Like most types of business, the real estate industry has a lot of jargon that you might not be familiar with. With that in mind, we bring to you today a short list of the ABC's of real estate. How many of the following real estate terms do you recognize?
Appraisal: an expert estimate of the value of a property as determined by one of three methods: comparable sales (residential), replacement cost (insurance), or income approach (commercial).
Broker: a person who acts as a mediator between two or more parties for the purpose of negotiating a transaction agreeable to all parties.
Closing: the formal meeting where loan documents are signed, funds are disbursed, and keys are exchanged.
Deed: conveys or transfers title to land or other real property.
Earnest money: a monetary amount or something of value given by a prospective buyer of real property as evidence of good faith.
Foreclosure: the process of terminating an owner's rights to property due to delinquent payments.
Gain: an increase in money or property value.
HOA (Homeowners Association): organization of homeowners in a subdivision, planned use development, or condominium created to enforce deed restrictions and manage common elements of the development.
Interest rate: percentage of loan amount charged for borrowing money.
Joint tenancy: ownership of real estate by two or more persons, each of whome has an undivided interest.
Kickout clause: seller contingency that allows the seller to accept a buyer's contingent offer to purchase, while allowing the seller to continue to market the property and take backup offers. Also known as the 72-hour clause.
Lien: claim on a property of another as security for money owed. Example: judgments, mechanic's liens, mortgages, and unpaid taxes.
Mortgage loan: loan secured by a lien against real property given by borrower to a lender.
Net cash flow: investment income after expenses such as principle, interest, taxes, and insurance are subtracted.
Ordinance: municipal rules governing the use of land.
PITI (principle, interest, taxes, and insurance): monthly payments required by an amortizing loan that includes escrow deposits for taxes and insurance in addition to principle and interest.
Quiet enjoyment: an owner's or tenant's right to use and possession of property without interference.
Realtor: designation given to licensed real estate agents who are members of the National Association of Realtors.
Section 8: privately owned rental swelling units participating in the low-income rental assistance program created by 1974 amendments to section 8 of the 1937 Housing Act.
Title insurance: an insurance policy that protects the holder from loss sustained by defects in the title, which is evidence of ownership.
Undivided interest: ownership right to use and possession of property shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.
VA Loan: a home loan guaranteed by the U.S. Veteran's Administration under the Servicemen's Readjustment Act of 1944 and later to compensate the lender in the event of default.
Warranty Deed: deed that contains covenant that the grantor protects the grantee against any and all claims and ensures good title, freedom from encumbrances, and quiet enjoyment.
Regulation X: also known as the Real Estate Settlement Procedures ACT (RESPA). Concerned with the process of completing real estate sales. Monitored by the U.S. Department of Housing and Urban Development.
Yield: effective return on investment
Zoning: a legal mechanism for local governments to divide an area into zones as to restrict the number and types of buildings and their uses.