The Evaluation and Purchase of Your Home
Appraisal - An evaluation to
determine the price for which a property would sell in the current marketplace.
Appreciation - An increase in the value of a property.
Assessment - A tax levied on a property or a value placed
on the worth of a property by a taxing authority.
Comparative Market Analysis (CMA) - A survey of attributes
and selling prices of comparable houses listed for sale, recently sold or
expired from the market; used to help determine correct pricing strategy for
a seller's property.
Conditions, Covenants and Restrictions - The standards that
define how a property may be used and the protections the developer makes
for the benefit of all owners in a subdivision.
Easement - The right-of-way
granted to a person or company authorizing access to the owner's land; for
example, a utility company may be granted an easement to install pipes or
wires. An owner may voluntarily grant an easement, or can be ordered to grant
one by a local jurisdiction.
Fixture - A recognizable object (such as a chandelier, kitchen
cabinet, or light unit) that is permanently attached to property and belongs
to the property when it is sold, unless otherwise specified in the sale agreement.
Market Value - The price that is established by present economic
conditions, location and general trends.
Property Survey - A survey to determine the boundaries of
your property. The cost depends on the complexity of the survey.
R-Value - The resistance of insulation material (including
windows) to heat passing through it. The higher the number, the greater the
insulating value.
Walk-Through - A final inspection of a home before title
transfer to search for problems that need to be corrected before ownership
changes.
Zoning - Regulations established by local governments regarding
the location and use for any given piece of property within a specific area.
The Representation
Agent - Acts on behalf of another, representing that person's
interests.
Broker - A real estate professional who has a higher level
of training than an agent. A broker is the legal representative and/or manager
of the office, the term may also refer to the brokerage under which an agent
is licensed.
Buyer Representation - Historically, an agent represented
only the seller in a real estate transaction (agents working with buyers were
actually "sub-agents" of the seller's listing agent). Buyers today
have the opportunity to be fully represented by an agent and brokerage firm.
Fiduciary Duties - Obligations owed by an agent/broker to
a client (buyer or seller). In real estate, these include loyalty, obedience,
full disclosure, skill, care, diligence, and accounting of all monies.
Multiple Listing Service (MLS) - A system that provides to
its members detailed information about properties for sale.
Realtor® - Registered trade name which may be used only
by members of state and local real estate boards affiliated with (and subscribing
to the Code of Ethics of) the National Association of REALTORS®.
Total Representation - Lake Realty Ohio's program of representing either the buyer or seller in a transaction.
The Transaction Process
Closing - The completion of documents that transfer property
from a seller to a buyer (also referred to as a settlement). Also used loosely
to mean "reaching final agreement."
Closing Costs - Charges paid at closing for obtaining a mortgage
loan and transferring a real estate title.
Contingency - A condition in a contract that must be met
for the contract to be binding.
Deed - Legal document that formally conveys ownership of
property from seller to buyer.
Down Payment - The difference between the sale price and
the mortgage amount. A down payment is usually paid at closing.
Earnest Money - A sum deposited with the broker at the time
an offer is presented to show that a potential purchaser is serious about
buying.
Escrow - The handling of funds or documents by a third party
on behalf of the buyer and/or seller.
Listing Contract - Agreement whereby an owner engages a real
estate company for a specified period to market a property, for which (upon
sale) the broker receives a commission.
Possession Date - The day on which a property's new owner
is actually entitled to occupy that property.
Recording Fee - A charge for recording the transfer of a
property, paid to a city, county, or other appropriate branch of government.
Real Estate Settlement Procedures Act (RESPA) - A federal
law requiring lenders to provide home buyers with information about known
or estimated settlement costs.
Sales Contract - An agreement between a buyer and seller
that should explain, in detail, exactly what the purchase includes, if there
are any warranties, when the buyer can move in, what the closing costs are,
and what recourse the parties have if the contract is not fulfilled or if
the buyer cannot obtain a mortgage commitment at the agreed-upon terms.
Title - Evidence (usually in the form of a certificate or
deed) of a person's legal right to ownership of a property.
Transfer Taxes - Taxes levied on the transfer of property
or on real estate loans by state and/or local jurisdiction.
Ownership
Condominium (Condo) - Type of real estate ownership where
the owner has title to a specific unit and shared interest in common areas.
Joint Tenancy - A form of ownership in which the tenants
own a property equally. If one dies, the other would inherit the entire property.
