Abandonment

Abstract (Of Title)

A historical summary of all of the recorded instruments and proceedings that affect the title to property. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase title.

Acceleration

The right of the mortgagee (a.k.a.: the lender) to declare the entire mortgage immediately due and payable upon violation of a specific loan provision such as failure to make payments on time.

Acceptance

The act of agreeing to accept an offer.

Access Right

The right of property owners to get to and from their property.

Accommodator

A principal involved in an IRS 1031 tax-deferred, like-kind exchange that agrees to assist the seller in the transaction (a.k.a.: a facilitator or intermediary).

Accommodating Party

In an IRS 1031 tax-deferred, like-kind exchange, the person or party that steps in to accommodate or facilitate the exchange transaction. Depending on how the transaction is structured, the accommodating party may incur additional liability in their efforts to assist in the exchange.

Acquisition Property

In an IRS 1031 tax-deferred, like-kind exchange, this term is synonymous with replacement property.

Acknowledgment

A declaration by a person who has signed a document that such a signature is a voluntary act, witnessed by an authorized official such as a notary public.

Actual Receipt

In an IRS 1031 tax-deferred, like-kind exchange, this is the point in time when the exchanger receives the funds from the sale of the relinquished property. Receipt of cash by the exchanger before s/he receives the replacement property may be enough to destroy the tax-deferred treatment of the transaction.

Addendum

A stipulation added as an attachment to a contract, letter, or escrow instructions, etc.

Adjusted Basis

In an IRS 1031 tax-deferred, like-kind exchange, this term describes the purchase price plus capital improvements less depreciation. Transactions involving exchanges, gifts, probates and receiving property from a trust can have an impact on calculating the property's adjusted basis. The property owner's CPA or tax advisor should know how to calculate for adjusted value.

Agent

A person who acts or has the power to act for another. A real estate agent acts on behalf of the principal (the buyer or seller) and has a fiduciary responsibility toward the principal.

Agreement of Sale

A contract or written agreement in which the seller agrees to sell and the buyer agrees to buy under specific terms and conditions (a.k.a.: an offer of acceptance, a contract of sale or an earnest money contract).

Alta Title Insurance

An extended insurance policy that grants more specific coverage than the CLTA standard policy including coverage of unrecorded liens. The rate of the policy is based on the loan amount and is required by most lenders. The cost may be obtained from a printed rate chart.

Amenities

Features that enhance or add value and desirability to a piece of real estate. Common amenities include swimming pools, professional landscaping, a gourmet kitchen, a remodeled bathroom, etc.

Amortization

The reduction of a debt over time by making periodic payments, usually monthly, a portion of which is interest and a portion of which reduces the outstanding amount of the debt. Monthly mortgage payments remain constant over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan period the principal repayment is very small, but the interest is very high. At the end of the loan, the relationship is reversed.

Appraisal

An estimate or opinion of the value of property made by a qualified professional appraiser.

Appraisal Fee

A fee paid to the appraiser to obtain an estimate of market value upon which the lender will base the loan amount. The cost ranges from $250 to $500 and is non-refundable.

Appraiser

A licensed professional qualified to estimate the value of real property. Appraisers' work also involves reviewing reports prepared by repairmen, contractors or other real estate professionals; consulting and analyzing real estate data or recommendations on the cost to fix problems in a piece of real estate listed for sale.

Annual Percentage Rate

The effective rate of interest for a loan per year (a.k.a.: APR).

Adjustment Interval

The period of time that determines when the interest rate on an Adjustable Rate Mortgage may be changed. A loan that adjusts its interest rate after six months is called a six-month ARM. Rate caps limit how much your interest rate can move up or down. Periodic caps limit the change per adjustment period, and a lifetime cap governs the maximum amount the interest rate can increase or decrease over the life of the loan.

