Real Estate Terms
Here is a list of terms you will hear during a Real Estate transaction:
Approval – This takes place once you have chosen a home. This is the final approval completed by the lender. When this takes place the lender will usually require that an evaluation of the property is completed, this is known as a Home Appraisal.
Agency – A legal relationship in which someone (principal) hires someone else (agent) to represent them to a third party.
Amendment – An alteration, addition or correction to an agreement that does not change the principal idea or essence of the original agreement.
Appraisal – Opinion as to value of property; a conclusion resulting from an analysis of facts affecting fair market value.
Chain 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 that may affect the marketability of the title.
Closing or COE – The final settlement of a real estate transaction between the Buyer and Seller.
Contingency – A condition that has to be fulfilled in order for another event to happen.
Conventional Mortgage – A mortgage securing a loan made by investors without governmental underwriting.
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 from the original offer.
Deed – Written instrument which, when properly executed and delivered, conveys title of real property.
Deed of Trust – A written instrument used in Arizona in place of a mortgage to secure the lender’s rights.
Earnest Money Deposit – Down payment made by the purchaser of real estate as evidence of good faith.
Escrow – The deposit of instruments and funds with instructions (the Contract) to a third neutral party (Escrow Agent) to carry out the provisions of an agreement or contract.
Fair Market Value – The price at which a willing Seller would sell, and a willing Buyer would buy, neither being under abnormal pressure.
FHA Loan – A loan guaranteed by the Federal Housing Administration.
Home Inspection – A home inspection is a limited, non-invasive examination of the condition of a home, often in connection with the sale of that home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections.
MLS – is a private offer of cooperation and compensation by listing brokers to other real estate brokers. Brokers share information on properties they have listed and invite other brokers to cooperate in their sale in exchange for compensation if they produce the buyer. Sellers benefit by increased exposure to their property. Buyers benefit because they can obtain information about all MLS-listed properties while working with only one broker.
Mortgage – An instrument recognized by law by which property us hypothecated to secure the payment of a debt or obligation; procedure for foreclosure in the event of default is established by statute.
Pre-Qualification – This usually takes place first of all and this is a basic review of your financial information to determine how large of a loan you are able to qualify for. Pre-qualifications are non-binding which means there is no guarantee that you will get approved for this amount.
Pre-Approval – This is similar to the pre-qualification described above but this is a more in depth look at your financial situation and will usually include completing a formal Loan application. This also tends to take place before you have selected a home and is also non-binding.
PITI – A payment that includes Principal, Interest, Taxes and Insurance.
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.
Short Sale – Occurs when a property is sold at a price lower than the amount the homeowner owes on the mortgage, and the homeowner’s mortgage lender(s) agrees to the “short” payoff. A lender might accept a short sale with the property worth less than the balance of the mortgage, if the borrower cannot continue to make the monthly loan payment, does not have enough money to pay back the full balance of loan and needs to move out of the property.
S.P.D.S – Also referred to as “SPUDS”, is the Seller’s Property Disclosure Statement. Sellers are required to fill out a form to disclose any problems that they are aware of that affect the property.
Time is of the Essence – A term that demands punctual performance in a binding agreement.
VA Loan – A loan guaranteed by the Veteran’s Administration.