Century 21 Patty Snell & Associates Real
Estate Glossary & Definitions
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 A CENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
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 .
The right of the mortgagee (lender) to demand the
immediate repayment of the mortgage loan balance upon the
default of the mortgagor (borrower), or by using the right
vested in the Due-on-Sale-Clause.
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.
Something added. Items added to a document, letter,
contract, escrow instructions, etc.
A person who acts or has the power to act for
another. A real estate agent acts on behalf of the principal
(the buyer or seller) and has a fiduciary responsibility
towards the principal. Buyer's Agent: a agent who represents
the buyer and owes fiduciary duties to the buyer. Seller's
Agent: an agent who represents the seller and owes fiduciary
duties to the seller. They are usually referred to as the
listing agent who is authorized by a property owner to find
a buyer or a tenant for the property.
A written agreement of contract in which the seller
agrees to sell and the buyer agrees to buy under specific
terms and conditions.
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.
Features that enhance and add to the value or
desirability of real estate. Common amenities include
swimming pools, professional landscaping, gourmet kitchen
and so on.
The reduction of a debt over time by making periodic
payments, usually monthly, a portion of which is interest
and a portion of which reduces the outstanding amount of the
debt. The monthly mortgage payments remain the same over the
life of the loan, even though the proportion of principal to
interest changes over time. In the early part of the loan
period the principal repayment is very small and interest
repayment is very high. At the end of the loan that
relationship is reversed.
An estimate of the value of property, made by a
qualified professional called an "appraiser".
Someone who practices appraisal. Appraisers' work
involves appraising, review (the process of critically
studying a report prepared by another), or consulting (the
process of providing information, analysis of real estate
data, and recommendations on diversified problems in real
estate, other than estimating value).
The actual
interest rate taking into account the points and other
prepaid fees expressed in annual percentage terms. Not to be
confused with initial interest rate, a teaser rate lenders
use to get you into a loan.
A loan
that allows the interest rate to change periodically up or
down.
The interest rate on an ARM is determined by adding a margin
or spread to a specified financial index. Financial indexes
include; Treasury, Certificate of Deposit, Cost of Funds.
The margin is the difference between the index rate and the
ARM rate.
Adjustment interval is how often the interest rate is
adjusted. A loan that adjusts its interest rate after six
months is called a six-month ARM.
Rate caps limit how much your interest rate can move up or
down. Periodic caps limit the change per adjustment period,
and a lifetime cap governs the maximum amount the interest
rate can increase or decrease over the life of the loan.
A local tax levied against a property for a specific
purpose, such as a sewer or street lights.
One appointed to assess property for taxation.
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.
The agreement between the buyer and seller where the
buyer takes over the payments on an existing mortgage from
the seller. Assuming a loan can usually save the buyer money
since this is an existing mortgage debt, unlike a new
mortgage where closing costs and new, probably higher,
interest rates will apply.
BCENTURY
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Patty Snell & Associates Real Estate Glossary & Definitions
A mortgage for a fixed term shorter than necessary to
fully repay the debt. As a result, the remaining amount of
principal is due at the maturity of the loan.
A mortgage covering at least two pieces of real
estate as security for the same mortgage.
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.
Violation of an obligation in a contract.
A loan, usually short term, that finances the portion
of the purchase price not provided by the mortgage loan and
the down payment. A bridge loan is commonly used when a
purchaser has not sold his existing home before he closes on
his purchase of a new home. The bridge loan is paid off when
the old home is sold, out of the proceeds of that sale.
A real estate professional who has acquired a higher
level of training and experience than a sales agent. A
minimum number of classes must be taken along with passing a
state exam to acquire a brokers license. Generally they are
a legal representative or a proprietor of the office.
Brokers usually charge a fee or receive a commission for
their services.
A set of stringent laws that control the construction
of buildings, design, materials and other similar factors.
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.