Adjustable Rate Mortgage

A loan that allows the interest rate to change periodically up or down (a.k.a.: ARM). The interest rate on an ARM is determined by adding a specific sum, called a margin or a spread, to a financial index. Examples of financial indexes include: Treasury, Certificate of Deposit, Cost of Funds. The margin is the difference between the index rate and the ARM rate.

Assessment

The amount of tax due to a tax entity or authority.

Assessor

An official appointed to assess property for taxation.

Assignment

The method by which a right or contract is transferred from one person to another.

Assumption

The agreement between the buyer and seller in which the buyer takes over the payments on an existing mortgage from the seller with no change in loan terms. Assuming a loan can save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, higher, interest rates will apply.

Assumption Fee

A fee charged by the existing lender for the privilege of assuming the existing loan, which may be assessed at a rate of up to one percent of the remaining balance on the loan.

Attachment

The legal seizure of property to force payment of a debt.

Attorney in Fact

One who is authorized to act for another under power of attorney.

Bankruptcy

The legal term for someone who files Chapter 11 because of an inability to pay debts when due.

Balloon Mortgage

A short-term mortgage that requires a large, single payment when the loan reaches full maturity (a.k.a.: A Balloon Payment).

Bid

The amount a buyer offers to pay for property.

Blanket Mortgage

A single mortgage that covers more than one parcel of real estate.

Bond

In the construction business, a third party that ensures the principal that the contractor will complete a project (a.k.a.: a performance bond).

Boot

Any type of property received or given up in an IRS tax-deferred exchange that does not meet the like-kind requirement. Receiving boot will trigger the recognition of gain and taxes. If the exchanger receives boot, they will be taxed. Boot added or given up by the exchanger does not necessarily trigger a taxable event. In a real property exchange, boot received is any type of property received by the exchanger that is not real property held for investment or productive use in a trade or business.

Breach

The violation of an obligation in a contract (a.k.a.: a default).

Bridge Loan

A short-term loan that finances a portion of the purchase price not provided by the mortgage loan and the down payment. A bridge loan is used by a buyer when the purchase of a new home is completed before the sale of the old one.

Broker

A state licensed agent who, for a fee, acts for property owners in real estate transactions.

Building Code

Regulations established by local governments describing the minimum structural requirements for building a foundation, a roof, plumbing and electrical systems, and other construction elements considered necessary for safety and sanitation.

Building Line or Setback

Distances from the ends and/or sides of a lot beyond which construction may not extend.

Building Permit

A piece of paper issued by local government that grants permission to build a specific structure at a particular site.

Business Day

The standard measure for conducting business. Business days exclude weekends and holidays.

Buy-down

The option to pay an additional sum, referred to as discount points, to a lender each month in exchange for a reduced rate of interest on a loan.

Buyer's Agent

An agent who represents the buyer and owes fiduciary duties to the buyer.

Buyer's Market

A real estate market in which buyers have a wide choice of properties and may negotiate lower prices.

Bylaws

A set of regulations that govern how an organization conducts its communal activities. Most condominiums and townhouse complexes have a written set of bylaws.

Cap Rate

A limit placed on adjustments to protect the borrower from large increases in the interest rate or the payment in ARMs.

Cash Flow

The amount of cash derived over a certain period of time from an income-producing property. Cash flow must be large enough to pay the expenses of the income producing property such as mortgage payments, insurance, maintenance, and utilities.

Cash Boot

Cash Boot consists of cash and non-qualifying property. A car, a boat or receipt of the beneficial interest in a promissory note is all examples of Cash Boot.

Capital Gains

Income from the sale of a real (tangible) asset.

Certificate of Eligibility

The document given to qualified veterans that entitles them to VA-guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

Chain of Title

A history of conveyances and encumbrances affecting the title as far back as records are available.

City Transfer Tax

A municipal tax imposed on the sale of property within the corporate limits of some cities. The cost is $3.30 per $1,000 of selling price, payable by buyer or seller depending on the county. The VA does not allow veterans to pay any portion of this cost.

