Download REAL ESTATE TERMS

GLOSSARY OF COMMONLY USED REAL ESTATE TERMS
Housing Terms- Financial Terms- Real Estate Terms
HOUSING TERMS
Common Areas: Those portions of a building, land and amenities owned by a multi-unit property
that can be used by all unit owners. Common areas include the lobby, common corridors, exterior
and recreational facilities.
Condominiums: Building with multiple residential units whereby each purchaser becomes the title
holder to their specific unit as well as owning an interest in the common elements of the building
or complex. These common elements include the lobby, grounds, exterior walls, stairways, roof,
amenities and elevators.
Cooperative: Building with multiple residential units whereby each purchaser becomes a
shareholder in the corporation that owns the building. The stock that is purchased represents the
ownership of the specific unit in addition to proportional share of the common elements of the
building. These common elements include the lobby, grounds, exterior walls, stairways, roof,
amenities and elevators.
Duplex: This term is used differently in different parts of the country. A two-story unit. Within the
context of a walk-up vintage building, a high-rise or loft building, a living space could be duplexed
to the floor above or below.
Flat: A residential unit that occupies an entire floor of a mult-level building., may be a rental or
condominium. For example, a two-flat is a two-story building with one unit per floor.
High-rise: Building with many floors of residential units, usually divided vertically into tiers, with
identical floor plans stacked on top of each other, but with each floor having units with different
floor plans. High-rises always have elevators and often doormen, swimming pools, commissaries,
tennis courts, health clubs and parking.
Lofts: Residential units or offices that occupy existing, older commercial buildings such as
warehouses, factories, hospitals, schools or office buildings. These spaces differ from convential
construction in that they usually offer high ceilings (12’ to 14´), minimum room partitioning,
exposed ductwork, brick or timber beams and oversized windows.
Mid-rise: Building with several floors of residential units, usually divided vertically into tiers, with
identical floor plans stacked on top of each other, but with each floor having units with different
floor plans. Mid-rises may or may not have elevators.
Rehabbed: Older building with restored or updated features. A “gut rehab” indicates that the
rehab was extensive often taking walls to the stud or even replacing them. Usually includes new
electric, heating/air and plumbing. (Synonym to renovation)
Renovated: Older building with restored or updated features. A “gut rehab” indicates that the
rehab was extensive often demolishing walls to the studs or even replacing them. Usually includes
new electric, heating/air and plumbing. (Synonym to rehab)
CityViews Group
Mary Vallender, Realtor, MBA
676 N. Michigan Ave. Suite 3010 Chicago, IL 60611
(312) 485-3438 [email protected]
GLOSSARY OF COMMONLY USED REAL ESTATE TERMS
Row houses: Buildings with facades that form a continuous row, but with internal structures that
have vertically divided common walls between buildings. These forerunners of today’s
townhomes, were built in the 1890s.
Single-family: A building that is designed to house one family only. one anIn Chicago, singlefamily homes are normally frame, brick or stucco. Frame and stucco homes tend to be less costly
than brick. Building lots in Chicago are typically 25’ by 125’, although this varies considerably,
especially as you move further from downtown.
Soft Loft: Units created in older commercial buildings such as warehouses or factoriesimplies a
more finished look, often white walls, industrial carpeting and more definition in room divisions. A
benefit of such conversions is that they preserve the architectural character and heritage of the
city’s aging industrial and commercial districts.
Townhomes: A residential unit in a multi-unit building that has a common roof, but where varying
facades and vertical interior walls reflect individual units. Often the units are two-stories. A buyer
owns all of the space within his or her unit, similar to a condominium. Townhomes typically have
a garage on ground level and either a patio or balcony. Exterior walls, roofs, and often
landscaping and garages are designated as common elements.
Vintage buildings: These are older structures, usually pre-World War II. They are valued for their
character which is not found in new construction. They typically have hardwood floors, high
ceilings, fine woodwork, sun parlors and plaster moldings.
FINANCIAL TERMS
Amortize: To spread the payoff a loan over time by making regular payments with part of each
payment being applied to principal and part to interest.
Adjustable Rate Mortgage (ARM): A mortgage that permits the lender to adjust the interest rate
periodically based upon the movement of a specified index. These interest rates are usually lower
than fixed interest rates at the same point in time.
Annual Percentage Rate: The cost of a loan stated as a yearly rate: includes not only the interest
rate, but mortgage insurance and origination fees (points).
Appreciation: An increase in the value of property due to changes in market conditions or other
causes.
Assessment: 1) The process of placing a value on property for the strict purpose of taxation.
2) A fee charged multi-unit properties for shared common areas and amenities.
Assumable Mortgage: A mortgage that can be taken over (assumed) by the buyer when a home
is sold. This type of mortgage is utilized primarily in times of quickly rising or high interest rates.
