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Each term
comes with not one, BUT TWO definitions. The first definition being the
widely accepted and approved ‘real’ definition, called the Realty
definition. The second is what the word really means, or as we denote it,
the Reality definition.
MyREALTY.com
is Real Estate 2.0. You decide the content. If you have a “Realty” and/or a “Reality” definition for the
MyREALTY.com Glossary, then please send it to us.
1031
Exchange
Realty = An exchange called Internal Revenue Code 1031, where a property owner
can trade a similar property and defer paying an income tax.
Reality = There are very specific guidelines you have to follow, so
watch out. Likely, it will not be an actual trade, but a third party
exchange agent holds your sales proceeds so that you can purchase a
property. You could sell a home and purchase a commercial property (or
two), or buy land on speculation.
Agency
Realty = Your representation during a real estate transaction. Your agency
might be a buyer’s agent, a listing (seller) agent or dual agency.
Reality = Avoid dual agency, or having one real estate agent
represent both the buyer and seller. This typically happens because the
potential buyer calls the phone number on the “For Sale” sign in front of a
home for sale. Once you do that, you’re speaking to the real estate agent
who is representing (and earning a commission from) the sellers. If
you’re looking to buy, do not call the number on the real estate signs.
Rather find a buyer’s agent to represent you.
Agent
Realty = Usually, an independent sales worker who represents buyers and/or
sellers in the transaction of real property. The client represented is
called a “principle”.
Reality = All Realtors® are agents, but not all agents are
Realtors®. The term Realtor® is often considered generic for ‘real estate
agent’ when in fact Realtor® is a member of an association (National
Association of Realtors®). For an agent not to be part of the Association
is silly (assuming she lives in an area where the association exists) because
once an agent pays the annual dues, they can access the MLS, or Multiple
Listing Service, and have an agreement with other Realtors® to split a
commission. The MLS is currently the North American industry standard for
listing homes for sale. The newer Global Listing Service (GLS) is open to
all agents, Realtors® or not, as well as, property owners who want to get
maximum exposure and list their property for free.
Agreement
of Sale
Realty = The contract in which a seller agrees to sell and a buyer agrees to
buy. Other specific terms and conditions are out in writing and signed by
both buyer and seller. Also known as “binder,” “purchase
agreement,” "sales agreement” and “buy-sell contract”.
Reality = Get EVERYTHING in writing. Seller’s tip: Disclose,
Disclose, Disclose! Buyer’s tip: Do your Due Diligence before you
get to this point, or ensure you have contingencies to allow you the time to
perform your due diligence.
Amortization
Realty = Paying off and reducing a debt, commonly a mortgage, with regularly
installed payments of principal and interest. Amortization is often
associated with an amortization schedule that is the timetable in which a
mortgage is paid. For example, your mortgage may come with a 5, 15, 20,
30 or even a 40-year amortization.
Reality = Over the period of a fifteen-year mortgage of $200,000 you
might pay $150,000 dollars less in total interest than you would a thirty-year
mortgage. The drawback of a shorter amortization is that you’re monthly payment
will be considerably higher. Watch out for Balloon and Negative
Amortization mortgages! Balloon Mortgages require total payment of the
loan after the amortization is over. Negative amortization requires very
little up-front costs but your monthly payment only covers part of the interest
while the balance continues to grow.
Annual
Percentage Rate (APR)
Realty = Includes the cost of initiating a loan as well as costs incurred during
the life of the loan. Interest, insurance and the points (origination
fee) are expressed in the total APR as a quoted interest rate. The APR
also represents all additional service and finance charges associated with the
loan.
Reality = The APR is a good way to find out how much a loan will
really cost. A lot of lenders will advertise a low, low interest rate,
but sneak in a variety of fees and closing costs. The APR offers a more
complete picture of the expense at hand an apples-apples comparison, if you
will.
Appraisal
Realty = Based on an expert appraiser’s site judgment, measure of dimensions,
comparable sale analysis, and re-build cost estimates, a professional appraisal
includes calculations of the value of real estate for a given date.