Closing

The act of transferring ownership of a property from seller to buyer in exchange for payment in accordance with a contract.

Closing Costs

Costs the buyer must pay at the time of the closing a sale in addition to the down payment. These cost may include points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance. Closing costs vary considerably from one financial institution to another.

Cloud (On Title)

An outstanding claim or encumbrance which adversely affects the marketability of title.

Comparative Market Analysis

This is a report prepared by a real estate agent that pulls Information on home sale activity from the MLS and is used to develop the listing price for a home. The report is confined to comparable properties that are properties like the property about to be put for sale. These comparable properties have reasonably the same size, location and attributes. The CMA is used by the agent to estimate the fair market value of the property.

Condemnation

The taking of private property for public use under the doctrine of eminent domain. The government often compensates the owner with an assessment below market value.

Conditional Sales Contract

A contract for the sale of property in which the buyer purchases the right to take possession of real estate, but the seller retains title until the conditions of the contract have been fulfilled (a.k.a.: a land contract).

Condominium

A condominium is a home in a shared building or development (a.k.a.: a condo). The buyer purchases title for the space inside the unit, shares the common areas with other unit owners and pays a maintenance fee to the condominium association to cover needed maintenance, repairs and improvements to the property.

Construction Loan

An interim, short-term loan to pay for the construction of building or homes. These are usually designed to provide periodic disbursements to the builder as construction progresses.

Constructive Receipt

In an IRS tax-deferred exchange, when the exchanger does not actually receive the proceeds from the disposition of the relinquished property, the exchange will be disqualified.

Contingency

A condition that must be met before a contract is binding. Examples of contingencies include an appraisal, approval of a loan, or the various inspections required by the buyer.

Conventional Loan

A fixed rate and fixed term loan that is made without government insurance or guarantee.

Convertible Loan

A provision in an ARM loan that allows it to convert to a fixed rate mortgage at specific times, usually from the end of the first year to the end of the fifth year. There also may be an additional fee ranging fromo $300 to $500 to convert the loan.

Convey

To deed or transfer title to another party.

Conveyance

The transfer of title from one party to another.

Co-operative

In a residential co-operative, the buyer purchases shares in the co-op corporation which is made up of the residents in the co-op property (a.k.a.: a co-op). The buyer owns the shares rather than owning real property. In exchange, the buyer may lease or occupy a co-op unit.

Covenants

Agreements written into deeds and other instruments stating performance or non-performance of certain acts or noting certain uses or non-uses of property.

Credit Report

An evaluation of the buyer's credit habits made by a credit bureau for the lender. Lenders investigate a buyer's credit history to ascertain their ability to pay back a loan or debt. Lenders buy such a report from a credit bureau. The report includes information on a buyer's other outstanding debts and their record for paying debts on schedule. The cost of such a report costs between $50 and $60 an is non-refundable.

Cul-De-Sac

A street with an intersection on one end and a closed turning area on the other.

Debt

An obligation to pay.

Debt-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income.

Deed

A legal document, properly signed and delivered, by which property title is transferred from one owner to another.

Default

Failure to fulfill a legal obligation or promise in a contract, specifically, failure to make the monthly payments on a mortgage.

Delayed Exchange

A tax-deferred exchange in which the replacement property is received after the transfer of the relinquished property. The exchanger must identify all potential replacement properties within 45 days from the transfer of the relinquished property and the exchanger must receive all replacement properties within 180 days or the due date of the exchanger's tax return, whichever occurs first (a.k.a.: a non-simultaneous, deferred and starker).

Deposit

Money paid in good faith to assure performance of a contract.

Depreciation

Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Devisee

A person who receives real estate from another by will.

Down Payment

The down payment is the percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender. The down payment amount, in addition to the mortgage, equals the purchase price of a property. Most lenders ask for at least 10% but can require more than 50 percent of the purchase price, depending on the buyer's credit history. The lower the down payment, the better the credit history must be. But a lower down payment may also result in a higher interest rate.

