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REAL ESTATE GLOSSARY


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Z



A

Abstract of Title - A summary of public records in regard to the title on a piece of property. Abstracts must be consulted to be certain there are no liens or other claims outstanding against the property before the buyer can purchase it.

Acceleration Clause - A provision in a mortgage that allows the lender to request the remaining balance of the loan if payments are not made on time.

Acceptance - A written document that the seller of a property has accepted the offer from a potential buyer.

Addendum - An addition or change to an existing contract. Sometimes known as a rider.

Agency - A written contract that states that a specific person (usually a real estate agent) has authority to act on behalf of someone else (usually either the buyer or seller).

Agent - A man or woman who has been licensed to buy or sell real estate.

Amendment - A change to a specific section of a legal document without altering the rest of it.

Annual Percentage Rate (APR) - The total yearly cost of a mortgage or a loan, including interest, points, and other fees.

Appraisal - A report from an independent third party detailing the estimated value of real estate.

Assessment - A local tax placed on a property in addition to its existing taxes. Assessments are generally used by local governments to improve the neighborhood.

Assets - Items of positive value, such as stocks, real estate, and cash.


B

Backup Offer - A bid that a seller will accept if their first choice offer falls through.

Bankruptcy - A stipulation of Federal Law that allows an insolvent debtor to receive relief from creditors. A Trustee is assigned to sell off the debtors assets in order to repay the debts. Bankruptcy appears on your credit report for seven years after the initial declaration.

Binder - A document from a title insurance company stating that they will insure a property under a specific set of guidelines.

Breach of Contract - Failure to follow the regulations set up in a contract or covenant.

Broker - One who acts as an intermediary on behalf of other for a fee or commission.

Buyer Broker - A real estate agent who represents buyers exclusively.

By-Laws - Rules and regulations that govern a corporation or an association. Usually seen with co-ops and condominiums.



C

Cancellation Clause - A mortgage provision that details how the interested parties may cancel the document.

Cashier's Check - A check made out from a bank's own account.

Caveat Emptor - Latin for "let the buyer beware." Always a sound principle when purchasing real estate.

Certificate of Occupancy - A certificate that states a particular property is suitable to be lived in.

Chattel - Personal property.

Closing - Also called "settlement." A meeting of all parties involved in a property transaction during which the transaction is consummated.

Condominium - The absolute ownership of a unit in a multi unit building.

Contract - A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy.

Commitment - Also called "binder." A document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued.

Co-op - Abbreviation for "cooperative," a portion of a large property whose owner has purchased exclusive rights to its use by buying a share of the corporation that owns the large property

Credit report - Used by lenders to determine a potential borrower's credit worthiness. Independent sources compile the report, which lists the borrower's debts, liabilities and assets.



D

Deed - A legal paper which transfers the ownership of a property from one party to another. The person transferring the interest is the "grantor," and the one acquiring the interest is the "grantee."

Default - Failure to meet the conditions set forth in a legal document (i.e., not making monthly mortgage payments).

Deposit - An initial cash outlay towards the purchase/rent of a property.

Down payment - A sum of money paid by buyers out of their own resources when the agreement of sale is issued.

Dual Agency - A real estate agency that represents both the seller and buyer in a transaction

Duplex - A property spread over two floors.



E

Easement - The temporary or permanent right for a third party to use a property for a specific purpose (i.e., power lines).

Eminent Domain - The right of the government to take over private property for public use, with monetary compensation to be made to the owner.

Encroachment - A physical portion of a property that extends onto another property (i.e., a driveway).

Encumbrance - A lien or other claim against a property.

Equity - The current value of a property to its owner, minus outstanding mortgage payments or other debts.

Escrow - A method of closing a real estate transaction in which all required documents and funds are placed with a third party for processing and disbursement.

Escrow Account - An account opened for a buyer to deposit money to cover expenses such as property taxes or homeowners insurance.

Estate - Total assets of a person who is recently deceased.

Exclusive Agency - The practice of representing either the buyer or the seller in a transaction. Owes Fiduciary Duties to the party that agent represents.

Exclusive Listing - A property that is being shown by one particular real estate agent or agency.



F

Fair Housing Act - A federal law that makes it illegal to refuse to sell a property based on a potential buyer's race, religion, national origin, family status, color, or disability.

Fannie Mae - The Federal National Mortgage Association. The association buys mortgages from lenders and sells them on the secondary mortgage market.

Federal Housing Administration (FHA) - A government agency that provides mortgages to qualified buyers for a small down payment.

First Mortgage - The primary mortgage, which must be paid off before all other property debts.

Fixed Rate Mortgage - A mortgage having a rate of interest that remains the same for the life of the mortgage.

