Glossary of Terms
A property appraisal is a professional assessment of a property's value, typically conducted by a licensed or certified appraiser. It involves analyzing factors such as the property's location, size, condition, recent sales of similar properties in the area (comparables), and current market trends. Appraisals are commonly required during real estate transactions to ensure that the property's value aligns with the agreed-upon purchase price, particularly for mortgage financing. They are also used for refinancing, tax assessments, and estate planning.
Amortization: The process of paying off a loan over time through regular payments.
Assessed Value: The value assigned to a property by a public tax assessor for tax purposes.
Balloon Mortgage: A mortgage with small monthly payments for a certain period and a large payment for the remaining balance at the end.
Broker: A licensed professional who arranges real estate transactions, bringing buyers and sellers together.
Buyer’s Agent: A real estate agent who represents the buyer's interests in a transaction.
Bridge Loan: A short-term loan used to bridge the gap between buying a new home and selling the old one.
Closing Costs: Fees and expenses paid at the closing of a real estate transaction.
Comparative Market Analysis (CMA): An evaluation of similar, recently sold homes in the same area to determine a property’s market value.
Contingency: A condition that must be met for a real estate contract to become binding.
Condominium: A type of real estate ownership where individuals own units within a multi-unit building and share common areas.
Capitalization Rate (Cap Rate): A measure of a property’s profitability, calculated by dividing the net operating income by the property’s current market value.
Caveat Emptor: A Latin phrase meaning "let the buyer beware," emphasizing the buyer's responsibility to inspect and verify the condition and quality of a property before purchase.
Certificate of Occupancy: A document issued by a local government agency certifying that a building complies with applicable building codes and is suitable for occupancy.
Chain of Title: The sequence of historical transfers of title to a property.
Closing: The final step in a real estate transaction where the title is transferred from the seller to the buyer, and the buyer finalizes their mortgage.
Deed: A legal document that transfers property ownership from one party to another.
Down Payment: The initial upfront portion of the total amount due on a purchase.
Depreciation: A decrease in a property’s value over time due to wear and tear or market conditions.
Due Diligence: The investigation and evaluation of a property before completing a purchase.
Easement: A legal right to use another person’s land for a specific purpose.
Encumbrance: A claim, lien, charge, or liability attached to and binding real property.
Environmental issues - when purchasing a home, beware of some environmental issues.
Escrow: A neutral third party that holds funds or documents until certain conditions are met in a transaction.
Estate Tax - is a tax to make someone more money.
Equity: The difference between the market value of a property and the amount owed on it.
Fair Market Value: The price a willing buyer would pay to a willing seller in an open and competitive market.
Fiduciary: A person or organization that acts on behalf of another person, putting their client’s interest ahead of their own.
Fixed-Rate Mortgage: A mortgage with an interest rate that remains constant throughout the loan term.
Foreclosure: The legal process in which a lender takes possession of a property due to the borrower’s failure to make mortgage payments.
Gross Rent Multiplier (GRM): A figure used to evaluate the value of an income-producing property, calculated by dividing the property’s price by its gross rental income.
Grant Deed: A legal document used to transfer ownership of real property.
Guarantor: A person who agrees to be responsible for the debt or obligation of another.
General Contractor: A professional responsible for the day-to-day oversight of a construction site, management of vendors, and communication of information to all involved parties.
Homeowners Association (HOA): An organization in a subdivision, planned community, or condominium that makes and enforces rules for the properties within its jurisdiction.
Home Equity Line of Credit (HELOC): A line of credit extended to a homeowner that uses the borrower’s home as collateral.
HUD (Department of Housing and Urban Development): A U.S. government agency that oversees federal programs designed to help Americans with housing.
Home Inspection: An examination of a property’s condition, typically conducted by a licensed inspector before the sale is finalized.
Interest Rate: The percentage charged on a loan or mortgage, typically expressed as an annual percentage of the loan amount.
Initial Public Offering (IPO): In real estate, this refers to the first time a real estate investment trust (REIT) offers shares to the public.
Improvements: Additions or changes to a property that increase its value or utility, such as building an extension or remodeling.
Interest-Only Loan: A type of mortgage where the borrower only pays the interest for a set period, after which they begin paying both interest and principal.
Involuntary Lien: A claim placed on a property without the owner’s consent, often due to unpaid taxes or legal judgments.
Insurance: Financial protection against loss or damage, commonly referring to homeowner’s insurance which covers the property and its contents.
Interest Rate: The percentage charged on a loan or mortgage, typically expressed as an annual percentage of the loan amount.