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10. Real Estate ‘Terms’ Glossary

 

GLOSSARY
 
ADJUSTABLE-RATE MORTGAGE (ARM)

interest rates on this type of mortgage are periodically adjusted up or down depending on a specified financial index

 

AMORTIZATION

a method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed

 

ANNUAL PERCENTAGE RATE

the actual finance charge for a loan, including points and fees, in addition to the stated interest rate

 

APPRAISAL

an expert opinion of the value or worth of a property

 

ASSESSED VALUE

the value placed on a property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value

 

BALLOON PAYMENT

a large principal payment due all at once at the end of some loan terms

 

CAP

a limit on how much the interest rate can change in an adjustable-rate mortgage

 

CERTIFICATE OF TITLE

a document, signed by a title examiner, stating that a seller has an insurable title to the property

 

CLOSING

the deed to a property is legally transferred from seller to buyer, and documents are recorded

 

CLOSING COSTS

see "Settlement" or refer to "Settlement–who pays what" in this guide

 

COMMISSION

a fee (usually a percentage of the total transaction) paid to an agent or broker for services performed

 

COMPARATIVE MARKET ANALYSIS (CMA)

a survey of the attributes and selling process of comparable homes on the market or recently sold; used to help determine a correct pricing strategy for a seller's property

 

CONTINGENCY

a condition in a contract that must be met for the contract to be binding

 

CONTRACT

a binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property)

 

DEED

a legal document that formally conveys ownership of a property from seller to buyer

 

DOWN PAYMENT

a percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender

 

EQUITY

the value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens

 

ESCROW

a fund or account held by a third-party custodian until conditions of a contract are met

 

FIXED-RATE MORTGAGE

interest rates on this type of mortgage remain the same over the life of the loan. Compare to "adjustable-rate mortgage"

 

FIXTURE

a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to a property and belongs to the property when it is sold

 

HAZARD INSURANCE

compensates for property damage from specified hazards such as fire and wind

 

INTEREST

the cost of borrowing money, usually expressed as a percentage rate

 

LIEN

a security claim on a property until a debt is satisfied

 

LISTING CONTRACT

an agreement whereby an owner engages a real estate company for a specified period of time to sell a property, for which, upon the sale, the agent receives a commission

 

MARKET PRICE

the actual price at which a property sold

 

MARKET VALUE

the price that is established by present economic conditions, location and general trends

 

MORTGAGE

security claim by a lender against a property until the debt is paid

 

MULTIPLE LISTING SERVICE (MLS)

a system that provides to its members detailed information about properties for sale

 

ORIGINATION FEE

an application fee(s) for processing a proposed mortgage loan

 

PITI

principal, interest, taxes and insurance, forming the basis for monthly mortgage payments

 

POINT

one percent of the loan principal. It's charged in addition to interest and fees

 

PREPAYMENT PENALTY

a fee paid by a borrower who pays off the loan before it is due

 

PRINCIPAL

one of the parties to a contract; or the amount of money borrowed, for which interest is charged

 

PRORATE

divide or assess proportionately

 

PURCHASE & SALE AGREEMENT

a contract between buyer and seller that outlines the details of the property transfer; or refer to "Purchase and sale agreement" in this guide

 

SETTLEMENT

all financial transactions required to make the contract final. See "Settlement–who pays what" in this guide.

 

TITLE

a document that indicates ownership of a specific property

 

TITLE SEARCH

detailed examination of the entire document history of a property title to make sure there are no legal encumbrances