GLOSSARY OF REAL ESTATE TERMS

Referring to these terms and definitions about real estate and real estate transactions will assist buyers and sellers in making informed decisions. The terms and definitions are in alphabetical order.

AGENT:  A person who represents and acts on behalf of another person, called the principal, in dealing with a third part or parties pursurant to a contract of agency.

:AMENITY: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use. An amenity could be natural, like woods, water or location, or it could be man-made like a garden or a swimming pool.

AMORTIZATION: repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period – say 15 or 30 years.

ANNUAL PERCENTAGE RATE (APR): calculated by using a standard formula, the APR shows the cot of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

APPLICATION: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

APPRAISAL: a document that gives an estimate of a property’s fair market value; an appraisal is generally required by a lender before loan approval to insure that the mortgage loan amount is not more than the value of the property.

APPRAISER: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

ARM: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.

ASSESSOR: a government official who is responsible for determining the value of a property for the purpose of taxation.

ASSUMABLE MORTGAGE: a mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer, the seller is no longer responsible for repaying it; there may be a fee and/or credit package involved in the transfer of an assumable mortgage.

Buyer Agency Contract:  A contract between a prospective buyer of real estate and a real estate agent authorizing the salesperson/broker/firm to act as the agent for the prospective buyer in locating a particular type of property for purchase.

Closing:  The consummation or completion of a transaction involving the sale or exchange of real estate; may be accomplished either at a closing meeting attended by the various parties (or their agents) or by way of an escrow closing. At closing, title to the property is formally transferred to the purchase and all financial matters relevant to the transaction are settled.

Commission:  Compensation earned by a broker for the performance of specific duties in connection with the sale of lease of a property. The amount of payment is usually measured by a percentage of another sum and usually is paid by the seller (if a sale is involved) or owner (if a lease is involved).