Reality = Professional appraisers are good people with houses, spouses
and dreams of one day winning the lottery. However, as of late, the
appraisal industry has come under fire for “rubber stamping” the value of a
property. This will happen two ways. If you are buying, an
appraiser might value a home congruent to the offer price stated on the
buy/sell contract. So, it’s a good idea not to make an offer until you
get an appraisal. Secondly, lending institutions have, through their own
appraisals, overvalued homes in order to loan money to homeowners. In
turn, homeowners find themselves owing more money than their house is
worth. Foreclosure can result if a home is overvalued for the purpose of
loaning money, and the owner can’t keep up on payments.
Appraiser
Realty = A qualified, licensed person who is paid a fee to estimate the value of
an asset, your property.
Reality = You’ll want to find a reputable appraiser who will act
independently, without bias, when evaluating your property. Shop around for
references, although your lender often selects the appraiser in a loan/mortgage
process.
Appreciation
Realty = The increase in the value of your property over time.
Reality = The longer you can hold onto your property, the more likely
the
appreciation will grow. Search for
properties in a neighborhood with a good appreciation track record.
Assessed
Value
Realty = The public tax assessor uses this property valuation for the basis of
taxes.
Reality = While some lender appraisals lean to the high side, the county
appraisals are usually lower than market value, so don’t confuse the two.
Assessor
Realty = A government official who determines the value of property.
Reality = The numbers they come up with will calculate future
property taxes.
AVM
Realty = An AVM or Automated Valuation Model, often used by lenders, is a
computerized estimation of a property’s value. It is often used by buyers
wanting statistical information that will help them make an educated offer on a
home for sale, lot or land.
Reality = While AVM’s have become all the rage in real estate, they
are computer generated and reflect constantly fluctuating valuations; they are
NOT professional appraisals. If you want a professional appraisal
(something you might consider BEFORE you make an offer to buy, refinance or
borrow money against your property) then contact a professional
appraiser.
Balloon
Payment
Realty = The final total payment due at the end of a balloon mortgage.
Reality = It’s not paying for your property with a fancy balloon,
it’s if you have
a balloon mortgage, then this is the
lump sum payment at the end of the decided
term. You may have a 5 or 10 year
balloon with a loan, although the loan may
be amortized over 20 or 30 years to
ensure that the payments are more palatable.
Bill
of Sale
Realty = A "Deed" that transfers real property.
Reality = In many jurisdictions this can be as simple as what’s sold,
for how much, to whom and when. Another example of why you need not get
bowled over by real estate transactions.
Bridge
Loan
Realty = People who haven’t sold their previous property, but have to close on a
new purchase property can get this type of loan, which sources their funds for
the down payment
Reality = These aren’t used so much anymore, because more people tend
to use second mortgage lenders that will lend at a high loan to value.
Broker
Realty = Like a real estate agent a broker is an intermediary between buy/sell transactions,
however, a broker who runs a brokerage oversees real estate agents and their
transactions.
Reality = After some years of experience, a real estate agent may
want to become a licensed broker. Commonly, an exam must be passed and the
new broker may want to work for another broker as a broker-associate.
With all of the experience and education, working with a broker is commonly
seen as advantageous to working with an agent, but finding an agent with the
oversight of a good broker can be just as good.
Broker-Associate
Realty = A broker who does not run his or her own brokerage, but rather works
for another broker.
Reality = Get to know them because one day they’ll have their own
brokerage.
Broker-Owner
Realty = A real estate broker who owns a real estate brokerage.
Reality = Someone you may want to know when you’re looking to buy or
sell real estate.
Buyer’s
Agent
Realty = A real estate agent who represents the buyer in a real property
transaction.
Reality = The person you want to call when looking for a home -
instead of calling the number on the “For Sale” sign. When a buyer’s
agent finds you a home, you owe them nothing. They get a piece of the
listing agent’s commission (from the sale price) – assuming the home is listed
in an MLS. If they find you a home that is not listed in an MLS, you’ll
have to agree to a commission or fee.
Buyer’s
Broker (or Buyer’s Agent)
Realty = Represents the potential homebuyer in a buy/sell transaction.
