Common Terms & Definitions
January 9, 2022
While we all come across real estate at different points in life whether we purchase, own, rent, sell, lease, inherit etc, it is important to understand basic terms used in this industry. Below is a table of some commonly used terms we gathered for you, note that this list is provided for convenience purposes only and does not attempt to cover all terms nor is it a substitute to consultation with industry professional to further understand some of these.
| Term | Description |
|---|---|
| Agent | A “sales” person with expressed or implied authority represent or act on behalf of a third party. Usually works for a specific Broker. |
| Appraiser | A certified and knowledgeable professional who estimates the value of properties in real estate transactions, most appraisers are independent but some work directly for mortgage lenders. |
| Assessor | performs the assessment and establishes the value of a property for taxation purposes. |
| Attorney in Fact | A person authorized by a principal under a power of attorney to perform either a specific act or general acts such as real estate transactions. |
| Auction | A procedure where a real property is being sold via a competitive bid, typically with no real opportunity to assess the property’s physical or legal status. |
| Binder | A written agreement to consider a deposit payment for the purchase of real estate as evidence of good faith by the buyer. |
| Broker | A licensed real estate professional representing either a buyer or a seller of a property for a fee |
| Buyer’s Agent | A real estate broker/agent representing a buyer in a real estate transaction under common-law. |
| Certificate of Occupancy | Local government authorization to a developer permitting a property to be occupied by the public after it had been renovated or constructed. |
| Closing | A meeting to finalize a real estate transaction between parties by signing documents for final transfer of ownership (title) to buyer in exchange for money paid to seller. |
| Closing Costs | Costs incurred to complete a real estate transactions such as prorated prepaid costs, loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges. |
| Contribution (seller paid closing costs) | An agreed amount where one party pays a certain amount due from the other on behalf of that other party (Usually seller paying some of the closing costs on behalf of buyer). |
| Deed | A legal document conveying title (ownership) to a property, used for registration at the state. |
| Earnest Money (Deposit) | A deposit made to a seller showing the buyer’s good faith (seriousness) in a transaction, also allowing buyer additional time for seeking finance. |
| Escrow (Escrow Agent) | An item of value, money, or documents deposited with a third party (usually attorneys or closing agents) to be delivered upon the fulfillment of some conditions. |
| Escrow Account (Trust Account) | An account established by a broker, attorney or closing agent where all funds are deposited prior to completion of a transaction (closing) after which they are released to the seller in exchange for transfer of title to buyer (registration of deed). |
| Estate | The assets (real estate and personal property) owned by a person at time of death. |
| Estate Tax | Tax imposed on one’s estate at time of death. |
| Foreclosure | The legal process of depriving a borrower in default of his/her interest in the mortgaged property, involving a forced sale of the property at public auction where proceeds of the sale are applied to the mortgage debt. |
| Hard Money Loan | A short-term bridge loan backed by property value, not by the credit worthiness of the borrower, with lower Loan to Value (LTV) ratios Since the property itself is used as only collateral. Hard money loans usually carry even higher interest rates than subprime loans. |
| HOA (Homeowner’s Association) | An organization that manages the common areas of a subdivision, a condominium complex or a planned community, enforcing rules and |
| HUD-1 Settlement Statement | A document providing an itemized listing of the funds paid at closing. Items on the statement include real estate commissions, prorated prepaid/unpaid expenses, loan fees, points, and initial escrow (impound) amounts. |
| Joint Venture | An arrangement where 2 or more parties agree to pool their resources for the executing a specific task. |
| LLC (Limited Liability Company) | A hybrid entity that combines the characteristics of a corporation and a partnership or sole proprietorship. the LLC incorporates the limited liability feature of a corporation and the partnership feature of availability of flow-through taxation to the members of a LLC. |
| Mortgage | A pledge of real estate collateral to secure a debt. |
| Property Manager | A company/person hired by a property owner to manage the day-to-day functioning of a piece of real estate including rent collection, maintenance, etc. |
| Property Tax | The tax issued by a municipality on the ownership of a property. |
| REO (Real Estate Owned) | Property owned by a lender (usually a bank) after an unsuccessful sale at a foreclosure auction. |
| Realtor | A real estate professional who is a member of the National Association of Realtors. Realtors include agents that work as residential and commercial brokers, salespeople, property managers, appraisers, counselors and other real estate professionals. |
| Short Sale | Sale of property or mortgage at a price short of the balance of debts secured by liens against the property. The process requires mutual agreement by the lender and owner as an alternative to a foreclosure process and usually takes several months to complete. |
| Title | The evidence or documentation that an owner is in lawful possession of a property, such as a property deed. |
| Title Insurance | An insurance policy protecting from financial loss caused by a defect or question about the title to real property. |
| Title Search / Exam | A process that examines local public records, laws and related court decisions to determine if any other parties have valid claims against the subject property (such as past due taxes, judgments or mechanics’ liens). It also discloses past and current facts about the subject property’s ownership. |
| Transfer Tax | A tax imposed on the conveyance of title to real property by deed. |
Sources:
http://www.realestateabc.com
http://www.investopedia.com
http://www.realestatewords.com
http://worklife.columbia.edu