Abandonment
The voluntary relinquishment of rights of ownership or another
form of interest (an easement) by failure to use the property over an
extended period of time.
ABR
The Accredited Buyer Representative designation idicates a real
estate agent specializing in representating buyers in the real estate
transaction.
Abstract (Of Title)
A summary of the public records relating 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 clear, marketable, and insurable title.
Acceleration Clause
Condition in a mortgage that may require the balance of the loan
to become due immediately, if regular mortgage payments are not made or
for breach of other conditions of the mortgage.
Acre
A measure of land, equal to 160 sq. rods (43,560 sq.ft.). An
acre is approximately 209' x 209'.
Acknowledgment
A formal declaration before an authorized official (usually a
notary public) by a person who has executed a document, that he did in
fact execute (sign) the document.
Addendum
Something added. A list or other items added to a document, letter,
contract, escrow instructions, etc.
Adverse Possession
A method of acquiring title by open and notorious possession
usually vary with each state.
Agent
Acts of behalf of another, representing that person's interests
and serving as an intermediary.
Agreement of Sale
Known by various names, such as contract of purchase, purchase
agreement, or sales agreement 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.
Alienation Clause
A clause within a loan instrument calling for a debt in its entirety
upon the transfer of ownership of the secured property. Also called a
"due on sale" clause.
Amortization
A payment plan which enables the borrower to reduce his debt
gradually through monthly payments of principal.
Appraisal
An expert judgment or estimate of the quality or value of real
estate as of a given date.
Assessed Value
Value placed on property by the tax assessor.
Assignment
A transfer or making over to another the whole of any property,
real or personal, or of any estate or right therein. To assign is to transfer.
Assumption of Mortgage
An obligation undertaken by the purchaser of property to be personally
liable for payment of an existing mortgage. In an assumption, the purchaser
is substituted for the original mortgagor in the mortgage instrument and
the original mortgagor is to be released from further liability in the
assumption, the mortgagee's consent is usually required.
Attachment
Seizure of property by court order, usually done in pending law
suit to make property available in case of judgment.
Balloon Payment
The final installment paid at the end of the term of a note;
used only when preceding installments were not sufficient to pay off the
note in full.
Bill of Sale
An instrument used to transfer personal property.
Binder or "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.
Blanket Mortgage (Trust Deed)
A single mortgage or trust deed which covers more than one piece
of real estate.
Bond
An insurance agreement by which one party is insured against
loss or default by a third party. In the construction business a performance
bond ensures the interested party that the contractor will complete the
project. A bond can also be a method of financing debt by a government
or corporation which is interest-bearing and has priority over stock in
terms of security.
Breach
Violation of an obligation in a contract
Broker, Real Estate
An agent licensed by the state to carry on the business of operating
in real estate. He usually receives a commission for his services of bringing
together buyers and sellers, owners and tenants, in exchange agreements.
Building Code
A set of stringent laws that control the construction of buildings,
design, materials and other similar factors.
Building Line or Setback
Distances from the ends and/or sides of the lot beyond which
construction may not extend. The building line may be established by a
filed plat of subdivision, by restrictive covenants in deeds or leases,
by building codes, or by zoning ordinances.
Built-Ins
Items that are not movable, such a stoves, ovens, microwave ovens,
dishwashers.
Buyers Market
A market condition which occurs in real estate where more homes
are for sale than there are interested buyers.
Capital Gains
A term used for income tax purposes which represents the gain
realized from the sale of an asset less the purchase price and deductible
expense.
Capitalization
An appraising term used in determining value by considering net
operating income and a percentage of reasonable return on investment.
Cash Flow
The owner's spendable income after operating expenses and debt
service is deducted.
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. A certificate of
title offers no protection against any hidden defects in the title which
an examination of the records could not reveal. 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.
Chain Of Title
A history of conveyances and encumbrances affecting the title
as far back as records are available.