Tenancy in Common - A form of ownership in which the tenants
own separate but equal parts. To inherit the property, a surviving tenant
would either have to be mentioned in the will or, in the absence of a will,
be eligible through state inheritance laws.
Adjustable Rate Mortgage (ARM) - A loan for which the interest
rate is subject to change on a periodic basis (i.e., every 1, 3, or 5 years).
Amortization - A payment plan by which a loan is reduced
through monthly payments of principal and interest.
Annual Percentage Rate (APR) - The annual cost of credit
over the life of a loan, including interest, service charges, points, loan
fees, mortgage insurance and other items.
Assumption - A transaction allowing the buyer to assume responsibility
for an existing loan instead of originating a new loan.
Balloon - A loan that has a series of monthly payments with
the remaining balance due in a large lump sum payment at the end.
Buy Down - A subsidy (usually paid by a builder or developer)
to reduce the monthly payments on a mortgage loan.
Cap - A limit to the amount an interest rate or a monthly
payment can increase for an adjustable rate loan either during an adjustment
period or over the life of the loan.
Conventional Loan - A mortgage loan not insured by a government
agency (such as FHA or VA).
Conversion Option - The ability to change a loan from an
adjustable rate to a fixed rate.
Credit Report - A report ordered from a credit bureau that indicates if a borrower is a good credit risk.
Default - A breach of a mortgage contract (i.e., not making
the required payments).
Due-On-Sale - A clause in a mortgage contract requiring the
borrower to pay the entire outstanding balance upon sale or transfer of the
property.
Equity - The difference between the value of a home and what
is owed on it.
FHA/VA (Federal Housing Administration/Veterans Affairs) - Government agency that provides housing notes for people with less than fair credit at a lower interest rate.
FNMA ("Fannie Mae") - A privately owned corporation created by Congress that buys mortgage notes
from local lenders and is responsible for the guidelines a majority of lenders
use to qualify borrowers.
Finance Charge - The total cost, including all fees, points,
and interest payments a borrower pays to obtain credit.
Fixed-Rate Mortgage - A mortgage with an interest rate that
remains constant over the life of a loan.
Hazard Insurance - Protection against damage cause by fire,
wind or other common hazards. Most lenders require borrowers to carry it in
an amount at least equal to the mortgage.
Housing Finance Agency - A state agency that offers below-market-rate
home financing for low and moderate-income households.
Index - The interest rate or adjustment standard that determines
the changes in monthly payments for an adjustable rate loan.
Level Payment Mortgage - A mortgage with identical monthly
payments over the life of the loan.
Lien - Security claim on property until a debt is satisfied.
Mortgage Broker - A broker who represents numerous lenders
and helps consumers find affordable mortgages, the broker charges a fee only
if the consumer finds a loan.
Mortgage Commitment - A formal written communication by a
lender, agreeing to make a mortgage loan on a specific property, specifying
the loan amount, length of time and conditions.
Mortgage Company - A company that borrows money from a bank,
lends it to consumers to buy homes, then sells the loans to investors.
Mortgage Loan - A contract in which the borrower's property
is pledged as collateral. It is repaid in installments. The mortgagor (buyer)
promises to repay principal and interest, keep the home insured, pay all taxes
and keep the property in good condition.
Negative Amortization - An increase in the outstanding amount
when a monthly payment does not cover the monthly interest due.
Note - A formal document showing the existence of a debt
and stating the terms of repayment.
Origination Fee - A charge for the work involved in preparing
and servicing a mortgage application (usually one percent of the loan amount).
P.I.T.I. - Principal, interest, taxes, and insurance. The
four major components of monthly housing payments.
Point - A one-time charge paid by a borrower at closing to
receive a lower rate. It is one percent of the mortgage amount.
Pre-Approval - A mortgage approval obtained before negotiating
a contract on a specific home.
Pre Payment - Payment of a debt prior to maturity.
Pre-Qualification - An informal estimate of how much financing
a potential borrower might expect to obtain.
Principal - The amount borrowed, excluding interest and other
charges.
Private Mortgage Insurance (PMI) - Insurance required on
most conventional loans with less than 20% down payment to protect the lender
against default.
Veterans Administration (VA) - A federal agency that guarantees
mortgage loans for honorably discharged veterans and their surviving spouses.
Down payment requirements are very liberal. Borrowers may make little or no
down payment.