If you're planning on buying property in the near future, it's perhaps practical that you familiarize yourself with terms that will be useful when you negotiate or inquire about a particular property. Below is a rundown of real estate terms that should help your property parlance before, during, and after your acquisition process.
Agent ?An authorized person who manages or transacts business for another. Laws governing real estate--especially relating to agents--vary considerably from state to state. While some standardization has been achieved, it is best to check the particulars in each state.
Buyer Agent ?An agent who represents the buyer in a real estate transaction. A buyer agent may be paid by the buyer, seller, or listing agent at closing, provided all parties consent.
Dual Agent? An agent representing both parties in a transaction. In almost every state, dual agency is illegal and unethical without the written consent of both the buyer and the seller.
Listing Agent? The agent who represents the seller.
Selling Agent? The agent who obtains a buyer. A selling agent may represent the buyer, or may be a subagent of the seller.
Amenities ?Features that enhance the value or desirability of a property.
Amortize ?To pay a debt in periodic amounts until the total amount, including any interest, is paid.
Appraisal ?A qualified party's opinion of the value of a property. This may include examples of sales of similar properties.
Assessment / Assessed Value? An official valuation of property for tax purposes. Payments made by condominium or cooperative owners for their share of building maintenance expenses.
Balloon Payment/Mortgage? A mortgage with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mort-gage may contain an option to "reset" the interest rate to the current market rate and to extend the due date if certain conditions are met.
Broker ?An independent business person who sets real estate office policies, hires employees, determines their compensation, and supervises their activities.
Closing ?The point at which real estate formally changes ownership. Closing costs are fees paid for services associated with a home's closing such as title insurance, surveying fees, recording fees, deeds, and affidavits.
CMA (Competitive Market Analysis) ?A method of determining the value of a property by comparing the prices paid for similar properties.
Commission ?Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange, or lease of property.
Condominium (Condo) ?Individual ownership of a portion of a building, with common areas shared by all owners. Maintenance fees called "assessments" are paid to the condominium association to maintain, repair, or improve the property.
Conventional Loan ?A fixed-rate, fixed term loan that is not insured by the government.
Co-operative (Co-op) ?An arrangement in which a corporation made up of residents owns a building. The buyer owns a proprietary lease, rather than real property, and a corresponding number of shares in the corporation.
Counter Offer ?A new offer as to price, terms, and conditions, made in response to a prior, unacceptable offer. A counter offer terminates an original offer.
Disclosure ?Revealing what previously was private knowledge. Any statement of fact that is required by law.
Down Payment ?A percentage of the purchase price the buyer pays in cash.
Earnest Money ?A buyer's partial payment to the seller as a show of good faith in completing the transaction.
Equity ?The difference between the current market value of a property and the claims--such as the unpaid portion of a mortgage--that exist against it.
Escrow ?The closing of a real estate transaction through a neutral third party who holds funds and/or documents for delivery after specific conditions have been met.
Exclusive Listing ?A written agreement in which the seller appoints only one agent to market the property for a specific period of time. If the owner sells the property himself, he is not required to pay a commission.
Fannie Mae (Federal National Mortgage Association) ?Fannie Mae purchases home mortgages, thus serving as a source of funds for mortgage lenders. It is a privately owned corporation whose shares are traded on the New York Stock Exchange, but it is subject to the strict supervision of the secretary of the U.S. Department of Housing and Urban Development (HUD).
Federal Fair Housing Law Refers to Title VIII of the Civil Rights Act, and stipulates that discrimination based on race, color, sex, familial status, handicap, religion, or national origin is illegal in connection with the sale or rental of most dwellings.
FHA (Federal Housing Administration) ?A federal agency established to improve housing standards and conditions. The FHA provides mortgage insurance to approved lending institutions.
Forbearance Agreement? An agreement between a mortgage holder and a borrower that specified a loan payment plan and halts the foreclosure action if borrower meets requirements and terms of the agreement. The payment plan generally includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond it's original term.
Foreclosure? The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower's loan.
Freddie Mac (Federal Home Loan Mortgage Corporation) ?A federally chartered corporation established to purchase mortgages in the secondary, or resale, market. Freddie Mac's policies are designed to serve the needs of savings and loan associations. It is subject to oversight by the U.S. Department of Housing and Urban Development (HUD).
Guaranty ?A pledge made by one person (the guarantor) to ensure that another person (the obligor) will fulfill an obligation to a third party (the obligee).
Improvements ?Additions intended to increase the value of a property.
Inspection ?An examination of a property by the buyer, agent, title insurance company, or other interested party.
Lien ?A charge or claim by one party on the property of another as security for the payment of a debt.
Listing ?A written agreement between a property owner and a real estate broker authorizing the broker to find a buyer.
Market Value ?The price a property will command on the open market.
MLS (Multiple Listing Service) ?A means by which agents are informed of the properties offered for sale by other agents.
Mortgage ?A legal document pledging property as security for the payment of a loan.
Mortgage Insurance ?An insurance plan that protects the lender if the borrower does not repay a loan. Mortgage insurance is required when a home buyer makes less than a 20% down payment at the time of purchase. Private mortgage insurance (PMI) covers conventional (fixed-year, fixed-rate) loans. The Federal Housing Administration charges a mortgage insurance premium (MIP) on FHA loans.
Offer ?A proposal to purchase property at a specified price and terms.
Open House ?The common real estate practice of showing "For Sale" homes to the public during established hours.
Origination Fee ?A lender's charge for establishing and processing a new mortgage loan. It is generally computed as a percentage of the loan and may be tax deductible.
Owner of Record ?The person named in the public record as the owner of a property or mortgage.
Principal ?The amount of money upon which interest is paid.
Qualified Buyer ?A buyer who has demonstrated the financial ability to afford the asking price of a home. Prequalifying with a lender can expedite the home buying transaction.
Refinance ?Obtaining a new loan to pay off an existing loan. Refinancing is a popular practice when interest rates drop.
Short Sale ?To sell a home through negotiation with the bank or lender, who agrees to accept less than the full amount owed to satisfy the debt allowing the debt to be 'paid off', short. Short sales are subject to bank approval and are often used as options in lieu of foreclosure.
Title Insurance ?An insurance policy that protects against losses arising from title defects such as forged or misfiled documents
Town House ?Also known as a row house, generally refers to a type of dwelling having two floors, with the living area and kitchen on the first floor, and the bedrooms on the second. Town houses share a common wall between units.
Walk-Through ?A final inspection of a property before it changes ownership