When the lender and or the home builder subsidized
the mortgage by lowering the interest rate during the first
years of the loan. While the payments are initially low,
they will increase when the subsidy expires.
A market condition which occurs in real estate where
more homes are for sale than there are interested buyers.
CCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The amount of cash derived over a certain period of
time from an income-producing property. The cash flow should
be large enough to pay the expenses of the income producing
property (mortgage payment, insurance, maintenance,
utilities, etc.)
Income that results from sale of a capital (tangible)
asset.
An appraising term used in determining value by
considering net operating income and a percentage of
reasonable return on investment.
The document given to qualified veterans which
entitles them to VA guaranteed loans for homes, business,
and mobile homes. Certificates of eligibility may be
obtained by sending DD-214 (Separation Paper) to the local
VA office with VA form 1880 (request for Certificate of
Eligibility).
A history of conveyances and encumbrances affecting
the title as far back as records are available.
The end of the transaction when the seller hands over
the title to the buyer in exchange for payment. Also called
settlement.
Costs the buyer must pay at the time of the closing
in addition to the down payment which may include points,
title charges, credit report fee, document preparation fee,
mortgage insurance premium, inspections, appraisals,
prepayments for property taxes, deed recording fee, and
homeowners insurance. Closing costs can vary considerably
from one financial institution to another.
An outstanding claim or encumbrance which adversely
affects the marketability of title.
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.
A declaration by governing powers that a structure is
unfit for use.
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.
A condominium is a home in a shared building or
development. The buyer gets title the space inside the unit,
shares the common areas with other unit owners and pays a
maintenance fee to the condominium association to pay for
needed maintenance, repairs and improvements to the
property.
A short term interim loan to pay for the construction
of building or homes. These are usually designed to provide
periodic disbursements to the builder as he progresses.
A condition that must be met before a contract is
binding. Contingencies include: the property must appraise
for sales price or buyers approving of various inspections.
A contract between purchaser and a seller of real
estate to convey title after certain conditions have been
met. It is a form of installment sale.
A fixed rate and fixed term loan that is made without
government insurance.
Some ARM Color loans include a provision that allows
it to convert to a fixed rate mortgage at specific times,
usually from the end of the first through the fifth years.
There is usually an additional fee, $300-$500, to convert
it.
The transfer of the title to land from one to
another.
In a residential co-operative, the buyer purchases
shares in the co-op corporation which is made up of the
residents in the co-op property. The buyer owns the shares
rather than owning real property. In exchange he has the
right to lease and occupy a co-op unit.
Agreements written into deeds and other instruments
stating performance or non-performance of certain acts or
noting certain uses or non-uses of property.
Lenders will investigate your credit record which is
a history of your credit reports.
DCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The ratio, expressed as a percentage, which results
when a borrower's monthly payment obligation on long-term
debts is divided by his or her gross monthly income.
A legal document by which property title is
transferred from one owner to another.
Failure to meet legal obligations in a contract,
specifically, failure to make the monthly payments on a
mortgage.
Decline in value of a house due to wear and tear,
adverse changes in the neighborhood, or any other reason.
A person who receives real estate from another by
will.
The down payment is the percentage of the purchase
price that the buyer must pay in cash and may not borrow
from the lender. The down payment amount in addition to the
mortgage equals the purchase price of a property. They can
vary from 0% to over 50%. The less your down payment the
better your credit has to be. Lower down payments generally
result in higher interest rates.
Representing both parties in a transaction. In
virtually all states it is unethical and illegal for a
broker to represent buyer and seller in a real estate
transaction without written consent of both.
A provision in a mortgage or deed of trust that
allows the lender to demand immediate payment of the balance
of the mortgage if the mortgage holder sells the home.
ECENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The deposit money given to the seller by the
potential buyer as evidence of good faith in purchasing real
estate. The broker places the money in an escrow or trust
account until closing, when it becomes part of the down
payment.
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.
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.
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.
