Definitions of Common Real Estate Terms

M-Z

Market Price

The actual price at which a property is sold. 

Market Value

The price that is established for a property by existing economic conditions, property location, size, etc. 

Marketable Title

Merchantable title, free and clear of objectionable liens or encumbrances. 

Mold

Mold is a superficial and often woolly growth produced on damp or decaying organic matter or on living organisms. See www.epa.gov/iag/molds/moldguide.html for a guide that provides information and guidance for homeowners and renters on how to clean up residential mold problems. 

Mortgage

A legal claim received by the lender on a property as security for the loan made to a buyer. 

Mortgagee

The lender of money or the receiver of the mortgage document. 

Mortgage Broker

An independent, third-party, licensed broker who arranges loan transactions between lenders and borrowers by facilitating the application and approval process. 

Mortgage Insurance Premium (MIP)

The consideration paid by a mortgagor for mortgage insurance either to the FHA or a PMI company. On an FHA loan, the payment is one half of one percent annually on the declined balance of the mortgage. It is a part of the regular monthly payment and is used by the FHA to meet operating expenses and provide loss reserves. 

Mortgagor

The borrower of money or the giver of the mortgage document. 

Multiple Listing Service (MLS)

A system through which participating brokers agree to share commissions on a predetermined percentage split on the sale of properties listed on the system. 

Origination Fee

This fee is a supplemental fee paid buy buyers to lenders, usually stated as a percentage or as points. 

Personal Property

Any property which is not real property: e.g., money, savings accounts, appliances, cars, boats, etc. 

PITI

Common real estate acronym meaning Principal, Interest, Taxes, Insurance. 

Point

A single percent of the loan principal, often charged by the lender in addition to various fees and interest. 

Prepayment

When a borrower pays off an entire mortgage before the scheduled payoff date. 

Prepayment Penalty

A fee included in the mortgage agreement that is required of the borrower in the event the loan is paid of  before the due date. Look for a clause that says, “There shall be no prepayment penalty.” 

Prequalification

An informal estimate of the “financing potential” of a prospective borrower. 

Principal

The amount of money borrowed against which interest and possibly fees will be charged. OR: One of the parties to a contract. 

Private Mortgage Insurance (PMI)

Insurance issued to a lender by a private company to protect the lender against loss on a defaulted mortgage loan.  Its use is usually limited to loans with high loan-to-value ratios. The borrower pays the premiums. 

Promissory Note

A written contract that contains a promise to pay a definite amount of money at a specific time in the future. 

Pro-ration

Proportionate division of expenses based on days or time occupied or used by the seller and/or buyer. 

Purchase Agreement

A written, legally binding contractual agreement between a buyer and a seller for the purchase of real estate. 

Qualification

Ability of a borrower to satisfy a lender’s mortgage-approval requirements. 

Radon

A colorless, odorless gas formed by the breakdown of uranium in sub-soils. It can enter a house through cracks in the foundation or in water and is considered to be a hazard. Your REALTOR^® can supply a radon brochure. 

Real Property

Any land and whatever by nature or artificial annexation is a part of it. 

Referral

The recommendation by one agent of a potential buyer and/or seller to another agent either locally or long-distance. 

Refinancing

The process of applying for a new mortgage to gain better terms or use of equity. 

Relocation Specialists

A firm or person specializing in advising buyers or sellers on relocating to different and/or new communities.  There are designations for REALTORS that indicate additional educational training. Look for the Certified Relocation Professional (CRP) designation. 

RESPA Statement

The Real Estate Settlement Procedures Act requires a precise listing of all closing costs for both sellers and buyers. 

Return on Investment (ROI)

The profit gained as the result of money spent on an improvement or addition to a home or property. 

Settlement Disclosure Statement

A statement or list providing a complete breakdown of costs involved in finalizing a real estate transaction prepared by the lender’s agent prior to closing and reviewed at closing by the buyer and seller. 

Survey

The process by which a parcel of land is measured and its area ascertained. Title companies study the survey to check for encroachments. 

Title

A legal document that defines the property, right of ownership, and possession. 

Title Defect

An outstanding claim or encumbrance on property that affects marketability. 

Title Insurance

An insurance policy that protects the buyer against errors, omissions, or any defects in the title. 

Title Search

A highly detailed search of the document history of a property title for the purpose of identifying any and all legal encumbrances to the property prior to title transfer to a new owner. 

VA Mortgage

The Department of Veterans Affairs has made guaranteed mortgages available through banks and other lending institutions to active military personnel, veterans, or spouses of veterans who died of service-related injuries. 

Variance

A special suspension of zoning laws to allow the use of property in a manner not in accord with existing laws. 

Walk-Through Inspection

The final inspection by the buyers, usually in the company of the buyers’ real estate sales agent, to ensure that all conditions noted in the offer to purchase and all seller-related contingencies have been met. This inspection is most often completed immediately prior to the closing and after the seller has vacated the premises. 

Zoning

Virtually all local communities have established specific restrictions for land use, new construction, and remodeling activity. These are available to you through a local regulatory department such as the Building Inspector’s Department or office or the Planning and Zoning Board.