Ever find yourself wondering what a lot of these real estate terms mean? We’re going to break it down for you with a glossary of some of the most widely-used words in real estate that may have you stumped!
Adjustable-rate mortgage (ARM)
A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.
A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.
Profit earned from the sale of an asset.
A written instrument that, when executed and delivered, conveys title to or an interest in real estate.
A good faith deposit that upon acceptance of a buyer’s Purchase Agreement by a seller, is held in a trust account until closing. At closing it used as part payment for the purchase of the property.
A relationship of trust and confidence, as between trustee and beneficiary, attorney and client or principal and agent.
Growing-equity mortgage (GEM)
A loan in which the monthly payments increase annually, with the increased amount being used to reduce directly the principal balance outstanding and thus shorten the overall term of the loan.
Land that is owned and occupies as the family home. In many states a portion of the area or value of this land is protected or exempt from judgements for debts.
A short-term loan usually made during the construction phase of a building project (in this case referred to as a construction loan.)
Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, the descendant’s interest passes to the surviving joint tenant or tenants by the right of survivorship.
The purchase of real property, the consummation of which is preceded by a lease, usually long-term. Typically done for tax or financing purposes.
The most probable price property would bring in an arm’s-length transaction under normal conditions on the open market.
A listing based on the net price the seller will receive if the property is sold. Under a net listing the broker can offer the property for sale at the highest price obtainable to increase the commission. This type of listing is illegal in many states.
A listing contract under which the broker’s commission is contingent on the broker’s producing a ready, willing and able buyer before the property is sold by the seller or another broker.
Private mortgage insurance (PMI)
Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.
A court action to remove a cloud on the title
Reverse-annuity mortgage (RAM)
A loan under which the homeowner receives monthly payments based on his or her accumulated equity rather than a lump sum. The loan must be repaid at a prearranged date or upon the death of the owner or the sale of the property.
The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.
An instrument, similar to a certificate of sale, given to a purchaser at a tax sale.
A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.
A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs in order to limit the lender’s possible loss.
A method of refinancing in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. In essence it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount without disturbing the existence of the first mortgage.
An exercise of police power by a municipality to regulate and control the character and use of property.