Real Estate Terms - REO Title Company of Florida

Glossary of Real Estate Terms

Some terminology you may encounter in your real estate transaction.
Adjustable Rate Mortgage	Also called an ARM or adjustable, this type of mortgage typically starts off with a lower “teaser” interest rate that stays fixed for a specified time, then adjusts periodically depending on changes in the market interest rate.
Appraisal	A report made by a certified or licensed expert that states an opinion of the fair market value and quality of the property following a personal visit and examination of the property.
Appraiser	A certified or licensed expert who states his or her opinion of the fair market value and quality of the property following a physical review of the property and the market condition.
Appreciation	An increase over time in the market value of a property, increasing the equity.
Assumable Mortgage	A type of mortgage set up so that a buyer purchase the property and take over the seller’s obligations and payments under the mortgage, usually with the lender’s approval.
Bill of Sale	An instrument conveying title to personal property.
Closing (Settlement)	The final step of a property sale or mortgage transaction, in which the legal (“closing”) documents, (e.g., deed, note, mortgage, affidavits) are executed and funds disbursed in accordance with the terms of the sales contract or loan commitment.
Closing Agent (Settlement Agent)	The agent who oversees and conducts the many steps involved in the real estate transaction during the closing or “settlement” process, including controlling the down payment and all documents related to the sale.
Commitment Letter	A written agreement in which the lender agrees to lend money if the borrower meets certain conditions.
Comparative Market Analysis	A written comparison of a property to comparable properties in the area that are either presently on the market or that have sold recently.
Contingencies	Conditions (or escape clauses) that buyers put in their purchase offer, and sellers add in the counter-offer so that, if the contingency is not fulfilled, the party that made it is free to walk away from the deal.
Contract	A legally binding document in which the buyer agrees to purchase specific property and the seller agrees to sell under stated conditions. Also called a contract for purchase and sale, purchase and sale agreement, binder, or earnest money contract.
Curb Appeal	The attractiveness of a home and its property to perspective buyers viewing it from the street as compared with other homes on that same street or within that same neighborhood.
Deed	The formal written document that transfers real property ownership rights from the seller to the buyer. It contains an accurate, specific legal description of the property and is delivered at closing. To be effective it must comply with particular legal requirements.
Default	The failure of a buyer or seller to comply with the terms of a contract, or the failure of a borrower to pay the monthly mortgage payment or the failure to comply with other, non-monetary, terms of the note or mortgage.
Discount Broker	A transactional agent who works at a discount by providing only certain services.
Earnest Money	Funds the buyer offers the seller as a sign of “good faith” that he or she intends to buy the property. Earnest money is typically 5% to 10% of the purchase price and is placed in an escrow or trust account, never given directly to the seller.
Endorsements	Additional title insurance coverage that protects the lender or owner from situations that are not already included in the policy.
Equity	The market value of a home minus what the homeowner owes on it. Homeowners sometimes borrow against their equity, taking out a home equity loan (also called a second mortgage), with tax-deductible interest, to pay for whatever they choose.
Escrow	Money that is set aside so that the lender can pay taxes: hazard, flood, mortgage insurance, and other special costs connected with owning property.
Fair Market Value	The value of a property based on a comparison of that property with comparable properties in the same neighborhood that are either presently on the market or that have sold recently.
FHA Loan	Federal Housing Administration. A federal agency within the U.S. Department of Housing and Urban Development (HUD). Using loan insurance programs to insure mortgages for lenders, the FHA stimulates the availability of housing for low and moderate-income families.
Fixed-Rate Mortgages	A type of mortgage in which the interest rate remains the same, or “fixed” throughout the term of the loan. The most common length fixed-rate mortgages are 15-year and 30-year.
Foreclosure	In Florida, a lawsuit filed by a lender to obtain a judgment ordering a public sale of the property to pay off the loan because the borrower has defaulted under the terms of the note or mortgage, usually by not making the required payments.