A legal right or interest in land that affects a good
or clear title, and diminishes the land's value.
Is a federal law that requires lenders and other
creditors to make credit equally available without
discrimination based on race, color, religion, national
origin, age, sex, marital status or receipt of income from
public assistance programs.
The value of the property less the amount of unpaid
mortgages and any outstanding liens.
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.
The reverting of property to the state in the absence
of heirs.
Money or other valuables given to a third party with
directions to deliver them to another party upon the
fulfillment of a specific act or condition.
This discloses when the escrow should be closing and
when possession should take place, peroration of property
taxes, transfer taxes, release of funds and the basics of
satisfying the escrow demands.
The ownership interest of a person in real property.
Also refers to a deceased person's property.
A written agreement giving the broker the right to
market an owner's property for a certain period of time, but
also allowing the owner to sell the property during that
period without paying a commission.
A written agreemen Color t between the agent and the
owner whereby the owner promises to pay a fee or commission
to the broker if his property is sold during the listing
period, regardless of whether the broker is responsible for
the sale.
FCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
That price a property will bring given that both
buyer and seller are fully aware of market conditions and
comparable properties.
Nickname for the Federal National Mortgage
Association. FNMA is a public corporation originally
established by the federal government. Fannie Mae purchases
mortgage loans from lenders and results in a major source of
funds for mortgage companies.
Ownership of title to property without any
limitation, which can be sold, left at will, or inherited.
Part of the US Department of Housing and Urban
Development (HUD). It was established in 1934 to encourage
improvement in housing standards and communities. The FHA
insures mortgage loans.
A mortgage loan insured by the Federal Housing
Administration.
Requires a fee (up to 2.25% of the loan amount) paid
at closing to insure the loan with FHA. In addition, FHA
mortgage insurance requires an annual fee of up to 0.5% of
the current loan amount, paid in monthly installments. The
lower the down payment, the more years the fee must be paid.
The forced sale of a piece of real estate to repay a
debt.
Nickname for Federal Home Loan Mortgage Corporation.
It is a quasi-governmental agency that purchases
conventional mortgages from insured depository institutions
and HUD- approved mortgage bankers.
Loss in value due to out-of-date or poorly designed
equipment while newer equipment and structures have been
invented since it's construction.
GCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
Government National Mortgage Association
A type of flexible-payment mortgage where the
payments increase for a specified period of time and then
level off. This type of mortgage has negative amortization
built into it.
That party in the deed who is the buyer or recipient.
That party in the deed who is the seller or giver.
HCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
A detailed inspection of the physical structure, the
plumbing, electrical and heating systems and the overall
condition of the home. Typically the cost is $150-$300 and
the results are detailed in a multiple page report.
Insurance that protects the homeowners from Casualty
losses or damage to the home or personal property and from
liability damages to other people or property. Homeowners
insurance is required by the lender and may be included in
the monthly mortgage payment.
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.
The ratio, expressed as a percentage, which results
when a borrower's housing expenses are divided by his or her
gross monthly income.
Department of Housing and Urban Development, a
government agency created to make the American Dream of home
ownership a real possibility for everyone. HUD has many
programs involving home ownership assistance for low and
moderate income families, community planning and
development, fair housing and equal opportunity, and home
improvement loans. The Housing and Urban Development home
page is a rich resource of information.
ICENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
That portion of a borrower's monthly payments held by
the lender or service to pay for taxes, hazard insurance,
mortgage insurance, lease payments, and other items as they
become due. Also known as reserves.
A published interest rate against which lenders
measure the difference between the current interest rate on
an adjustable rate mortgage and that earned by other
investments (such as one-three and five-year U.S. Treasury
security yields, the monthly average interest rate on loans
closed by savings and loan institutions, and the monthly
average costs-of-funds incurred by savings and loans), which
is used to adjust the interest rate on an adjustable
mortgage.
