Definitions of Common Real Estate Terms

A-D

Abstract of Title

The summary of the public records relating to the ownership of a particular piece of land. It represents a short legal history of an individual piece of property from the time of the first recorded transfer to present. 

Acceptance

Consent to an offer to enter into contract. 

Adjustable Rate Mortgage (ARM)

A mortgage in which interest and payment rates vary periodically, based on a specific index, such as 30-year Treasury Bills or the Cost-of-Funds index. 

Adjustments

Money credited or debited to either/both buyer and seller at closing, including real estate taxes, association fees, garbage fees, rents, etc. 

Agency

A mutual-consent, legal relationship in which a seller or buyer engages a broker-agent in the sale or purchase of property. 

Agent/REALTOR^®

A licensed person who represents the seller (and/or buyer) and who provides market assessment, offers sales or buying strategy, recommends various services and sources important to the seller or buyer, is a member of the National Association of REALTORS (NAR), and subscribes to NAR’s strict Code of Ethics. 

Amortization

A method by which monthly mortgage payments are equalized over the life of a loan, despite the fact that the proportion of principal to interest changes. 

Annual Percentage Rate (APR)

The total finance charge (interest, loan fees, points) expressed as a percentage of the mortgage amount. 

Appraisal

A professional and unbiased written opinion of a property’s value that is based on recent, comparable sales; quality of construction and current condition; and style of architecture. 

Appreciation

Increase in value to any cause. 

Asking Price

The price at which a property has been placed on the market for sale. 

Assessed Value

The established value of a property for tax-assessment purposes, which may or may not reflect market value. 

Assumption of Mortgage

The taking of title to property by a grantee, wherein he or she assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor for the payment of a mortgage or deed for trust note. 

Balloon Mortgage

A short-term mortgage, generally at a fixed rate of interest, to be paid back in predetermined, equal monthly payments with a large final payment for the balance of the loan to be paid at the end of the term. 

Broker

A person licensed to represent home buyers or sellers for a contracted fee. Brokers manage real estate offices and employ licensed agents to sell properties. 

Bridge Loan

A short-term mortgage made until a longer-term loan can be made; it’s sometimes used when a person needs money to build or purchase a home before the present one has been sold. 

Building Codes

State and local laws that regulate the construction of new property and the rehabilitation of existing property. 

Cap

A limit on the total amount an interest rate can be increased in a specified time and over the lifetime of an adjustable-rate mortgage. 

Capital Gains

The taxable profit derived from the sale of a capital asset. A gain is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, fix-up expenses, capital improvements, allowable depreciation, etc. 

Closing

The final settlement at which time the title is transferred from seller to buyer, accounts are settled, new mortgages are signed, and all fees and expenses are dispersed or satisfied. 

Closing Costs

All fees, taxes, charges, commissions, surveys, lender fees, inspection fees, and other costs paid by the buyer and/or seller at the closing. 

Commission

A previously agreed upon percentage of the home’s sale price paid to the listing and selling agent(s). 

Comparables

Similar properties in type, size, price, and amenities that have sold recently, been adjusted, and are used for comparison in the appraisal report.

Condominium (Condo)

Real estate ownership in which a property owner has title to a specific unit but shared interest in common areas. 

Contingency

A condition that must be satisfied before a contract is binding. 

Contract

An agreement to do or not to do a certain thing. 

Contract for Deed

A contract ordinarily used in connection with the sale of a property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer. 

Contract of Title

A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title together with any other elements or records that may affect the marketability of the title. 

Conventional Mortgage

Most popular home financing form not insured by Federal Housing Administration (FHA) or guaranteed by Veteran’s Affairs (VA). Available from many lenders at varying rates, terms, and conditions. 

Conversion Clause

Clause in an ARM permitting conversion from an adjustable loan to a fixed-rate loan. 

Counteroffer

An offer made by a buyer or seller to the other party, responding to the asking price or a subsequent adjustment to that price to complete a purchase of sale. 

CRV

Certificate of Reasonable Value. A document of appraisal issued by VA establishing their opinion of the maximum value. 

Curb Appeal

A term used by REALTORS^® that encompasses all that a buyer sees from the street that may induce the buyer to look more closely at the property. 

Deed

A legal “instrument” that conveys the title to a property from seller to buyer. 

Disclosure Laws

State and federal regulations that require sellers to disclose such conditions as whether a house is located in a flood plain or if there are any known defects that would affect the value of the property. 

Discount Points

Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level. 

Down Payment

The buyer and lender determine the down payment requirements during the pre-qualification process. The down payment is usually expressed as a percentage of the purchase price: e.g., 0%, 5%, 10%, 20%, 25%, 30%. 

Earnest Money (Escrow Deposit)

Money paid by the buyer at the time an official offer to purchase is submitted to the seller, intended to demonstrate the good faith of the buyer to complete the purchase. Earnest money is applied against the purchase price when the sale is finalized. Under certain conditions, the earnest money may be forfeited if the buyer fails to complete the purchase under the terms of the sales contract. 

Last Updated July 29, 2010

Rick Lorenz, Broker, CRS, ABR, CLHMS, CNE The Wells Group Real Estate Brokerage 901 Main Avenue, Durango, CO 81301 (970) 375-7007   (800) 955-0259 ext 1123 E-Mail: Rick@BuyDurango.com Copyright 1999 - 2010 All content is copyright protected as intellectual property of RickLorenz