Real Estate Terms to Know
Letchworth Valley Realty values educating our clients to understand every step of selling or purchasing a home. The following is a list of common terms displayed to help you feel more confident during a real estate transaction.
Agent
A person formally authorized to act on behalf of another, called the principal or fiduciary.
Appraisal
An expert judgment or estimate of the fair market value of a property.
Assessed Value
The valuation placed on property by a public tax assessor for taxation purposes.
Bill of Sale
An written document that transfers title to personal property.
Buyer-Broker Agreement
A written agreement authorizing a broker to represent a buyer's best interests in the purchase of a property.
CC&Rs (Covenants, conditions and restrictions)
A document that controls the use, requirements and restrictions of a property.
Certificate of Reasonable Value (CRV)
An appraisal of property used for a Veteran’s Administration guaranteed mortgage.
Certificate of Title
A document signed by a title examiner or attorney stating that the title to the real estate is legally held by the current owner.
Closing Statement (Settlement)
A document stating the final financial details of a property sale between a buyer and seller and the costs paid by each party. Also, "settlement sheets," "HUD-1."
Commission
Payment to a real estate broker for purchasing or selling securities or property.
Contingency
A condition that must be met before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.
Deed
A formal written instrument that transfers real estate from one party to another. Also called "conveyance".
Deed of Trust
A document used in some states, instead of a mortgage, to secure the repayment of money borrowed. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee and the lender (or beneficiary).
Earnest Money
A deposit delivered to the seller or escrow agent by the buyer with a written offer as evidence of good faith.
Equity
The difference of the price for which a property could be sold over and above the debts against it. (Sales Price - Mortgage Balance = Equity).
Federal National Mortgage Association (FNMA)
Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.
Fee Simple
An estate in which the owner has the right to dispose of the property or pass it on to heirs without limitation. It is the greatest interest a person can have in real estate.
Fiduciary Duty
The professional responsibility of an agent, principal or fiduciary to act truthfully and with good faith in representing a client. These duties include reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account.
Fixture
Personal property, which is now permanently attached to real property, and goes with the property when it is sold.
Graduated Payment Mortgage
A residential mortgage with small monthly payments, which increase at a predetermined rate over a period of time.
Hazard Insurance
Insurance coverage that protects against damages caused to a property by fire, wind, vandalism, or other hazards.
Home Inspection Report
An evaluation of a property’s structural and mechanical systems prepared by a qualified inspector.
Home Warranty Plan
An insurance policy protecting against failure of mechanical systems within a property such as plumbing, electrical and heating systems and breakdowns of major appliances.
Joint Tenancy
An equal undivided ownership of property by two or more persons. Upon the death of any owner, rights pass to the surviving owner or owners.
Lien
The liability of real estate as security for a debt or charge.
Listing Contract
An agreement between a homeowner and a licensed real estate broker that authorizes the broker to market the real estate within a given time, and for which service the owner agrees to pay a commission. Also, "listing agreement."
Loan Commitment
A written promise by a lender to make a loan for a specified amount under certain terms and conditions.
Loan-To-Value Ratio
The relationship between the amount of the mortgage and the total value of the property, expressed as a percentage.
Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Basis for "listing price'' or "asking price."
Mortgage
A written pledge of property by the buyer to the lender that is used as security for the repayment of a loan.
Mortgage Life Insurance
A policy of insurance which promises to pay out the remaining balance owing on a mortgage should the borrower die. The coverage decreases as the mortgage balance declines and the policy ends upon the paying out of the mortgage.
Mortgage Note
A written agreement to repay a mortgage loan at a stated interest rate during a specified term. It is secured by a mortgage. Also, "deed of trust note."
Negative Amortization
The result of a mortgage repayment plan in which payments made by the borrower equal less than the interest due. Unpaid interest is then added to the outstanding loan balance, causing the outstanding loan balance to increase instead of decrease.
Origination Fee
A fee paid to the bank to compensate them for the cost of administering the mortgage loan. The fee is limited to one percent of FHA and VA loans.
PITI
Principal, interest, taxes and insurance.
Point
An amount equaling one percent of the loan amount. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.
Prepayment Penalty
A penalty imposed when a mortgage is paid before it is due. Not allowed for FHA or VA loans.
Principal
1.The person for whom a broker executes an order, or dealers buying or selling for their own accounts.
2. The amount of debt, exclusive of interest, remaining on a loan.
Private Mortgage Insurance (PMI)
Insurance written by a private company protecting the lender in case the borrower defaults on his/her loan.
Prorate
To divide the proportionate share of existing expenses on a piece of property between the seller and buyer. For example, a prorate on real property taxes, fire insurance or condominium fee.
Purchase Agreement
A contract between the purchaser and the seller that discloses the terms and conditions under which a property will be sold. Also called a sales contract, purchase offer or agreement for sale.
REALTOR®
A real estate agent with membership in a local real estate board affiliated with the New York Association of Realtors® and the National Association of Realtors®.
Survey
A professional examination of a property displayed as a map or plat showing the size of a property, its boundary distances, ground contours and where improvements or alterations have been made. Lenders often require surveys to assure a building is sited on the land according to its legal description.
1031 or Tax Deferred Exchange
IRS rules allowing owners to dispose one investment property and acquire another without paying capital gains taxes.
Tenancy in Common
A type of joint ownership in land held by two or more persons each having equal rights of possession and enjoyment with no right of survivorship.
Title Insurance
Protects the lender and the homeowner against loss of their interest resulting from any defects in the title or claims against a property that were not uncovered in the title search.
Title Search or Examination
An examination of public records, laws and court actions to make sure that the seller is the legal owner and there are no liens, overdue special assessments, or other claims on the property.
Transfer tax
Tax paid to the city, county, state or other government entity upon sale of a property.