Client
One who employs another's services, as in an attorney, real estate
agent, insurance agent, etc.
Closing
In the sale of real estate it is the final moment when all documents
are executed and recorded and the sale is complete. Also a general selling
term where a sales person is attempting to sell something and the buyer
agrees to purchase.
Closing Costs
The numerous 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 prepaid
at the closing day.
Closing Statement
A list of the final accounting of all Moines of both buyer and
seller prepared by an escrow agent which notes all costs each must pay
at the completion of a real estate transaction.
Cloud (On Title)
An outstanding claim or encumbrance which adversely affects the
marketability of title.
Commission
Money paid to a real estate agent or 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, 10 percent
on land.
Common Area
That area owned in common by owners of condominiums and planned
sight development homes within a subdivision.
Community Property
Both real and personal property accumulated by a husband and
wife after marriage through joint efforts of both living together.
Condemnation
A declaration by governing powers that a structure is unfit for
use.
Conditional Sales Contract
A contract for the sale of property where the buyer has possession
and use, but the seller retains title until the conditions of the contract
have been fulfilled. Also known as a land contract.
Condominium
Individual ownership of a dwelling unit and an individual interest
in the common areas and facilities which serve the multi- unit project.
Consideration
Anything of value given to induce someone into entering into
a contract.
Construction Loan
The short-term financing of improvements on real estate. Once
the improvements are completed a 'take out' loan for a longer term is
usually issued.
Contingency
A condition upon which a valid contract is dependent. For example;
the sale of a house is contingent upon the buyer obtaining adequate financing.
Contract
An agreement between tow or more parties, written or oral, to
do or not to do certain things.
Contractor
In the construction industry, a contractor is one who contracts
to erect buildings or portions of them. There are also contractors for
each phase of construction: heating, electrical, plumbing, air conditioning,
road building, bridge and dam erection, and others.
Conventional Mortgage
A mortgage loan not insured by HUD or guaranteed by the Veterans'
Administration. It is subject to conditions established by the lending
institution and State statutes. The mortgage rates may vary with different
institutions and between States. (States have various interest limits.)
Conveyance
The transfer of the title to land from one to another.
Counter Offer
An offer in response to an offer. 'A' offers to by 'B's' house
for $20,000 which is listed for $22,000. 'B' counter offers 'A's' offer
by stating that he will sell the house to 'A" for $21,000. The $21,000
is the counter offer.
Covenants
Agreements written into deeds and other instruments stating performance
or non-performance of certain acts or noting certain uses or non-uses
of property.
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, should be signed and witnessed
according to the laws of the State where the property is located, and
should be delivered to the purchaser at closing day. There are two parties
to a deed: the grantor and the grantee.
Default
Failure to make mortgage payments as agreed to in a commitment
based on the terms and at the designated time set forth in the mortgage
or deed of trust. It is the mortgagor's responsibility to remember the
due date and send the payment prior to the due date, not after. Generally,
thirty days after the due date if payment is not received, the mortgage
is in default. In the event of default, the mortgage may give the lender
the right to accelerate payments, take possession and receive rents, and
start foreclosure. Defaults may also come about by the failure to observe
other conditions in the mortgage or deed of trust.
Depreciation
Decline in value of a house due to wear and tear, adverse changes
in the neighborhood, or any other reason.
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 with each State.
Down Payment
The amount of money to be paid by the purchaser to the seller
upon the signing of the agreement of sale.
Earnest Money
The deposit money given to the seller or his 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 downpayment. If the sale does not go through, the
earnest money will be forfeited or lost unless the binder or 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. An electric company obtaining a right-of-way
across private property is a common example.
Economic Obsolescence
Loss of useful life and desirability of a property through economic
forces, such as change in zoning, changes in traffic flow, etc., rather
than deterioration.
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. A title
search is all that is usually done to reveal the existence of such encumbrances,
and it is up to the buyer to determine whether he wants to purchase with
the encumbrance, or what can be done to remove it.
