Real estate terms,St Charles County MO Homes for Sale,Linda Grissette,Keller Williams Realty West

Real Estate Article:  Real Estate Terms

Whether you are buying or selling, understanding the language used in real estate is very important.  Unfortunately, those of us in the industry often forget that everyone doesn't understand exactly what we are talking about.  To help you, I have put together this basic information on some of the terms we use.  If you have any questions about these terms...or any others you might here, feel free to contact me and ask about it.  I like working with informed buyers and sellers!

Linda

Abstract (of Title)  An Abstract is a book that contains a copy of all items about the property in the public records.  An abstract is only used in a few states, such as Oklahoma.  An Abstract is no longer used in Missouri.

Acceleration Clause A clause within the mortgage that the remaining loan balance is due immediately if the mortgage payments are not made.

Acceptance  The legal term that means that both parties have agreed to a contract.

Adjustable Rate Mortgage  A mortgage loan where the interest rate and the payment changes at a predetermined interval.  The interest rate change will usually be capped based on an index.

Amortization  The method of payment normally used in mortgage loans.  The debt reduced slightly each month while the payment stays the same, allowing more interest to be paid with each payment

Appraisal  An appraial is the document created by an appraiser that tells the lender the current market value of the home so that a mortgage can be made.  An appraisal can also be done just to find out the value of the home or for insurance purposes.

Appraiser  A trained (and possibly licensed, depending on the state) person who can establish the fair market value of a piece of real estate.

Assumption (of Mortgage)  Taking over a mortgage.  Few loans (if any) are now being written by lenders that allow for an assumption.

Balloon Loan  A mortgage loan that is amortized over a longer period that the term of the mortgage.  At the end of the term of the mortgage a large final payment is due.

Building Line  The distance from the edge of the lot that determine where a structure can be placed.

Buyer Agency Contract  A contract between a prospective buyer and a real estate broker that states the terms under which the broker will act as an agent for a buyer in a real estate transaction.

Certificate of Eligibility  This is the certificate issued my the Veteran’s Administration (VA) which states that the Veteran is eligible for a VA loan and what amount of guarantee they have.  Official known as DD-214.

Chain of Title  Shows the history of ownership of a piece of real property

Closing Costs  Fees that buyers and sellers pay at closing.  These include lender fees, title company fees, commission, inspection costs, repair bills and other similar items

Closing Day The day the sale of real estate is closed or finalized.

Closing  The time when all documents are signed by buyers and sellers and the sale is finalized.  Also known as “Close of Escrow” on the West Coast.

Cloud on Title  A problems with the title that could prevent a property from closing

CMA (Comparative Market Analysis or Competitive Market Analysis)  An estimate of value of a property prepared by a real estate professional comparing the property to other homes that are similar to the property.  Properties used as comparison properties are those that are currently for sale, those that are under contract and those that have recently closed.

Commission  The amount the real estate professionals are paid to help sell and close real property.  It can be a percentage of the sale price or a flat fee.  The amount of commission due will be in the listing contract and the buyer’s agency contract.

Condemnation  The process of the taking of private property by a governmental unit (Federal Government, State, County or City/Town, School District, etc.

Condominium  A type of property ownership where the homeowners only own their unit while the exterior and other parts of the property are owned by all owners through a condominium association.

Contingency  A clause in a sales contract stating that the sale of the property is subject to some action, such as the buyer obtaining a loan commitment, have inspections, sell their existing property, or other things.

Contract for Deed  A method of selling a property where the title or deed to the property is not delivered until all payments have been made.  Also called a “Land Contract”.  These should not be done on properties with a mortgage, as the lender will call the loan “due and payable:/

Conventional Mortgage  A mortgage that is not insured by the FHA or guaranteed by VA.

Counter Offer  When a buyer has made an offer on a property, the seller can make a counter offer.  The buyers can also make a counter offer to the seller’s counter offer.  There is no limit to the number of times a contract can be countered.

Credit Report  A report by a credit bureau stating the debts owed and the payment histories of a prospective buyer.

Credit Score  The credit score is a number on the credit report that summarizes the credit of the prospective buyer, giving the lender a subjective method of determining the credit worthiness of a borrower.

Cul-de-sac  A subdivision street that ends at a circle.

Deed   The legal document that transfers title to real estate.

Deed of Trust   A Deed of Trust is what is used to secure a loan of real property in Missouri instead of a Mortgage.

Default   Default is the failure to make payments on a Mortgage or Deed of Trust. If a property is in default, the lender can start the foreclosure process.

