Real Estate Glossary

A

Adjusted Basis – Adjustments (increases or decreases) made to the basis of a home. (The basis is the amount paid if the home was bought or built.)

Adjustable Rate Mortgage (ARM) – A loan for which the interest rate is subject to change on a periodic basis (i.e. every 1, 3, or 5 years).

Agent – Acts on behalf of anotherThe annual cost of credit over the life of a loan including interest, service charges, points, loan fees, mortgage insurance and other items. representing that person’s interests.

Amortization – A payment plan by which a loan is reduced through monthly payments of principal and interest.

Annual Percentage Rate (APR) – The annual cost of credit over the life of a loan including interest, service charges, points, loan fees, mortgage insurance and other items.

Appraisal – An evaluation to determine the price for which a property would sell in the current marketplace.

Appreciation – An increase in the value of a property.

Assessment – A tax levied on a property or a value placed on the worth of a property by a taxing authority.

Assumable Mortgage – When a home is sold, a mortgage than can be taken over by the buyer at the same interest rate.

Assumption – A transaction allowing the buyer to assume responsibility for an existing loan instead of originating a new loan.

B

Balloon – A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end.

Bridge Loan – A loan obtained by a homeowner who has not yet sold an existing property, yet is closing on a new property. Often becomes the source of the down payment.

Broker – A real estate professional who has a higher level of training than an agent. A broker is the legal representative and/or manager of the office. The term may also refer to the brokerage under which an agent is licensed.

Buyer-agency – A relationship between an agency and a buyer in which the agent represents the interests of the buyer, not the seller. The primary duty of a buyer’s agent is to obtain the best deal for his/her client.

Buy Down – A subsidy (usually paid buy a builder or developer) to reduce the monthly payments on a mortgage loan.

Buyer Representation – Historically, an agent represented only the seller in a real estate transaction (agents working with buyers were actually "sub-agents" of the seller’s listing agent). Buyers today have the opportunity to be fully represented by an agent and brokerage firm.

C

Cap – A limit to the amount an interest rate or a monthly payment can increase for an adjustable rate loan either during an adjustment period or over the life of the loan.

Closing – The completion of documents that transfer property from a seller to a buyer (also referred to as a settlement). Also used loosely to mean "reaching final agreement."

Closing Costs – Charges paid at closing for obtaining a mortgage loan and transferring a real estate title.

Commission – The fee paid to a real estate agent/broker for services rendered during the sale or purchase of a home. Usually a percentage of the property’s sale price, averaging 6 to 7 percent on home sales.

Comparative Market Analysis (CMA) – A survey of attributes and selling prices of comparable houses listed for sale, recently sold or expired from the market; used to help determine correct pricing strategy for a seller's property.

Conditions, Covenants and Restrictions – The standards that define how a property may be used and the protections the developer makes for the benefit of all owners in a subdivision.

Condominium (Condo) – Type of real estate ownership where the owner has title to a specific unit and shared interest in common areas.

Condo Board – (Also condominium board.) A small group (usually three to seven) of resident-owners elected by a condominium community to serve as a governing board. Responsible for enforcing bylaws and maintaining common property.

Contingency – A condition in a contract that must be met for the contract to be binding.

Contract – An agreement for the sale of property.

Conventional Loan – A mortgage loan made by a lender to a borrower that requires no insurance or guarantee.

Conversion Option – The ability to change a loan from an adjustable rate to a fixed rate.

Cooperate – A standard of practice in real estate in which brokers/agents agree to work together with other brokers/agents, but only in their client's best interest. Under a cooperative arrangement, there is no obligation to share commissions or fees.

Counteroffer – An offer made in response to an offer received. Essentially it rejects the original offer.

Credit – A person’s reputation for solvency and integrity, allowing a borrower to receive something of value in exchange for a promise of repayment.

Credit History – A record of an individual's current and past debt obligations. Lenders use it when determining a potential borrower's ability to repay debt in a timely manner. Also see Credit Report.

Credit Report – A report ordered from a credit bureau that indicates if a borrower is a good credit risk.

Credit Score – A statistical methodology for determining a potential borrower's ability repay a loan. The higher the Credit Score, the more likely a borrower can qualify for the loan.