Terms

Addendum An addition or change to a contract.

Agreement of sale A document the buyer initiates and the seller approves that details the price and terms of the transaction.

Allowances Budgets offered by builders of new homes for the purchase of carpeting and fixtures.

Amortization The process of paying the principal and interest on a loan through regularly scheduled installments.

Annual Percentage Rate (APR) The cost of the loan expressed as a yearly rate on the balance of the loan.

Annual mortgagor statement A yearly statement to borrowers that details the remaining principal and amounts paid for taxes and interest.

Appraisal An opinion of the value of a property at a given point in time.

As-is condition The purchase or sale of a property in its existing condition.

Asking price A seller's initial price for a property.

Backup offer A secondary bid for a property that the seller will accept if the first offer fails.

Beneficiary The lender who makes a loan, also called a mortgagee. The person borrowing money is the mortgagor.

Brokerage The act of bringing together two or more parties in exchange for a fee or commission.Buyer broker A real estate broker who exclusively represents the buyer's interests in a transaction and whose commission is paid by the buyer rather than the seller.

Buyer's market A slow real estate market in which buyers have the advantage.

Clear title A property that does not have liens, defects or other legal encumbrances.

Closing The final procedure in which documents are signed and recorded, and the property is transferred.

Closing costs Expenses incidental to the sale of real estate, including loan, title and appraisal fees.

Commercial property An area that is zoned for businesses.

Commission The negotiable percentage of the sales price of a home that is paid to the agents of the buyer and seller.

Contingency A condition specified in a purchase contract, such as a satisfactory home inspection.

Counteroffer A response to an offer.

Covenants, conditions and restrictions (CC&Rs) Rules and regulations for a development, such as acceptable landscaping or improvements that can be made to individual units.

Curb appeal The first impression of a house as seen from the street.

Days on the market The period of time a property is listed for sale until it is sold or taken off the market

Deed The legal document that transfers ownership of a piece of property.

Disclosure A statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint.

Distressed property Property that is in poor physical or financial condition.

Earnest money Money a buyer gives with an offer to purchase a property. Also called a deposit.

Equity A determination of the value of a property after existing liens are deducted.

Escrow A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

FHA loans Mortgages that are insured by the Federal Housing Administration. The FHA's 203(b) loan program provides low-rate mortgages to buyers who make a down payment as small as 3 percent. The agency also operates loan plans for investors and purchasers of rural property.

Fannie Mae The official name of the Federal National Mortgage Association, it is a congressionally chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Foreclosure The legal process reserved by a lender to terminate the borrower's interest in a property after a loan has been defaulted. When the process is completed, the lender may sell the property and keep the proceeds to satisfy its mortgage and any legal costs. Any excess proceeds may be used to satisfy other liens or be returned to the borrower.

Freddie Mac The common name for the Federal Home Loan Mortgage Corporation, a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.

HUD-1 Uniform Settlement Statement A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.

Home inspection An examination of a home's construction, condition and internal systems by an inspector or contractor prior to purchase.

Home warranty A type of insurance that covers repairs to certain parts of a house and some fixtures.

Homeowners' insurance This insurance includes hazard coverage for any damages that may affect the value of a house, in addition to personal liability and theft coverage.

Income property Property that is not occupied by the owner but is used to generate income.

Lease A binding agreement that contains the terms and conditions of a renter's occupancy.

Letter of intent A formal statement that the buyer intends to purchase the property for a certain price on a certain date.

Listing A piece of property placed on the market by a listing agent.

Loan -to-value ratio A technical measure used by lenders to assess the relationship of the loan amount to the value of the property

Loan application The first step toward submitting a home loan requires the borrower to itemize basic financial information.

Loan origination fee Most lenders charge borrowers an origination fee--or points--for processing a loan. A point is 1 percent of the total loan amount.

Multiple listing service (MLS) The service combines the listings for all available homes in an area, except For-Sale-By-Owner (FSBO) properties, in one directory or database.

Multiple offers Multiple purchase offers occur in hot markets or hot neighborhoods.

Open house A marketing tool in which a listing agent opens a house for view.

Per-diem interest Interest charged or accrued daily.

Planned-unit development (PUD) Residents own the home and the land, and share the use and financial responsibility for common areas.

Purchase agreement A document which details the purchase price and conditions of the transaction.

Real estate agent A real estate agent has a state license to represent a buyer or a seller in a real estate transaction in exchange for a commission. Most agents work for real estate brokers.

Real estate broker A real estate agent who is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission. Most brokers also have agents working for them, and are entitled to a portion of their commissions.

Realtor A designation for an agent or broker who is a member of the National Association of Realtors.

Sales contract A contract signed by the buyer and seller that details the terms of a home purchase.

Seller's market A hot real estate market in which sellers have the advantage and multiple offers are common.

Settlement statement A document that details who has paid what to whom.

Title The actual legal document conferring ownership of a piece of real estate.

Title company Firms that ensure that the title to a piece of property is clear and provide title insurance.

Title insurance A policy issued to lenders and buyers to protect any losses because of a dispute over the ownership of a piece of property.

VA loans A program that allows most veterans to purchase a house without a down payment.

Zoning Regulations that control the use of land within a jurisdiction.