Adjusted Tax Basis: Generally, the adjusted tax basis of your home is the (sales price) – (the purchase price + any capital improvements + costs of selling the home). If your property was an investment and you have taken depreciation, this will have to be added back in. If title was transferred at any period between family members due to death, divorcing, or inheritance, consult an agent and tax attorney to help you determine the new “stepped up basis.”
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.
Annual Percentage Rate (APR): Includes quoted interest rate on the loan plus all additional service and finance charges associated with the loan. Includes all costs of financing; those paid at the time of closing and those paid over the term of the loan. The APR is usually slightly higher than the note rate.
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 a good marketable and insurable title.
Closing Statement (Settlement): 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. Also, “settlement sheets”, “HUD-1”.
Commission: Payment to a real estate broker 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. Also, “conveyance”.
Deed of Trust: Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender (or beneficiary).
Earnest Money: The money given to the seller by the potential buyer (usually held in escrow) upon the signing of the agreement of sale to show that buyer is serious about buying the house. Also, “deposit”.
Equity: The interest or value which owner has in real estate over and above the debts against it. (Sales Price – Mortgage Balance = Equity.)
Escrow: Funds, property, or other things of value left in trust to a third party. The escrow may be released upon the fulfillment of certain conditions or by agreement of the parties.
Fixture: What was formerly personal property which is now permanently attached to real property and goes with the property when it is sold.
Good Faith Estimate: The lender’s estimate of total closing costs and monthly payment, including the terms of the loan (what type of loan program, interest rate, points charged, PMI, duration of loan, down payment, etc.). The lender controls the 800-line items. Buyers can use this to compare lenders’ fees and rates. All other non-800 line item fees are guesstimates by the lender, and are nothing they can control, so these are not important to compare when choosing a lender.
Hazard Insurance: Protects against damages caused to property by fire, windstorms, and other common hazards.
Listing Contract: Between a homeowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to market the real estate within a given time for which service the owner agrees to pay a commission. Also, “listing agreement”.
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.
Mortgage Note: A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. Also, “deed of trust note”.
P.l.T.I. : Principal, interest, taxes, and insurance. Most residential mortgage payments include the above and are therefore referred to as P.I.T.I. Also, “carrying charges”.
Points: Sometimes called “discount points”, a point is one percent of the amount of the mortgage loan.
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 on their behalf; (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.
Ratified Contract: After all terms have been accepted and signed off on by the buyer(s) and seller(s), and delivery of the final documents have been made to said parties, a contract is considered ratified.
Sales Associate: A person with a real estate license and associated with a specific real estate broker.
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 a particular property.
Title/Settlement Company: The company, chosen by the buyer, that is responsible for performing the title
search and preparing all of the documents for closing. The title company also provides title insurance policies.
Title Abstract: A summary of the public records relating to the title to a particular piece of land. An attorney or title company reviews an abstract or title to determine whether there are any title defects.
Title Insurance: Protects lenders and homeowners against loss of their interest in property due to legal defects in title.
Title Search or Examination: A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims.
Transfer Tax: State tax, local tax (where applicable), and tax stamps (in some areas) required by law when title passes from one owner to another.