Buying a Home | Real Estate Terms
- 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.
- Certificate of Title – A document signed by a title examiner or attorney, stating that the seller has 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.”
- Commission – Payment of money or other valuable consideration 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.
- Listing Contract – Between a home owner (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.I.T.I. – Principal, interest, taxes, and insurance. Most residential mortgage payments include the above and are therefore referred to as P.l.T.I. Also, “carrying charges.”
- Points – Sometimes called “discount points.” A point is one percent of the amount of the mortgage loan.
- Pre-payment Penalty – Penalty for the payment of a mortgage note or deed of trust note before it actually becomes due.
- Principal – To Denote The Most Important; or
A Capital Sum Lent On Interest; or
One Who Appoints An Agent To Act For And In Principal’s Stead; or
Either Party To A Contract.
- 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 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 home owners 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/Recordation Tax – State tax, local tax (where applicable) and tax stamps (in some areas) required by law when title passes from one owner to another.