Glossary of Common Real Estate Terms

Adjustable Rate Mortgage:  Also called an ARM or adjustable, this type of mortgage may start off with a lower “teaser” interest rate that stays fixed for a specified time, then adjusts periodically depending on changes in the market interest rate.

Appraisal:  A report made by a certified or licensed expert who states his or her reasoned opinion of the fair market value of the property generally based on a comparison of that home with comparable homes in the same neighborhood that either are presently on the market or have sold recently.

Appraiser:  A certified or licensed expert who states his or her reasoned opinion of the fair market value and the quality of the property, generally following a physical review of the property and the market conditions.

Appreciation:  An increase over time in the market value of a home, further adding to the homeowner’s equity.

Assumable Mortgage:  A type of mortgage that is set up so that the buyer can take over the seller’s payments.

Bill of Sale:  An instrument conveying title to personal property.

Closing (Settlement):  The final step of a property sale transaction, in which the legal (“closing”) documents (e.g., deed, note, mortgage, affidavits) are executed and funds disbursed in accordance with the terms of the contract and/or loan commitment.

Closing Agent (Settlement Agent):  The agent who oversees and conducts the many steps involved in the real estate transaction during the closing, or “settlement” process, including supervision of the execution of all documents related to the sale, and disbursing the sale and/or loan proceeds.

Closing Costs:  The costs and expenses associated with a closing including such items as title services, title insurance premiums, documentary stamp taxes and recording fees, and the like.  For a list of common closing costs in cash transactions and transactions financed with a mortgage, click on [Closing Cost Calculator©].

Clouds on Title:  A lien or encumbrance that, if valid, would adversely affect the title to a parcel of real property.

Commitment Letter:  A written agreement in which the lender agrees to lend money on certain terms if the borrower meets certain conditions.

Comparative Market Analysis (CMA):  A written CMA compares the value of a home to comparable homes in the neighborhood that either are presently on the market or have sold in recent months.

Contingencies:  Conditions (or escape clauses) that buyers put in their purchase offer and sellers add in the counter-offer so that, if the contingency isn’t fulfilled, the party is free to walk away from the deal.

Contract:  A legally binding document in which the buyer agrees to purchase specific property and the seller agrees to sell under stated conditions.  Also called a contract for purchase and sale, purchase and sale agreement, binder, or earnest money contract.

Curb Appeal:  The attractiveness of a home and its property to prospective buyers viewing it from the street as compared with other homes on that same street or within that same neighborhood.

Deed:  The formal written document that transfers real property ownership rights from the seller to the buyer.  It contains an accurate, specific legal description of the property and is delivered at closing.

Default:  The failure of a party to a contract to fulfill his obligations under the contract (which may include the loan principal, interest, and possibly additional charges for taxes and insurance).

Documentary Stamp Tax on Deed:  A tax collected at the time when a deed is recorded, based upon the amount paid for the property.  You can use Premier Title’s [Closing Cost Calculator©] to calculate this tax.

Documentary Stamp Tax on Mortgage:  A tax collected for the state at the time of recording a mortgage based upon the amount of the loan.  You can use Premier Title’s [Closing Cost Calculator©] to calculate this tax.

Equity:  The market value of a home minus what the homeowner owes on it.  Homeowners sometimes borrow against their equity, taking out a home equity loan or line (also called a second mortgage), with tax-deductible interest, to pay for whatever they choose.

Escrow:  Money that is set aside and held by a third party for specific purposes.  Examples would include deposits under purchase contracts and money held by a lender to pay taxes, hazard, flood, mortgage insurance, and other costs connected with owning property.

Fair Market Value:  The value of a home based upon the amount that a fully informed buyer would pay and the amount a seller under no compulsion to sell, would accept, generally based on a comparison of that home with comparable homes in the same neighborhood that either are presently on the market or have sold recently.

FHA Loan:  Federal Housing Administration.  A federal agency within the U.S. Department of Housing and Urban Development (HUD).  Using loan insurance programs to insure mortgages for lenders, the FHA stimulates the availability of housing for low and moderate income families.

Fixed Rate Mortgage:  A type of mortgage in which the interest rate remains the same, or “fixed,” throughout the term of the loan.  Lenders typically charge a higher interest rate for these mortgages, as compared to an Adjustable Rate Mortgage (see above).