Dual Agent

An agent representing both the buyer and seller in the same transaction, who owes a fiduciary responsibility to both.

Duplex

Two dwelling units under one roof.

Due-on-Sale Clause

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

Easement Rights

A right-of-way granted to a person or company authorizing access to or over the owner's land. For example, when the electric company obtains a right-of-way across private property, it is a type of easement.

Economic Obsolescence

The loss of useful life and desirability of a property from all causes outside the property itself, such as change in zoning, changes in traffic flow rather than from deterioration of the property itself.

Eminent Domain

The right of government or a public utility to acquire property for public use by condemning property.

Encroachment

An obstruction, building, or part of a building that physically intrudes onto neighboring private or public land or beyond a legal boundary.

Encumbrance

A legal interest in land that affects its value and a good or clear title.

Equal Credit Opportunity Act

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs (a.k.a.: ECOA).

Equity

The interest or value that an owner has in real estate over and above outstanding liens.

Escalation Clause

A provision in a lease that requires the tenant to pay more rent based on an increase in costs.

Escheat

The reverting of property to the state in the event that the owner dies without leaving a will and without legal heirs.

Escrow

An agreement between principals in a real estate transaction to allow a third party to hold certain instruments, property, money or other valuables with directions to deliver them to another party upon the fulfillment of a specific act or condition.

Escrow Fee

A fee paid to the escrow holder that ranges from $300 to $900, depending on the loan amount. It may be paid by the buyer or the seller or split between the two, according to county custom.

Escrow Instructions

This conditions upon which the escrow account may be closed. Instructions stipulate what each party must do and when. Common considerations include when the buyer assumes possession, who will assume payment of property taxes, transfer taxes, when the Lender releases funds, and other basic details needed to close a sale.

Estate

The degree, nature and extent of interest that a person has in real property (a.k.a.: a deceased person's property).

Exchange

Similar property used in a trade or business or held as an investment that can be exchanged tax free as stipulated in section 1031 of the Internal Revenue Code.

Exclusive Agency Listing

A written agreement giving the broker the right to market an owner's property for a certain period of time, but also allowing the owner to sell the property during that period without paying a commission.

Exclusive Right-to-Sell

A written agreement between the agent and the owner whereby the owner promises to pay a fee or commission to the broker if his property is sold during the listing period, regardless of whether the broker is responsible for the sale.

Fannie Mae

Nickname for the Federal National Mortgage Association (a.k.a.: FNMA). FNMA is a public corporation originally established by the federal government. Fannie Mae purchases mortgage loans from lenders. And in turn, lenders rely on FNMA as a major source of funds to take on new loans.

Fee Simple/Fee Absolute/Fee Simple Absolute

Ownership of title to property without any limitation, which can be sold, left at will, or inherited.

Federal Housing Administration

Part of the US Department of Housing and Urban Development (HUD). FHA was established in 1934 to encourage improvement in housing standards and communities. The FHA insures mortgage loans for qualified buyers.

FHA Mortgage

A mortgage loan insured by the Federal Housing Administration.

FHA Mortgage Insurance

Requires a fee of up to 2.25 percent of the loan, which must be paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan, which must be paid in monthly installments. The lower the down payment, the longer the term over which the fee must be paid.

Fiduciary

One who acts in a financial role in the best interest of others.

Fixed Payment Mortgage

A loan secured by real property that features a periodic payment of interest and principal that remains constant over the term of the loan.

Flood Insurance

An insurance policy that covers property damage due to natural disaster.

Foreclosure

A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage (a.k.a.: a repossession of property).

Freddie Mac

Nickname for Federal Home Loan Mortgage Corporation (a.k.a.: FHLMC). Freddie Mac is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD- approved mortgage bankers.

Full Disclosure

A requirement to reveal all information pertinent to a transaction.