Balloon Mortgage: A mortgage with level monthly payments that will not amortize it over a stated
term but that provide for a lump sum payment to be due at the end of a specified period. The
principal and interest on the loan are amortized over a longer period than the actual loan term.
CityViews Group
Mary Vallender, Realtor, MBA
676 N. Michigan Ave. Suite 3010 Chicago, IL 60611
(312) 485-3438 [email protected]
GLOSSARY OF COMMONLY USED REAL ESTATE TERMS
Bridge Loan: A form of second trust that is collateralized by the borrower’s present home (which
is usually for sale) in a manner that allows the proceeds to be used for closing on a new house
before the present house is sold. Often used to finance construction of a new home.. Also known
as a ‘swing’ loan.
Buydown on a Mortgage: An initial sum payment made to reduce a borrower’s monthly payment.
Closing Costs: Expenses over and above the price of the property incurred by buyers and sellers
in transferring ownership of property. Normally include: origination fee, attorney’s fee, taxes, title
insurance fee and survey fee.
Commitment Letter: A formal offer by a lender stating how much money and the terms under
which it agrees to lend money to a home buyer. Recommended to obtain this before the property
search to insure that buyer is searching in the correct price range. This document also is valuable
when an offer is extended in assuring a seller that a buyer can actually purchase the property.
Conventional Mortgage: A loan that is not insured or guaranteed by the federal government.
Down Payment: The part of the purchase price of a property that the buyer pays in cash and does
not finance with a mortgage.
Earnest Money: a deposit made by the potential buyer to show that he/she is serious about
buying the property. This is usually made in the form of a personal check and given to the
seller’s agent when the contract is accepted by both parties.
Escrow Funds: Money deposited with a third party to be delivered upon the fulfillment of a
condition. During the purchase process this may be earnest money held until distrubion at the
closing of the sale. Ongoing it may be funds held by the lender for payment of taxes and
insurance.
Fair Market Price: The highest price a buyer, willing but not compelled to buy, would pay and the
lowest price a seller, willing but not compelled to sell would accept.
Fixed-Rate Loan: A loan with the same rate of interest for the life of the loan.
HUD-1 Statement: A document that provides an itemized listing of the funds that are payable at
closing. Items that appear on the statement include real estate commissions, loan fees, points,
and initial escrow amounts. The totals at the bottom of the HUD-1 statement define the seller's
net proceeds and the buyer's net payment at closing.
Interest: The fee charged for borrowing money, often stated as a percentage of the total amount
borrowed.
Interest Rate Cap: The maximum interest rate allowed on an adjustable-rate loan for any one
adjustment period during the life of the loan.
Lien: A legal claim against a property that must be paid off when the property is sold.
CityViews Group
Mary Vallender, Realtor, MBA
676 N. Michigan Ave. Suite 3010 Chicago, IL 60611
(312) 485-3438 [email protected]
GLOSSARY OF COMMONLY USED REAL ESTATE TERMS
Loan to Value: The relationship between the principal balance of the mortgage and the appraised
value (or sales price if it is lower) of the property. For example, a $100,000 home with an
$80,000 mortgage has a LTV percentage of 80 percent.
Lock-In: A written agreement in which the lender guarantees a specified interest rate if a
mortgage goes to closing within a set period of time. The lock-in also usually specifies the number
of points to be paid at closing.
Mortgage: A legal document that pledges a property to the lender as security for payment of a
debt.
Mortgage Insurance: A contract that insures the lender against loss caused by a mortgagor's
default. Mortgage insurance can be issued by a private company or by a government agency such
as the Federal Housing Administration (FHA).
Negative Amortization: A gradual increase in mortgage debt that occurs when the monthly
payment is not large enough to cover the entire principal and interest due. The amount of the
shortfall is added to the remaining balance to create "negative" amortization.
PITI: Principal, Interest, Taxes and Insurance The four components of a monthly mortgage
payment. Principal refers to the part of the monthly payment that reduces the remaining balance
of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to
the amounts that are paid into an escrow account each month for property taxes and mortgage
and hazard insurance.
Point: A one-time charge by the lender for originating a loan. A point is 1 percent of the amount
of the mortgage. Points typically reduce the interest rate charged on a loan. Example: On a
$100,000 loan, one point = $1000.
Prequalification: The informal process of determining how much money a prospective home buyer
will be eligible to borrow before he or she applies for a loan.
Principal: The amount of a loan borrowed or remaining unpaid. The part of the monthly payment
that reduces the remaining balance of a mortgage.
Private Mortgage Insurance (PMI): Mortgage insurance that is provided by a private mortgage
insurance company to protect lenders against loss if a borrower defaults. Most lenders generally
require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Title Insurance: Insurance that protects the lender (lender's policy) or the buyer (owner's policy)
against loss arising from disputes over ownership of a property.