Reality = When looking for a home, this is who you call… NOT
the agent on the ‘for sale’ sign.
Buy-Sell
Agreement or Buy-Sell Contract
Realty = Signed and agreed upon during closing, a real estate sales contract
identifies the property being sold, names the buyer and seller, states the
amount of money the buyer will pay and the date when title to the property will
be exchanged for the money.
Reality = Before you get to this point, you might consider a
professional appraisal, a professional inspection, negotiated near your original
offer and landed the right loan with the best interest rates. If not this
piece of paper could be the beginning of a very painful experience.
CAP
Rate
Realty = Used to compare investment properties, CAP rate is the Net Operating
Income (NOI), divided by the sales price.
Reality = There are many ways to value and compare an investment
property, and using a CAP rate is generally a precursor to more due diligence
and financial analysis.
Certificate
of Title
Realty = Does the seller have a good and insurable title? A title examiner
or attorney giving a legal opinion should sign a certificate title stating the
status of the property’s title.
Reality = The proper signature on this certificate ensures that the
title is clear.
Closing
Costs
Realty = There are two types of closing costs: non-recurring and pre-paid items.
Non-recurring costs are items you only pay once, as a result of buying or
getting a loan. Pre-paids are items that you
pay over time, such as property taxes.
Reality = Perform your due diligence to understand closing costs
between a loan and a real estate closing. The loan costs are typically
paid by a buyer, and property closing costs are typically paid by the seller or
split between the buyer and seller.
Closing
Statement (Settlement Sheet)
Realty = The total determination that the buyer must pay to seller to finalize
the purchase of the real estate. Also the “HUD-1”.
Reality = You’ll definitely want to look over it, as it will reveal
all the costs lurking at closing. This is usually distributed at least three
days prior to closing, so both parties have an opportunity for review.
Collateral
Realty = In a home loan, the property is the collateral.
Reality = You can lose your home, if the loan isn’t repaid according
to the guidelines of the mortgage or deed of trust.
Commission
Realty = The percentage of a real estate sale that goes to a broker and/or agent
for their services.
Reality = Typically between three to seven percent, real estate commissions
are negotiable. Setting a price in stone constitutes illegal price
fixing. A seller should understand that a commission is usually split
between the buyer’s brokerage and the seller’s brokerage. The brokerage
gets part for overhead and the agent gets the remainder.
Competitive
Market Analysis (CMA)
Realty = A valuation of your home using the prices of “comparable” homes in your
area.
Reality = You may get an agent to provide this for free or for a
fee. You can purchase a complete property report and valuation from
MyREALTY.com.
Condition
Realty = A promise or demand in an agreement or contract
Reality = Read the fine print for any stipulations in the contract
before signing. For example, if you’re buying a new home, but you want a
new roof to be included in the negotiated price, then it should be stated “a
condition” in your contract.
Conditions
Realty = As used in phrases like “the market conditions” to imply a “buyer” or
“sellers” market.
Reality = No matter the “market” real estate is usually one of your
better investment choices.
Condo
/ Condominium
Realty = Individual ownership (deeded) of a portion of a building, with common
areas shared by all owners. Monthly fees are charged to maintain the common
areas (parking, lawns, pool, etc.).
Reality = Condos are a great alternative to single-family homes for
people who don’t want to maintain the exterior of their home.
Contingency
Realty = A contractual clause that states something be done for the contract to
be binding.
Reality = A buyer often puts a contingency that specifies the
contract isn’t binding until he or she gets a home inspection report from a
qualified home inspector.
Convey
Realty = When one person or entity deeds or transfers a property to another
person or entity.
Reality = Say the title of your property has your name and your
brother’s name on it, but you want your name to be taken off. You can convey,
or transfer the title to someone his name.
Co-op
(Cooperative Housing Unit)
Realty = An ownership (shares) in a corporation that owns the building and
carries a leasehold interest in the unit.
Reality = Co-ops are often more exclusive than a condo. Co-ops can
impose strict guidelines for new buyers such as minimum income or required cash
purchases.
