A

Abstract (Of Title):
A summary of the public records to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase it.

Acceptance:
A positive response to an offer or counter-offer.

Adjustable Rate Mortgage:
A mortgage that allows the interest rate to be adjusted according to an index after a specific period of time.

Agent:
A person licensed by the State Real Estate Commission to act on behalf of another in a real estate transaction.

Agreement of Sale:
A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

Amortization:
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal over the term of the mortgage.

Appraisal:
An expert judgment or estimate of the quality or value of real estate as of a given date. All appraisals should be in writing.

"As-is" agreement:
Certifies that a buyer accepts whatever physical condition a property is in at the time the contract is signed. This may be controlled by state and local regulations

Assessed Value:
The value placed on land and improvements of a property by the city, county or state to determine property taxes.

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.

B

Balloon Mortgage:
A mortgage that has a substantial amount of principal due upon maturity of the loan.

Bridge Loan:
An equity mortgage placed on presently owned real estate that is used to finance the down payment of newly acquired real estate.

Broker:
An experienced agent licensed by the state real estate commission to supervise other licensed agents acting on behalf of others in a real estate transaction.

Buyer's Agent:
A broker and the agents under his or her supervision who have been formally appointed by a buyer to act on its behalf in a real estate transaction.

C

Cap:
A maximum or ceiling of interest that can be charged on a mortgage when it is adjusted.

Certificate of Title:
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Clear title:
A title to a property that is free of legal challenges to ownership.

Closing Costs:
The expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items pre-paid at the closing day. Typical closing costs include:

The agreement of sale negotiated previously between the buyer and the seller normally states in writing who will pay each of the above costs.

Closing Day:
The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Comparative market analysis:
A listing of recent home sales in the neighborhood, used as a basis for price comparison. This analysis is prepared by a real estate agent. Also called a "comp."

Commission:
Money paid to a real estate agent and broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price--6 to 7 percent on houses and 10 percent on land.

Condominium:
A residential development in which an owner owns one unit plus a percentage of the common areas and pays a maintenance fee to a condominium association for maintenance, insurance, management, repairs and improvements to the property.

Contingency:
A contractual provision that renders an agreement incomplete until a designated event (such as the buyer selling their current house, an inspection or some other action ) occurs.

Contract of sale:
A written signed agreement in which the seller agrees to sell and the buyer agrees to buy a particular property under specific terms and conditions.

Conventional Mortgage (Loan):
A fixed-rate, fixed-term loan that is made by a bank or other lending source. It is subject to conditions established by the lending institution and State statutes. Mortgage rates vary between lending sources.

Convey:
When real property is transferred from one owner to another.

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 credit worthiness. Independent sources compile the report, which lists the borrower's debts, liabilities and assets.

D

Deed:
A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, signed and witnessed according to the laws of the State where the property is located, and delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee.

Deed of Trust:
Like a mortgage, a security instrument whereby real property is given as security for a debt. If the borrower pays the debt as agreed, the deed of trust becomes void. If he/she defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust.

Depreciation:
Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Disclosed Dual Agent:
A broker and the agents under his or her supervision who represent both parties in a real estate transaction, after obtaining the written informed consent of both parties.

Documentary Stamps:
A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies by State.

Down payment:
The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. Down payment is the difference between the sales price and maximum mortgage amount. The down payment may not be refundable if the purchaser fails to buy the property without good cause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down payment and to pay interest and expenses incurred to the purchaser.

E

Earnest Money:
The deposit money given to the seller (or agent) by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited, unless the offer to purchase expressly provides that it is refundable.

Easement Rights:
A right-of-way granted to a person or company authorizing access to or over the owner's land. 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. An electric company obtaining a right-of-way across private property is another common example. Easements may restrict changes a buyer can make to a property

Encroachment:
An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance:
A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another.

Equity:
The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property.

Escrow:
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual.. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.

Exclusive Right-To-Sell:
A written agreement between the broker and the owner, whereby the owner promises to pay a fee or commission to the broker if his or her property is sold during the listing period.

F

Fair Credit Reporting Act:
A federal law that gives consumers the right to see their credit records and correct any mistakes.

Fannie Mae:
Nickname for the Federal National Mortgage Association, which buys and sells FHA and VA mortgages.

FHA Mortgage:
A mortgage loan insured by the Federal Housing Administration.

