Real Estate Terms

To help you through the process of buying or selling a home, here are some common real estate terms and their definitions. You may encounter some of these terms along the way, and some you may never hear or see. Thanks to Real Living Title for providing the list I present here. I hope this provides you with an easy reference, but if you need further help, please contact me any time!

A-C

A.L.T.A. Loan Policy Premium

Title Insurance Premium for insurance protecting a mortgage lender against loss arising from past occurences, such as missing heirs, forgery and fraud. A.L.T.A. stands for "American Land Title Association."

Appraisal

A written report containing a certified professional's opinion as to the value of the property and the reasoning leading to this opinion.

Assessment

The imposition of a tax, charge or levy usually according to established rates. A special assessment pays the costs of public improvements (sidewalks, sewers, street lights, etc.) which directly benefit the assessed property.

Assignments

A lender fee for the recording of assignments of the mortgage when the loan has been sold to an investor or will be sold to an investor in the future. FHA and VA prohibit a buyer from paying this fee.

Certified Check

A personal check drawn by an individual which is certified (guaranteed) to be good. The bank holds the funds to pay the certified check and will not pay any other checks drawn on the account if such payment would impede payment of the certified check.

Closing Date

The date established by contractual agreement for the transferring of title.

Commitment to Insure

Issuance of a written "binder" of title insurance that sets forth the proposed insured(s) ownership information, requirements and exceptions to coverage. Also known as a "title report."

Comprehensive Endorsement

Affords the lender various protections with respect to private property restrictions, building setback lines, encroachments and mineral rights. This endorsement expands policy coverage by minimizing the risk to the insured with respect to certain policy exclusions or exceptions.

Contingency

Commonly the dependence upon a stated event which must occur before a contract is binding. For example: The sale of a house, contingent upon the buyer obtaining financing.

County Transfer Tax

A tax payable to the County Auditor at the time real estate is transferred to a new owner.

Conventional Mortgage

A mortgage or deed of trust not obtained under a government insured program such as the Federal Housing Administration (FHA) or the Veterans Administration (VA).

Credit Report

A report on the past ability of a loan applicant to pay installment payments.

D-H

Deed

A written document which transfers title to property.

Document Preparation Fee

A lender fee for preparing the mortgage deed and other related mortgage loan documents. FHA and VA prohibit a buyer from paying this fee.

Encroachment

Construction onto the property of another, such as a wall, fence, building, etc.

Encumbrance

A general term for something which restricts the title of real property. These may be liens, leases, mortgages, judgments, deeds of trust or easements.

EPA Endorsement

This endorsement provides affirmative insurance that the lien of the insured mortgage is prior to unrecorded or unfiled environmental protection liens.

Earnest Money

A deposit or advance payment of part of the purchase price to bind a contract for property.

Escrow

The process of depositing papers and funds with a neutral third party along with instructions to carry out an agreement.

Holdback

Portion of a loan held back by the lender until a contingency is met.

Homeowner's Association

An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area.

I-N

Insurance Premium

Amount paid to insurance company to bind the homeowner's coverage. The first year premium and policy must be provided prior to closing.

Legal Description

A method of geographically identifying a parcel of land, which is acceptable in a court of law.

Lien

A legal claim upon property for the payment of a debt. Ther are numerous types of liens including a mortgage lien, judgment lien, mechanic's lien and tax lien.

Mortgage

A two-party contract which pledges specific property as security for payment of a debt. The borrower (mortgagor) retains possession and use of the property. Also known as a property loan.

Mortgage Discount Points

An up-front lender fee charged to negotiate the interest rate.

Mortgage Origination Fee

A one-time set-up fee charged by the lender, usually one percent of the mortgage amount.

Note

A written promise to pay. Straight notes have payments which cover interest only and installment notes have payments which cover the interest plus some of the principal.

O-P

Owner's Policy

Title insurance for a buyer that protects the new owner against land ownership problems arising from past occurrences, such as missing heirs, fraud, and forgery. It also protects the seller because title insurance attaches to the warranty covenants in a deed.

Payoff Current Liens/Encumbrances

First mortgage loan, obtained at the time of home purchase and secured by a recorded mortgage Deed. Equity line of credit, secured by a second mortgage, must be cleared at title transfer as well as any other liens, such as Judgment Liens and Federal Tax Liens.

Prepaid Mortgage Interest

Amount paid for use of the mortgage money from the date the mortgage is filed for record to the first day the first payment takes affect. The first payment is usually the first full month after closing.

PMI Reserves

Private Mortgage Insurance (PMI) protects the lender against a loss in the event of default by the borrower. 1/12 of the yearly premium is paid by the borrower at the time of closing and is placed in reserve.

Point of Sale Inspection

Inspection required by various municipalities acording to local ordinances. This inspection must be completed prior to title transfer.

Proration

To divide (prorate) property taxes, insurance premiums, rental income, etc. between buyer and seller proportionately to time of use, or the date of closing.

Purchase Agreement

An agreement between buyer and seller of real property, setting forth the price and terms of the sale.

R-S

Real Estate Commission

An amount paid to a real estate broker (REALTOR) as compensation for services. The amount paid to a real estate broker is generally a percentage of the sale price.

Regulatory Processing Fee (aka Administrative Service Fee)

A fee charged by a real estate broker to defray the costs of regulated disclosures, documentation and storage and other administrative costs.

Release Service Fee

The fee charged by the closing agent to follow up, obtain and file satisfaction or release any liens of record. Cost is $30.00 per lien. State of Ohio judgment liens are $85.00.

Recording Fee

A fee payable to the County Recorder in order to make a document a matter of public record.

Security Deposit

Commonly a deposit of money by a tenant to a landord to secure performance of a written or oral rental agreement.

Settlement Statement

A statement prepared by the closing agent giving a complete breakdown of costs involved in a real estate sale. A separate statement is prepared for the seller and buyer.

Survey

A site inspection of a parcel of land, its boundaries, its area, and sometimes its topography.

T-Z

Tax and/or Insurance Reserves

Amount held by the lender to pay taxes and/or insurance equal to 1/12 of the total yearly tax and/or hazard insurance premium times the number of months in period between the first payment of taxes and insurance.

Tax and Legal Report

A packet of information containing property tax information, record owner, transfer information, plat map, comparables and a description of the property.

Tax Proration

A debit to the seller and credit to the buyer at the time of closing for real estate tax liability that is accrued, but is not yet due and payable until a future date.

Tax Search

A part of a title search which determines if there are any unpaid taxes or assessments which may be a lien against the property being searched.

Termite/Pest Inspection

Inspection performed by a pest inspection company to determine if any termites or other insects are present.

Title

The evidence one has of right of ownership of land.

Title Insurance

Insurance against loss resulting from defects of title to a specifically described parcel of real property.

Title Search

A review of all recorded documents affecting a specific piece of property to determine a physical chain of title or historical record of ownership.

Truth in Lending

Also referred to as Regulation Z. Part of the Consumer Credit Protection Act. Federal legislation designed to protect borrowers by requiring lenders to furnish information regarding the cost of the loan. The law requires interest to be expressed as the annual percentage rate (APR) to the nearest 1/8 of one percent. The APR must include charges such as loan fees, discount points, servicing fees, etc., as well as interest. The law applies to 1 to 4 family residential properties only. It also applies to other consumer loans.

Underwriter

One who insures another. A small title company may buy insurance from a larger one (the underwriter) for all or part of the liability of its policies. A larger title company may buy part of the insurance from another company on high liability policies.

Warranty

An agreement and assurance by the grantors of real property for themselves and their heirs, to the effect that they are the owners and will be responsible and defend the title being conveyed.