Glossary
Definitions of real estate and referral related terms
Annual Percentage Rate (APR):
Financing costs represented as an annual rate.
Appraisal:
A professional assessment of the value of a piece of property.
Broker:
An individual or firm that acts as an agent between providers and users of products or services, such as a mortgage broker or real estate broker.
Closing:
The process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. In some jurisdictions, closing is referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. See also “Settlement.”
Commission:
The fee charged for services performed, usually based on a percentage of the price of the items sold (such as the fee a real estate agent earns on the sale of a house).
Concession:
Something given up or agreed to in negotiating the sale of a house. For example, the sellers may agree to help pay for closing costs.
Contingency:
A condition that must be met before a contract is legally binding. For example, home purchasers often include a home inspection contingency; the sales contract is not binding unless and until the purchaser has the home inspected.
Deed:
The legal document transferring ownership or title to a property.
Depreciation:
A decrease in the value of a house due to changing market conditions or deferred maintenance on a home.
Down Payment:
A portion of the home price, typically between 3-30%, paid up-front in cash and not borrowed. Some homes are purchased with 100% cash or with zero downpayment.
Easement:
A right to the use of, or access to, land owned by another.
Equity:
The value of your home less the total amount of the liens against your home. If you owe $500,000 on your house but it is worth $730,000, you have $230,000 of equity.
Escrow:
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
Eviction:
The legal act of removing someone from real property. In most states, this process is started in the court system.
Exclusive Right-to-Sell Listing:
The traditional kind of listing agreement under which the property owner appoints a real estate broker (known as the listing broker) as exclusive agent to sell the property on the owner’s stated terms, and agrees to pay the listing broker a commission when the property is sold, regardless of whether the buyer is found by the broker, the owner or another broker. This is the kind of listing agreement that is commonly used by a listing broker to provide the traditional full range of real estate brokerage services. If a second real estate broker (known as a selling broker) finds the buyer for the property, then some commission will be paid to the selling broker. Under an Exclusive Agency Listing, the owner retains the right to find a buyer.
Fair Market Value:
The price at which property would be transferred between a willing buyer and willing seller, each of whom has a reasonable knowledge of all pertinent facts and is not under any compulsion to buy or sell. AKA, an arms-length-transaction.
Foreclosure:
A legal action that ends all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
Home Inspection:
A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
Homeowner’s Insurance:
A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances.
Homeowners’ Association:
An organization of homeowners residing within a particular area whose principal purpose is to ensure the provision and maintenance of community facilities and services for the common benefit of the residents.
HUD-1 Settlement Statement:
A final listing of the closing costs of the mortgage transaction. It provides the sales price and down payment, as well as the total settlement costs required from the buyer and seller. This document will usually include an accounting of any referral fees due.
Interest:
The cost of capital borrowed from a lender.
Lease-Purchase Option:
An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.
LIen:
A claim or charge on property or collateral for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Mortgage:
A loan using your home as collateral. In some states the term mortgage is also used to describe the document you sign (to grant the lender a lien on your home). It also may be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage often is the purchase price of the home minus your down payment.
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