The initial rate quoted usually is a lower
introductory rate, sometimes called a teaser or discount
rate. This lower rate lasts only until the first adjustment,
after which you will be charged the fully indexed rate.
A charge paid for borrowing money.
JCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
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.
A loan which is larger than the limits set by the
FNMA and FHLMC (more than $207,000 as of 1/1/96). Because
jumbo loans cannot be funded by these two agencies, they
usually carry a higher interest rate.
LCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
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.
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.
The geographical identification of a parcel of land.
A hold or claim on the property of another to satisfy
an unpaid debt or obligation.
Life time cap governs the maximum amount the interest
rate increase or decrease over the life of the loan.
An agreement between a homeowner and a licensed real
estate broker that authorizes the broker to market the
property for sale during a given time period.
A fee charged by the lender for evaluating, preparing
and submitting a proposed mortgage loan.
The ratio of a mortgage loan principal to the
property's appraised value or its sales price, whichever is
lower. Loan-to-value ratios vary depending upon the
individual lender's policy.
A commitment made by a lender to make a mortgage loan
at a specified rate, pending loan approval, on or prior to a
specified date.
MCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The highest price a buyer will pay for a property and
the lowest price the seller will accept in a typical market.
The amount a lender adds to the index on an
adjustable rate mortgage to establish the adjusted interest
rate.
A lien created by statute on a specific property for
labor or materials contributed to an improvement on that
property.
A lien on real estate given by the buyer to secure
money borrowed to purchase the real estate.
An individual or company that obtains mortgages for
others by finding lending institutions, insurance companies
or private sources to lend the money. The mortgage broker
may also handle collections and disbursements.
A policy that provides protection for the lender in
case of default and or which guarantees repayment of the
loan if the borrower becomes disabled or dies.
Insurance from FHA to the lender against incurring a
loss on account of the borrower's default.
A listing taken by a member of an organization of
brokers, whereby all members have an opportunity to find a
buyer.
NCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The largest trade association in the country serving over
700,000 Realtors. The purpose of the association is to
enhance the ability and opportunity of its members to
conduct business successfully and ethically and to promote
the preservation of the right to own, transfer and use real
property.
Occurs when your monthly payments are not large enough to
pay all the interest due on the loan. This unpaid interest
is added to the unpaid balance of the loan. The danger of
negative amortization is that the home buyer ends up owing
more than the original amount of the loan.
A statement in a mortgage contract forbidding the
assumption of the mortgage without the prior approval of the
lender.
One who is authorized by federal or local government
to attest authentic signatures and administer oaths.
A written instrument acknowledging a debt and
promising payment.
OCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
A proposal to purchase real estate at a particular
price, subject to other specified terms and conditions.
Acceptance of the offer by the seller creates a purchase
contract. A counteroffer is a different offer made in
response to the initial offer.
Application fee(s) for processing a proposed
mortgage.
A right given, for consideration, to purchase or
lease property upon stipulated terms within a specific
period of time.
PCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
Periodic caps limit the change per adjustment period
of a loan.
A loan payment that combines Principal, Interest,
Taxes and Insurance.
A map or chart of a lot, subdivision or community
drawn by a surveyor showing boundary lines, buildings,
improvements on the land, and easements.
Insurance issued to a lender to protect it against
loss on a defaulted mortgage loan. Its use is usually
limited to loans with high loan-to-value ratios, generally
in excess of 80%. The borrower pays the premiums.
An amount equal to one percent of the loan amount
paid to a lender for making the loan. A lender may charge
the borrower several points in order to provide the loan.
A legal document authorizing one person to act on
behalf of another.
A privilege in a mortgage permitting the borrower to
make payments in advance of their due date.
Money charged for an early repayment of debt.
Prepayment penalties are allowed in some form, but are not
necessarily imposed in many states.
Lenders making mortgage loans directly to borrowers
such as savings and loan associations, commercial banks, and
mortgage companies. These lenders sometimes sell their
mortgages into the secondary market such as FNMA or GNMA.
