REAL ESTATE TERMINOLOGY
For new buyers, here are some terms which you’ll be reading. Knowing their meaning before signing contracts can be helpful…
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.
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 good marketable and insurable title.
Chattel. Tangible property which may or may not be included, the sale of real property.
Closing Statement. The computation of financial adjustments between buyer and seller as of the day of closing a sale to determine the net amount of money which buyer must pay to seller to complete purchase of the Real Estate, and seller’s net proceeds. This will be prepared by the respective solicitors acting for the buyers and sellers.
Commission. Payment of money or other valuable consideration to a Real Estate brokerage 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.
Deposit Money. The money given to the seller by the potential buyer upon the signing of the agreement of sale to show that buyer is serious about buying the property/house.
Equity. The interest or value which owner has in Real Estate over and above the debts against it. (Sale Price – Mortgage Balance = Equity)
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.
Land Contract. Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a land contract the parties involved are only the seller and buyer. Seller receives land contract payments and continues to pay existing mortgage payments, if they exist .
Listing Agreement. Between a home owner (as principal) and a licensed Real Estate broker (as agent) by which the broker is employed to sell the Real Estate within a given time for which service the owner agrees to pay a commission.
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.
P.IT.I. Principal, interest, taxes and insurance. Most residential mortgage payments include the above and are therefore referred to as PITI. Also, “carrying charges”.
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: (A) to denote the most important; (B) a capital sum lent on interest; (C) one who appoints an agent to act for and in behalf of the “principal”; (D) either party to a contract.
Property Management. The operation of real property, including the leasing of space, collection of rents, selection of tenants, and the repair and renovation of the buildings and grounds.
Prorate. To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a prorate of real property taxes, fire insurance, or condominium fee.
Sales Representative. A person with a real estate license and associated with a specific real estate broker. Commonly referred to as an “agent”.
Survey. A map or ‘plat’ made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure a building is actually sited on the land according to its legal description.
Title. As generally used, a document that indicates rights of ownership and possession of particular property. A summary of the public records relating to the title to a particular piece of land.
Title Abstract. A summary of the public records relating to the title to a particular piece of land.
Title Insurance. Protects lenders and property homeowners against loss of their interest in property due to legal defects in title.
Title Search or Examination. A check of the title records, to make sure the buyer is purchasing property and there are no liens, overdue special assessments, or other claims.
Transfer Tax. Local tax (where applicable) required by law when title passes from one owner to another.