Fixed-Rate Mortgage:
A loan that has only one stated interest rate.

Foreclosure:
A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property.

Freddie Mac:
Nickname for the Federal Home Loan Mortgage Corporation which buys and sells FHA, VA, and, conventional loans from the members of the Federal Reserve System and Federal Home Loan Bank System.

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.

G

General Warranty Deed:
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

H

Hazard Insurance:
Protects against damages caused to property by fire, wind-storms, and other common hazards.

Home Inspection:
An examination of the physical structure and systems of a home and property.

HUD:
U.S. Department of Housing and Urban Development.

I

Interest:
A charge paid for borrowing money. See also mortgage note.

L

Lien:
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also special lien.)

Listing Contract:
A written agreement between a seller and a broker that allows the broker to show the property during a given time period for a stated commission.

Loan Application Fee:
The charge paid by the buyer to the lender when applying for a mortgage.

Loan Origination Fee:
The charge paid by the buyer to the lender for processing a mortgage.

M

Marketable Title:
A title that is free and clear of objectionable liens or other title defects. A title enables an owner to sell his property freely to others and which others will accept without objection.

Market Value:
The highest price a buyer is willing to pay and the lowest price a seller is willing to accept.

Mechanic's lien:
Any payment owned to a contractor for work done on the property.

Mortgage lien:
The unpaid balance on the mortgage loan.

Mortgage:
A lien or claim against real property given by the buyer to the lenders security for money borrowed. Mortgages generally run from 10 to 30 years, during which time the loan is to be paid off.

Mortgage Commitment:
A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance:
A policy that provides protection for the lender in the case of default. It may also guarantee repayment of the loan in the event of the death or disability of the borrower.

Mortgage Note:
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it will be paid. It states the amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgage (Open-End):
A mortgage with a provision that permits borrowing additional money in the future without re-financing the loan or paying additional financing charges. Open-end provisions often limit such borrowing to no more than the balance to the original 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.

O

Offer to Purchase:
A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited, unless the binder expressly provides that it is to be refunded.

Option:
The right to purchase property under certain terms for a specified period of time.

P

Plat:
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Points:

Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on their loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited by law from paying points on HUD or Veterans' Administration guaranteed loans -however, sellers may pay. On a conventional mortgage, points may be paid by either party or split between them.

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. Do not confuse with pre-qualification.

Prepayment:
Payment of mortgage loan, or part of it, before due date. Mortgage agreements may restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment.

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.

PMI:
Private mortgage insurance provides protection for the lender when the borrower's down payment is less that 20% of the purchase price.

Principal:
a. The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.
b. A person who appoints another person to act as his or her representative.

Purchase Agreement:
See agreement of sale.

R

Real Estate Broker:
An agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, and represents the owner.

Recording fee:
Fee charged by a government for entering into the public record a real estate purchase or sale.

Re-financing:
The process of the same mortgagor paying off one loan with the proceeds from another loan.

Restrictive Covenants:
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. For example, a restrictive covenants might limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating.

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.

Rollover Loan:
A loan that is renewed at an established time at then current market interest rates.

S

Sales Agreement:
See agreement of sale.

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.

Special Assessments:
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

Special Lien:
A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf.

State Stamps:
See documentary stamps

Survey:
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

T

Take-back:
A loan made directly from the seller to the buyer.

Tax:
As applied to real estate, a charge imposed on persons, property or income, to be used to support the State. The governing body utilizes the funds in the best interest of the general public.

Tax lien:
A type of lien placed on a title when the owner has not paid property or assessment taxes or other state and federal taxes.

Title:
Indicates evidence and quality of ownership in real estate and possession of particular property. Title may also refer to the instruments or documents by which a right of ownership is established.

Title company:
A company that performs and insures title searches. Usually selected by the seller, they sometimes work as a lender's agent.

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:
Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy. An owner should purchase an "owner's title policy", if they desire the protection of title insurance.

Title Search:
A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.

Townhouse:
A residence, often two or three stories, that is connected by a common wall to another residence.

Trustee:
A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

V

VA Mortgage:
A mortgage loan guaranteed by the Veterans Administration.

W, X, Y

Walk-through:
The final tour of a home prior to closing during 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.

Z

Zoning Ordinances:
The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

* These definitions are general and not legal.