Functional Obsolescence/Functional Depreciation

Loss of value from all causes within the property.

Graduated Payment Mortgage

A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Grantee

The person or party to whom title to real property is conveyed (a.k.a.: the buyer).

Grantor

The person or party that conveys a deed to real property (a.k.a.: the seller, guardian or trustee).

Hazard Insurance Reserve

A two month premium that may be collected for the impound account should the loan requires one. The buyer either provides or pays for coverage for the first year.

Home or Property Inspection

A detailed inspection of the physical structure, the plumbing, electrical and heating systems and the overall condition of the home. Costs range from $150 to $300 and the results are detailed in a multiple-page report.

Homeowners Insurance

Insurance that protects homeowners from casualty losses or damage to the home or personal property and from liability damages to other people or property. Homeowners insurance is required by the lender and may be included in a monthly mortgage payment.

Home Owners Association

An association of homeowners within a community formed to improve and maintain the quality of the community. An association formed by the developer of condominiums or planned developments.

Housing Expense-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his or her gross monthly income.

HUD

Nickname for the US Department of Housing and Urban Development, a government agency created to make the American Dream of home ownership a real possibility for everyone. HUD has many programs involving homeownership assistance for low and moderate income families, community planning and development, fair housing and equal opportunity, and home improvement loans.

Initial Interest Rate

The initial rate quoted may be a lower introductory rate (a.k.a.: a teaser or discount rate). The lower rate remains in effect only until the first adjustment, after which the buyer is charged the fully indexed rate.

Inspection Fees

The fees that are charged by various service contractors to conduct physical inspections of the property for sale. The buyer may ask for various property inspections ( foundation, electrical, plumbing and overall construction) that range in cost of $175 to $275, roof inspections that range in cost from $75 to $125, geological reports (assess relationship between home's siting to fault and slide zones) and typically cost around $50, septic inspections that range in cost from $200 to $400, radon inspections that range in cost from $50 to $100, and asbestos inspections that range in cost from $75 to $125.

Interest

The cost to a borrower for the use of money.

Jumbo Loan

A loan that is larger than the limits set by the FNMA and FHLMC (more than $207,000 as of 1/1/96). Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Lease with Option to Purchase

A lease in which the lessee has the option to purchase the leased property. The terms of the purchase option must be set forth in the lease.

Legal Description

The geographical identification of a parcel of land.

Lessee

A person to whom property is rented under a lease (a.k.a.: a tenant)

Lessor

The person or party that rents property to another under a lease (a.k.a.: a landlord).

Lien

A hold or claim on the property of another to satisfy an unpaid debt, judgment or mortgage.

Like-Kind Property

In an IRS tax-deferred property exchange, this term refers to the nature of the property the echanger gives up or receives as part of the transaction. In order to qualify as like-kind, the property given up or received must be held for productive use in a trade or business or held for investment.

Liquidated damages

An amount agreed upon in a contract that one party pays to another in the event of a breach of the contract.

Lifetime Cap

Limits the maximum amount the interest rate may increase or decrease over the life of the loan.

Line of Credit

An agreement whereby a financial institution promises to lend up to a certain amount without the need to file another application.

Listing Agreement

This details all of the terms and conditions of the agreement between the Seller and the agency during the listing period. Terms such as length of time of the agreement, listing price, personal property included, MLS and lockbox authorization as well as the duties and responsibilities of the Seller and the agency.

Listing Contract

An agreement between a homeowner and a licensed real estate broker that authorizes the broker to market the property for sale during a given time period.

Loan Origination Fee

A fee charged by the lender for evaluating, preparing and submitting or establishing a new mortgage loan. Government regulations limit the fee to one percent of FHA or VA loans. Conventional loan fees vary from one to three or more points on the loan, plus other costs.

Loan-to-Value Ratio

The ratio that compares the amount borrowed against the cost or value of the property purchased.

