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Buyers, Sellers, Lessors and
Lessees of real estate will find
this glossary helpful for understanding words
and terms used in real estate
transactions. Terms are defined as they
are commonly understood in the mortgage and real
estate industry, however, the same terms may have
different meanings in another context. State
laws, as well as custom and use in various States
or regions of the country, may modify or
completely change the meanings of certain terms
defined.
Before
signing any documents or depositing any money
preparatory to entering into a real estate
contract or lease, you should consult with an
attorney of your choice to ensure that your rights
are properly protected.
A
-
- Acceptance
- A
positive response to an offer or counteroffer.
An acceptance may be "conditional," "express,"
"implied" or "qualified."
- Agent
- Someone who acts on behalf of
another for a fee, such as a real estate agent.
- Appraisal
- An
estimate of value, as determined by an
independent agent familiar with local real
estate values.
- "As-is" agreement
- Certifies that a buyer accepts
whatever physical condition a property is in at
the time the contract is signed. May be
controlled by state and local regulations.
- Assumption
- When a buyer assumes the loan
payments and obligations of the seller. If the
purchaser defaults, however, both the buyer and
seller are responsible for the debt.
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B
-
- Broker
- A
licensed real estate professional who,
typically, represents the seller of a property.
A broker's duties might include determining
market values, advertising properties for sale,
showing properties to prospective buyers, and
advising clients with regard to offers and
related matters.
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C
-
- Clear title
- A
title to a property that is free of legal
challenges to ownership.
- Closing costs
- Costs associated with the purchase
of a home that must be paid at the sale closing.
These could include mortgage fees, title
insurance, appraisal and inspection fees and
points.
- Comparative market analysis
- A
listing of recent home sales in the
neighborhood, used as a basis for price
comparison. This is prepared by a real estate
agent. Also known as a "comp."
- Condominium
- Piece of a large property that is
owned as an individual unit. Ownership includes
a non-exclusive interest in certain "common
properties" controlled by the condominium
organization.
- 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.
- Co-signer
- A
person who assumes joint liability for a loan.
The co-signer of a loan agreement is not
necessarily, however, a co-owner.
- Contingency
- A
contractual provision that renders an agreement
incomplete until a designated event (such as an
inspection or an escrow payment) occurs.
- Credit
- A
measurement of a person's ability to pay bills
on time. Several companies track individuals'
credit histories by detailing late or missed
payments on loans, credit cards and other debts.
- Credit report
- Used by lenders to determine a
potential borrower's creditworthiness.
Independent sources compile the report, which
lists the borrower's debts, liabilities and
assets.
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D
-
- Deed
- A
document that transfers real estate from one
party to another. Officially recorded in
government records.
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E
-
- Easement
- A
landowner can grant a second party the right to
use land in a certain way. For example, if you
need to cross your neighbor's property to access
your garage, you would ask your neighbor to
grant you an easement. Easements may restrict
changes a buyer can make to a property.
- Encroachment
- Anything belonging to one
landowner that extends onto an adjacent
landowner's property is considered an
encroachment. A fence that is a few inches over
the property line is one example.
- Encumbrance
- A
problem with the title to a property that does
not affect the transfer of ownership.
- Equity
- The
actual cash value of property after all claims
against the property have been paid.
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F
-
- Fair Credit Reporting Act
- A
federal law that gives consumers the right to
see their credit records and correct any
mistakes.
- Front ratio
- The
proportion of a purchaser's income that lenders
will allow for principal, interest, taxes and
insurance on a property. Used in the evaluation
of a loan application.
- Full disclosure
- A
requirement that sellers fully disclose all
known defects in a property when selling it.
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J
-
- Judgment
- An
unpaid, court-ordered monetary judgment against
a current or previous property owner.
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L
-
- Lien
- Any
claim against a property, including mortgages,
unpaid taxes or repair bills or other unpaid
charges. Prospective property buyers conduct a
title search to determine whether any liens
against the property exist. A lien must be filed
or recorded with the local county government to
be attached to a property title.
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M
-
- Mechanic's lien
- Any
payment owned to a contractor for work done on
the property.
- Mortgage lien
- The
unpaid balance on the mortgage loan.
- Multiple listing service
- The
multiple listing service, or MLS, is a local
database that lists homes for sale. Member real
estate agents can access the MLS and show listed
homes to potential buyers.
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O
-
- Offer
- A
bid for a home purchase. Generally, it is made
in writing. Offers may be withdrawn without
penalty prior to acceptance or rejection; if
accepted, the offer becomes binding.
- Option
- The
right to buy or sell property or sign a
contract, based upon certain terms and
conditions. Usually applicable to specific time
frames during which the "option" may be
exercised.
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P
-
- Plat
- A
map that shows all boundaries of a piece of
property.
- 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.
- Pre-qualification
- Some lenders "pre-qualify"
mortgage applicants in less than an hour by
performing cursory checks. Seldom can a lender
fully check an applicant's credit, asset and
debt status this quickly, so final approval
typically takes at least a few more days. Though
such preliminary pre-qualifications may soon
lead to a full pre-approval, there is no
guarantee until the applicant receives a letter,
certificate or wallet-size card bearing the
mortgage-holder's name and maximum loan amount.
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R
-
- Recording fee
- Fee
charged by a government for entering into the
public record a real estate purchase or sale.
- Right of first refusal
- A
priority arrangement that grants a particular
prospective buyer the first right to purchase a
property, given certain agreed-upon conditions.
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S
-
- Self-amortization
- Occurs when monthly payments allow
a loan to be repaid, including principal and
interest, over its terms without any balloon
- Settlement (Closing)
- The
process by which all financial dealings and
contractual arrangements are completed for the
buyer and seller. At the time of settlement, or
closing, all debts are paid, adjustments made
and money disbursed, and a deed is prepared in
the new owner's name.
- Survey
- A
professional examination of a property. A survey
usually will reveal the size of a property, its
boundary distances, ground contours and where
improvements or alterations have been made.
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T
-
- T ax
- A
type of lien placed on a title when the owner
has not paid property or assessment taxes or
other state and federal taxes.
- Take-back
- A
loan made directly from the seller to the buyer.
- Tax basis
- The
value of your home for tax purposes.
- Title
- Evidence of the right of property
ownership; can be held solely, jointly, in
common or in corporate or partnership form.
- Title company
- A
company that performs and insures title
searches. Usually selected by the seller, they
sometimes work as a lender's agent. Depending on
the preferences of the seller, buyer and others
involved in the sale, the closing might take
place at the title company's offices.
- Title defect
- Anything that is wrong with a
title -- including an easement, encroachment or
lien -- that has not been recorded with the city
building department or the county recorder's
office.
- Title insurance
- Insurance that protects a property
owner against defects to or claims against a
property. Typically purchased by the buyer upon
closing, sometimes as required by the lender.
Title companies issue the policies.
- Townhome
- A
residence, often including two or three stories,
that is connected by a common wall to another
residence.
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W
-
- Walk -through
- A
final tour of a home after the sale closing in
which any defects are noted.
- Warranty
- A
protection plan, generally paid for by the
seller, that protects the buyer against major
repair expenses and breakdowns. Warranties are
assigned to specific items, usually major
appliances or systems on the property.
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