Real Estate with Sanda O’Brien: tips and information on selling and buying homes in Brookline, Boston, Newton, and Needham; Buyers Agent; Green Certification; Sellers Agent; Certified Relocation Specialist.

Common Real Estate Terms

real estate terms Some new terms may seem confusing at first, especially to someone new to the process.    Here is a short list of the most used terms in Real Estate.  Feel free to ask me about any other word. common terms Adjustable Rate Mortgage (ARM) A mortgage in which the interest rate is adjustable, meaning that the rate can go up or down according to prevailing financial market conditions. Agent An individual who represents a seller, a buyer or both in the purchase or sale of real estate. Amortization The schedule of loan payments that establishes the amount of payment to be applied to the principal and the amount to be applied to interest, usually on a monthly basis, for the full term of the loan. Annual Percentage Rate (APR) The total interest rate of a mortgage, including the stated loan interest as well as any upfront interest paid in securing the loan. The APR will invariably differ from the mortgage rate quoted due to the inclusion of these items. Appraisal An estimate of value of a real estate property by a professional third party. Virtually all non-owner financed mortgages will require an appraisal and is generally paid for by the buyer. Appraised Value An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Appraiser An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent. Appreciation The increase in the value of a property due to changes in market conditions, inflation, or other causes. Assessed Value The value of a property as determined by the local tax jurisdiction which is used to determine the amount of your property taxes. Assessment (1) The placing of a value on property for the purpose of taxation. It is done by the local government 9town, city) and it determines the amount of property taxes to be paid by the owner. Assessment (2) In the Boston area the same word is used to mean the amount of additional funds to be collected from condominium owners by the condominium association in order to pay for major capital projects ( roof, heating systems, structural repairs, etc) that belong to the common areas. Assessor A public official who establishes the value of a property for taxation purposes. Assignment When ownership of your mortgage is transferred from one company or individual to another, it is called an assignment. Assumable Mortgage A mortgage that is transferred to the buyer, who then becomes personally liable for the terms and conditions, including payments. Buyer's Agent A real estate Agent that has made an agreement with a buyer to represent the buyer exclusively, and not the seller. Comparable Market Analysis (CMA) A comparison of the prices of similar houses in the same general geographic area. A CMA is used to help determine the value of a property, either for a seller or a buyer. Closing The process that effects the final transfer of the deed from the seller to the buyer, as well as finalize all aspects of the mortgage of the property.  That is when the seller stops owning the property and the buyer begins.  That is when the buyer gets the keys. Closing Costs Funds needed at the time of closing (separate from and in addition to the down payment). Loan origination fees, discount points, attorney fees, recording fees and pre-paids are some items that may be included. They often will total from 3% to 5% of the price of the home, payable in cash. Contingencies These are conditions - or "safety valves" written into real estate offers and contracts to prevent a buyer from being forced to buy a house that is unsatisfactory - either structurally or financially. Examples of contingencies are "This contract is subject to the buyer obtaining a satisfactory whole house inspection." or "Subject to the buyer being able to obtain a mortgage." Condominium A form of ownership,  where the owner owns only the unit in which they live - from the interior walls inward, generally - as well as a portion of the common area. Co-op A form of ownership,  where the owner owns shares in a corporation and leases his/her unit. The monthly condo fees will generally include the taxes.  Most common in New York City, rare in our Boston Market. Debt to Income Ratio The ratio of a borrower's total debt as a percentage of their total gross income. Deed The document that, when recorded with your local government, ( Registry of Deeds)  determines ownership of a property. Transferred from seller to buyer at closing. Earnest Money Money that is submitted with an offer to purchase which indicates a buyer's seriousness and good faith. In virtually all cases, earnest money will need to be submitted at the time of the offer and remains in escrow until the time of closing, at which time it becomes part of the downpayment. Equity The difference between the value of a property and the total of any outstanding mortgages or loans against it. Escrow Funds held in reserve both prior to closing (for example the earnest money and deposit) by a third party and after closing by the mortgage company to pay future taxes and homeowners insurance. In some areas, "escrow" also refers to the closing process. Fixed Rate Mortgage A mortgage loan where the interest rate is established at its origination and continues unchanged through the life of the loan. FSBO (For Sale By Owner) Real estate that is sold without the assistance of an agent. FSBO can refer to both the individual selling the property "They are a FSBO," or the property itself "that house is a FSBO." Foreclosure The process through which a lender takes back property from a defaulting owner and re-sells it. Homeowner's Association An owners group, whether in a condominium, townhouse or single family subdivision that establishes general guidelines for the operation of the community, as well as its standards. Inspection A whole house inspection of a home being considered for purchase which looks for defects in the property. Interest That portion of a mortgage payment that is the "charge" for using the lender's funds. Lien A legal claim against a piece of property that can prevent it from being sold unless the lien is satisfied (paid off). Liens can be filed by unpaid contractors or other debtors in a legal process so that they will be paid when a property is sold. Listing A property for sale by a Real Estate Broker, posted in the MLS (Multiple Listing Service). Loan Origination Fee A charge imposed by the lender, payable at closing, for processing the loan. Lock-in An agreement by the lender at the time of mortgage application or shortly thereafter, to write the mortgage at a specific interest rate, whether rates rise or fall up to the date of closing. Obviously a good move if rates are rising, not so good if they are falling. Lock-ins have specific expiration dates, such as 30, 60 or 90 days in the future. LTV (Loan to Value) The ratio of the amount of the mortgage as a percentage of the value of the property. MLS (Multiple Listing Service) A listing (almost always computerized) of all the properties for sale by Real Estate Brokerages in a given geographical area. PMI (Private Mortgage Insurance) Required on virtually all conventional loans with less than 20% downpayment. Although the payments for PMI are included in your mortgage payment, it protects the lender should you default on the loan. On FHA loans, you will pay a MIP (Mortgage Insurance Premium) which accomplishes the same purpose. Points 1 point is equal to 1% of the loan value, paid at closing. Points can be loan origination fees or "discount points" which reduce the interest rate of the loan (you are actually paying a finance charge up front). When a lender, for example, quotes a rate of 8 1/2% with 1 + 1 points, 1 point is for the origination fee and 1 point is for the discount fee. Pre-approval Occurs when a home buyer secures a guaranteed mortgage approval (for a specific amount) before making an offer on a house.  In our market it is required as part of almost all offers. Pre-qualification The first stage of a mortgage application where the lender will run a minimal or no credit report and will estimate how much mortgage you qualify for. Not the pre-approval demanded by sellers. Pre-paids Paid for (in cash) at closing for such items as homeowners insurance for one year and real estate taxes for several months. Principal The amount borrowed for a mortgage loan. Your monthly mortgage payment will be made of both interest and principal. In the first years of paymnets the largest part of your payments goes towards the interest, and only later you start paying of more of the principal. Property Tax An annual, semi-annual, or quarterly tax paid to one or more governmental jurisdictions based on the amount of the property assessment. Generally paid as part of the mortgage payment, if there is a mortgage. Recording The act of entering deed and/or mortgage information into public record with your local government jurisdiction (Registry of Deeds). Title Insurance Insurance issued by title companies that protects a property owner against future defects to or claims against a property. Typically purchased by the buyer upon closing and usually required by the lender. Warranty Covers either most of the house in a new home, or selected items (for example the heating and air conditioning system or the water heater) in a used home. Warranties can vary widely and are optional in used homes (paid for by either the buyer or the seller). Zoning Laws that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential, condominiums, commerical or retail, or a mix of two or more uses.