Foreclosure:  Legal proceeding whereby a lender gets a judgment ordering a public sale of the property to pay off the loan because the borrower has defaulted on the mortgage payments.

Hidden Defect:  Any claim on a property that does not appear in the public records, for example, an unknown heir or an unrecorded municipal utility lien.

Homestead Tax Exemption:  A tax credit for Florida residents on their principal residence.  The exemption basically takes $25,000 – $50,000 off the tax-assessed value of the property.

Inspection:  Physical examination of a property to see that it meets the standards of the contract, the lender, and the buyer.

Intangible Tax on Mortgage:  A tax collected at the time of recording a mortgage based upon the amount of the mortgage.  You can calculate this tax using Premier Title’s [Closing Cost Calculator©].

Lien:  A legal claim on the property that acts as a security for the payment of a debt.  If the debt is not repaid as promised, the lender or the lienholder can foreclose its claim on the property and force a public sale to pay the debt.

Marketable Title:  Property is said to have marketable title when the title, or rights to a property, has no problems or only minor problems that any well-informed and prudent buyer would accept.

Mortgage Note:  The borrower’s written promise to repay money borrowed.  The Mortgage secures the Mortgage Note.

Mortgage Policy:  A title insurance policy issued to a lender insuring the lender as to the priority, validity and enforceability of its mortgage.

Mortgage:  A document based on the Mortgage Note that places a lien on property.  The lender holds the lien as security for the money borrowed.

Multiple Listing Service (MLS):  A computer based resource used by real estate agents that lists and contains descriptions of houses that are for sale in a particular area.

Owner’s Policy:  A title insurance policy issued to a property’s owner that protects the owner against hidden or missed title defects.

Points:  Up front interest charged by a lender.  Also known as “loan origination fees”.  Each point equals 1 percent of the loan, Points are also referred to as “discount points” because usually the more points paid, the lower the interest rate stated on the Mortgage Note.

Pre-Approval:  Initiating the loan approval process before finding a home.  Pre-approval involves providing information regarding employment, income, and debt to a lender to prove the buyer is a good risk.  A more complex process than pre-qualification, pre-approval sometimes involves a fee.

Pre-Qualification:  Pre-qualifying entails speaking with a lender who offers an opinion of the loan amount the buyer is eligible to borrow, generally without providing any supporting paperwork or credit history.

Principal:  The amount of money borrowed on a loan on which interest is charged.

Private Mortgage Insurance:  Typically required by lenders if a down payment is less than 20 percent of the purchase price.  Designed to offset losses where a borrower does not repay a loan and the lender is not able to recover its costs after a foreclosure.

Property Taxes:  Taxes paid by homeowners annually to local and state governments based upon the assessed value of the home, as determined by the country property appraiser, and tax rate determined by the taxing authority.

Real Estate Sales Agent/Broker:  A person tested and licensed by the state to put buyers and sellers together for a commission.  Brokers have taken an additional test, generally following several years in the business, and are authorized to operate a private real estate firm.

Real Property:  Refers to a parcel of land and any permanent improvements to it.

REALTOR®:  A licensed real estate professional who is a member of the National Association of REALTORS, a trade organization with its own educational standards and ethics in addition to those required by the state.

Survey:  A procedure whereby land is located and measured and its boundaries are certified by a registered land surveyor.

Title Agency:  A title agency is authorized to issue title policies and prepare documents in connection with transactions for which it issues policies, and to conduct real estate Closings (see above).

Title Defect:  Claims or other factors that could cause the title to a property to be called into question.  Examples include unpaid real estate taxes or claims to the property, such as those of an unknown heir.

Title Examination:  An examination of public records, laws and court actions to make sure that a property’s seller is the legal owner and to disclose other claims or encumbrances on the property affecting its ownership.

Title Exception:  An item which affects title to the property or encumbers the property (such as an easement for placement of utilities) that title insurance does not protect against.  These exceptions may or may not be acceptable to a lender or purchaser.

Title Insurance:  A type of insurance that protects the policy holder against loss sustained through title defects.

Title:  Title can refer to two things:  1) the rights of ownership and possession of a particular property; 2) the document that shows evidence of those rights.

Note:  The above definitions are derived in part from information provided by Attorney’s Title Insurance Fund, Inc.  They do not constitute, and should not be relied upon as, legal advice.  For further information, contact Premier Title.