Helpful Real Estate Vocabulary and Terms for Sellers

There are many terms and lingo that’s specific to real estate, the loan process, and real estate contracts.  Below is a list of real estate terms to help provide a better understanding.

1031 Exchange – a tax-deferred exchange of real estate employed to offset or even avoid capital gains tax.

Adjustment- The amount added to or subtracted from the sales price of a comparable property to arrive at an indicated value for the subject property. Not all comparables require adjustments.

Affidavits- These are binding statements by either party. For example, the sellers will often sign an affidavit stating that they haven’t incurred any liens on the property.

Appraisal- A written estimate of a property’s current market value prepared by an appraiser, based on a number of valuation factors. A process of developing an opinion of value as defined by the Uniform Standards of Professional Appraisal Practice. Appraisals are required for most federally related transactions above $250,000.

Automated Valuation Model – (AVR) Service or software that provides a property valuation, often based on mathematical modeling. Some of the ones are consumers use are Zestimate and RPR. They cannot take interrupt specifics, location, etc. RPR pulls from the MLS and public records.

Broker Price Opinion- An estimate of the probable selling price of a property.  Sometimes banks request several of these before determining what price to list the foreclosure at.

Building Line or Setback– Distances from the ends and/or sides of the lot beyond which construction may not extend.

Capital Gains- Profit earned from the sale of real estate. The new tax code does not tax the profits from the sale of a home if the proceeds are used to buy another house costing at least as much as the sales price of the old one.

Clear Title- A title that free of clouds and disputed interests.

Cloud (On Title)- An outstanding claim or encumbrance which adversely affects the marketability of title.

Closing – the final step in the loan process when loan documents are signed at an escrow or title company.

Closing Costs- The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. They include: Documentary Stamps, Recording fees, Title Insurance, Lenders Title Insurance, Loan fees, Survey, Appraisal, HOA transfer fees, commissions, etc.

Closing date- The date on which the closing occurs. The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Closing Disclosure- A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). The lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from the lender.

CMA- (Comparative Market Analysis)- An estimate of the probably selling price of a property.  Includes an analysis of the neighborhood, subject property, local and regional market trends, and a description of comparable properties that are similar to the subject property. The purpose of a CMA is to establish an accurate range of value for a property.  A CMA reflects a licensed real estate broker’s analysis of similar, recently sold properties to derive an indication of the probable sales price of a particular property. It is not an appraisal, but rather a guide to help a seller determine a listing price.

Comparable- A recently sold property that is substantially similarly to the subject property. Comparables are used as a basis for determining value of a subject property. The term “comp” is often used as an abbreviated version of the term comparable.

Competition- A currently listed property that can compete for the likely buyers of a given subject. It’s important to understand the competition to determine what buyers are looking at and their choices.

Condominium– Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.

Contingency– A condition put on an offer to buy a home; such as the perspective buyer making an offer contingent on his or her sale of a present home.

Deed– A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also Deed of Trust, General Warranty Deed, Quitclaim Deed, and Special Warranty Deed)

Depreciation- Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Documentary Stamps– A State tax in the forms of stamps attached to certain documents to show that the tax has been paid. Documentary stamps are required on all deeds or transactions of deeds that money or consideration is involved, including deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.

Down Payment – an upfront payment made by the home buyer toward the property purchase price, usually ranging from five to 20 percent. The remainder of the sales prices makes up the mortgage loan amount.

Due-on-sale clause- A provision of a loan contract that stipulates that if the property is sold the loan balance must be repaid. This bars the seller from transferring responsibility for an existing loan to the buyer when the interest rate on the old loan is below the current market.

Earnest Money– The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the downpayment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Easement Rights– A right-of-way granted to a person or company authorizing access to or over the owner’s land. An electric company obtaining a right-of-way across private property is a common example.

Encroachment– An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance– A legal right or interest in land that affects a good or clear title, and diminishes the land’s value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

Escrow – a third party intermediary who holds and allocates funds, including taxes and insurance in a mortgage transaction.

Foreclosure – the legal process by which a bank or lender sells a property after a borrower fails to meet the repayment terms of the loan.

FSBO- For sale by owner.

