Oaktree Realtors - Printer Friendly Page

Glossary of Terms

Abstract of Title: A summary of all conveyances, such as deeds or wills and legal proceedings, giving names of the parties, the description of the land and the agreements, arranged to show the continuity of ownership.

Acceleration Clause: A clause authorizing the lender to collect the total debt if the borrower defaults on his mortgage payments.

Access: The right to enter and leave a tract of land from a public way.

Agency: A legal relationship in which an owner/principal engages a broker/agent in the sale of property or buyer/principal engages a broker/agent in the purchase of property.

Amortized Loan: The act or process of extinguishing debt, with equal payments at regular intervals over a specific period of time.

Appraisal: An estimate of the value of a property.

Appreciation: An increase in value of real estate, due to economic or related causes which may be either temporary or permanent.

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

ARM: Adjustable-Rate Mortgage; A loan that allows the interest rate to be changed periodically.

Assessed Value: The value placed on a property by a public tax assessor as the basis of property taxes.

Assumption of Mortgage: Agreement by the buyer to assume responsibility for a mortgage owned by the seller. The seller remains liable to the lender unless the lender agrees to release him.

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

Broker: A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business. A broker must pass an examination and have experience as a realtor for a period of time (will vary from state to state) before that person is allowed to take the broker test.

Buydown: A payment to the lender from the seller, buyer, or third party that will cause the lender to reduce the interest rate during the early years of the loan.

Cap: A maximum amount of interest that can be charged.

Closing: Point of a real estate transaction when the seller transfers title (ownership) to the buyer in exchange for the purchase price.

Closing Costs: Fees and charges (not including the price of the home) payable by the seller and the buyer at the time of closing such as brokerage commissions, title insurance, inspection, appraisal fees

Condominium: A form of property ownership providing for individual ownership of an apartment or other space, and undivided interest in land and common areas of the structure.

Contract for Deed: Similar to a mortgage, used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer. (Also Land Contract)

Contingency: A condition that must be met before a contract is binding such as a property inspection, financing, a house to sell.

Conventional Loan: A fixed-rate, fixed-term loan that is made without government underwriting (e.g. not FHA insured or VA guaranteed).

Counteroffer: A new offer made as a result of another offer, which cancels the original offer.

Deed: An instrument in writing, that when executed and delivered, conveys title.

Discount Points: Additional charges made by the lender at the time a loan is made. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate market level. One point = one percent.

Earnest Money Deposit: A payment given to the seller by a potential buyer indicating the buyers intent to complete the purchase of a property under the terms of a contract. If the buyer defaults, the earnest money is forfeited. It is applied to the purchase price if the sale is closed.

Easement: The right to use or enjoy certain privileges that appertain to the land of another by reason of an agreement of record with the owner of adjacent property (example, right of way).

Encroachment: A building or some portion of it - a wall or fence - that extends beyond the land of the owner and illegally intrudes upon some land of an adjoining owner or a street or alley.

Encumbrance: Any lien, such as a mortgage, tax, or judgment lien, an easement, a restriction on the use of the land.

Equity: The value of the interest of an owner of property less encumbrances on that property.

Escrow: Money placed with a third party for safekeeping pending the fulfillment or performance of a specific contract or condition.

FHA Loan: A loan which has been insured by the federal government guaranteeing its payment in case of default by the borrower.

FmHA Loan: Similar to an FHA loan, usually used for residential properties in rural areas.

Fee Appraisal: The process through which estimates of property value are obtained for a fee; the estimate of value of property.

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

Foreclosure: A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document.

HUD: Housing and Urban Development- U.S. government agency that implements certain federal housing and community development programs.

Joint Tenancy: A tenancy shared equally by two or more parties with the right of survivorship.

Judgment: The formal decision of a court upon the respective rights and claims of the parties to an action or suit. After a judgment has been entered and recorded, it usually becomes a general lien of the property of the defendant.

Lien: A legal claim against a property that must be paid when property is sold.

Listing Agreement: A contract between a landowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed as agent to sell real estate on the owner's terms within a given time, for which service the landowner agrees to pay a commission.

Loan Origination Fee: A fee you must pay to the lender for processing your mortgage.

Marketable Title: Clear title with no undisclosed encumbrances, has no serious defects and will not expose the buyer to litigation.

Market Value: The highest price a ready, willing, and able buyer will pay and the lowest price a seller will accept.

Mortgage: A lien on real estate given by the buyer as security for money borrowed from a lender.

Mortgage Insurance: A policy that provides protection for the lender in case of default and guarantees repayment of the loan in the event of death or disability of the borrower.

MLS: Multiple Listing Service; A marketing tool used by members of the service to expose properties to a wider market base.

Option: An agreement to keep open for a set period an offer to sell or purchase property.

Origination Fee: A fee charged the borrower by the lending institution.

Personal Property: Any property which is not real, e.g. money, cars, etc.

Points: A dollar amount, expressed as a percentage of the mortgage amount, which is paid to a lender as a consideration for making a loan. A point is 1% of the amount of the mortgage loan; also called discount points.

Prepayment Penalty: A charge imposed on a borrower by a lender for early payment of the loan principal to compensate the lender for interest and other charges that would otherwise be lost.

P & I: Principal and Interest Payment; A monthly payment that includes the interest charges for the period plus an amount applied to amortization of the principal balance.

PITI: Principal, Interest, Taxes, and Insurance Payment; A monthly payment that includes the principal and interest payment plus a contribution to the escrow account set up by the lender to pay insurance premiums and property taxes on the mortgage property.

Promissory Note: Once the lender agrees to make a loan, the borrower signs a note promising to repay the loan under designated terms.

Purchase Agreement: An agreement between a buyer and a seller for the purchase of real estate.

RealtorŪ and Realtor Associate: Registered and licensed designation that identifies real estate professionals who are members of the National Association of Realtors and subscribe to its strict Code of Ethics.

Realty: Real estate, land and whatever naturally or artificially is a part of it.

Special Assessment: A charge laid against real estate by public authority to defray the cost of making public improvements from which the real estate benefits.

Subdivision: Area of land that has been divided into smaller plats, suitable for building.

Tenancy in Common: A tenancy shared by two or more parties, without right of survivorship; interests need not be equal.

Title: A document that is evidence of ownership.

Title Insurance: Protection for lenders and homeowners against financial loss resulting from legal defects in the title.

Title Search: A check of title records to identify liens, encumbrances, and ownership rights to the property.

Trust Account: Bank account set up by broker to deposit funds entrusted to him by his principals.

VA Loan: A loan guaranteed by the veterans administration insuring payment in case of default by the borrower. Available to qualified veterans.

Warranty Deed: Conveyance of title that contains certain assurances and guarantees by the grantor that the deed conveys a good and unencumbered title.

Zoning: Government regulation of land use; of such matters as height, bulk, and use of buildings and use of land intended to accomplish desirable ends.