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| COMMONLY USED REAL ESTATE TERMS |
| Agency – A relationship trust created when one person grants another authority to represent them in dealings with third parties.
Agent – A person authorized to represent another in dealings with third parties. Agreement – Contract ALTA – American Land Title Association – A national organization of title insurance companies. Amenities – Features of a property that contribute to the pleasure or convenience of ownership, such as a fireplace or a pool. Appraisal – An estimate or opinion of the value of a piece of property as of a particular date. (Also called Valuation) Appraiser – One who estimates the value of a property. Usually an expert qualified to do so by training and experience. Appreciation – Usually used to refer to an increase in property value. Assessment – 1. The valuation of a property for the purposes of taxation. 2. A specific charge against a property for a particular purpose, such as installation of new street lights or sewers. Bill of Sale – A document used to transfer title to personal property from one person to another. (Also referred to as a Personal Property Agreement). Binder – An instrument providing immediate insurance coverage until the regular policy is issued. Blighted – An area where the Real property has declined in value significantly. Bona Fide – In good faith; genuine; not fraudulent. Breach – Violation of an obligation, duty or law; especially an unexcused failure to perform a contractual obligation. Brokerage – A Real Estate brokerage business. Brokerage Fee – The commission or other fee charged for a Real Estate Broker’s Service. Bundle of Rights – The rights inherited in ownership of property, including the right to use, lease, enjoy, encumber, will, sell, or do nothing with the property. Buydown – The payment of discount points to a lender to reduce (buy down) the interest rate charged to the borrower; especially when a seller pays discount points to help the buyer/borrower qualify for financing. Buyer Representation Agreement – A contract in which a Real Estate Broker agrees to try to locate suitable property for the other party (the buyer) in exchange for a commission. Cancellation – Termination of a contract without undoing acts that have already been performed under the contract. Capital Gain – Profit realized from the sale of a capital asset. If the asset was held for more than one year, it is a long term capital gain; if the asset was held for one year or less it is a short-term capital gain. Caveat Emptor – A latin phrase meaning “let the buyer beware” it expresses the idea that a buyer is expected to examine property carefully before buying, instead of relying on the seller to disclose problems. This was once a firm rule of law, but is has lost most its force, especially in residential Real Estate transactions. Chattel – An article of personal property. Client – One who employs a broker, lawyer, appraiser, or other professional. A Real Estate Broker’s client may be the seller, the buyer or both. Closing – The final stage in a Real Estate transaction, when the seller receives the purchase money, the buyer receives the deed, and title to the property is transferred. Also called settlement. Closing Costs – Expenses incurred in the transfer of Real Estate in addition to the purchase price; for example, appraisal fee, title insurance premiums, brokers commission, and state deed tax. Also called settlement costs. Closing Date – The date on which all the terms of the contract are met or the contract is terminated. Cloud on Title – A claim, encumbrance or apparent defect that makes the title to a property unmarketable. Compliance Inspection – A building inspection to determine, for the benefit of a lender whether building codes, specifications, or conditions established after a prior inspection have been met before a loan is made. Contingency Clause – A provision in a contract that makes the parties rights and obligations depend on the occurrence or non-occurrence of a particular event. Contract – An agreement between to or more persons to do or not do a certain thing, for a fee/consideration. Contract for Deed – A contract for the sale of Real Property in which the buyer (The Vendee) pays in installments; the buyer takes possession of the property immediately, but the seller (The Vendor) retains legal title until the full price has been paid. Also called a conditional sales contract, installment sales contract, land contract, or Real Estate contract. Counter-Offer – A response to a contract offer, changing some of the terms of the original offer; it operates as a rejection of the original offer (not as an acceptance). Customer – From the point of view of a seller’s agent a prospective property buyer. Damages – In a civil lawsuit, a sum of money the defendant is ordered to pay the plaintiff. Damages Liquidated – A sum that parties to a contract agree in advance (at the time the contract is made) will serve as full compensation in the event of a breech. Deed – An instrument which conveys title to real property from the grantor (seller) to the grantee (buyer). Deed – Quitclaim – A deed that conveys any interest in a property that the grantor has at the time the deed is executed without warranties. Deed in Lieu of Foreclosure – A deed given by a mortgage borrower to satisfy the debt and avoid foreclosure. Depreciation – a loss in value (caused by deferred maintenance functional obsolescence, or economic obsolescence. Also for the purposes of income tax deductions, apportioning the cost of an asset over time. Discount Points – A percentage of the principal amount of a loan, collected by a lender at the time the loan is originated, to give the lender an additional yield. Downpayment - The part of the purchase price of the property that the buyer is paying in cash; the difference between the purchase price and the financed amount. Downpayment Assistance Program – Programs available to certain buyers to assist with obtaining funds for the downpayment on a home. Earnest Money – A deposit that a prospective buyer