Flat Fee - A set fee charged by a real estate agent in lieu of a percentage of a property's sale value.

Foreclosure - A legal procedure whereby property used as security for a debt is sold to satisfy the debt.



G

General Contractor - The contractor in charge of hiring subcontractors and suppliers during any construction process.

Gift - A monetary sum given by a buyer's relative or other source for purchasing a property that does not need to be repaid.

Good Faith Estimate - An estimate of costs a mortgage lender gives to a potential buyer which includes all foreseen fees.

Grace Period - The time in which a mortgage payment can be made after its due date without incurring a late fee.

Grantee - A person receiving an interest in a property

Grantor - The person giving up interest in a property.

Guardian - A person appointed by the court to oversee the affairs of a minor.



H

Hazard Insurance - Insurance that protects against common hazards such as fire or winds. It is generally required by all lenders before a mortgage is approved.

High-Rise - A building over six stories tall. Usually with an elevator.

Home Equity Loan - A loan that allows property owners to borrow against their property's equity. This loan is paid out in one lump sum, and is usually repaid in installments.

Housing Discrimination - Denying a person the right to own property based on their race, color, religion, sex, national origin, family status or disability.



I

Indemnity - Protection against a specific event that allows for compensation should the event occur.

Index - Any financial table used to set the interest rate on adjustable rate mortgages

Insurance - Any policy that provides compensation against a specific type of loss.

Interest - A fee property buyers must pay in order to receive a mortgage, usually expressed as a percentage of the mortgage.

Interest Rate - The value charged by the lender for the use of the lender's money. Expressed as a percentage.



J

Joint Liability - When two or more people are liable for the terms of a mortgage.

Joint Tenancy - Property ownership between two or more people, all of whom live on the property. The property automatically passes onto the co-owner(s) if one of the others is deceased.

Judgment Lien - A lien placed on a property by a court of law.

Jumbo Loan - A loan higher than those insured by such organizations as Fannie Mae.

Junior Mortgage - Any mortgage that is of lesser priority than the first mortgage.



K


L

Landscape - A property's exterior surroundings.

Lease - A contract between a landlord and a tenant conveying the use and/or occupation of the landlord's property.

Leasehold Estate - A long-term agreement that allows a tenant property rights under the provision of a lease.

Lender - Any bank or similar institution that offers mortgages and other loans.

Legal Description - A description of a property recognized by a court of law.

Liability Insurance - An insurance policy that protects property owners from personal injury and other liability lawsuits.

Lien - A claim laid against a property. Liens must be removed from a property's title before it can be sold.

Life Estate - The right of a person to own a property for their entire life.

Liquid Assets - Any asset that can be converted into cash in a short period of time.

Listing agreement - A contract between an owner and a real estate broker by which the broker is employed as agent to find a buyer for the owner's real estate.

Lock-In - A guarantee that a mortgage's interest rate will be the same at the end of the loan approval process as it was in the beginning. Especially sought after when interest rates are fluctuating.



M

Margin - The amount in percentage points that a mortgage lender adds to an adjustable rate mortgage.

Market Value - The value of a property given the current market conditions.

Metes and Bounds - A method of describing a property by distances and directions.

Mortgage - A legal document that states that a certain amount of money is being used to purchase a property. If the loan is not paid back according to the terms set forth in the document, the loan is forfeit, and the property may be seized in order to pay it back.

Mortgage Banker - Originates mortgage loans, loaning you their funds and closing the loan in their name.

Mortgage Broker - One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security. Also known as a loan broker.

Multi-Dwelling Property - Any property with one mortgage that contains several dwellings (i.e., an apartment building).

Multiple Listing Service (MLS) - A marketing organization composed of member brokers, who agree to share their listing agreements with one another in the hope of finding the buyers for their properties more quickly. Remember Manhattan Real Estate market is not organized in a Multiple Listing Service.



N

Negative Amortization - Monthly mortgage payments that are not large enough to pay off accrued interest, which actually increases the mortgage's principal.

Notary Public - Any person authorized by law to certify signatures and documents

Note - A legal document signed by a buyer to repay the stated amount of a loan by a certain date

Notice of Default - A legal document that states that a mortgagor is in default, and that further legal action is most likely forthcoming.



O

Offer - A monetary proposal for a property, usually from the buyer to seller.

Open House - A property open to be viewed by the general public.

Open listing - A listing contract under which the broker's commission is contingent on the broker's producing ready, willing and able buyer before the property is sold by the seller or another broker.

Option - A right exercised by a buyer to keep an offer to purchase a property open for a certain amount of time.

