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Glossary
Agent
A person acting on behalf of another, called the principal.
Agreement of Sale
Known by various names, such as “contract of purchase”, “purchase agreement”, “sales
agreement”, or “binder”, according to location or jurisdiction. A contract in which
a seller agrees to sell and a buyer agrees to buy, under certain specific terms
and conditions spelled out in writing and signed by both parties.
Annual Percentage Rate (APR)
Includes quoted interest rate on the loan plus all additional service and finance
charges associated with the loan. Includes all costs of financing; those paid at
the time of closing and those paid over the term of the loan. The APR is usually
slightly higher than the note rate.
Appraisal
An expert judgment or estimate of the quality or value of real estate as of a given
date.
Assessed Value
The valuation placed upon property by a public tax assessor as the basis for taxes.
Bill of Sale
An instrument which transfers title to personal property (chattels); a “Deed” transfers
real property.
Certificate of Title
A document signed by a title examiner or attorney, stating that the seller has a
good marketable and insurable title.
Closing Statement (Settlement)
The computation of financial adjustments between buyer and seller as of the day
of closing a sale to determine the net amount of money which buyer must pay to seller
to complete purchase of the real estate and seller’s net proceeds. Also, “settlement
sheets”, “HUD-1”.
Commission
Payment to a real estate broker for services performed.
Convey
To deed or transfer title of property from one person to another.
Deed
A formal written instrument by which title to real property is transferred from
one owner to another. Also, “conveyance”.
Deed of Trust
Like a mortgage, a security instrument whereby real property is given as security
for a debt. However, in a deed of trust there are three parties to the instrument:
the borrower, the trustee, and the lender (or beneficiary).
Earnest Money
The money given to the seller by the potential buyer (usually held in escrow) upon
the signing of the agreement of sale to show that buyer is serious about buying
the house. Also, “deposit”.
Equity
The interest or value which owner has in real estate over and above the debts against
it. (Sales Price – Mortgage Balance = Equity.)
Escrow
Funds, property, or other things of value left in trust to a third party. The escrow
may be released upon the fulfillment of certain conditions or by agreement of the
parties.
Fixture
What was formerly personal property which is now permanently attached to real property
and goes with the property when it is sold.
Hazard Insurance
Protects against damages caused to property by fire, windstorms, and other common
hazards.
Listing Contract
Between a homeowner (as principal) and a licensed real estate broker (as agent)
by which the broker is employed to market the real estate within a given time for
which service the owner agrees to pay a commission. Also, “listing agreement”.
Market Value
The highest price which a buyer, ready, willing and able but not compelled to buy,
would pay, and the lowest price a seller, ready, willing and able but not compelled
to sell, would accept. Basis for “listing price”, or “asking price”.
Market Price
The actual amount for which a piece of property is sold. Also, “sales price”, “purchase
price”.
Mortgage
A lien or claim against real property given by the buyer to the lender as security
for money borrowed.
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgage, serves
as proof of an indebtedness, and states the manner in which it shall be paid. Also,
“deed of trust note”.
P.l.T.I.
Principal, interest, taxes, and insurance. Most residential mortgage payments include
the above and are therefore referred to as P.I.T.I. Also, “carrying charges”.
Points
Sometimes called “discount points”, a point is one percent of the amount of the
mortgage loan.
Prepayment Penalty
Penalty for the payment of a mortgage note or deed of trust note before it actually
becomes due.
Principal
This word has several meanings:
(A) to denote the most important;
(B) a capital sum lent on interest;
(C) one who appoints an agent to act on their behalf;
(D) either party to a contract.
Property Management
The operation of real property, including the leasing of space, collection of rents,
selection of tenants, and the repair and renovation of the buildings and grounds.
Prorate
To allocate between seller and buyer their proportionate share of an obligation
paid or due. For example, a prorate of real property taxes, fire insurance, or condominium
fee.
Sales Associate
A person with a real estate license and associated with a specific real estate broker.
Survey
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. A survey is often required by the lender to assure a building is
actually sited on the land according to its legal description.
Title
As generally used, a document that indicates rights of ownership and possession
of a particular property.
Title Abstract
A summary of the public records relating to the title to a particular piece of land.
An attorney or title company reviews an abstract or title to determine whether there
are any title defects.
Title Insurance
Protects lenders and homeowners against loss of their interest in property due to
legal defects in title.
Title Search or Examination
A check of the title records, generally at the local courthouse, to make sure the
buyer is purchasing a house from the legal owner and there are no liens, overdue
special assessments, or other claims.
Transfer Tax
State tax, local tax (where applicable), and tax stamps (in some areas) required
by law when title passes from one owner to another.
Ask for a copy of the “Understanding the Role of the Real Estate
Agent” (LF1192, for use in the state of Maryland only);”A REALTORS® ROLE” (LF1193,
for use in the state of Virginia only); or “The Agency Disclosure Brochure"
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