Transfer Tax: State or local tax payable when title passes from one owner to another. This
expense is most often borne by the seller, although customs vary. Although in Chicago it is borne
by the buyer and costs $3.75 for every $500 of price paid. Example: Tax for a $100,000 home
would be $3.75 x 200 = $750.
Underwriting: The process of evaluating a loan application to determine the risk involved for the
lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the
property itself.
CityViews Group
Mary Vallender, Realtor, MBA
676 N. Michigan Ave. Suite 3010 Chicago, IL 60611
(312) 485-3438 [email protected]
GLOSSARY OF COMMONLY USED REAL ESTATE TERMS
REAL ESTATE TERMS
Agency: In real estate, it refers to working with a real estate broker to buy or sell property. Your
agent has a legal responsibility to you and owes you fiduciary duties such as loyalty, accounting
and disclosure.
Appraisal: A written analysis of the estimated value of a property prepared by a qualified
appraiser. This estimate is based on the property condition and the selling prices of comparable
homes recently sold in the area. This service is often requested by the lender and serves as the
basis for the amount of financing that lender will provide on that property. (Not to be confused
with Inspection)
Appraiser: A licensed person who evaluates property and uses comparative market analysis to
determine its market value.
Buyer Working With Broker: In the past, buyers of residential real estate have worked with a real
estate agent on a non-agency basis. In other words, the sales associate was in effect an agent of
the seller. The sales associate had a responsibility to deal with the buyer in a fair and honest
manner, but did not have fiduciary responsibility to the buyer. That has now changed and the
buyer’s agent is legally bound to act in the buyer’s best interest under a fiduciary relationship.
The buyer’s agent will provide the best quality service to the buyer just as the seller’s agent
provides to the seller.
Clear Title: A title that is free of liens or legal questions as to ownership of the property.
Closing: A meeting at which a sale of a property is finalized. The buyer signs mortgage
documents pays closing costs and funds are distributed. At this meeting, ownership is transferred
from the seller to the buyer.
Cloud on Title: Any condition revealed by the title search that adversely affects the title to real
estate. This might include inability to determine clear ownership or liens against the property that
have not been cleared.
Contingency: A condition that must be met before a contract is legally binding. For example, the
sale of a home might be contingent on the seller’s paying for certain repairs.
Designated Agency: This arrangement with a real estate brokerage company will result in one or
more sales associates being designated as your legal agent. You can enter into this arrangement
either as a seller or buyer. Other sales associates in the firm may be the legal agents of other
buyers and sellers and may be the legal agent of the party who buys your property or from whom
you buy property. The only individuals owing you fiduciary duties are those designated as your
legal agent and not the real estate brokerage company itself or all other sales associates with that
company. A real estate brokerage company will generally offer this service to provide
representation for both buyers and sellers.
Dual Agency: In this situation, both the seller and buyer in a transaction are represented by the
same legal agent. Thus, fiduciary duties are owed to both parties. The law states that this is not
legally possible without the consent of the buyer and seller. If your consent is secured to allow
this type of situation, the role of the sales associate will be somewhat limited, and the buyer and
seller will act at times on their own behalf in negotiations for the sale or purchase of the property.
CityViews Group
Mary Vallender, Realtor, MBA
676 N. Michigan Ave. Suite 3010 Chicago, IL 60611
(312) 485-3438 [email protected]
GLOSSARY OF COMMONLY USED REAL ESTATE TERMS
Homeowners Policy: A multiple peril insurance policy commonly called a package policy. Available
to owners of private homes, it covers the dwelling and contents in case of fire or wind damage,
theft, liability for property damage and personal liability.
Joint Tenancy: A form of co-ownership that gives each tenant equal interest and equal rights in
the property, including the right of survivorship. The most common form of ownership used by
married couples.
Quitclaim Deed: A deed that transfers without warranty whatever interest or title a grantor may
have at the time the conveyance is made.
Seller’s Agent: In a designated seller’s agency situation, you have one broker as your legal agent.
The seller’s agent is a limited as opposed to general agent. In other words, the listing or other
agreement with the broker gives the selling agent certain authority to act on your behalf in the
marketing and sale of the property. However, the selling agent does not have general powers to
act on your behalf such as the power to enter into a binding contract for the sale of your real
estate. In marketing your real estate, the seller’s agent will act in the seller’s best interest.
Tenancy in Common: A type of joint ownership in a property without right of survivorship.
Title: Documentary evidence of the right to or ownership in property provided by an abstract
company, title company or attorney, which in real estate is the deed. Title may be acquired
through purchase, inheritance, gift or exchange, as well as through foreclosure of a mortgage.
CityViews Group
Mary Vallender, Realtor, MBA
676 N. Michigan Ave. Suite 3010 Chicago, IL 60611
(312) 485-3438 [email protected]