Covenants
Realty = Restrictive covenants are standards that define how a property may be
used and the protections the developer makes for the benefit of all owners in a
subdivision. Commonly called “CC&Rs”, the
term usually refers to a written recorded declaration, which sets forth certain
covenants, conditions, restrictions, rules or regulations, established by a
sub-divider or other landowner, to create uniformity of buildings and use
within tracts of land or groups of lots.
Reality = Always read covenants thoroughly before agreeing to
them. The homeowners’ association, not city or county authorities must
uphold covenants. The tighter (more restrictive) the covenants are, the more
likely your home/property will hold its value.
Credit
Report
Realty = A credit report includes information on where you reside, the frequency
at which you pay your bills, and if you've been sued, arrested or filed for
bankruptcy. Consumer reporting companies sell your report to creditors,
insurers, employers and other businesses that use it to evaluate your
applications for credit, insurance, employment or renting a home. The three
credit reporting companies in the United States are Equifax, Experian,
and TransUnion. By law, these companies are
required to give you a FREE credit report every year. Your credit score
is based on a three-digit number that, until recently, was not disclosed to the
public.
Reality = That fickle three-digit number can cost you thousands of
dollars in interest. Any missed payment or neglected debt could dock your
score considerably, and with a lower score comes higher interest rates.
Deed
Realty = A formal written instrument expressing the conveyance by which title to
real property is transferred from one owner to another.
Reality = Always look through the conditions of a deed, called
covenants, before accepting.
Deed
of Trust
Realty = Just like a mortgage, in that a deed of trust isn’t really a loan, but rather
real property held as a security for debt. Instead of two parties, lender
and borrower, a deed of trust also involves a trustee.
Reality = Some states use this document instead of a mortgage. The
title is actually transferred to a trustee, such as a bank, rather than to the
borrower.
Down
Payment
Realty = The initial partial payment of the purchase price of a property.
Reality = The buyer pays this in cash instead of financing it through
a mortgage. It’s typical to put 20% down and get a loan for the remaining 80%,
resulting in an 80% loan to value (LTV).
Dual
Agency
Realty = When a real estate agent or broker represents both buyer and seller in
a real estate transaction.
Reality = Humans are, well, human and having the same person who’s getting
paid by the seller negotiate for the buyer seems to be a conflict of interest.
Earnest
Money
Realty = Literally, money to show that a potential buyer is “earnest,” or
serious, about their intentions to buy a home. The money is given to the
seller and usually held in escrow.
Reality = It wouldn’t be so wrong to call earnest money a “deposit”,
although some agreements vary. When you buy a home, typically, the earnest
money in escrow goes towards the purchase price of the house.
Easement
Realty = Permission granted to use another person’s real estate for any number
of specific purposes. Common easements include the right to travel over
someone else’s property or right-of-way for utilities.
Reality = Easements are referred to as burdens because once
established, the property owner cannot interfere with it. Please note if
you allow a ‘friendly’ use of your land that the easement could become
“prescriptive,” or assumed in the description of your property.
Encroachment
Realty = An improvement that illegally intrudes on another’s property.
Reality = My land is not your land. Make sure you know your
property lines, so that you don’t build that Olympic size pool that takes over
your neighbor’s property and vice versa. Fences are typical offenders in
an encroachment.
Encumbrance
Realty = Anything that affects or limits the title to a property, such as a lien
or mortgage, easement, or a lease or other restriction.
Reality = Encumbrances are a drag… avoid them whenever possible.
Equity
Realty = The interest or value, which the owner has in real estate, over and
above the debts against it.
Reality = Property sale price (or market value) – what you owe
(mortgage, lien, etc.) = Equity
Escrow
Realty = Money, property, or anything of value left in a trust account overseen
by a third party. Upon fulfillment of certain conditions or by agreement of the
parties, the money is released. Often a lender will set up an escrow account
that accumulates a set amount of your monthly mortgage in order to pay
homeowner’s insurance and county property taxes.
Reality = It’s as easy as buying a soda (pop, cola, depending on your
region’s vernacular.) When you put change in the vending machine your
money is held in an escrow “account” until you commit to buy. If you
change your mind and decide to cash out, then the refund button releases the
money. If you decide to buy and make your selection, the money is sent to
the vending machine’s vault. Impress your friends by saying you’re constantly
dealing with money in escrow. In many regions a title company provides
escrow and closing services for a fixed fee.
Estate
Realty = The total amount of all property (real and personal) owned by a person
at time of death.
Reality = Work with a good attorney to ensure that your heirs don’t
end up paying a large amount of taxes for transfer of your estate after your
death.
Federal Housing Administration
Realty = An agency whose main activity is insuring residential mortgage loans
made by private lenders.
Reality = The FHA insures private first mortgage loans for new and
existing homes and repairs, but they don’t permit 2nd mortgages on insured
mortgage loans.
Fixture
Realty = What was formerly personal property, which is now permanently attached
to real property and goes with the property when it is sold.
Reality = If you can’t remove it without damaging the property, it’s
a fixture.
Flipping
(Fix and Flip)
Realty = A type of real estate investment where a property is purchased and resold
often within a few weeks or months for a quick profit.
Reality = Profit is generated through price appreciation, renovations
and capital improvements.
Foreclosure
Realty = A legal process where a property is taken back or sold to satisfy a
debt if the owner defaults on payments or terms.
Reality = The increase in foreclosures has flooded the market with
inexpensive houses, but for every foreclosed property is an individual or
family that just lost their home. Adding to the dark side of the growing
foreclosure market is that a foreclosed home in your neighborhood can
potentially decrease the value of your property. The simplest way
to avoid foreclosing on your home is to owe less than your house is
worth. Interest-only loans can be a good option when you have equity
built in other properties or know for certain (if that’s ever possible) that
the property for which you’ve taken the loan will appreciate. But
interest-only loans and some “no money down” options are risky. Any
mortgage or loan, however, requires much due diligence before signing the
dotted line.
FSBO
Realty = For Sale
by Owner versus using a real estate agent.
Reality = FSBO, or For Sale By Owner, properties have taken a small chunk
of business from listing agents because seller’s want to avoid paying the
listing agent a commission on the ultimate selling price of their
property. Selling your own home is not a difficult thing to do and it can
save you money. One note: Recent research shows that the
professional sales skills of a listing agent will get you more money for your
home and that comparatively FSBO’s sometimes lose
money. For example, a FSBO might sell their home for $200,000. A
listing agent might sell the same property for $220, 000 therefore completely
negating any savings attained by selling without commissioned
representation.
FSBA
Realty = For Sale
by Agent.
Reality = Until recently this term did not yet exist in the universal
sphere of real estate definitions, however, it just makes sense to have
it. MyREALTY.com’s web wizard, Mark Husson, invented it. “FSBO”
came up in a conversation about real estate acronyms and Mark innocently
proclaimed, “So a FSBO is different than a FSBA.” No one in the
room had ever heard of a “FSBA” but it just made so much sense that we’re
kicking off the FSBA revolution right here and now.
Gazunder
Realty = When a buyer reduces his or her bid for a property before the
transaction has been signed and finalized.
Reality = If the real estate market is crashing, a buyer might offer
less because he or she knows that the seller desperately wants to sell the
property.
GLS
Realty = The Global Listing Service emulates the many Multiple Listing Services (MLS)
in its function as a catalog of properties for sale. However, the GLS
differs in that the MLS requires an agent to join the National Association of
Realtors® to submit listing to or access its data. The GLS is free and
open to all, agents and consumers alike.
Reality = The GLS is the brainchild of the founder of MyREALTY.com,
the company that hosts this glossary, so even though the facts completely
warrant it, there’s potential for a favorable bias in the definition.
Grantee
Realty = The person who receives a transfer of real property by a grant deed.
Reality = Grantee obtains property from the grantor.
Grantor
Realty = A person who transfers his or her interest in real property to another
by a grant deed.
Reality = Grantor transfers ownership in a property to the grantee.
Hazard
Insurance
Realty = Protects against damages caused to property by fire, windstorms, and
other common hazards.
Reality = If you live in a high-risk area, (some fire or
hurricane-prone areas; just Google “State
Farm Rita Court” for more) then you may need this
in addition to your Homeowner’s Policy.
Home
Equity
Realty = The value of ownership built up in a property (not including any
outstanding mortgage Payments).
Reality = One of the largest sources of net worth for many investors
and homeowners.
Home
Equity Line of Credit (HELOC)
Realty = A loan providing you with the ability to borrow funds at the time and
in the amount you choose, up to a maximum credit limit for which you have
qualified. Repayment is secured by the equity in your home – often times
in lieu of a second mortgage. Simple interest (interest-only payments on
the outstanding balance) is usually tax-deductible. Often used for home
improvements, major purchases or expenses, and debt consolidation.
Reality = A loan where you can get cash, which is drawn against the
equity in your property. Consider this alternative to a second mortgage.
Homeowner’s
Association (HOA)
Realty = A nonprofit association which manages the common areas of a planned
unit development or condominium.
Reality = Homeowners pay monthly fees in exchange for using common
areas. Beware: know your HOA rules before you alter your
property. Some HOA members have been known to be rabid.
Homeowner’s
Insurance
Realty = An insurance policy that covers a residential real estate owner against
personal liability, common risks, theft, fire, etc.
Reality = If you live in a natural disaster prone area, you may need
to get additional insurance, such as flood or hurricane insurance.
Homeowner’s policy prices vary widely depending upon prior claims, personal
credit, location, building construction, building age, and the amount of your
deductible.
Homeowner’s
Warranty
Realty = An insurance policy that covers certain physical systems within a home.
Typically, the warranty will cover the electrical and plumbing systems, the
furnace and range, roof, and other items, for one year from the date of
closing. If a repair is needed, the homeowner calls the warranty company, who
dispatches a technician to repair or replace the item in question. The
homeowner pays a small deductible, and the warranty company covers the rest.
Reality = A warranty can be a homeowner’s best friend.
HUD
(Housing and Urban Development)
Realty = A department of the federal government created in 1965 which is
responsible for the implementation and administration of the U.S. government
Housing and Urban Development programs which include FNMA, FHA, Public Housing
Urban Renewal and Community Facilities.
Reality = HUD oversees many programs designed to promote home
ownership.
HUD-1
Form
Realty = A form used by a closing agent which itemizes charges imposed on a
borrower and seller in a real estate transaction.
Reality ="Buyers" are referred to as "borrowers"
on this form even if no loan involved. It’s also known as a “closing
sheet” or “settlement form”. The HUD-1 is usually issued three days
before a closing.
Inspection
(home)
Realty = A written statement illustrating the inspection results of a given
property by a professional home inspector. It will show problems and potential
problems with the property not always visible to an average purchaser (i.e. a
deteriorating roof, an ancient furnace, termites, wood rot, and basement
seepage). Many purchasers make their offer to purchase conditional upon
obtaining a satisfactory Home Inspection report.
Reality = Do your homework for a good home inspector. They will
write it up and sign a report that states every little flaw of the property to
any major disasters waiting to happen. Oftentimes an inspector will
oversee tests for radon, termites, etc...
Interest
only
Realty = A mortgage where the borrower is only required to pay the interest due
on the principle mortgage amount during the specified term. The principle loan
must be repaid at the end of the term.
Reality = Seems like a boon, but keep in mind that you’re not
building any equity and if your property depreciates you still owe the entire
original principal of the mortgage.
Joint
Tenancy
Realty = An equal ownership interest of property of two or more persons.
Reality = Each party of the property ownership is on the form and in
the event of death, the survivor owns the property in its entirety.
Jumbo
Loan
Realty = a loan which is larger than the limits set by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation. Because
jumbo loans cannot be funded by these two agencies, they usually carry a higher
interest rate.
Reality = Watch out for those jumbo loans. That higher interest rate
might get you if you aren’t careful.
Lease
Option
Realty = A lease where the tenant has the right to purchase real property under
certain conditions either during or at the end of the lease term.
Reality = A rent to own type of property. The monthly rent may
have an additional amount added which can be applied to the down payment of the
property. It often starts with a sizeable down payment as well. Many
investors use lease options to control and sell properties without ever owning
them.
Lessee
Realty = The person who rents property from a Lessor.
Reality = The tenant. Always read your lease and understand
what you’re bound to.
Lessor
Realty = An owner, or landlord who has granted tenant possession and use of a
property for a period of time.
Reality = Typically, a landlord.
Lien
Realty = A piece of property is used to secure payment of some sort. Your mortgage
is considered a lien.
Reality = It’s like someone is holding your car for ransom. You don’t
pay your parking tickets, so the county takes your car as a lien (impounds it)
until you pay up. In addition to a mortgage, tradesmen may file a “mechanics”
lien on your property, in the event they are not paid for their work.
Listing
Agent
Realty = The real estate agent assisting the sellers of real property.
They work for a commission, anywhere form 3-7% of the sale price of the
home.
Reality = You pay them to do the dirty work.
Listing
Broker
Realty = Also known as the seller’s agent, representing the party selling real
estate in a buy/sell transaction.
Reality = This is the person listed on the ‘for sale’ sign.
Listing
Contract
Realty = A contract between a homeowner (as principal) and a licensed real
estate broker (as agent) by which the broker is employed to market the real
estate within a given time, and in return, the owner agrees to pay a
commission.
Reality = A signed agreement between the homeowner and agent that
says you will pay the agent a commission for listing your house. These
contracts are usually exclusive and the standard listing term is 180 days.
Loan
(vs. Mortgage)
Realty = Borrowing of money.
Reality = Use loans with caution, as the interest that can accumulate
can be substantial. A mortgage is different from a loan in that you
basically sign away your house if the money isn’t paid back.
Loan
to Value (LTV)
Realty = The percentage relationship between the amount of the loan and the
appraised value or sales price (whichever is lower).
Reality = Most lenders require a minimum 20% down payment (80% loan
to value).
Loan
to Value Ratio
Realty = The amount of mortgage debt a lender can loan you compared to the
appraisal value of a property used as collateral (expressed as a percentage).
Reality = The higher the LTV, the higher the risk…which means the
loan will cost you more to borrow or you’ll need to purchase mortgage
insurance. Bankers usually require a ratio at a maximum of 80% for a mortgage
to be approved.
Market
Price
Realty = The actual amount for which a piece of property is sold.
Reality = The sales price or purchase price.
Market
Value
Realty = The highest price, which a ready, willing and able buyer, (but is not
compelled to buy), would pay, and the lowest price a ready, willing and able
seller, (but not compelled to sell), would accept.
Reality = Research the market value in your area. It is pretty
much the basis for a "listing price" or "asking price".
MLS
(Multiple Listing Service)
Realty = MLS is a current and comprehensive listing system for relaying a
specific area’s “for sale property” information, (except those being sold by
the owner) between Realtors®.
Reality = A marketing service in which many brokers pool all of their
listings and establish procedures for sharing commissions. Generally, multiple
listing services (MLS) require that property owners sign an exclusive agency or
exclusive right to sell their listing with participating brokers in order to
have access to the marketing pool.
Mortgage
Realty = A lien or claim against real property, given by the buyer to the
lender, as security for money borrowed.
Reality = The amount of money you owe your lender until your property
is completely paid off. Once you pay off your note, ensure that your
lender removes the mortgage from county records.
Mortgage
Note
Realty = A written agreement to repay a loan. The agreement is secured by a
mortgage, serves as proof of indebtedness, and states the manner in which it
shall be paid. Also, “deed of trust note".
Reality = A loan that puts your mortgage up as proof of debt and
lists the terms under which the mortgage is to be paid.
Option
Realty = A right to purchase or lease a property upon certain specified terms
within a particular time period.
Reality = The receiving party is not obligated to purchase the
property. It’s only an option.
Origination
Fee
Realty = A fee charged for the work involved in the evaluation, preparation and
submission of a proposed mortgage loan.
Reality = Beware of all origination fees and “closing costs”
associated with obtaining a loan. Shop to obtain an
apples-apples comparison.
