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Glossary of Real Estate Terms

A  C  D  E  F  G  H  I  J   L  M  N  O  P  R  S  T  U  V  W  Z

A

Addendum

A document that is added to a real estate contract or purchase agreement.

Adjustable-Rate Mortgage (ARM)

A mortgage loan with an interest rate that can change throughout the life of the loan.

Agent

A real estate professional that is licensed to represent buyers and sellers in real estate transactions. An agent cannot operate independently, they must work under a licensed broker.

Amortization

The process of gradually reducing mortgage loan debt over time by establishing scheduled monthly payments. The interest payment of an amortized loan will decrease as time goes on, while the principal payment will increase.

Appraisal

An approximation of a home's current value based on a range of factors such as the price of similar properties in the area.

Appreciation

The increase in a property's value over time.

Assessed Value

The value of a property used for tax purposes.

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B

Bridge Loan

A short-term loan used to bridge the gap between buying a home and selling your previous one. Sometimes you want to buy before you sell, meaning you do not have the profit from the sale to apply to your new home's down payment.

Broker

A real estate broker is qualified to represent a seller or buyer. He or she can choose to work independently of a firm, real estate agents must work with licensed brokers.

Buyer’s Agent

A real estate agent or broker that operates on behalf of a client buyer to help them find and purchase a property.

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C

Closing

The final step of a real estate transaction when legal documents are signed, and the property is transferred from the seller to the buyer.

Closing Costs

The costs and fees that come along with the purchase of a property.

Clouded Title

An irregularity, claim, or encumbrance which, if valid, would affect or impair the title.

Commission

The fee that a real estate agent makes at closing, usually a percentage of the sale price.

Comparable (Comp)

A term that refers to the prices of recently sold properties that are used to determine market value of other similar properties. An agent will refer to these “comps” when trying to figure out what their property is worth.

Comparative Market Analysis (CMA)

Process used to determine the value of a home based on the sale prices of similar properties in the area.

Contingency

A condition that must be met in order for a real estate contract to be finalized.

Construction Loan

This is a short-term loan that covers the cost of building a property.

Contract

A written and legally binding agreement between a buyer and seller outlining the details of a real estate transaction.

Conventional Mortgage

Ideal for borrowers with strong credit, this type of loan is not backed by a government agency like the Federal Housing Administration (FHA).

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D

Debt-to-Income Ratio (DTI)

It is the total of all monthly debt payments divided by monthly gross income. It is used to determine affordability and for loan approval.

Deed

The deed refers to the legal document that transfers ownership of a property from a seller to a buyer.

Deed-in-Lieu of Foreclosure

A document transferring the title of a property from a homeowner to the bank that holds the mortgage. A homeowner might submit a deed-in-lieu of foreclosure if the bank has denied them a loan modification or short sale. However, the bank can deny the request for a deed-in-lieu (and often do).

Default

When a homeowner fails to make several mortgage payments on time, according to the terms of the loan contract.

Delinquency

Occurs when a homeowner has failed to make a mortgage payment on time.

Discount Points

Fees homebuyers pay directly to the lender at the time of closing in to buy down the interest rate which can lower monthly mortgage payments. One point is equal to one percentage of the loan amount. 

Down Payment

The down payment is the amount of money a buyer must contribute to the purchase of a property at closing. This can typically range from 5 - 20% of the home's cost.

Dual Agent

A situation when one real estate agent represents the buyer and seller in a transaction.

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E

Earnest Money

Money paid by the buyer to indicate that they are serious about purchasing the property. Sometimes referred to as good faith deposit.

Egress

The right to a path or right-of-way over that a person may leave or go away from his own real estate

Eminent Domain

The right of eminent domain gives the government the ability to use private property for public purposes. It is only exercisable when and if the government fairly compensates the owner of the property.

 Encroachment

The extension of a structure from the real estate to which it belongs across a boundary line and onto adjoining property.

 Encumbrance

A claim, right or lien upon the title to real estate, held by someone other than the real estate owner.

Equity

This is calculated by taking the difference between the amount owed to a lender and the market value of a property.

Escrow

During the home buying process, your money will be placed "in escrow" and is protected by a third party until the real estate transaction is closed.

Exclusive Listing

An exclusive listing is when a seller commits to working with one specific broker and a designated agent on the sale of a property.

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F

Fair Credit Reporting Act

This federal law determines how a consumer's credit information can be used.

Fair Market Value

The amount a property would sell for in a competitive market, or when a seller and buyer can agree on the price of a property.

FHA Mortgage

A Federal Housing Administration mortgage loan is backed by the government and is typically reserved for buyers with a low credit score or significant amount of debt.

