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Glossary of Common Real Estate Terms
 
Use this glossary of common real estate terms to assist you in your buying and/or selling experience! Don't let realtors confuse you with complex terminology. Get the most out of your real estate transaction by taking the time to understand the language and make smart decisions!
 
 
 
Abstract of Judgment - This type of lien is issued pursuant to a court order for the payment of a debt.

Abstract of Title - A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record, which may affect the marketability of the title.

Adjustable Rate Mortgage (ARM) - A mortgage that has an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

Adjustment Period - The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one year ARM, which means that the interest rate can change once a ear.

Amortization - Repayment of a loan in equal installments of principal and interest, rather than interest only payments.

Amortized Loan - A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a Level Payments Loan.

Annual Percentage Rate (APR) - The total finance charges (interest, loan fees, points) expressed as a percentage of the loan amount.

Appreciation - An increase in the value of real estate.

Assumption of Mortgage - A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

Balloon Payment - A lump sum principal payment due at the end of some mortgages or other long term loans.

Binder - Sometimes known as an offer to purchase or an earnest money request. A binder is the acknowledgment of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.

Cap - The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgag
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CC&RS — Covenenants, Conditions and Restrictions - A document that controls the use, requirements and restrictions of a property.

Certificate Of Reasonable Value (CRV) - A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.

Closing Statement - The financial disclosure statement that accounts for all of the funds received and accepted at the closing including deposits for taxes, hazard insurance, and mortgage insurance.

Condominium - A form of real estate ownership. The owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors, and ceilings) serve as its boundaries.

Contingency - A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

Contract For Deed - A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.

Conventional Mortgage - A mortgage securing a loan made by investors without governmental underwriting, i.e., that which is not FHA insured or VA guaranteed.

Conversion Clause - A provision in some ARMs that enables you to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.

Cooperative - A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.

Counter Offer - A rejection of an offer by a seller along with an agreement to sell the property to the potential buyer on terms differing form the original offer.

CRB—Certified Residential Broker - To be certified, a broker must be a member of the National Association of Realtors, have five years experience as a licensed broker and have completed five required Residential Division courses.

Deed - Written instrument which, when properly executed and delivered, conveys title.

Deed Of Trust - The Deed of Trust is a security device for a lender. Under California law, the Deed of Trust allows a relatively quick and easy way for a lender to obtain real property with which to satisfy a delinquent loan.

Discount Points - Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level.

Due-On-Sale Clause - An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.

Earnest Money - The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.

Easement - Created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one party has in the land of another (i.e. right-of-way).

Escrow - A procedure in which an independent third party acts as a stakeholder for both the buyer and the seller, carrying out both parties’ instructions and assuming responsibility for handling all of the paperwork and distribution of funds.

Equity - The interest or value which an owner has in real estate over and above the liens against real property.

FHA Loan - A loan insured by the Insuring Office of the Department of Housing and Urban Development; the Federal Housing Administration.

Federal National Mortgage Association (FNMA) - Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

Fee Simple - An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

Finance Charge - The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

Graduated Payment Mortgage - A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

GRI—GRADUATE REALTOR’S INSTITUTE
A professional designation granted to a member of the National Association of Realtors who has successfully completed three courses covering Law, Finance and Principles of Real Estate.

HOME INSPECTION REPORT
A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

HOME WARRANTY PLAN
Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.

INDEX
A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.

Joint Tenancy
An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedents interest in the property.

LAND CONTRACT
A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.

LIEN
A legal hold or claim on property as security for a debt or charge (i.e. judgements, taxes, mortgages, deeds of trust, etc.).

LOAN COMMITMENT
A written promise to make a loan for a specified amount on specified terms.

LOAN-TO-VALUE RATIO
The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

MARGIN
The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

MARKETABLE TITLE
Merchantable title free and clear of objectionable liens or encumbrances.

MECHANICS LIEN
Under California law, workmen who provide materials and/or labor to a property owner who is improving his property are entitled to use the real property to satisfy the debt. This type of lien also alerts the selected title company to the possibility of on-going construction work which may affect the priority of a new Deed of Trust.

MORTGAGE
An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation, procedure for foreclosure in event of default is established by statute.

MORTGAGE LIFE INSURANCE
A type of term life insurance often bought by mortgagors. The coverage decreases as the mortgage balance declines. If the borrower dies while the policy is in force, the debt is automatically covered by insurance proceeds.

MULTIPLE LISTING
Multiple Listing is the name given a service performed by the local Board of Realtors (Multiple Listing Service). MLS provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the service to expose properties to a wider market base.

NEGATIVE AMORTIZATION
Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn’t covered is added to the unpaid balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that are not high enough to cover the interest.

ORIGINATION FEE
A fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan. The fee is limited to one percent for FHA and VA loans.

PERSONAL PROPERTY
Any property which is not real property, (i.e. money, savings accounts, appliances, cars, boats, etc.)

PITI
Principal, interest, taxes and insurance

PLANNED UNIT DEVELOPMENT (PUD)
A zoning designation for property developed at the same or slightly greater overall density than conventional development, sometimes with improvements clustered between open, common areas. Uses may be residential, commercial or industrial.

POINT
An amount equal to one percent of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

PRE-PAYMENT PENALTY
A fee charged to a mortgagor who pays a loan before it is due. Not allowed for FHA or VA loans.

PRIVATE MORTGAGE INSURANCE (PMI)
Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage (A requirement if down payment on subject property is less than 20 percent).

PROMISSORY NOTE
Following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment.

PROPERTY TAXES
Each year on March 1 the lien of the following year’s taxes attaches to the land pursuant to California law. Property taxes are assessed on the July 1 through June 30 fiscal year.

PURCHASE AGREEMENT
A written document in which the purchaser agrees to buy certain real estate and seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.

Real Estate Agent - a person that is licensed by the state to represent a buyer or seller in a real estate transaction in exchange for a commission. Real Estate Agents must work in association with a real estate broker or brokerage company.

REAL PROPERTY
Land and whatever by nature or artificial annexation is a part of it.

REALTOR® - A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics.

REGULATION Z
The set of rules governing consumer lending issued by the Federal Reserve Board of Governors in accordance with the Consumer Protection Act.

SPECIAL ASSESSMENT
Legal charge against real estate by a public authority to pay cost of public improvements such as: street lights, sidewalks, street improvements, etc.

SUBDIVISION
A parcel of land that has been divided into smaller parts (lots, blocks or tracts).

TENANCY IN COMMON
A type of joint ownership of property by two or more persons with no right of survivorship.

TERM OF MORTGAGE
The period during which a mortgage must be paid.

TITLE INSURANCE POLICY
A policy that protects the purchaser, mortgagee or other party against losses.

TRUST ACCOUNT
An account separate and apart and physically segregated from broker’s own funds in which broker is required by law to deposit all funds collected for clients.

VA LOAN
A loan that is partially guaranteed by the Veterans Administration and made by a private lender.

WARRANTY DEED
A deed used to convey real property which contains warranties of title and quiet possession where the grantor agrees to defend the premises against the lawful claims of third persons.

Jeff Cairncross

CONTACT ME NOW!

Cell 619-884-9115

Office 858-272-9696

Email Jeff@cairnx.com

DRE# 665053

RE/MAX Coastal Properties

4444 Mission Blvd.

San Diego,CA

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