cooperative: A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.

    Counter Offer: A new offer as to price, terms, and conditions, made in response to a prior, unacceptable offer. A counter offer terminates an original offer.

    CRB (Certified Residential Broker): To be certified, a broker must be a member of the National Association of Realtors®, have five years experience as a licensed broker and have completed required Residential Division courses.

    CRS (Certified Residential Specialist): A professional designation awarded to experienced agents who complete an advanced course of study in residential real estate and have a history of demonstrated sales performance through the documented execution of residential sales transactions. Only 5% of Realtors, Nationwide, have earned the CRS designation.     Top

    Deed: A legal document by which property title is transferred from one owner to another.

    Down payment: The down payment is the percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender. The down payment amount, in addition to the mortgage, equals the purchase price of a property.

    Dual agency: Representing both parties in a transaction. In virtually all states, it is unethical and illegal for a broker to represent both buyer and seller in a real estate transaction without written consent of both.

    Due-On-Sale Clause: A clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.     Top

    Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.

    Equity: The value of the property, less the amount of unpaid mortgages and any outstanding liens.

    Escrow: A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties´ instructions and assuming responsibility for handling all of the paperwork and distribution of funds.

    Exclusive Agency Listing: A written agreement giving the broker the right to market an owner´s property for a certain period of time, but also allowing the owner to sell the property during that period without paying a commission.

    Exclusive Right-To-Sell: A written agreement between the agent and the owner, whereby the owner promises to pay a fee or commission to the broker if his property is sold during the listing period, regardless of whether the broker is responsible for the sale.     Top

    Fannie Mae: Nickname for the Federal National Mortgage Association, FNMA is a public corporation originally established by the federal government. Fannie Mae purchases mortgage loans from lenders, and thus, is a major source of funds for mortgage companies.

    Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

    FHA Loan: A loan insured by the Federal Housing Administration (of the Department of Housing and Urban Development).

    Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

    Freddie Mac (Federal Home Loan Mortgage Corporation): A federally chartered corporation established to purchase mortgages in the secondary, or resale, market. Freddie Mac´s policies are designed to serve the needs of savings and loan associations. It is subject to oversight by the U.S. Department of Housing and Urban Development (HUD).     Top

    Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

    GRI: Graduate, Realtors Institute. A professional designation granted to a member of the National Association of Realtors® who has successfully completed courses covering Law, Finance and Principles of Real Estate.     Top

    Home Inspection Report: A qualified inspector´s report on a property´s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

    Homeowners Insurance: Insurance that protects the homeowner from "casualty" (losses or damage to the home or personal property) and from "liability" (damages to other people or property). Homeowners insurance is required by the lender and is usually included in the monthly mortgage payment.

    Home Warranty Plan: Protection against failure of mechanical systems within the property. Usually includes plumbing electrical, heating systems and installed appliances.

    Department of Housing and Urban Development, a government agency created to make the American dream of home ownership a real possibility for everyone. HUD has many programs involving homeownership assistance for low-and moderate-income families, community planning and development, fair housing and equal opportunity, and home improvement loans. The Housing and Urban Development home page is a rich resource of information.     Top

    A measure of interest rate changes used to determine changes in an ARM´s interest rate over the term of the loan.

    Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent´s interest in the property.     Top

    Lein: A legal hold or claim on property as security for a debt or charge.

    Listing Contract: An agreement between a homeowner and a licensed real estate broker that authorizes the broker to market the property for sale during a given time period.

    Loan Commitment: A written promise to make a loan for a specified amount on specified terms.

    Loan Origination Fee: A fee charged by the lender for evaluating, preparing and submitting a proposed mortgage loan.

    Loan-To-Value Ratio: The ratio of a mortgage loan principal to the property´s appraised value or its sales price, whichever is lower. Loan-to-value ratios vary depending upon the individual lender´s policy.

    Lock-In Rate: A commitment made by a lender to make a mortgage loan at a specified rate, pending loan approval, on or prior to a specified date.     Top

    Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

    Market Value: The highest price a buyer will pay for a property and the lowest price the seller will accept.