gives the seller as evidence of his or her good faith intention to complete the transaction. Also called a good faith deposit. Easement – An irrevocable right to use some part of another person’s real property for a particular purpose. (Such as a utility easement). Eminent Domain – The government’s constitutional power to take (condemn) private property for public use, as long as the owner is paid just compensation. Encroachment – A physical intrusion onto the neighboring property, usually due to a mistake regarding the location of boundaries. Encumbrance – A nonpossessory interest in real property; a right or interest held by someone other than the property owner, which may be a lien, an easement, or a restrictive covenant. Equity – An owner’s unencumbered interest in his or her property; the difference between the value of the property and the liens against it. Escrow Account – A bank account maintained by a lender for payment of property taxes and insurance premiums on the secured property; the lender requires the borrower to make regular deposits and pays the expenses out of the account. Facilitator – Performs services for the seller of buyer and facilitates the transaction, but does not assume the fiduciary duties that an agent owes to a client. Federal Housing Administration (FHA) A federal agency within the Department of Housing and Urban Development (HUD) that provides mortgage insurance to encourage lenders to make loans to low and middle income homebuyers. Fiduciary Relationship – A relationship of trust and confidence, in which one party owes the other (or both parties owe each other) loyalty and a higher standard of good faith than is owed to third parties. For example, an agent is a fiduciary in relationship to the principle: husband and wife are fiduciaries in relation to one another. Finance Charge – Any charge a borrower is assessed, directly or indirectly in connection with a loan. Insurance, Hazard – Insurance against damage to real property by fire, flood, theft, or other mishap. Also called casualty insurance. Insurance, Homeowner’s – Insurance against damage to the real property and the homeowner’s personal property. Insurance, Mortgage – Insurance that protects a lender against losses resulting from the borrower’s default. Latent Defects – Defects that are not visible or apparent (as opposed to patent defects). Legal Description – A precise description of a parcel of real property. LTV – Loan to value ratio. The relationship between the loan amount and the sales price or appraised value of the property expressed as a percentage. MAR – Minnesota Association of Realtors. Material Fact – An important fact; one that is likely to influence a decision. Multiple Listing Service – An organization of Brokers who share their exclusive listings. NAR – National Association of Realtors. Negligence – Failure to exercise reasonable care; conduct that falls below the standard of care that a reasonable person would exercise under the circumstances. Offer – the action of one person (the offeror) in proposing a contract to another (the offeree) if the offeree accepts the offer, a binding contract is formed. Origination Fee – A fee a lnder charges a borrower upon making a new loan, intended to cover the administrative costs of making the loan. Owners Policy – Protects the purchaser and the purchaser’s heirs for as long as they have an interest in the property. Personal Property – Any property that is not real property; movable property not affixed to Real Estate. Procuring Cause – The real estate agent who is primarily responsible for bringing about a sale; for example, by negotiating the agreement between the buyer and seller. The agent who produces a buyer ready, willing, and able to buy the property on the seller’s terms. Proration – The process of dividing or allocating something (usually a sum of money or an expense) proportionately, according to time, interest, or benefit. Purchase Agreement (PA) A contract in which a seller promises to convey title to real property to a buyer in exchange for the purchase price. Qualifying Standards – The standards a lender requires a loan applicant to meet before a loan will be approved. Also called underwriting standards. Real Estate – Lan and everything attached to or appurtenant to it, including the improvements on the land and the rights that go with ownership of the land. Realtor – a Real Estate agent who is an active member of a state, and local Real Estate board tat is affiliated with the National Association of Realtors. Recording – Filing a document at the county recorder’s office, so that it will be placed in the public record and give constructive notice. Sheriff’s Sale – A foreclosure sale. Short Sale – A negotiated agreement with a lender that allows a home-owner to sell a property for less than what is owed in order to satisfy the mortgage debt. Specific Performance – A legal remedy in which a court orders someone who has breached a contract to actually perform the contract as agreed, rather than simply paying money damages to the other party. Steering – Channeling prospective buyers or tenants to or away from particular neighborhoods based on their race, religion, national origin or ancestry, in violation of anti-discrimination laws. Time is Of the Essence – A clause in a contract that means performance on the exact dates as specified in an essential element of the contract; failure to perform on time is a material breach of contract. Title – Lawful ownership of real property. Also the deed or other document that is evidence of that ownership. Title – Marketable – Title free and clear of objectionable liens, encumbrances, or defects, so that a reasonably prudent person with full knowledge of the facts would not hesitate to purchase the property. Underwriting – In Real Estate lending, the process of evaluating a loan application to determine the probability that the applicant would repay the loan, and matching the risk to an appropriate rate of return. Value - Market – The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. |
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