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. A homeowner's equity increases as he
pays off his mortgage or as the property appreciates in value. When the
mortgage and all other debts against the property are paid in full the
homeowner has 100% equity in his property.
Escalation Clause
A clause in a lease providing for an increased rent at a future
time due to increased costs to lessor, as in cost of living index, tax
increases, etc.
Escheat
The reverting of property to the state in the absence of heirs.
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. In FHA mortgage transactions an escrow account
usually refers to the funds a mortgagor pays the lender at the time of
the periodic mortgage payments. 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.
Estate
The ownership interest of a person in real property. Is also
used to refer to a deceased person's property. And often used to describe
a large home with spacious grounds.
Fair Market Value
That price a property will bring given that both buyer and seller
are fully aware of market conditions and comparable properties.
Fee Simple
Ownership of title to property without any limitation, which
can be sold, left at will, or inherited.
Fixtures
Items affixed to buildings or land usually in such a way that
they cannot be moved without damage to themselves or the property, such
as plumbing, electrical fixtures, trees, etc.
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, and depriving the mortgagor of possession.
Front Footage
The linear measurement along the front of a parcel. That portion
of the parcel which fronts the street or walkway.
Functional Obsolescence
Loss in value due to out-of-date or poorly designed equipment
while newer equipment and structures have been invented since it's construction.
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 or has a "cloud" on it (such as mortgage
claims, tax liens, title claims, judgments, or mechanic's liens against
it) the grantee may hold the grantor liable.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party in the deed who is the seller or giver.
Ground Lease
A lease of vacant land.
Hazard Insurance
Protects against damages caused to property by fire, windstorms,
and other common hazards.
Home Owners Association
An association of homeowners within a community formed to improve
and maintain the quality of the community. An association formed by the
developer of condominiums or planned developments.
HUD
Interest
A charge paid for borrowing money. (See also Mortgage
Note).
Involuntary Lien
A lien which attaches to property without the consent of the
owner such as tax liens as opposed to voluntary liens (mortgages).
Joint Tenancy
Joint ownership by two or more persons with right of survivorship.
Upon the death of a joint tenant, his/her interest does not go to his/her
heirs, but to the remaining joint tenants.
Lease
A contract between the owner of real property, called the lessor,
and another person referred to as the lessee, covering all conditions
by which the lessee may occupy and use the property.
Lease With Option To Purchase
A lease where the lessee has the option to purchase the leased
property. The terms of the purchase option must be set forth in the lease.
Legal Description
The geographical identification of a parcel of land.
Lessee
One who contracts to rent property under a specified lease.
Lessor
An owner who contracts into a lease with a tenant (lessee).
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).
Life Estate
A estate in real property for the life of a person.
Listing
A contract between owner and broker to sell the owner's property.
Marketable Title
A title that is free and clear of objectionable liens, clouds,
or other title defects. A title which enables an owner to sell his property
freely to others and which others will accept without objection.
Mechanic's Lien
A lien created by statute on a specific property for labor or
materials contributed to an improvement on that property.
Mortgage
A lien or claim against real property given by the buyer to the
lender as security for money borrowed. Under government- insured or loan-
guarantee provisions, the payments may include escrow amounts covering
taxes, hazard insurance, water charges, and special assessments. Mortgages
generally run from 10 to 30 years, during which 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 Premium
The payment made by a borrower to the lender for transmittal
to HUD to help defray the cost of the FHA mortgage insurance program and
to provide a reserve fund to protect lenders against loss in insured mortgage
transactions. In FHA insured mortgages this represents an annual rate
of one- half of one percent paid by the mortgagor on a monthly basis.
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 shall be paid. The note states the actual 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 refinancing the loan or paying additional
financing charges. Open- end provisions often limit such borrowing to
no more than would raise the balance to the original loan figure.
Mortgagee
The lender in a mortgage agreement.
Mortgagor
The borrower in a mortgage agreement.