    Mortgage: A lien on real estate given by the buyer to secure repayment of money borrowed to purchase the real estate.

    Mortgage Broker: An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private sources to lend the money; may also handle collections and disbursements.

    Mortgage Insurance: An insurance plan that protects the lender if the borrower does not repay a loan. Mortgage insurance is required when a home buyer makes less than a 20% down payment at the time of purchase. Private mortgage insurance (PMI) covers conventional (fixed-year, fixed-rate) loans. The Federal Housing Administration charges a mortgage insurance premium (MIP) on FHA loans.

    Mortgage Life Insurance: A type of term life insurance bought by some home buyers. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the mortgage debt is automatically covered by insurance proceeds.     Top

    National Association of Realtors®: The National Association of Realtors® is the largest trade association in the country serving over 700,000 Realtors®. The purpose of the National Association of Realtors® is to enhance the ability and opportunity of its members to conduct business successfully and ethically, and to promote the preservation of the right to own, transfer, and use real property.

    Negative Amortization: Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn´t covered is added to the unpaid principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren´t high enough to cover the interest.     Top

    Offer: A proposal to purchase real estate at a particular price and subject to other specified terms and conditions. Acceptance of the offer by the seller creates a purchase contract. (Counter offer: An offer made in response to a different offer.)

    Origination Fee: A lender´s charge for establishing and processing a new mortgage loan. It is generally computed as a percentage of the loan and may be tax deductible.

    Owner of Record: The person named in the public record as the owner of a property or mortgage.     Top

    PITI Payment:
    A loan payment that combines Principal, Interest, Taxes and Insurance.

    Planned Unit Development (PUD): A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial.

    Point: An amount equal to 1 percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

    Prepayment Penalty: A fee charged to a borrower who pays a loan before it is due. Not allowed for FHA or VA loans.

    Private Mortgage Insurance (PMI): Insurance issued to a lender to protect it against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan-to-value ratios (generally in excess of 80%). The borrower pays the premiums.

    Purchase Agreement: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

    Principal: One of the parties to a transaction. For example, the buyer and seller are principals in the purchase of real property.

    Realtor®: A Realtor® is a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics. This distinguished professional is committed to protecting and promoting private ownership of real property, establishing and maintaining high professional standards of practice, and creating unity in the NATIONAL ASSOCIATION OF REALTORS® organization and respect for the real estate profession. When you want to buy or sell a home, call a REALTOR®.

    Regulation Z:
    The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.     Top

    Seller's Agent: An agent who represents the seller and owes fiduciary duties to the seller. Usually referred to as the listing agent, this agent is authorized by a property owner to find a buyer or a tenant for the property.

    Tenancy in Common: A type of joint ownership of property by two or more persons with no right of survivorship.

    Title: Ownership of real property. Title is transferred from one party to another through a document called a deed.

    Title Insurance Policy: A policy that protects the purchaser, mortgagee or other party against losses arising from title defects such as forged or misfiled documents.

    Title Search: An examination of the public records to determine whether the current title is clear or defective.

    Town House: A type of dwelling structure that usually shares a common wall between units.

    Trust: A property interest held by one person for the benefit of another.     Top

    VA or US Department of Veterans Affairs: A federal agency designed and operated to help veterans enter the housing market. The VA assists veterans in terms of low or no down payment, mortgage qualification assistance and low interest rates.

    VA Loans: A loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are made to honorably discharged veterans or their unremarried widows or widowers. Such loans require a minimal or no down payment and offer lower interest rates.

    Walk-Through: A final inspection of a property before it changes ownership.

    Additional Reference Guides:
    The Ultimate Language of Real Estate, 4th Edition, by John W. Reilly, Real
    Estate Education Company, Chicago, 1993.
    Webster´s New World Illustrated Encyclopedia Dictionary of Real Estate, 3rd Edition, by Jerome S. Gross, Prentice-Hall, New York, 1987.