Acceleration Clause: Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership without the lender's consent, destruction of the property (see Waste), or other event which endangers the security of the loan. (See also: Alienation Clause).
Acceptance: Voluntarily agreeing to the price and terms of an offer. Offer and acceptance create a contract.
Accrued Interest: Interest on a note, bond, etc. which has been earned but not yet paid. Since interest is usually paid in arrears, accrued interest does not necessarily indicate a delinquency in payment. (See also: Accumulated Interest).
Act of God: Damage caused by nature (floods, winds, etc.) rather than destruction by man.
Addendum: Something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, etc. (See also: Amendment).
Adjustable Mortgage Loan: Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARM's), Flexible Rate Loans, Variable Rate Loans. (See also: Indexing, Rate Index).
Agent: One who is authorized to act for or represent another (principal), usually in business matters. Authority may be express or implied.
Amendment: A change, either to correct an error or to alter a part of an agreement without changing the principal idea or essence.
Amortization: Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments. (See also: Balloon Note; Straight Note).
Annual Percentage Rate: The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes.
Appraisal: An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.
Attorney-In-Fact: One who is appointed to act (as agent) for another (principal) under a power of attorney. The scope of the agent's authority is limited to that given by the power of attorney, which may be limited to one specific act or may be broader. (See also: Power of Attorney)
Binder: A report issued by a title insurance company setting forth the condition of title to certain property as of a certain date, and also setting forth conditions which, if satisfied, will cause a policy of title insurance to be issued. Also called a commitment. (See also: Preliminary Title Report). (2) A policy of title insurance (used primarily by investors) calling for a reduced rate for a future policy if the property is sold within a specified period.
Bona Fide: A legal term which refers to any actions, situations, or persons that are honest, in good faith, and without fraud.
Breach of Contract: Failure to perform a contract, in whole or part, without legal excuse.
Buydown: A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first 1 to 5 years of the loan. (See also: Certificate Backed Mortgage).
Cap: A maximum amount of a charge. Example: An adjustable Rate Mortgage with a 5% rate cap could not adjust the interest rate by more than 5%.
Certificate of Occupancy: A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied.
Closing: In real estate sales, the final procedure in which documents are executed and /or recorded, and the sale (or loan) is completed. (2) A selling term meaning the point at which the client or customer is asked to agree to the sale or purchase and sign the contract.
Cloud on Title: An invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or if necessary, by court action.
Commission: An amount, usually as a percentage, paid to the agent (real estate broker) as compensation for his services. The amount to a real estate broker is generally a percentage of the sale price or total rental.
Common Area: The area owned in common by the owners of condominiums or planned unit development homes in a subdivision.
Comparables: Properties used as comparisons to determine the value of a specific property.
Concession: A granting of a right, by government or privately, usually to use of land or area in a building to carry on a business.
Condominium: A structure or two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior floors, and ceiling. The balance of the property is called the common area.
Contingency: Commonly, the dependence upon a stated event which must occur before a contract is binding. For example: The sale of a house, contingent upon the buyer obtaining financing.
Conventional Loan: A mortgage or deed of trust not obtained under a government insured program, (such as F.H.A. or V.A.).
Conveyance: Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.
Credit Report: A report on the past ability of a loan applicant to pay installment payments. Several national and local companies make such reports.
Deed Restrictions: Limitations on the use of property placed in conveyance deed by the grantor, which bind all future owners.
Deferred Maintenance: Repairs necessary to put a property in good condition. A concern of a purchaser. An owner may have an account for such maintenance.
Delivery: In conveyancing, the placing of the property in the actual or constructive possession of the grantee. Usually accomplished by delivery of a deed to the buyer or agent of the buyer, or by recording said deed.
Deposit: Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money.
Disbursements: Payments made during the course of an escrow or at closing.
Domicile: A legal term signifying a place where a person has his permanent home. The most accurate meaning is the layman's understanding of the place where a person "lives", since this takes into consideration the intent of the person to make a particular property his "home".
Donee: One who receives a gift.
Donor: One who gives a gift.
Double Escrow: Two concurrent escrows on the same property, having the same party as buyer and seller of the property. Example: Escrow 1- A buys from B. Escrow 2- sells the same property to C. A is using C's money to buy B's property. The process is illegal in many states unless full disclosure is made.
Dower: A common law interest of a wife in the property of her deceased husband. Being changed in many states by statute to give more equality between men and women in property rights.
Due on Sale Clause: A type of acceleration clause, calling for a debt under a mortgage or deed or trust to be due in its entirety upon transfer of ownership of the secured property. Also called a "due-on-sale" clause.
