House Buying 101
Disclaimer: The words and their definitions on this and other pages are for reference only, and are worded to help "the rest of us" understand these terms easily. If you are looking for legal definitions, you may wish to consult with an attorney.
| TERM | EXPLANATION |
|---|---|
| 1031 Exchange | An owner can trade a property for another property, and under certain tax regulations, and if all requirements are met, the owner can defer having to pay income tax. The important word in this definition is defer, which means delay. |
| Acre | a land measurement equaling 43,560 square feet or 208.71 feet on each side. |
| ALTA | American Land Title Association Policy |
| Addendum | Stipulations or other specifics that are added to a contractual agreement on a separate piece of paper. Plural is "addenda". |
| Amortization | Paying down a mortgage (or other debt) over a specific period of time, making payments that are enough to cover both the principal and the interest. |
| Appraisal | An opinion of the value of a specific property by a qualified third party. |
| ARM | Adjustable Rate Mortgage |
| Balloon Payment | A payment on a note that is significantly higher than the typical payments, often due at the end of the payment period, but can occur in the middle or at any point of the loan. |
| Closing | Meeting where the parties involved in the transaction transfer necessary titles and documents and disburse funds, completing the transaction. |
| Commingle | An illegal and unethical act in which the broker mixes his personal funds with the funds of a client. |
| Convey | to transfer property from one person to another. |
| Defeasible Fee Estate | when the rights of property ownership are contingent or dependant on a certain event. |
| Duplex | a residential structure that consists of two living units, separated by a common wall. |
| Escrow | money or documents held by a third party (such as a title company) until contractual obligations are met. This ensures that the parties fulfill their obligations and protects the interests of everyone involved. |
| Fee Simple (ownership) | The most flexible form of property ownership recognized by law. The owner can rent, lease or do anything they choose to with the property, as long as they abide by local laws and zoning restrictions. |
| Fiduciary Duties | duties that an agent is obligated to perform on behalf of their client, which includes moral, ethical and legal obligations, as well as appropriate disclosure and confidentiality. |
| GPI | Gross Potential Income on a property, minus credit and vacancy loss. |
| HUD | U.S. Department of Housing and Urban Development, the main source of federal government housing programs. |
| Improved Land | A land lot that has services, such as water, electric or telephone added to it. |
| Material Fact | when used in reference to a real estate transaction, this is information that is so material to the deal that disclosure of this information may have caused the buyer or seller to make an alternate decision. |
| MLS | Multiple Listing Service. A service accessible via internet that has listings of homes for sale and property descriptions. |
| PMI | Private Mortgage Insurance. Insurance that is available to conventional lenders to help guarantee payment. |
| Pre-Qualified | A preliminary evaluation of a buyer's ability to obtain a loan, based on specific guidelines. This is not a guarantee or an extension of credit. |
| Pre-Approved | When a lender establishes that a borrower can qualify for a specific loan amount. Buyers can look for houses with confidence, knowing that their loan will be approved. |
If you're feeling comfortable with these terms, feel free to
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