Down Payment  The down payment is the difference between the purchase price and the loan amount.

Disclosure  Sellers should make disclosures about their home to buyers.  Some, such as the Lead Paint Disclosure are required by law.  Even though other disclosures are not specifically required by Missouri law, seller’s should still use a Seller’s Disclosure Form to tell the buyers about any problems with the home.

Discount Points  The terms “points” or “discount points” are used interchangeable.   They are upfront money paid by the borrower that effectively reduce the interest rate on the loan.

Earnest Money  This is the money that prospective buyers offer to the sellers to show that they are “in earnest” about purchasing a property.  The money is usually held in an Escrow of Trust account as described in the sales contact.

Equity  The difference between the current loan amount and the current value of a property.

Encroachment    When a structure, or other property elements such as a driveway or sidewalk, crosses a property and goes onto the neighboring property it is said to be “encroaching” on the other property.

Encumbrance   Any legal right or interest that attaches to a property and diminishes the value of the property, making it harder to sell.

Escrow  Money paid by one party to an escrow agent to home until a specific even takes place.

Escrow or Impound Account  The special account required by the lender on some loans (usually if the borrower puts less than 20% down).  The monthly payment will then include an extra amount for property tax and insurance.  The lender then pays the property tax and insurance when they are due.

Escrow or Trust Account    This is the special account that real estate brokers keep for holding earnest money for buyers and sellers while a property is under contract.  By law, brokers cannot mix (or co-mingle) this money with their own funds.

FHA  Federal Housing Authority (part of HUD) which insures home mortgages loans made by lenders.

Fixed Rate Mortgage  A loan where the payments stay constant throughout the duration of the loan.

Flood Insurance  Special insurance that covers homeowners if the property is flooded.  Homeowner’s Insurance does not cover flooding.  Flood Insurance is a government program, but can be purchased thorough most insurance agents.

Foreclosure  The procedure that a lender uses to take the property when the homeowner defaults of the loan.

Good Faith Estimate  Lenders are required by Federal Law to give borrowers a  statement on what they expect the loan costs will be.

Grace Period  A period after the due date of a loan payment in which the lender will not consider the payment late.

Hazard Insurance or Homeowner’s Insurance   The insurance which insures the homeowner for  things that can happen to the property.  The coverage can differ from policy to policy.

HUD  Department of Housing and Urban Development. 

Interest  The charged paid for borrowing money.

Lien  A claim on the property of another.  Liens can include judgments, unpaid taxes, labor or materials

Lease Purchase  A method of buying a home where the purchaser rents the home for a period of time and will purchase the home for a set price at the end of the rental period.

Lease Option  A method of renting a home for a period of time where the renter has an option to buy the property.

Legal Description  The method of describing the property.  It can be a lot in a subdivision or it can be a long legal description used for defining rural property.  The legal description always remains the same, while an address can possibly change.

Listing Agreement  An agreement where a property owner hires a real estate broker to market and sell the property.

Marketable Title  A title that is free and clear of any liens or other title defects.

PITI  Stands for “Principal, Interest, Taxes and Insurance” and describes a loan payment where taxes and insurance are paid into an trust account.  PI would stand for “Principal and Interest” payment.

Plat  Drawn by a surveyor, the plat shows all of the lots of a subdivision.

Quit Claim Deed   A deed that conveys whatever interest the maker of the deed has to the property.

REALTOR®   A licensed real estate broker who is a member of the National Association of REALTORS®.  The Designated REALTOR® is the primary broker in an office while others with a broker’s license can be REALTOR® members.  Those with sales associate’s licenses under a broker is a REALTOR-Associate®.  Learn about the REALTORS® Code of Ethics.

RESPA   The Real Estate Settlement Procedures Act, which governs the activities related to the closing of purchases of real property.

Special Assessment  A special tax for improvements that is only imposed on the properties affected by the improvement.

Survey  Created by a surveyor, a survey shows the boundaries of a property, easements, building lines, and all improvements on the property.

Title  The legal document by which the ownership of a property is established.

Title Company   The closings on real estate transactions are normally done at Title Companies, which do all of the title work, making sure everything is correct.  The also prepare a closing statement (HUD-1), coordinate with all parties and issue title insurance commitments in order to get the property to closing.

Title Insurance  This insurance protects property owners and lenders against unknown problems with the title to the property.

Title Search  A title search is searching all the records in the courthouse to find all documents relating to the property.

Title Opinion  A statement by an attorney after reading the chain of title on a property.  The title opinion will note any problems with the title.

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