Oral Agreement - Any agreement not made in writing. Oral agreements are not usually considered legally binding.

Owner Financing - A property transaction in which the owner agrees to finance some or all of the purchase price



P

Parcel - Any officially designated plot of land

Personal Property - Any item in a dwelling not considered a fixture.

Point - A fee charged by a mortgage lender, typically at closing. Each point is worth one percent of a loan's total principal (i.e., a point on a $150,00 loan would $1,500).

Power of Attorney - A document stating that a certain individual is an attorney in fact, and may act on behalf of someone else.

Pre-approval - A process whereby a potential home buyer secures a guaranteed mortgage approval before making an offer on a house. A lending institution guarantees in writing to grant a loan for a specified amount. Not to be confused with pre-qualification.

Prepayment - Paying off all or part of the mortgage before the scheduled date.

Prepayment Penalty - A fee paid to the lending institution for paying a loan prior to the scheduled maturity date.

Principal - The base amount of a mortgage, minus interest.

Promissory Note - A note that promises payment of a specific amount on demand, which can be transferred much like a check.

Property Line - The official boundary line of a property.

Purchase Money Mortgage (PMM) - A mortgage given from buyer to seller as part of a property's purchase price.



Q

Qualifying Ratio - A ratio used by a mortgage lender to determine how much a buyer can afford to borrow.

Quiet Title - A lawsuit brought to remove a lien or other claim from a property title.

Quit-Claim Deed - A document releasing a person from any interest they may hold in a property.


R

Real Estate - Land and anything physically attached to it (i.e., an apartment building, a barn, etc.).

Real Estate Agent - A person who has a state license to assist buyers and sellers in property transaction and is generally paid by commission.

Real Estate Settlement Procedures Act (RESPA) - The federal law that allows buyers and sellers to be aware of the various settlement charges associated with buying a property

Realtor - Any real estate agent or broker who is a member of the National Association of Real Estate Realtors.

Recission - The cancellation of a mortgage or other contract by law or the mutual consent of those involved.

Recording - Filing a document with the proper government agency.

Refinancing - Replacing an old mortgage or loan with one that has more favorable terms.

Regulation Z - A provision in the federal Truth-in-Lending Act that requires a property buyer to be informed in writing of all the costs associated with acquiring credit.

Right to Recission - A provision in the Truth-in-Lending Act that allows a buyer to cancel a mortgage or other loan within three days of signing it.



S

Sales Contract - A contract that details the terms of a property sale.

Second Mortgage - A mortgage taken out after a first mortgage that ranks second in payment priority.

Seller's Market - A market advantageous to sellers, with not many properties for sale and many buyers.

Settlement Statement - A statement that documents exactly what has been paid and by whom.

Specific Performance - A legal action filed in order to insure the complete performance of a contract.

Statute of Limitations - The time in which a law suit can be legally filed.



T

Tax Lien - A lien placed on a property for non-payment of back taxes.

Tenants in Common - Two or more people who own a property without an established right of survivorship. Occasionally, if one partner dies, their interest may not be given to the co-owner(s).

Title - A legal document that provides proof of property ownership.

Title Insurance - An insurance policy that protects a buyer should someone else claim title to a property.

Title Search - An examination of local records to provide proof positive of a title's owner, and to be certain that there are no liens or other claims against the property.

Townhouse - A dwelling unit usually with two to four floors, and shared walls. It can be individually owned, a condominium, a cooperative, or rental property.

Trust - A right to a property held by another, either written or implied.

Truth-in-Lending Act - A federal law that requires a mortgage lender to disclose the annual percentage rate to a prospective buyer after they have applied for the loan.


U

Underwriting - A process by which mortgage lenders assess the risk of a potential property buyer, and adjust their loan terms accordingly.

Unrecorded Deed - A deed that has been transferred from seller to buyer without being noted in the public records.

Unsecured Loan - A mortgage not backed by collateral

Usury - Charging interest on a mortgage or other loan higher than is allowed by law.


V

VA Loan - A Department of Veterans Affairs program that allows qualified veterans to secure a mortgage with little or no down payment.

Variable Rate - An interest rate that is subject to fluctuation.

Verification of Employment (VOE) - A document signed by a potential property buyer's employer that verifies the buyer's employment and salary.



W

Waiver - The voluntary relinquishment of a right.

Warranty - A legal document assuring a specified action in the future

Will - A legal document that specifies how a person's estate is to be handled after their death.

Wraparound Mortgage - A mortgage that contains not only the amount to be loaned to purchase a property, but also the remaining balance of that property's previous mortgage.


X



Y



Z

Zoning - The local regulation of land usage.

Zoning Variance - A one-time change in an area's zoning law.