Lock-in Rate

A commitment made by a lender to make a mortgage loan at a specified rate, pending loan approval, on or prior to a specified date.

Margin

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

Mechanic's Lien

A lien created by statute on a specific property for labor or materials contributed to an improvement on that property.

Miscellaneous Costs & Fees

A nominal amount of money that pays for the services of a notary, or the recording of documents, the production of endorsements, as well as variations on inspection estimates. Buyers should plan to set aside at least $150 to cover these costs.

Mortgage

A lien on real estate given by the buyer to secure money borrowed to purchase the real estate.

Mortgage Boot

In an IRS tax-deferred exchange, when the secured debt is given up and received as part of the exchange. If the exchanger increases the amount of debt on the replacement property over that of the relinquished property, it is called receiving Mortgage Boot. If the exchanger decreases the amount of debt on the replacement property compared to the relinquished property, it is also called receiving Mortgage Boot. The received Mortgage Boot triggers the recognition of gain and is taxable, unless offset by Cash Boot added or given up in the exchange.

Mortgage Broker

The person who places loans with investors for a fee but does not service such loans.

Mortgage Insurance

A policy that provides protection for the lender in case of default and/or that guarantees repayment of the loan if the borrower becomes disabled or dies. The cost may range from .05 percent to one percent per year and require the purchaser to put down a 14-month premium in advance.

Mortgage Insurance Premium

Insurance from FHA to the lender against the borrower's default (a.k.a.: MIP).

Multiple Listing Service

This is an information database accessible only by agents that provides details on home sale activity. The MLS provides details on home sales that are sold, pending, currently listed. Agents use the MLS to pull information specific to a neighborhood that will be used to establish a listing price for a home. Another important function of the MLS is for use as the master information source for agent in searching for homes for their buyers.

Negative Amortization

When monthly payments do not pay all the interest due on the loan, the unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.

Negotiation

The process of bargaining that precedes an agreement.

Neighborhood Update

This is a recap of home sales activity in your neighborhood. We pull this information from the local Multiple Listing Service (MLS). Our update includes information on homes currently listed for sale, homes with sales pending and homes that have sold. We confine the MLS search to all activity within the past six months and to an area of one square mile to your property.

Non Assumption Clause

A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Notary Public

A person who is authorized by federal or local government to authenticate signatures and administer oaths.

Note

A written instrument acknowledging a debt and promising payment.

Origination Fee

Charges to a borrower to cover the costs of issuing a loan. Such costs might include credit reports, appraisals, and title expenses.

Option

A right given to purchase or lease property upon stipulated terms within a specific period of time.

Plat

A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, easements, and improvements on the land.

Private Mortgage Insurance

Insurance issued to a lender to protect it against loss on a defaulted mortgage loan (a.k.a. PMI). Its use is usually limited to loans with high loan-to-value ratios in excess of 80 percent. Normally, the borrower pays the premiums for this insurance.

Point

An amount equal to one percent of the loan amount paid to a lender for making the loan. A lender may charge the borrower several points in order to provide the loan.

Power of Attorney

A legal document authorizing one person to act on behalf of another.

Prepaid Interest

The interest that must be paid from close of escrow to 30 days prior to the first regular mortgage payment. Buyers should plan on paying at least one month's interest in advance.

Prepayment

A stipulation in a mortgage that permits the borrower to make payments in advance of their due date.

Prepayment Penalty

Money charged for an early repayment of debt. Although legal in many states, prepayment penalties are often not imposed.

Pest Inspection Fee

A fee charged by a termite company for inspecting the property for damage done by wood destroying organisms. It is customary for the seller to pay for Section 1 and the buyer for Section 2 work.

Primary Mortgage Market

Lenders who make mortgage loans directly to borrowers such as savings and loan associations, commercial banks, and mortgage companies. These lenders sometimes sell their mortgages into the secondary market such as FNMA or GNMA.

