Agent. A person who acts or has the power to act for another. A fiduciary relationship is created under the "law of agency" when a property owner, as the principal, executes a listing agreement or management contract that authorizes a licensed real estate broker to be the agent. In this example, the property owner would be called the principal. See also Real Estate Agent below.
Agreement of Sale. Known by various names, such as "contract of purchase," "purchase agreement," "sales agreement" or "binder," according to location or jurisdiction. 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.
Annual Percentage Rate (APR). This is the relationship of the total finance charges associated with a loan. It includes the quoted interest rate on the loan plus all additional service and finance charges, and includes all of the costs of financing; those paid at the time of closing and those paid over the term of the loan. The APR is usually slightly higher than the note rate. This rate must be disclosed to borrowers by lenders under he Truth-In-Lending Act.
Appraisal. An expert judgment or estimate of the quality, quantity or value of real estate as of a given date. The process through which conclusions of property value are obtained, but it also refers to the report that sets forth the process of estimation and conclusion of value.
Assessed Value. Also known as the Assessment, this is the valuation placed upon property by a public tax assessor as the basis for taxes, charges or levies, usually according to established rates.
Bill of Sale. An instrument that transfers title to personal property (chattels); a "Deed" transfers real property.
Buyer's Agent. A residential real estate broker or salesperson who represents the prospective purchaser in a transction. The buyer's agent owes the buyer (the principal) the common-law or statutory agency duties. See also Understanding the Role of Real Estate Agents.
Certificate of Title. A document signed by a title examiner or attorney, stating that the seller has good marketable and insurable title, based on an examination of the specified pubilc records.
Closing Statement (Settlement). The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the real estate and seller's net proceeds. Also, known as "settlement sheets" of the "HUD-1," it is a detailed cash accounting of a real estate transaction that showns all cash received, all charges and credits made and all cash paid out in the transaction of transferring real estate from one person to another.
Commission. Payment to a real estate broker for services performed, such as the sale or purchse of real property.l This is usually a percentage of the selling price of the property..
Convey or conveyance. To deed or transfer title of property from one person to another, which usually would apply to certain fixtured (shelving units, lighting, window dressings, etc.) that are to be transferred in the sale of a property.
Deed. A formal written instrument by which title to real property is transferred from one owner to another. Also, "conveyance".
Deed of Trust. Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender (or beneficiary).
Down Payment. The amount of cash that you will bring to settlement. This amount, plus the amount that you will finance with a mortgage, will make up the total price of the house you are buying.
Earnest Money. The money that is deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults, but is applied to the purchase price if the sale is closed. This money is usually held in escrow upon the signing of the agreement of sale to show that buyer is serious about buying the house. This is also known as the "deposit."
Equity. The interest or value which a property owner has in real estate over and above the debts against it. (Sales Price - Mortgage Balance = Equity).
Escrow Account. A trust account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction. The escrow may be released upon the fulfillment of certain conditions or by agreement of the parties.
Fixture. An item of personal property that has been converted into real property by being permanently afixed to the real property. These items convey with the property when it is sold.
Hazard Insurance. Protects against damages caused to property by fire, windstorms, and other common hazards.
Homeowner Association Dues. The fees, paid monthly, quarterly, semi-annually or annually, that are collected by the company that provides management services to homes in a Homeowners Association (HOA). It pays for services provided to homeowners and maintenance of common areas.
Interest. A charge made by a lender for the use of money.
Listing Agreement. A contact made between a home owner (as principal) and a licensed real estate broker (as agent) by which the real estate broker and the real estate agent are employed to market the real estate within a given time for which service the owner agrees to pay a commission. Also referred to as the "listing contract." See also Understanding the Role of Real Estate Agents.
Market Value. The highest or most probable price that a buyer, ready, willing and able but not compelled to buy, would pay, and the lowest price a seller, ready, willing and able but not compelled to sell, would accept. This is the basis for determining the "listing price" or "asking price" for a property when executing the listing agreement.
Mortgage Loan. A conditional transfer or pledge of real estate as security for the payment of a debt. It is also the document creationg a mortgage lien (also known as a deed of trust in Maryland).
Mortgage Note. A written agreement to repay a loan. The agreement is secured by a mortgage, and serves as proof of an indebtedness. It states the manner in which it shall be paid. Also known as a "deed of trust note."
P.I.T.I. Principal, interest, taxes, and insurance. Most residential mortgage payments include the above and are therefore referred to as P.l.T.I. This is also know as the "carrying charges" on a mortgage or deed of trust.
Points. Sometimes called "discount points," it ius a unit of measurement used for various loan charges. One point equals one percent of the amount of the mortgage loan.
Pre-payment Penalty. A penalty charge imposed on a borrower who pays off the loan principal early. This penalty compensates the lender for interest and other charges that would otherwise be lost.
Pre-qualification. The first step in obtaining financing for a mortgage loan. It involves a preliminary review of your assets, liabilities, income and expenses, to help you determine the amount of a monthly mortgage payment you can handle. While an experienced Realtor can help you with this process, the best pre-qualificaiton is done by a loan officer who works for a mortgage company.
Principal. This word has several meanings:
See also Understanding the Role of Real Estate Agents.
Private Mortgage Insurance. Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency by the purchaser of a home.
Property Management. The operation of real property, including the leasing of space, collection of rents, selection of tenants, and the repair and renovation of the buildings and grounds.
Property Taxes. The taxes paid, usually once a year, to the County or other local jurisdiction where real property is located. This is paid from an escrow account established by the mortgage lender.
Prorate. To allocate between seller and buyer their proportionate share of an obligation paid or due. For example a prorate of real property taxes, fire insurance, or condominium fee.
Real Estate Agent, Sales Associate or Salesperson. A person with a real estate license and associated with a specific real estate broker. In my case, I am a Real Estate Agent who is associated with Long & Foster Real Estate, Inc., the real estate broker. See also Understanding the Role of Real Estate Agents.
Sales Price, Purchase Price or Market Price. The actual amount for which a piece of property is sold.
Survey. The process by which boundaries are measured and land areas are determined. It includes the on-site measurement of lot lines, dimensions and the position of a house on a lot, including the determination of any existing encroachments or easements. It is also 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 a building is actually sited on the land according to its legal description.
Title. As generally used, a document that indicates rights of ownership and possession of particular property. It is also the document that shows evidence of ownership of real property
Title Abstract or Abstract of Title. A summary or condensed history of the public records relating to the title to a particular parcel of real estate. It consists of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate. An attorney or title company reviews an abstract or title to determine whether there are any title defects.
Title Insurance. A policy that insures the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects and matters specifically excluded by the policy. This insurance protects lenders and home owners against loss of their interest in property due to legal defects in title.
Title Search or Examination. A check of the public records relating to real estate, 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.
Transfer Tax. State tax, local tax (where applicable) and tax stamps (in some areas) required by law to be affixed to a deed when title passes from one owner to another.
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