Fixed-Rate Mortgage

This mortgage has the same interest rate for the term of the loan.

For Sale by Owner [FSBO]

This refers to a homeowner putting their property up for sale without assistance from a real estate agent or broker.

Foreclosure

A property goes into foreclosure when the homeowner misses mortgage payments, and the lender tries to recover the balance of a loan.

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G

Good Faith Estimate

A required statement from the lender that shows all the expected closing costs.

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H

Home Equity Line of Credit

Also referred to as a HELOC, this is a second mortgage that allows a homeowner to borrow money against their home's value.

Home Equity Conversion Mortgage (HECM)

An FHA reverse mortgage program enabling homeowners to withdraw equity on their home through either a fixed monthly payment, a line of credit, or a combination of the two.

Home Inspection

A home inspection involves the evaluation of a property's condition, including electrical work, sewage, and plumbing before the closing.

Homeowner's Association

When a group of homeowners in a community, such as a condominium, join in paying fees that cover the maintenance of the entire property.

Homeowner's Insurance

Financial protection that helps with covering costs associated with repairs of a property or even replacement if necessary.

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I

Ingress

The place of entry such as a right-of-way across adjoining land. 

Interest

The amount of money charged on a loan.

Intestate

Dying without a legal will.

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J

Joint Tenancy

Joint ownership by two or more persons with right of survivorship. Upon the death of a joint tenant, his interest does not go to his heirs, but to the remaining joint tenants.

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L 

Lender

A lender is a financial institution or person that loans money to another party for the purpose of purchasing real estate.

Lien

A lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. 

Listing

A property that is for sale.

Listing Agent

A real estate agent who represents the seller in a transaction. 

Listing Agreement

A legally binding agreement between a real estate broker and an owner of real property granting the broker the authority to act as the owner's agent in the sale of the property.

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M

 Mortgage

A mortgage is a loan that is used to purchase a home or other form of real estate.

Mortgage Banker

A mortgage banker provides mortgage loans.

Mortgage Broker

A mortgage broker acts as the agent between mortgage borrowers and potential lenders.

Mortgage Insurance

Mortgage insurance is paid by a borrower who pays less than 20% down payment on their loan. It is paid by borrower but is used to protect the lender from losses in the event of a default on the loan.

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N

Negative Amortization

When interest on a mortgage loan has not been paid to the lender, it is added to the loan balance.

Note

A written instrument acknowledging a debt and promising payment.

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O

Original Principal Balance

This is the amount of the mortgage loan before interest is taken into account.

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P

Pre-Approval

The pre-approval process involves a potential lender or bank reviewing an individual's finances, including their income, assets, and credit history, to determine how much money can likely be borrowed.

Prime Interest Rate

Banks offer customers who have proven to be creditworthy their best, or prime, interest rate.

Principal

The principal is the amount of money you borrowed from a lender, excluding the interest.

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R

Real Estate Agent

A licensed professional who helps sellers or buyers complete real estate transactions.

Right of Refusal

A lease or contract might include "right of first refusal" to note that an individual has the right to put an offer on a property before it is listed on the market by a seller.

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S

Second Mortgage

Also known as a junior lien, a second mortgage is an additional loan taken on the same property.

Servicer

A servicer is a company that manages mortgage loans, they collect payments, monitor accounts, interface with the customers.

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T

Time is of the Essence

Within a real estate contract, a “time is of the essence” clause creates a specified timeframe for the party to meet its obligations

Title

This legal document states who has owned a property in the past and notes any liens associated with it.

Transfer Tax

A tax that is charged by a state, county, or city when ownership of a property is transferred.

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U

Under Contract

This refers to a prospective buyer and seller reaching an agreement on a property. At this early stage, both parties are in alignment with the terms of the deal, including the property's price and closing date.

Underwriter

The person in the lending institution whose job it is to review loan documentation and evaluate the borrower’s ability and willingness to repay the loan.

Undisclosed Dual Agency

An illegal situation that arises when a real estate broker represents both parties but does not inform one or more of the parties.

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V

Variable Interest Rate

A fluctuating interest rate that can go up or down depending on the going market rate.

Voluntary Lien

A consensual lien by the owner such as a mortgage, as opposed to involuntary liens (taxes). 

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W

Waive

To relinquish, or abandon. To forego a right to enforce or require anything.

 Walk-Through

A final inspection of the property before closing to see that all agreed to repairs have been completed and that the property is in the condition the buyer expects.

 Wrap-Around Mortgage

A second mortgage, which is subordinate to but includes the face value of the first mortgage.

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Z

Zoning Ordinances

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

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