Getting pre-qualified for a loan is a free process
and normally takes between 15 minutes to an hour on the
phone. The lender will ask you some basic questions about
your household income, time on the job, credit history, down
payment and personal savings. You should get pre-qualified
before looking for properties so you and your real estate
agent know in what price range to start looking.
One of the parties to a transaction. For example, the
buyer and seller are principals in the purchase of real
property. Also the amount of debt, not counting interest,
left on a loan.
An agreement between buyer and seller denoting price
and terms of the sale.
RCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
Rate caps limit how much the interest rate can move
up or down.
A licensed person who works under the direction of a
broker selling and renting real estate.
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.
A Realtor is a real estate professional who is a
member of the National Association of Realtors and
subscribes to its strict Code of Ethics. This professional
is committed to protecting and promoting private ownership
of real property, establishing and maintaining high
professional standards of practice, and creating unity in
the National Association of Realtors organization and
respect for the real estate profession.
The cancellation of a contract. With respect to
mortgage refinancing, the law that gives the homeowner three
days to cancel a contract in some cases once it is signed if
the transaction uses equity in the home as security.
Obtaining a new mortgage loan on a property already
owned. Often to replace existing loans on the property.
Short for the Real Estate Settlement Procedures Act.
RESPA is a federal law that allows consumers to review
information on known or estimated settlement costs once
after application and once prior to or at a settlement. The
law requires lenders to furnish the information after
application only.
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.
A form of mortgage in which the lender makes periodic
payments to the borrower using the borrower's equity in the
home as Satisfaction of Mortgage: the document issued by the
mortgagee when the mortgage loan is paid in full.
SCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
A mortgage made subsequent to another mortgage and
subordinate to the first one.
The place where primary mortgage lenders sell the
mortgages they make to obtain more funds to originate more
new loans. It provides liquidity for the lenders.
More buyers than sellers.
A mortgage in which a borrower receives a
below-market interest rate in return for which the lender or
investor, receives a portion of the future appreciation in
the value of the property. May also apply to mortgage where
the borrowers share the monthly principal and interest
payments with another party in exchange for part of the
appreciation.
A special tax imposed on property, individual lots or
all property in the immediate area, for road construction,
sidewalks, sewers, street lights, etc.
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.
TCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
Ownership of real property. Title is transferred from
one party to another through a document called a deed.
Protection for lenders and homeowners against
financial loss resulting from legal defects in or other
claims against the property's title. The cost of the policy
is usually a function of the value of the property and is
often borne by the purchaser and or seller.
An examination of municipal records to determine the
legal ownership of property. Usually is performed by a title
company.
A property interest held by one person for the
benefit of another.
A party who is given legal responsibility to hold
property in the best interest of or "for the benefit of"
another.
A federal law requiring disclosure of the APR-Annual
Percentage Rate to home buyers shortly after they apply for
the loan. Also known as Regulation Z.
UCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The decision whether to make a loan to a potential
home buyer based on credit, employment, assets, and other
factors and the matching of this risk to an appropriate rate
and term or loan amount.
VCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
A federal agency designed and operated to help
veterans enter the housing market. The VA assists veterans
in terms of low or no down payment, mortgage qualifications
assistance and low interest rates.
A mortgage loan guaranteed by the US Department of
Veterans Affairs against loss to the lender and made through
a private lender.
A fluctuating interest rate which can go up or down
depending on the going market rate.
WCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
To relinquish, or abandon. To forego a right to
enforce or require anything.
Results when an existing assumable loan is combined
with a new loan, resulting in an interest rate somewhere
between the old rate and the current market rate. The
payments are made to a second lender or the previous
homeowner, who then forwards the payments to the first
lender after taking the additional amount off the top.
ZCENTURY
21
Patty Snell & Associates Real Estate Glossary & Definitions
The acts of an authorized local government
establishing building codes, and setting forth regulations
for property land usage.
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