Words To The Wise
Agent
A person acting on behalf of another, called the principal.
Agreement of Sale
Known by various names, such as "contract of purchase", "purchase agreement", "sales
agreement", or "binder", according to location or jurisdiction. A contract in which
a seller agrees to sell and a buyer agrees to buy, under certain specific terms
and conditions spelled out in writing and signed by both parties.
Annual Percentage Rate (APR)
Includes quoted interest rate on the loan plus all additional service and finance
charges associated with the loan. Includes all costs of financing; those paid at
the time of closing and those paid over the term of the loan. The APR is usually
slightly higher than the note rate.
Appraisal.
An expert judgment or estimate of the quality or value of real estate as of a given
date.
Assessed Value.
The valuation placed upon property by a public tax assessor as the basis for taxes.
Bill of Sale.
An instrument which transfers title to personal property (chattels); a "Deed" transfers
real property.
Certificate of Title.
A document signed by a title examiner or attorney, stating that the seller has a
good marketable and insurable title.
Closing Statement (Settlement).
The computation of financial adjustments between the buyer and seller as of the
day of closing a sale to determine the net amount of money which the buyer must
pay to the seller to complete the purchase of the real estate and seller's net proceeds.
Also, "Settlement Sheets", "HUD-1".
Commission.
Payment to a real estate broker for services performed.
Convey.
To deed or transfer title of property from one person to another.
Deed.
A formal written instrument by which title to real property is transferred from
one owner to another. Also, "conveyance".
Deed of Trust.
Like a mortgage, a security instrument whereby real property is given as security
for a debt. However, in a deed of trust there are three parties to the instrument:
the borrower, the trustee, and the lender (or beneficiary).
Earnest Money.
The money given to the seller by the potential buyer (usually held in escrow) upon
the signing of the agreement of sale to show that buyer is serious about buying
the house. Also, "Deposit".
Equity.
The interest or value which the owner has in real estate over and above the debts
against it. (Sales Price – Mortgage Balance = Equity.)
Escrow.
Funds, property, or other things of value left in trust to a third party. The escrow
may be released upon the fulfillment of certain conditions or by agreement of the
parties.
Fixture.
What was formerly personal property which is now permanently attached to real property
and goes with the property when it is sold.
Hazard Insurance.
Protects against damages caused to property by fire, windstorms, and other common
hazards.
Listing Contract.
Between a homeowner (as principal) and a licensed real estate broker (as agent)
by which the broker is employed to market the real estate within a given time for
which service the owner agrees to pay a commission. Also, "listing agreement".
Market Value.
The highest price which a buyer, ready, willing and able but not compelled to buy,
would pay, and the lowest price a seller, ready, willing and able but not compelled
to sell, would accept. Basis for "listing price", or "asking price".
Market Price.
The actual amount for which a piece of property is sold. Also, "Sales Price", "Purchase
Price".
Mortgage.
A lien or claim against real property given by the buyer to the lender as security
for money borrowed.
Mortgage Note.
A written agreement to repay a loan. The agreement is secured by a mortgage, serves
as proof of an indebtedness, and states the manner in which it shall be paid. Also,
"Deed Of Trust Note".
P.I.T.I.
Principal, interest, taxes, and insurance. Most residential mortgage payments include
the above and are therefore referred to as P.I.T.I.
Points.
Sometimes called "Discount Points", a point is one percent of the amount of the
mortgage loan.
Prepayment Penalty.
Penalty for the payment of a mortgage note or deed of trust note before it actually
becomes due.
Principal.
This word has several meanings: