Abstract of Title
A summary of the public records describing the legal history of ownership of a piece of property. A licensed abstractor must update the abstract of title prior to closing. It shows the purchases and sales, mortgages, judgments, and other liens or rights against the property recorded with the county. It reflects the records of the county through the date shown on the abstract.

Adjusted Sales Price
An estimate of value after all adjustments have been made to account for differences between the subject and comparable properties.

Adjustable-Rate Mortgage (ARM)
A type of loan with an interest rate that fluctuates with the market. Though ARMs are appealing because their starting interest rates are quite low, they are riskier than fixed-rate mortgages.

Agency Disclosure
A signed document explaining the relationship between the client and broker. A broker may represent buyer, seller, both, or neither.

Agent
A person licensed by the state who represents a buyer or seller in the purchase or sale of a house. Real estate agents earn a commission from the sales transaction, and they must work for a licensed broker or real estate company.

Amortization
A payment plan that reduces a borrower’s loan debt through monthly payments of principal and interest. A schedule shows the amount due each month and the loan’s balance.

Appraisal
An estimate or opinion of the value of a property provided by a professional appraiser.

Assessed Value
The value of property established for tax purposes.

Assumable Mortgage
A buyer takes over the obligations and payments of the seller’s loan agreement. The seller may transfer, in writing, to the buyer all legal responsibilities for the mortgage. Most lenders require that the buyer be approved, prior to assuming the mortgage.

Balloon Mortgage (or Payment)
A type of mortgage wherein a borrower pays principal and interest each month up to a specified date; then the entire balance of the loan is due.

Broker
A licensed person who acts as an agent for a seller or buyer while working for a real estate company or independently.

Broker Reciprocity
Broker reciprocity is a system by which real estate brokers agree to share their listings with each other. All participating brokers may publish each other’s data on their respective Web sites.

Buy-down
A term for when one or more of the parties pays points at closing, to lower the interest rate on the buyer’s loan.

Buyer’s Broker
A real estate broker who represents buyers through a contract to find the best property for them and negotiate the best price and terms.

Buyer’s Market
When the home-selling market favors
the buyer with more homes for sale than buyers to purchase them, often leading to lower prices.

Certificate of Title
Often referred to as torrens, a written
document that indicates the homeowner legally owns a piece of property. When the property is sold, the title is transferred to the buyer, who eventually receives a new title of ownership.

Closing
The day when sellers and buyers finalize the agreements made in the purchase agreement, including signing documents, settling financial details, and transferring the title of a home to new owners.

Closing Costs
All costs paid by sellers and buyers related to closing on a piece of property, including lender-discount points, loan-prepayment penalty, deed-recording fees, inspection-appraisal fees, attorney fees, brokerage fees, title insurance premium, etc. (See page 45 for a complete list.)

Commission
The amount of money paid to a broker by a seller (or buyer) for selling a home. A commission is always negotiable and is usually a percentage of the sale price of the home.

Comparables
A list of properties with similar features to a home being sold, used to determine the home’s value.

Comparative Market Analysis (CMA)
A study of comparable homes, usually in close proximity to a specific property. Indicators such as square footage, number of bedrooms, lot value, etc., are used to determine an estimate of value.

Contingency
Specific conditions in a purchase agreement that must be met prior to closing. The contract may be terminated if contingencies aren’t met. Typical contingencies include financing and inspection.

Conventional Mortgage
A mortgage loan underwritten by banks, savings and loans, or other types of mortgage companies.

Counter Offer
When a seller or buyer responds to an offer with new terms and/or price.

Credit Report
Used by lenders to verify a borrower’s
ability to repay a mortgage loan. It lists all credit accounts, debts, and late payments reported to a credit company.

Deed
The document that transfers ownership of a property from seller to buyer.

Down Payment
The cash that buyers pay toward the purchase of a property.

Earnest Money
The money a buyer gives to a seller as a sign of a good-faith commitment to buy the house. Earnest money deposits typically range from 1 to 3 percent.

Equity
The monetary value of a property beyond any amounts owed on it in mortgages, claims, liens, etc.

Escrow
A situation when a third party holds documents or funds for buyers and sellers until the sales transaction is completed.

Fixed Rate
A mortgage interest rate that does not change over the life of the loan.

FSBO
Stands for For Sale by Owner (pronounced "fizzbo). A property and/or person that is marketed by the owner without the assistance of a conventional real estate broker. FSBOs account for approximately 25 percent of all real estate transactions.

Good-Faith Deposit
Money given by the buyer to the seller with a signed contract or offer to purchase, showing a good-faith or serious, commitment. Also called earnest money.

Inspection
The service performed by an inspector scrutinizing a home for possible structural defects.

Interest
Money charged for using borrowed funds. Usually an annual percentage of a total loan amount.

Lender
A person, company, corporation, or other entity that lends money for the purchase of real estate.

Lien
The legal right to claim on a person’s property.

Listing
A property for sale that a real estate agent represents in return for a fee.

Loan
Money lent to a buyer to purchase a home.

Lock-in
When a borrower tells a lender that he or she accepts an interest rate for a specific amount of time.

Mortgage
The legal document that gives the lender a legal right to the property if the loan is in default.

Multiple Listing Service (MLS)
A computerized listing of all properties offered for sale by member real estate companies.

Origination Fee
The fee a lender receives for securing a loan.

Personal Property
Property that can be moved and that is not intended to stay with a house, such as furniture, appliances, clothing, etc.

PITI
An acronym for Principal-Interest-Taxes-Insurance — the costs included in a monthly mortgage payment.

Point
A point is one percent of a loan amount charged as a fee for borrowing money to lower a loan’s interest rate.

Prequalifying for a Loan
A mortgage company tells a buyer approximately how much money he or she can afford to borrow.

Principal
The amount of money borrowed and remaining on a loan.

Private Mortgage Insurance (PMI)
A lender’s insurance policy to allow for financing more than 80 percent of a property’s value.

Property Tax
A county, city, or state tax on the value of a property.

Purchase Agreement
A legal document between a seller and buyer for the purchase of a property.

Real Estate Agent
A state-licensed person, acting on behalf of a seller or buyer, who receives a commission on the sale of a house based on a percentage of the sales price.

Real Estate Attorney
An attorney who has experience in handling real estate transactions.

Realtor
A designation for real estate agents and brokers who are members of the National Association of Realtors.

Sellers Disclosure Statement
A statement in which the seller must disclose any "adverse condition" (e.g., radon gas, lead paint) or material defect (wet basement, leaking roof) to potential buyers.

Seller’s Market
Housing-market conditions that favor the seller. When there are few homes for sale and a large demand, homes often sell at higher prices.

Selling Broker
The licensed real estate agent or broker who procures the buyer.

Special Assessment
An assessment charged against a property to pay for a city or public improvement.

Title
The ownership of a particular piece of property.

Title Company
A corporation or company that insures a title and handles aspects of the closing.

Title Insurance
Insurance that protects a lender and property owner against defects or problems with a title.

Title Search
An examination of the public records to verify ownership and identify encumbrances affecting a property.

Torrens Title
A method used to record the chain of ownership for property.

Trust Account
Otherwise known as an escrow account; a separate bank account in which the broker or attorney deposits all money collected for clients.

Variable Interest Rate
An interest rate that rises and falls based on economic indicators.

Warranty
A legally binding promise provided by a seller to a buyer at closing, regarding the condition of the property.