When it comes to buying or selling a home, there are simply some terms you must know. Everyone knows what closing costs, titles, appraisals, and pre-approvals are, but what is escrow? Here are some rare or uncommon real estate vocabulary terms that could apply to you!
This is the process of combining both interest and principal in payments, rather than simply paying off interest at the start. This allows you to build more equity in the home early on.
A written statement signed and sworn to before a person authorized to administer an oath.
Abstract of title
A condensed version of the history of a title to a particular parcel of real estate as recorded in the county clerk’s records; consists of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property.
The actual depreciation that has occurred to a property at any given date; the difference between the cost of replacement new (as of the date of the appraisal) and the present appraised value.
This is how much a home is worth according to a public tax assessor who makes that determination in order to figure out how much city or state tax the owner owes.
A contract in which each party promises to perform an act in exchange for the other party’s promise to perform.
A mortgage that covers more than one parcel of real estate and provides for each parcel’s partial release from the mortgage lien on repayment of a definite portion of the debt.
The cash reserves is the money left over for the buyer after the down payment and the closing costs.
Comparative market analysis
Comparative market analysis (CMA) is a report on comparable homes in the area that is used to derive an accurate value for the home in question.
Chain of title
The succession of conveyances from some accepted starting point by which the present holder of real property dervies his or her title.
Capacity of parties
The legal ability of persons to enter into a valid contract. Most persons have fully capacity to contract and are said to be competent parties.
This term refers to conditions that have to be met in order for the purchase of a home to be finalized. For example, there may be contingencies that the loan must be approved or the appraised value must be near the final sale price.
A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage.
A clause in insurance policies covering real property that requires the policyholder to maintain fire insurance coverage that is generally equal to at least 80% of the property’s actual replacement cost.
A loan that is not insured or guaranteed by a government agency.
Dual agency is when one agent represents both sides, rather than having both a buyer’s agent and a listing agent.
A written instrument that when executed and delivered conveys title to, or an interest in, real estate.
An added loan free charged by a lender to make the yield on a lower-than-market-value loan competitive with higher-interest loans.
Escrow is an account that the lender sets up that receives monthly payments from the buyer.
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 owner’s stated terms and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner, or another broker.
A construction specialist who enters into a formal construction contract with a landowner or master lessee to construct a real estate building or project. The general contractor often contracts with several subcontractors specializing in various aspects of the building process to perform individual jobs.
A short-term loan usually made during the construction phase of a building project, often referred to as a construction loan.
A listing is essentially a home that is for sale. The term gets its name from the fact that these homes are often “listed” on a website or in a publication.
The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the selling broker, from whose office negotiations leading to a sale are initiated. The listing broker and the selling broker may, of course, by the same person.
A right given by law to certain creditors to have their debt paid out of the property of a defaulting debtor, usually by means of a court sale.
A method of appraising or evaluating real property based on the proposition that an informed purchaser would pay no more for a property than the cost to him or her of acquiring an existing property with the same utility.
The most profitable price a property will bring in a competitive and open market under all conditions requisite to a fair sale. The price at which a buyer would buy and a seller would sell, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
MLS (Multiple Listing Service)
A service created for the use of displaying listings across many brokers and brokerages.
A public official authorized to certify and attest to documents, take affidavits, take acknowledgments, administer oaths, and perform other such acts.
A listing contract under which the broker’s commission is contingent on the broker producing a “ready, willing, and able” buyer before the property is sold by the seller or another broker; the principal (owner) reserves the right to list the property with other brokers.
The principal is the amount of money borrowed to purchase a home. Paying off the principal allows a buyer to build equity in a home. Principal is combined with interest to determine the monthly mortgage payment.
A method of financing in which the purchase of the land also finances the purchase of certain personal property items.
A book containing recorded subdivisions of land.
Principal, interest, taxes, and insurance.
The act of acquiring a new mortgage to replace the old mortgage, oftentimes advantageous to the borrower.
Real property consists of land, anything affixed to it so as to be regarded as a permanent part of the land, that which is appurtenant to the land, and that which is immovable by law, including all rights and interests.
Renegotiable rate mortgage
A mortgage loan that is granted for a term of 3 to 5 years and secured by a long-term mortgage of up to 30 years with the interest rate being renegotiated or adjusted each period.
Secondary mortgage market
A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called the secondary money market. Mortgages are originated in the primary mortgage market.
The substitution of one creditor for another, with the substituted person succeeding to the legal rights and claims of the original claimant. Subrogation is used by title insurers to acquire the right the sue from the injured party to recover any claims they have paid.
A title company’s review of the deed and the (potential) claims upon it.
Title insurance is often required as part of the closing costs. It covers research into public records to ensure that the title is free and clear, and ready for sale. If you purchase a home and find out later that there are liens on the home, you’ll be glad you had title insurance.
Tenancy by the entirety
The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. On the death of one spouse, the survivor becomes the owner of the property.
A one-sided contract by which one party makes a promise to induce a second party to do something. The second party is not legally bound to perform; if the second party does comply, however, the first party is obligated to keep the promise.
Unity of ownership
The four unities traditionally needed to create a joint tenancy – unity of title, time, interest, and possession.
An exception from the zoning ordinances; permission granted by zoning authorities to build a structure or conduct a use that is expressly prohibited by zoning ordinance.
Writ of attachment
The method by which a debtor’s property is placed in the custody of the law and held as security, pending the outcome of a creditor’s suit.