Multiple Listing
A listing taken by a member of an organization of brokers, whereby
all members have an opportunity to find a buyer.
Negative Amortization
When monthly payments are not enough to cover interests costs,
they are added to the principal balance, and you may end up owing more
than when you started. This is most likely to occur with ARMs
that have payment caps.
Notary Public
One who is authorized by federal or local government to attest
authentic signatures and administer oaths.
Note
A written instrument acknowledging a debt and promising payment.
Offer
A presentation to form a contract or agreement.
Option
A right given, for consideration, to purchase or lease property
upon stipulated terms within a specific period of time.
Origination Fee
Application fee(s) for processing a proposed mortgage.
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.
P.M.I. (Private Mortgage Insurance)
Insurance which covers a portion of the first mortgage allowing the lender
to offer more lenient terms to a borrower.
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 his 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 from paying points on HUD or Veterans'
Administration guaranteed loans (sellers can pay, however). On a conventional
mortgage, points may be paid by either buyer or seller or split between
them.
Prepayment
Payment of mortgage loan, or part of it, before due date. Mortgage
agreements often restrict the right of prepayment either by limiting the
amount that can be prepaid in any one year or charging a penalty for prepayment.
The Federal Housing Administration does not permit such restrictions in
FHA insured mortgages.
Prepayment Penalty
A penalty within a note, mortgage, or deed of trust imposing
a penalty if the debt is paid in full before the end of its terms.
Principal
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.
Purchase Agreement
An agreement between buyer and seller denoting price and terms
of the sale.
Real Estate Agent
A licensed person who works under the direction of a broker selling
and renting real estate.
Real Estate Broker
A middle man or 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, but generally represents the owner.
Realtor
A real estate broker holding membership with the National Association
of Realtors.
Refinancing
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, or may be "personal"
and binding only between the original seller and buyer. The determination
whether a covenant runs with the land or is personal is governed by the
language of the covenant, the intent of the parties, and the law in the
State where the land is situated. Restrictive covenants that run with
the land are encumbrances and may affect the value and marketability of
title. Restrictive covenants may limit the density of buildings per acre,
regulate size, style or price range of buildings to be erected, or prevent
particular businesses from operating or minority groups from owning or
occupying homes in a given area. (This latter discriminatory covenant
is unconstitutional and has been declared unenforceable by the U.S. Supreme
Court).
Seller's Market
More buyers than sellers.
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. In some
localities it is called "particular" lien or "specific"
lien. (See also Lien.)
Special Warranty Deed
A deed in which the grantor conveys title to the grantee and
agrees to protect the grantee against title defects or claims asserted
by the grantor and those persons whose right to assert a claim against
the title arose during the period the grantor held title to the property.
In a special warranty deed the grantor guarantees to the grantee that
he has done nothing during the time he held title to the property which
has, or which might in the future, impair the grantee's title.
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.
Tax
As applied to real estate, an enforced charge imposed on persons,
property or income, to be used to support the State. The governing body
in turn utilizes the funds in the best interest of the general public.
Title
As generally used, the rights of ownership and possession of
particular property. In real estate usage, title may refer to the instruments
or documents by which a right of ownership is established (title documents),
or it may refer to the ownership interest one has in the real estate.
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, so it
is important that an owner purchase an "owner's title policy",
if he desires the protection of title insurance.
Title Search or Examination
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.
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. (See also Deed
of Trust.)
Variable Interest
Rate
A fluctuating interest rate which can go up or down depending
on the going market rate.
Voluntary Lien
A voluntary lien by the owner such as a mortgage, as opposed
to involuntary liens (taxes).
Waive
To relinquish, or abandon. To forego a right to enforce or require
anything.
Wrap-Around Mortgage
A second mortgage which is subordinate to but includes the face
value of the first mortgage.
Zoning Ordinances
The acts of an authorized local government establishing building
codes, and setting forth regulations for property land usage.