Earnest Money: Money given by the buyer with an offer to purchase. Shows good faith.
Easement: A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another. It is either for the benefit of land (appurtenant), such as right to cross A to get to B, or "in gross", such as a public utility easement.
Egress: A term concerning a right to come and go across the land (public or private) of another. Usually part of the term ingress and egress.
Elevation: Height above sea level. The exterior design of a structure, usually but not necessarily, viewed from the front. Called a horizontal elevation.
Eminent Domain: A governmental right to acquire private property for public use by condemnation, and the payment of just compensation.
Encroachment: Generally, construction onto the property of another, as of a wall, fence, building, etc.
Encumbrance: A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title.
Entity: A separate existence or being, most commonly referring to a corporation or other form of business, rather than an individual.
Equity Line of Credit: A combination of a line of credit and equity loan. A maximum loan amount is established based on credit and equity. A mortgage (deed of trust) is recorded against the potential borrower's property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the mortgage.
Erosion: The wearing away, over a prolonged period, of rock, earth, or other portions of land.
Escrow: Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event. Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions as to their use.
Escrow Instructions: Instructions which are signed by both buyer and seller, and which enable an escrow agent to carry out the procedures necessary to transfer real property, a business, or other assignable interest.
Escrow Officer: An escrow agent. In some states, one who has, through experience and education, gained a certain degree of expertise in escrow matters.
Ethics: With regard to professions, a code of professional standards, containing aspects of fairness and duty to the profession and the general public.
Evidence of Title: A document establishing ownership to property. Most commonly, a deed.
Exclusive Agency Listing: A listing or agreement protecting the listing broker's commission against the sale of the property by another agent but not against the sale by the principal. The term is not universal, as some areas use the term, nonexclusive listing, to describe this agreement.
Exclusive Listing: A written contract between a property owner and a real estate broker, whereby the owner promises to pay a fee or commission to the broker if certain real property of the owner is sold during a stated period, regardless of whether the broker is or is not the cause of the sale. The broker promises to put forth his best efforts to sell the property, and may make specific promises as to advertising or other promotion in certain instances.
Execute: To complete; to fulfill a purpose, such as to execute an instrument, meaning to sign, seal and deliver.
Fair Credit Reporting Act: A federal law giving one the right to see his or her credit report so that errors may be corrected. A lender refusing credit based on a credit report must inform the buyer which company issued the report. The buyer may see the report without charge if refused credit, or for a charge if just curious.
Fair Market Value: Price that probably would be negotiated between a willing seller and a willing buyer in a reasonable time. Usually arrived at by comparable sales in the area.
Federal Discount Rate: The interest rate charged to member banks borrowing from the Federal Reserve Bank.
Federal Tax Lien: A lien attaching to property for nonpayment of a federal tax (estate, income, etc.). A federal tax lien differs from other liens in that it is not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien (except by judicial foreclosure).
Fee Simple: An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.
First Mortgage: A mortgage having priority over all other voluntary liens against certain property.
Foreclosure: A proceeding in or out of court, to extinguish all rights, title, an interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.
Forgery: A false signature or material alteration with intent to defraud. The forged signature of the grantor will not pass title regardless of recording or lack of knowledge by the grantee or future grantees.
Full Disclosure: In real estate, revealing all the known facts which may affect the
decision of a buyer or tenant. A broker must disclose known defects in the property for sale or lease.
Fully Amortizing Loan: A loan of equal, regular payments which cause the principal and interest to be completely paid by the due date.
General Lien: A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed which attaches only to specific property.
Gift Deed: A deed for nominal consideration.
Good Faith: Something done with good intentions, without knowledge of fraudulent circumstances, or reason to inquire further.
Grace Period: A period of time past the due date for a payment, during which time a payment may be made and not considered delinquent.
Grandfather Clause: The clause in a law permitting the continuation of a use, business, etc., which, when established, was permissible but, because of a change in the law, is now not permissible.
Grantee: One to whom a grant is made. Generally, the buyer.
Grantor: One who grants property or property rights.
Growing Equity Mortgage: A fixed rate, graduated payment loan allowing low beginning payments and a shorter term because of higher payments as the loan progresses. Based on the theory of increasing income by the buyer and, therefore, ability to make higher future payments.
Holdback: Portion of a loan held back by the lender until a contingency is met. In the sale of a home insured by V.A. or F.H.A., funds may be held back to make necessary improvements to bring the property to V.A. or F.H.A. standards.
Homeowners Association: An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. An association formed by the builder of condominiums or planned developments, and required by statute in some states.
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