Hidden Defect in Title	Any claim on a property that does not appear in the public records, for example, an unknown heir or an unrecorded municipal utility lien.
Homeowner’s Insurance	Required by lenders for all homeowners, it protects against, damage, accidents and theft that might occur on or to the property. Usually also provides the homeowner with liability insurance protection.
Homestead Tax Exemption	A tax credit for Florida residents on their principal residence. The exemption reduces the tax-assessed value of the property by $25,000, giving the homeowner tax savings of about $500.
Inspection	Examination of a property to see that it meets the standards of the contract, or that the condition is satisfactory to the lender or the buyer.
Interest	A charge for a loan, usually a percentage of the amount loaned. The IRS allows homeowners to deduct mortgage interest and real property taxes, within limits, on annual income tax returns.
Lien	A legal claim on the property that acts as a security for the payment of a debt. If the debt is not repaid as promised, the lender or the lien holder can foreclose its claim on the property and force a public sale to pay the debt.
Marketable Title	Property is said to have marketable title when the title, or rights to a property, has no defects or encumbrances or only minor defects or encumbrances that any well-informed and prudent buyer would accept.
Material Defect	Defects, including any property damage, malfunctions of major systems and environmental hazards affecting the condition of a home, which should be readily disclosed to a buyer.
Mortgage	A voluntary lien against a property given by the property owner to a lender as security for the repayment of a loan given by the lender to the property owner.
Mortgage Note	The written promise by a borrower to repay money to a lender according to specified terms and conditions and to secure that promise with a mortgage. Also, “Note” and “Promissory Note.”
Mortgagee Policy	A title insurance policy issued to the lender. It protects the lender for the amount of the mortgage loan in the event of a title defect.
Multiple Listing Service (MLS)	A data base accessible to many real estate agents that lists and contains descriptions of properties that are for sale in a particular area.
Owner’s Policy	A title insurance policy issued to a property’s owner; it protects the owner against hidden title defects.
Points	Up-front interest to compensate the lender for processing a mortgage. Also known as “loan origination fees.” Each point equals 1% of the loan. Points are also referred to as “discount points” because usually the more points paid, the lower the interest rate.
Pre-Approval	Initiating the loan approval process before finding a home. Pre-approval involves providing information regarding employment, income and debts to a lender to prove the buyer is a good risk. A more complex process than pre-qualification, pre-approval sometimes involves a fee.
Pre-Qualification	Pre-qualifying entails speaking with a lender who offers an opinion of the loan amount the buyer is eligible to borrow, without providing any supporting paperwork or credit history.
Principal	The amount of money borrowed. Interest is charged on the amount of principal outstanding.
Private Mortgage Insurance	Typically required by lenders if a down payment is less than 20% of the purchase price. This can add several hundred dollars each year to the buyer’s loan costs until the equity in the home reaches 22%, when the insurance is no longer required.
Property Taxes	Taxes paid by homeowners annually to local and state governments. On average, about 1.5% to 2% of the appraised value of the home, as determined by the county property appraiser.
Real Estate Sales Agent/Broker	A person tested and licensed by the state to put buyers and sellers together for a commission. Brokers have taken an additional test, generally following several years in the business, and are authorized to operate a private real estate firm.
Real Property	Refers to a parcel of land and any permanent improvements to it.
REALTOR®	A licensed real estate professional who is a member of the National Association of REALTORS®, a trade organization with its own educational standards and ethics in addition to those required by the state.
Seller Disclosure	Requires sellers to inform buyers about known problems with a house that would lower its value.
Survey	A procedure whereby land is located and measured, and it’s boundaries are verified by a registered land surveyor. As a result of the survey the surveyor produces a detailed drawing reflecting the measurements and boundaries. The survey may also show the location of buildings and other things on the property.
Title	Title can refer to two things: 1) the rights of ownership, possession, interest in or encumbrance upon a particular property; 2) the document that shows evidence of those rights.