General Warranty Deed– A deed which conveys not only all the grantor’s interests in and title to the property to the grantee, but also warrants that if the title is defective or has a “cloud” on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic’s liens against it) the grantee may hold the grantor liable.

Hazard insurance- Insurance purchased by the borrower, and required by the lender, to protect the property against loss from fire and other hazards. Also known as “homeowner insurance.”

Home Equity – the value of a property less any and all existing liens. If a borrower owns a property worth $500,000 and has liens of $400,000, equity is $100,000.

Home Equity Line of Credit – a line of credit that uses the value of a property as collateral. Also called HELOC.

Homestead Exemption- The assessed value of a owner-occupied residential property may be reduced by the amount of the exemption for the purposes of calculating property tax. Available in some states.

Lease-to-own purchase- A transaction in which a hopeful home buyer leases a home with an option to buy it within a specified period.

Lien – a claim against a property by the issuing bank or lender to secure repayment of a debt, typically in the form or a mortgage.

Loan Commitment– A formal offer by a lender making explicit the terms under which it agrees to lend money to a borrower over a certain period of time. also called standby loan commitment or commitment letter or firm commitment lending.

Marketable Title– A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Planned Unit Development (PUD)– A project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.

Plat– A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

Power of Attorney– A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Approval-  A commitment by a lender to make a mortgage loan to a specified borrower, prior to the identification of a specific property. It is designed to make it easier to shop for a house. Unlike a pre-qualification, the lender checks the applicant’s credit.

Pre-Qualification – processes to determine what you can afford to ensure you can obtain mortgage financing when purchasing a property. The process of determining whether a prospective borrower has the ability, meaning sufficient assets and income, to repay a loan. It is subject to verification of the information provided by the applicant. Pre-qualification is short of approval because it does not take account of the credit history of the borrower. Qualified borrowers may ultimately be turned down because, while they have demonstrated the capacity to repay, a poor credit history suggests that they may be unwilling to pay.

Primary residence- The house in which the borrower will live most of the time, as distinct from a second home or an investor property that will be rented.

Quitclaim Deed– A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor’s interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.

Refinance – the act of replacing your existing loan(s) with a new loan on the same property. There are two main types of refinancing, including a rate and term refinance and cash-out refinance.

Restrictive Covenants– Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may “run with the land,” binding all subsequent purchasers of the land, or may be “personal” and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

Second Home (or Vacation Home)– This home is not rented and is occupied occasionally by the owners.

Seller contribution– A contribution to a borrower’s down payment or settlement costs made by a home seller, as an alternative to a price reduction.

Seller financing– Provision of a mortgage by the seller of a house, often a second mortgage, as a condition of the sale.

Set Back Ordinance– Regulates the distance from the lot line to the point where improvements may be constructed.

Settlement costs- Costs that the borrower must pay at the time of closing, in addition to the down payment.

Short Sale – a foreclosure alternative where a property is sold for less than the balance on the associated mortgage

Special Assessments– A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

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 him that a building is actually sited on the land according to its legal description.

Taxable Assessed Value– The assessed value of a parcel against which the tax rate is applied to compute the tax due. In case of a partial exemption, the exempt amount is subtracted from the assessed value in order to determine the taxable assessed value.

Title– As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.

Title Insurance– Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a “mortgagee’s title policy” called Lender’s Title Insurance. Insurance benefits will be paid only to the “named insured” in the title policy, so it is important that an owner purchase an “owner’s title policy”, if he desires the protection of title insurance.

Title Insurance Binder– Written commitment of a title insurance company to insure title to the property under the conditions stated in the binder.

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 or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.

Title Insurance – protection against lawsuits and claims tied to the chain of title on the subject property.

Trustee- A party who is given legal responsibility to hold property in the best interest of or “for the benefit of” another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.

Underwriting– The process of examining all the data about a borrower’s property and transaction to determine whether the mortgage applied for by the borrower should be issued. The person who does this is called an underwriter.

Zestimate – the estimated market value of a piece of property based on Zillow’s algorithm.

Zoning- A local government authority’s specifications for the use of property in certain areas.

Zoning Ordinances– The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

FOR ADDITIONAL VOCABULARY INCLUDING LENDER AND LOAN RELATED TERMS, CLICK HERE

Infinity Realty Group
20 S Main St #260
Winter Garden
,
FL
34787

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