Here are some common terms you may come across in a Real Estate transaction. If you have questions about terms not listed here, just give me a call and I'll be happy to explain them.
Scroll down to browse through the different terms, or click on a letter above to jump to a particular section.
A
adjustable rate mortgage (ARM)
This is a loan in which the interest rate changes, up or down at a fixed point in time. The beginning interest rate is lower than a fixed 30 year rate loan. This type of loan is useful for purchasers who know that their income will be increasing in the foreseeable future.
agency disclosure
This is required by the State of Oregon to identify on whose behalf the agent is working.
amortized loan
The term of years over which a loan is granted and calculating the interest which gives you the necessary payment amount to payoff the loan.
appraisal
This is the report that the appraiser creates for the bank. It compares a subject property to other homes, similar in size, age and location that have sold in the past 6 months. It determines the amount the bank is willing to lend on the property.
appraiser
Hired by the bank to create the appraisal.
appreciation
The increase in the value of a property from the time of purchase.
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
biweekly payment mortgage
A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.
Buyer Broker
A real estate broker hired by the buyer to find, negotiate and secure a specific type of property. The broker's compensation is guaranteed by the buyer to be a specific amount and not tied to the purchase price of the property.
The recording and funding of a real estate purchase.
closing costs
The banking and governmental costs associated with purchasing a property.
closing statement
Presented at the time of signing, this covers all the closing costs for the purchase.
common areas
In a condominium style of ownership there will be common areas that a property owner will have a recorded interest in. The property owner has the right to use the common areas and the responsibility of maintaining them, either through dues or physical care of the property.
comparables
Property similar in age, size and location to a subject property used in an appraisal or a comparative market analysis. An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.
conditions, covenants and restrictions (CC&Rs)
Created by the original developer, CC&R's are recorded permitted use of the property, required quality of construction and a code of behavior by the owners of the property.
condominium
A real estate project in which each unit owner has title to a unit in a building, an undivided interest in the common areas of the project and sometimes the exclusive use of certain limited common areas.
construction take-out loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
contingency
A condition of a purchase agreement that the buyer does not have control over. For example, a contingent sale would mean that the buyer cannot purchase the property unless the property identified as the contingency property is sold and closed.
conventional mortgage
Mortgage that is not insured or guaranteed by the federal government. Contrast with government mortgage.
counter offer
When an earnest money (purchase and sale agreement) is signed an offer is made. If the offer is not acceptable to the seller they can make a counter offer. If the counter offer is not acceptable to the purchaser, they can make a counter offer.
A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
dispute resolution system
A system where the purchaser and the seller agree in the earnest money to resolve any disputes that arise during or after the transfer of the property. All parties agree to mediate, and then arbitrate any disputes that would be greater in value then what could be settled in small claims court.
down payment
The buyers initial investment in a property.
dual agency
When a listing broker represents the buyer and the seller for the transfer of one piece of property. This should be done with written permission of both parties.
Also called the purchase and sale agreement, a binding contract that specifies the terms and conditions under which a buyer would purchase a property.
Earnest Money deposit
The money placed at risk by the buyer to demonstrate to the seller their willingness to purchase a property.
easement
A specific use of the land granted to an individual or company which benefits them.
equity
The difference in the value of property between the purchase and sale prices.
escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.
The value of property as determined by a willing purchaser and seller.
farm/forest tax deferral
Oregon tax code allows for property to be placed into farm or forest deferral for the purposes of deferring the property taxes. The taxes are deferred for a five year period and a specific farm or forest plan must be implemented. After the 5th year the taxes for the 1st year are forgiven.
fee appraisal
An appraisal ordered by the property owner to establish the value of the property.
FHA mortgage
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
flood insurance
Required by some lenders to insure property in a flood plain.
Required by lenders to assure the rebuilding or replacement of property damaged by fire or accidental disaster.
home inspection
Ordered and paid for by the buyer to assess the condition of a property the buyer has an accepted earnest money agreement on. Usually a condition of the sale would be the buyers' written acceptance of the condition of the property or the agreement of the seller to make requested repairs.
Allows a seller to defer paying the gain on investment/income property sold provided the gain is reinvested in like kind property. Very specific requirements, time tables and condition are required.
A contact agreement to purchase real property where the seller agrees to accept monthly payments at a specific interest rate and terms.
lead based paint disclosures
Required by the federal government that upon the sale of any properties build prior to 1978 the seller discloses any knowledge or testing information of the existence of lead based paint on the property.
lien
A legal claim against a property that must be paid off when the property is sold.
loan application
The completion of a loan application form and paying for a credit report and appraisal.
lock-in
The lenders agreement to an specific interest rate for a period of time prior to the closing of a loan, usually 30 days or less.
Any property that is not attached or secured to a building or home that can be easily removed.
PITI
Principle of a loan, Interest charged, Taxes on the property, Insurance on the property. The PITI is considered the total monthly cost of owning a property.
Planned Unit Development (PUD)
A housing development of high density with deeded open common areas.
Platt map
Recorded property line map for tax purposes.
points
A one-time charge by the lender for originating a loan. A point is 1 percent of the amount of the mortgage.
pre-approval letter
Provided by a lender prior to formal loan application, this letter states that the lender has examined the purchasers financial ability to obtain a loan and purchase a property and based on the information provided would lend the specified amount to the purchaser.
preliminary title report
Generated by the title company, this document examines the condition of the title. If there are any recorded liens, who is in ownership on the title and if there are any IRS tax liens against either the buyer or the seller. Also any record easements or governmental overlays on the property.
prepaids
Required early payment of interest and taxes by the lender.
prepayment penalty
Amount charged by a lender when a loan is paid off before a specific period of time.
principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
private mortgage insurance (PMI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
promissory note
Taken in place of a personal check when making an earnest money offer. Will have specific terms of redemption.
property disclosure
Oregon statute allows for the seller to provide a property disclosure statement to the purchaser. The purchaser has five business days from receipt of the disclosure to rescind the transaction. The disclosure is not a warranty, merely a statement of the condition of the property at the time of the sale.
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals and the interest, benefits and inherent rights thereof.
When condominium owners need to repair or improve common areas it is not unusual to have a special assessment to raise the funding to make the repairs or improvements.
survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments and other physical features.
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
title search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
trust account
A money account established to hold earnest money. Monies deposited into a client trust account with either the real estate or the title company are held until written instruction, signed by both parties are given to the account representative.
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
