The Reading-Berks
Association of REALTORS® provides
the following definitions of terms associated
with the real estate industry as a service to
you.
acceptance
An offeree’s consent to enter into a
contract and be bound by the terms of the offer.
adjustable-rate mortgage (ARM)
A mortgage that permits the lender to adjust
the mortgage’s interest rate periodically
on the basis of changes in a specified index.
Interest rates may move up or down, as market
conditions change.
amenity
A feature of real property that enhances its
attractiveness and increases the occupant’s
or user’s satisfaction although the feature
is not essential to the property’s use.
Natural amenities include a pleasant or desirable
location near water, scenic views of the surrounding
area, etc. Human-made amenities include swimming
pools, tennis courts, community buildings,
and other recreational facilities.
amortiztion schedule
A timetable for payment of a mortgage loan. An
amortization schedule shows the amount of each
payment applied to interest and principal and
shows the remaining balance after each payment
is made.
annual percentage rate (APR)
The cost of a mortgage stated as a yearly rate;
includes such items as interest, mortgage insurance,
and loan origination fee (points).
application
A form used to apply for a mortgage loan and
to record pertinent information concerning
a prospective mortgagor and the proposed security.
Lenders use the information on the loan application
to evaluate whether or not they can give the
loan, and if so, the amount of money they can
lend.
appraisal
A written analysis of the estimated value of
a property prepared by a qualified appraiser.
Contrast with home inspection.
assessment
The process of placing a value on property for
the strict purpose of taxation. May also refer
to a levy against property for a special purpose,
such as a sewer assessment.
attorney-in-fact
One who hold a power of attorney from another
to execute documents on behalf of the grantor
of the power.
broker
A person who, for a commission or a fee, brings
parties together and assists in negotiating
contracts between them.
chattel
Another name for personal property.
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
by the buyer signing the mortgage documents
and paying closing costs. Also called “settlement”.
At this meeting, ownership of the property
is transferred from the seller to the buyer.
closing costs
Expenses (over and above the price of the property)
incurred by buyers and sellers in transferring
ownership of a property. Closing costs normally
include an origination fee, an attorney’s
fee, taxes, an amount placed in escrow, and
charges for obtaining title insurance and a
survey. Closing costs percentage will vary
according to the area of the country; lenders
or REALTORS® often provide estimates of
closing costs to prospective homebuyers.
commission
The fee charged by a broker or agent for negotiating
a real estate or loan transaction. A commission
is generally a percentage of the price of the
property or loan.
commitment letter
A formal offer by a lender stating the terms
under which it agrees to lend money to a home
buyer. Also known as a “loan commitment”.
condominium
A real estate project in which each unit owner
has title to a unit in a building, an undivided
interest in the common areas of the project,
and sometimes the exclusive use of certain
limited common areas.
contingency
A condition that must be met before a contract
is legally binding. For example, home purchasers
often include a contingency that specifies
that the contract is not binding until the
purchaser obtains a satisfactory home inspection
report from a qualified home inspector.
contract
An oral or written agreement to do or not to
do a certain thing.
deed
The legal document conveying title to a property.
deposit
A sum of money given to bind the sale of real
estate, or a sum of money given to ensure payment
or an advance of funds in the processing of
a loan. See earnest money deposit.
earnest money deposit
A deposit made by the potential home buyer to
show that he or she is serious about buying
the house.
easement
A right of way giving persons other than the
owner access to or over a property.
encroachment
An improvement that intrudes illegally on another’s
property.
encumbrance
Anything that affects or limits the fee simple
title to a property, such as mortgages, leases,
easements, or restrictions.
equity
A homeowner’s financial interest in a property.
Equity is the difference between the fair market
value of the property and the amount still owed
on its mortgage.
escrow
An item of value, money, or documents deposited
with a third party to be delivered upon the
fulfillment of a condition. For example, the
deposit by a borrower with the lender of funds
to pay taxes an insurance premiums when they
become due, or the deposit of funds or documents
with an attorney or escrow agent to be disbursed
upon the closing of a sale of real estate.
escrow amount
The account in which a mortgage servicer holds
the borrower’s escrow payments prior
to paying property expenses.
fair market value
The
highest price that a buyer, willing but not compelled
to buy, would pay, and the lowest
a seller, willing but not compelled to see,
could accept.
fee simple
The greatest possible interest a person can have
in real estate.
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