Adjustable Rate Mortgage (ARM)
a mortgage having an interest rate which is usually initially lower than that of a mortgage with a fixed rate but is adjusted periodically according to the cost of funds to the lender
Agency
A relationship of trust created when one person (the client) grants another (the broker) authority to represent the client in dealings with third parties
Amortize
To gradually pay off a debt with installment payments that include both principal and interest
Annual Percentage Rate
All of the charges that the borrower will pay for the loan (including the interest, loan fee, discount points, and mortgage insurance costs), expressed as an annual percentage of the loan amount
Appraisal
An estimate or opinion of the value of a piece of property as of a particular date. Also called valuation.
Appreciation
An increase in value; the opposite of depreciation
Assessed Value
The value of a property as determinated by an official for the purpose of property taxation
Balloon Payment
A payment on a loan (usually the final payment) that is significantly larger than the regular installment payments
Cap (re:loan)
A limit on how much the interest rate can change in an adjustable-rate mortgage
Capitalization Rate
A percentage used in capitalization (Net Income=Capitalization Rate x Value). It is the rate believed to represent the proper relationship between the value of the property and the income it produces; the rate that would be a reasonable return on an investment of the type in question, or the yield necessary to attract investment of capital
Certificate of Title
A document, signed by a title examiner, stating that a seller has an insurable title to the property
Closing
The final stage in a real estate transaction, when the seller receives the purchase money, the buyer receives the deed, and title is transferred. Also called settlement
Closing Costs
Expenses incurred in the transfer of real estate in addition to the purchase price; for example, the appraisal fee, title insurance premium, broker’s commission, and excise tax
Commercial Brokers Association (CBA)
This Multiple Listing Service is a platform for properties that are listed publically. A member is a broker who subscribes to the services, rules and regulations and who can publish listings for other brokers and the public to view. Primarily used for commercial properties
Commission
The compensation paid to a broker for services in connection with a real estate transaction (usually a percentage of the sales price)
Comparative Market Analysis (CMA)
A comparison of homes that are similar in location, style, and amenities to the subject property, in order to set a realistic listing price. Similar to the sales comparison approach to value
Contingency
A provision in a contract that makes the parties’ rights and obligations depend on the occurrence or nonoccurance of a particular event.
Contract
An agreement between two or more persons to do or not do a certain thing, for consideration
Covenants Conditions & Restrictions (CC&R’s)
A declaration of covenants, conditions and restrictions; usually recorded by a developer to place restrictions on all lots within a new subdivision
Deed
An instrument which, when properly executed and delivered, conveys title to real property from the grantor to the grantee
Down Payment
The part of the purchase price of property that the buyer is paying in cash; the difference between the purchase price and the financing
Earnest Money
A deposit that a prospective buyer gives the seller as evidence of his good faith intent to complete the transaction
Equity
An owner’s unencumbered interest in her property; the difference between the value of the property and the liens against it
Escrow
An arrangement in which something of value (such as money or a deed) is held on behalf of the parties to a transaction by a disintereseted third party (an escrow agent) until specified conditions have been fulfilled
Fixed-Rate Mortgage
A loan on which the interest rate will remain the same throughout the entire loan term
Fixture
An item that used to be personal peoperty but has been attached to or closely associated with real property in such a way that it has legally become part of the real property
Gross Lease
A lease in which the rent is set at a fixed amount, and the landlord pays most or all of the operating expenses (such as utilities, taxes, insurance, and maintenance costs). Alos called a flat lease, fixed lease or straight lease
Hazard Insurance
Insurance against damage to real property caused by fire, flood, theft, or other mishap. Also called casualty insurance
Housing Urban Development (HUD)
The U.S Department of Housing and Urban Development
Interest, Simple
Interest that is computed on the principal amount of the loan only, which is the type of interest charged in connection with real estate loans
Lien
A nonpossessory interest in real property, giving the lienholder the right to foreclose if the owner doesn’t pay a debt owed to the lienholder; a financial encumbrance on the owner’s title
Listing Broker
The broker who takes a listing, and thus represents the seller
Listing Contract
A listing agreement that entitles the broker to a commission if anyone-including the seller-finds a buyer for the property during the listing term
Loan 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. Sometimes called risk analysis
Market Price
The current price generally being charged for something in the marketplace. The price actually paid for a property
Market Value
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
Mortgage
An instrument that creates a voluntary lien on real property to secure repayment of a debit and which does not include a power of sale, so it can only be foreclosed judicially; the parties are the morgagor (borrower) and the mortgagee (lender)
Multiple Listing Service (MLS)
Multiple Listing Service is a platform for properties that are listed publically. A member is a broker who subscribes to the services, rules and regulations and who can publish listings for other brokers and the public to view. Primarily used for residential properties
Origination Fee
A fee a lender charges a borrower upon making a new loan, intended to cover the administrative costs of making the loan
PITI
Principal, interest, taxes and insurance, forming the composition of monthly mortgage payments
Point
On percent of the principal amount of a loan
Pre-approval
A process that allows a prospective borrower to submit a loan application to a lender and get approved for a loan before beginning the home-buying process
Prepayment Penalty
A penalty charged to a borrower who prepays the mortgage before the term of the loan is up
Principal
One who grants another person (a broker) authority to represent him in dealings with third parties
Probate
A judicial proceeding in which the validity of a will is established and the executor is authorized to distribute the estate property; or, when there is no valid will, in which an administrator is appointed to distribute the estate to the heirs
Prorate
Divide or assess proportionally
Public Offering Statement (POS)
A document prepared by the attorneys representing the builders of a newly constructed condominium building. The statement includes information about the number and type of units in the building, the Homeowners Association rights and duties to owners, and a list of any easements or liens affecting the title of the building. In most cases, buyers looking to purchase a new construction condo can get the Public Offering Statement from their broker before they make an offer on a unit.
Purchase & Sale Agreement
A contract in which a seller promises to convey title to real property to a buyer in exchange for the purchase price.
Resale Certificate
A document prepared by the condominum’s board or management that includes information about the number and type of units in the building, homeowners rights and duties to owners, budget, rules and regulations and meeting mintues. This document is provided to a buyer when a condo is being resold
Selling Broker
The broker responsible for procuring a buyer for real estate; typically represents the buyer, may represent both or either the buyer or the seller
Settlement Statement
A document that presents a final, detailed accounting for a real estate transaction, listing each party’s debits and credits and the amount each will receive or be required to pay at closing. Also called a closing statement
Title
Lawful ownership of real property. Also, the deed or other document that is evidence of that ownership
Title Search
An inspection of the public record to determine all rights and encumbrances affecting title to a piece of property
Title Insurance
Insurance that protects against losses resulting from undiscovered title defects. An owner’s policy protects the buyer, while a mortgagee’s policy protects the lien position of the buyer’s lender
Triple Net Lease (NNN)
A lease requiring the tenant to pay all of the costs of maintaining the property (such as taxes, insurance and repairs), in addition to the rent paid to the landlord. The three N’s represent the three main expenses the landlord has; Taxes, Insurance and Maintenance
Vacancy Factor
A percentage deducted from a property’s potential gross income to determine the effective gross income, estimating the income that will probably be lost because of vacancies and tenants who don’t pay
Zoning
Government regulation of the uses of property within specified areas
1031 Exchange
A transaction in which one piece of property is traded for a piece of like-kind property; if the property involved is held for investment or the production of income, or used in a trade or business, tax on the gain may be deferred. Also called a Tax-Free Exchange