Pre-qualification

A free process that takes between 15 minutes to an hour on the phone. The lender asks basic questions about household income, job and credit history, down payment and personal savings. It is advised that buyers get pre-qualified before looking for properties in order to determine the appropriate price range.

Principal

A party to a transaction. For example, the buyer and seller are principals in the purchase of real property. Also the amount of debt, not counting interest, left on a loan.

Purchase Agreement

An agreement between buyer and seller denoting price and terms of the sale (a.k.a.: a contract of sale).

Real Estate Agent

A licensed person working under the direction of a broker selling and renting real estate.

Realized Gain

In an IRS tax-deferred property exchange, a gain that is not necessarily taxed. In a successful exchange the gain is realized but not recognized and therefore not taxed.

Recision

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a signed contract if the transaction uses equity in the home as security.

Recognized Gain

In an IRS tax-deferred property exchange, a gain subject to tax. When someone disposes of property at a gain or profit in a taxable transfer such as a sale, the gain is not only realized, but recognized and subject to tax.

Refinance

A new mortgage loan on a property already owned. Refinancing can be a good way to reduce high mortgage payments.

Relinquished Property

In an IRS tax-deferred property exchange, the property given up by the exchange to start the transaction. This property usually passes through a facilitator before transferring to the actual buyer.

RESPA

Acronym for the Real Estate Settlement Procedures Act. RESPA is a federal law that gives consumers a one-time opportunity to review information on known or estimated settlement costs after submitting an application and prior to or at the time of settlement. But the law only requires lenders to furnish the information after application.

Restrictive Covenants

Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land or they may be "personal," and thus binding only the original seller and buyer.

Reverse Exchange

An IRS tax-deferred property exchange in which the exchanger acquires or gains control of the replacement property before disposing of the relinquished property.

Secondary Mortgage Market

The place where primary mortgage lenders sell the mortgages they make to obtain more funds to originate more new loans. It provides liquidity for the lenders.

Seller's Agent

an agent who represents the seller and owes a fiduciary duty to the seller. They are usually referred to as the listing agent who is authorized by a property owner to find a buyer or a tenant for the property.

Seller's Market

A market condition in which there are more buyers than sellers.

Simultaneous Exchange

An IRS tax-deferred property exchange in which the exchanger transfers out of the relinquished property and receives the replacement property at the same time.

Special Assessments

A tax imposed on property for road construction, sidewalks, sewers, street lights, etc.

Survey

A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land.

Tax Service Fee

A charge made by a tax service company to verify to the lender that the taxes have actually been paid when due or are due to be paid by borrower or mortgage company. Costs around $75.

Transfer Tax

In an IRS tax-deferred property exchange, a tax usually assessed by a city or county on the transaction. The tax may be based on equity or on value. When structuring a multi-party exchange, the exchange agreement usually calls for direct deeding to eliminate potential transfer tax.

Title

The ownership of real property. Title is transferred from one party to another through a document called a deed.

Title Insurance

Protection for lenders and homeowners against financial loss resulting from legal defects in or other claims against the property's title. The cost of the policy is usually a function of the value of the property and is often borne by the purchaser and/or seller.

Title Search

An examination of municipal records to determine the legal ownership of property. A title search is usually conducted by a title company.

Trust

A property interest held by one person for the benefit of another.

Trustee

A party who is given legal responsibility to hold property in the best interest of or for the benefit of another.

Truth-in-Lending

A federal law requiring disclosure of the APR to home buyers shortly after they apply for a loan (a.k.a.: Regulation Z).

VA Loan

A mortgage loan made through a private lender but guaranteed by the US Department of Veterans Affairs against loss to the lender.

Variable Interest Rate

A fluctuating interest rate which can go up or down depending on the going market rate.

Wraparound Mortgage

When an existing assumable loan is combined with a new loan, the resulting interest rate will be fixed somewhere between the old rate and the current market rate. Payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.