Title Agency	Similar to other insurance agents, a title agency is authorized to issue title iunsurance policies and prepare documents in connection with transactions for which it issues policies. Staff members of the title agency do not represent either party and cannot give legal advice.
Title Defect	Any legal right to a property claimed by a person other than the owner. Examples include unpaid real estate taxes or claims to the property, such as those of an unknown heir.
Title Examination	An examination of public records, laws, and court actions to make sure that a property’s seller is the legal owner and to disclose all other claims or encumbrances on the property affecting its ownership.
Title Exception	As part of the title search, a real estate attorney will list any “exceptions” to the title. Situations where the title owner relinquishes control, use or interest in some aspect of the unfettered ownership of the property.
Title Insurance	A type of insurance that protects the policyholder against loss sustained through title defects.
Transfer Tax	One of the expenses paid by the seller on closing day as part of the closing costs, the transfer tax is based on a property’s sale price. Also known as documentary stamp tax on the deed.
Trust Account	Escrow maintained by an attorney in which only other parties’ money is held for a specific purpose. Earnest money is held in a Trust Account as is the money changing hands and being disbursed at the time of closing.
Trust	An arrangement where property, real or personal, is held by one party for the benefit of another.
Trustee	The person designated, appointed, or required by law to handle a trust.
Trusts, active and passive	If a special duty is to be performed by the trustee in respect to the estate, such as collecting rents and profits, selling the estate, etc., the trust is called active. All other trusts are called passive trusts.
Underwriter	An insurance company that is given a certificate of authority by the Florida Department of Insurance to engage in the business of issuing policies of title insurance.
Unrecorded	Not recorded in the Official Records
Usury	Interest, premium, profit, fee, or charge that is required, charged, or extracted by a lender in excess of the legal rate of interest.
Vacate	(1) To set aside. (2) To annul. (3) To Cancel.
Valid	Legally sufficient or authorized by law.
Vendee	(1) Purchaser. (2) Under a contract for sale or an agreement for deed, a contract vendee.
Vendee’s lien	A lien evidenced by agreement set forth in a conveyance.
Vendor	(1) Seller. (2) Under a contract for sale or an agreement for deed, a contract vendor.
Venue	(1) Neighborhood. (2) The county where a suit is brought or the place where an acknowledgment is taken.
Versus	Against. Abbreviated as vs. or v.
Vested	Fixed; settled; absolute; not contingent.
Void	(1) Binding on no one. (2) A nullity. (3) Something which is of no effect. (4) The defect or condition that is not subject to being waived, cured, or revitalized.
Voidable	Sufficiently defective to make void. The deficiency may be cured by confirmation or ratification.
Waiver	The act of waiving or intentionally relinquishing or abandoning some known right, claim, or privilege.
Warehousing	A system or temporary funding. The warehouse bank holds mortgages originated by a mortgage broker, putting up the funds for same, until the broker transfers the mortgages to a permanent lender.
Warrant	(1) To assure the title to the real property by an express covenant to that effect in the deed or conveyance. (2) To stipulate by an express covenant that the title of a grantee shall be good and his possession undisturbed.
Warranty	(1) An agreement or undertaking by a seller to be responsible for present or future losses growing out of the interest in or encumbrances on the title. (2) To guarantee the title.
Warranty deed	General warranty deed that contains five warranties.
Way of necessity	An easement for right of access that the owner of a landlocked tract is entitled to across adjoining land.
Will (testament)	An instrument executed by a competent person, before two witnesses in a manner provided by law, whereby that person makes disposition of property to take effect on and after that person’s death.
Writ	A formal legal document issued by a court requiring or prohibiting some action. The sheriff or some other officer of the court serves the writ.
Writ of execution	A direct order from the court to the sheriff to carry out the action required, such as seizing property and selling it to pay a money judgment.
Zoning ordinances	Laws passed by local government regulating the size, type, structure, nature, and use of land and buildings.