Real Estate Terms

Agency ? A legal relationship in which an owner?principal engages a broker?agent in the sale of property or a buyer? principal engages a broker-agent in the purchase of property.

Amortization ? The gradual repayment of a mortgage by installments.

Assessed Value ? The valuation placed on property by a public tax assessor as the basis of property taxes.

Assumption of mortgage ? An agreement whereby the buyer assumes responsibility for a mortgage owed by the seller; the seller remains liable to the lender unless the lender agrees to release the seller from the liability.

Binder ? An agreement, accompanied by a deposit, whereby the buyer evidences good faith.

Bridge Loan ? A short term loan made until a longer term loan can be arranged; it�s sometimes used when a person needs money to build or purchase a home before the present one has been sold.

Broker ? A person licensed by a real estate commission to act independently in conducting a real estate brokerage business. Although requirements for a broker�s licenses may vary, an individual must usually have at least one year of experience in the industry and pass an examination.

Cap ? The maximum amount an interest rate or monthly payment can change, either at adjustment time or over the life of the mortgage.

Cloud on title ? A lien or encumbrance that can prevent the seller from delivering clear title and the buyer from obtaining insurance.

Contingency ? A condition that must be met before a contract is binding.

Deed ? A legal document conveying title to a property.

Earnest money ? a portion of the down payment given to the seller by a potential buyer indicating the buyer�s intent to complete the purchase of the property.

Equity loan ? A loan based on the borrower�s equity in their home rather than on their credit worthiness.

Escrow ? The placement of money or documents with a third party for safe?keeping pending the fulfillment of a specified condition.

Graduated?payment?mortgage ? A mortgage loan in which the monthly payments increase by a specific amount each year, with the �over payments� applied to the principal.

Lien ? A legal claim against a property that must be paid when the property is sold.

Loan?to?value ratio ? The relationship between the amount of a home loan and the total value of the property. Lenders may limit their maximum loan to 80?95 percent of value.

Lock?in?rate ? A commitment made by lenders on mortgage loans to �lock?in� a certain rate pending loan approval. Lock-in periods may vary.

Market value ? The highest price a buyer will pay for a property and the lowest price the seller will accept.

Mortgage broker ? An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private ources to lend the money; may also handle collections and disbursements.

Mortgage insurance ? A policy that provides protection for the lender in case of a default and guarantees repayment of the loan if the borrower becomes disabled or dies.

Negative Amortization ? An increase in the outstanding balance of a loan resulting from the failure of periodic debt service payments to cover required interest charged on the loan.

Points ? A dollar amount paid to a lender for making the loan. A point is 1 percent of the loan amount; also called discount points.

Private mortgage insurance (PMI) ? Insurance issued to a lender to protect it against loss on a defaulted mortgage loan. Its use is usually limited to loans with high loan?to?value ratios. The borrower pays the premiums.

Realtor� and Realtor Associate� ? The registered collective membership marks that identify real estate professionals who are members of the National Assoc-iation of Realtors� and subscribe to its strict Code of Ethics.

Shared equity mortgage ? A home loan in which an investor is granted a share of the equity, thereby allowing the investor to participate in the proceeds from resale.

Title ? A document that�s evidence of ownership.

Title Insurance ? Protection for lenders and homeowners against financial loss resulting from legal defects in the title.

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