Adjustable-Rate Mortgage (ARM) – A loan characterized by a changing interest rate, usually a rate that is tied to a bank or savings and loan association cost-of-funds index.
Annual Percentage Rate (APR) – The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth-In-Lending Act.
Appraisal – An estimate of the quantity, quality or value of something. Also refers to the report that documents the process of estimation and the conclusion of value.
Broker – One who acts as an intermediary on behalf of others for a fee or commission.
Buydown – A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points given to the lender to buy down or lower the effective interest rate paid by the borrower, thus reducing the monthly payments for a set time.
Buyer-Agency Agreement – A principle agent agreement in which a real estate salesperson or broker is the agent for the buyer, with fiduciary responsibilities to the buyer.
Buyer’s Agent – A real estate salesperson or broker who represents the buyer in a transaction.
Civil Rights Act of 1866 – An act that prohibits racial discrimination in the sale or rental of housing.
Closing – An event where promises made in a sales contract are fulfilled and home buying funds (if any) are distributed to the buyer.
Closing Statement – A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction.
Competitive Market Analysis (CMA) – A comparison of the prices of recently sold homes that are similar to a listing seller’s home in terms of location, style and amenities.
Contingency – A provision in a contract that requires a certain act to be done or a certain event to occur before a contract becomes binding.
Contract – A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral (only one party is bound to act) or bilateral (all parties are bound to act).
Conventional Loan – A loan that requires no insurance or guarantee.
Counteroffer – A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless received by person making the original offer.
Designated Agent – A licensee authorized by a broker to act as the agent for a specific principle in a particular transaction.
Discount Point – A unit of measurement used for various loan charges; one point equals one percent of the amount of the loan.
Dual Agency – A licensee representing both parties to a transaction. This can be unethical unless both parties agree to it, and it is illegal in many states.
Earnest money – Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
Escrow – The closing of a transaction through a third party called an escrow agent who receives certain funds and documents to be delivered upon the performance of certain conditions outlined in the escrow instructions.
Exclusive-Right-To-Sell Listing – A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owners stated terms and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner or another broker.
Fair Housing Act – The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status and national origin. See http://www.fairhousing.vipnet.org/law.htm
Fannie Mae – A quasi-government agency established to purchase any kind of mortgage loan in the secondary mortgage market from the primary lenders. See http://www.fanniemae.com/index.jhtml
FHA Loans – A loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA’s regulations. See http://www.hud.gov/
Fiduciary – One in whom trust and confidence is placed; a reference to a broker employed under the terms of a listing contract or buyer agency agreement.
Freddie Mac – A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market. See http://www.freddiemac.com/
Ginnie Mae – A government agency that plays an important role in the secondary mortgage market. It sells mortgage-backed securities that are backed by pools of FHA and VA loans. See http://www.ginniemae.gov/
Homeowners Insurance Policy – A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability and other common risks.
Improvement – Any structure, usually privately owned, erected on a site to enhance the value of the property – for example, building a fence or a driveway. Interest – A charge made by a lender for the use of money.
Legal Description – A description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it.
Listing Agreement – A contract between an owner (as principle) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner’s real estate on the owner’s terms, for which services the owner agrees to pay a commission.
Listing Broker – The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to a cooperating broker, from whose office negotiations leading up to a sale are initiated. The listing broker and the cooperating broker may be the same person.
Loan Origination Fee – A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.
Loan-To-Value Ratio – The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.
Market Value – The most probable price property would bring in an arm’s-length transaction under normal conditions on the open market.
Mortgage – A conditional transfer or pledge of real estate as security for the payment of a debt. Also the document creating a mortgage lien.
Mortgagee – A lender in a mortgage loan transaction.
Mortgage Lien – A lien or charge on the property of a mortgagor that secures the underlying debt obligations.
Mortgagor – A borrower in a mortgage loan transaction.
Multiple-Listing Service (MLS) – A marketing organization made up of member brokers who agree to share their listing agreements with one another with the goal of finding ready, willing and able buyers for their properties more quickly than they could on their own.
Non-agent – An intermediary between a buyer and seller, or landlord and tenant, who assists both parties with a transaction without representing either.
Option – An agreement to keep open for a set period of time an offer to sell or purchase a property.
Personal Property – Items, called chattels, which do not fit into the definition of real property; moveable objects.
Principle – A main party to a transaction – the person for whom the agent works.
Prorations – Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing.
Real Property – The interests, benefits and rights inherent in real estate ownership.
REALTOR® - A registered trademark term reserved for the sole use of active members of local REALTOR® boards affiliated with the National Association of REALTORS®.
Right Of First Refusal – The right to buy something first; the right to decide whether or not to buy something before it is offered to other potential buyers.
Salesperson – A person who performs real estate activities while employed by or associated with a licensed real estate broker.
Survey – The process by which boundaries are measured and land areas are determined. The on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.
Title Insurance – A policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects and matters specifically excluded by the policy.
Valid Contract – A contract that complies with all the essentials of a contract and is binding and enforceable on all parties to it.
VA Loan – A mortgage loan made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs in order to limit the lender’s possible loss. See http://www.homeloans.va.gov/veteran.htm.
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