Here are some Terms with definitions that you might hear or see during a Real Estate Transaction.

 real estate agent  A person licensed to negotiate and transact the sale of real estate.

 Realtor®  A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

  pre-approval  A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification

  pre-qualification  This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

 contract  An oral or written agreement to do or not to do a certain thing.

 contingency  A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector, or the Buyer has to sell their current home.

 fixture  Personal property that becomes real property when attached in a permanent manner to real estate. (ex: drapes, stove)

 earnest money deposit  A deposit made by the potential home buyer to show that he or she is serious about buying the house.

 title  A legal document evidencing a person’s right to or ownership of a property.

 title company  A company that specializes in examining and insuring titles to real estate.

 title insurance  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.

 clear title  A title that is free of liens or legal questions as to ownership of the property.

 deed  The legal document conveying title to a property.

 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.

 easement  A right of way giving persons other than the owner access to or over a property.

 encroachment  An improvement that intrudes illegally on another’s property.

 eminent domain  The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

 appraised value  An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

 appraiser  An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

 closing  This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorders office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.

 closing costs  Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

 HUD-1 settlement statement or closing statement  A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the “closing statement” or “settlement sheet.”

 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 earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.

 escrow account  Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.

 escrow analysis  Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the anticipated expenditures.

 escrow disbursements  The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.

 estate  The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

  executor  A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. “Executrix” is the feminine form.

 flood insurance  Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

If you have any questions, please contact me. 

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