Real Estate Definitions

Real Estate Definitions

ABR® (Accredited Buyer's Representative)
The ABR® designation is the benchmark of excellence in buyer representation. This coveted designation is awarded to REALTORS® who meet the specified educational and practical experience criteria, by the Real Estate Buyer's Agent Council (REBAC) of the National Association of REALTORS®.

Adjustable-rate Mortgage (ARM)
A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index.

Agency
Any relationship in which one party (agent) acts for or represents another under the authority of the latter.

Amortization Schedule
A timetable schedule showing the amount of each payment applied to interest and principal and the remaining balance after each payment is made.

Appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.

Bi-weekly Payment Mortgage
A mortgage requiring payments every two weeks instead of the standard monthly payment. The result for the borrower is a substantial savings in interest.

Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.

Capital Gains
The profit obtained from the sale of an asset, such as real estate.

Closing
A meeting at which a sale of property is finalized.

Closing Costs
The fees, costs, and taxes associated with the purchasing of a home, the borrowing of money, and the preparation of necessary paperwork to finalize the sale.

Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan.

Commission
The fee charged by a broker or agent for providing services related to a real estate transaction such as marketing the property, bringing the parties together, and negotiating a purchase contract or loan.

Deed
The legal document conveying title to a property.

Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Equity
A homeowner’s financial interest in a property.

Escrow
A deposit of value, money, or documents with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow, held by the broker, bank or other party, until delivered to the seller when the transaction is closed.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit information by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Good-faith Estimate
An estimate of closing costs associated with the purchase of your home.

Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. Could be environmental, energy-efficient, etc.

Home Warranty
A guarantee for mechanical systems and appliances, but not the structure, against repairs not covered by homeowner's insurance; coverage is for a specific period of time.

Lien
The legal claim against a property that must be satisfied before the property may be sold.

LTV (Loan to Value)
The ratio of the amount of a mortgage loan to the appraised value or sales price of the property mortgaged, whichever is lower.

Lock-in
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time.

Mortgage
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. Generally, the mortgage document pledges the mortgaged property to the lender as security for the loan.

Mortgage Insurance
A policy that insures the lender against loss caused by a mortgagor’s default on a mortgage.

Net Worth
The value of all of a person’s assets, including cash, minus all liabilities.

P.I.T.I.
Principal, Interest, Taxes, and Insurance: four components of a monthly payment on mortgage loans.

Points
A point is 1 percent of the amount of the mortgage. At closing, lenders sometimes charge borrowers a percentage of the loan amount equal to the number of points to cover the lender's cost. Sometimes borrowers pay higher points in exchange for a lower interest rate.

Prime Rate
The interest that banks charge to their preferred customers, usually large corporations, for short-term loans.

Principal
The amount borrowed or remaining unpaid.

Real Estate Agent
A person licensed by a state to negotiate and transact the sale of real estate on behalf of a property owner/seller or buyer.

Real Estate Buyer's Agent Council (REBAC)
The Real Estate Buyer's Agent Council , a wholly-owned subsidiary of the National Association of REALTORS®

REALTOR®
A registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict code of ethics.

Sales Contract
Also known as a purchase contract, the legally binding document that sets forth the terms of the sale, establishes the rights and obligations of the parties involved, specifies the actions to be taken in order to close the sale, and establishes the time frames for those steps to be completed.

Settlement Statement
A document prepared by a broker, escrow company, or lender detailing the complete breakdown of the costs and disbursements in a real estate transaction.

Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and the other physical features.

Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Underwriting
The process for evaluating a loan’s application to determine the risk involved for the lender.

Walk-Through
A final inspection of a home before closing to verify that the condition of the property and contents are as contracted.