Real Estate Glossary - Part 1
acceleration clause
A clause in your mortgage that allows the lender to make the entire outstanding loan balance due
immediately if you default on a payment.
adjustable-rate mortgage (ARM)
A loan where the interest rate can go up or down, according to corresponding changes in the lenders
cost-of-funds index.
agent
An individual who represents a buyer or seller in the purchase or sale of real estate.
amortization
The loan payment can be broken down into a part that is paid on the principal or the original amount of
the loan and a part that covers the interest charged on the loan. Over time, as the loan balance
decreases the amount applied to cover the interest decreases and more of the payment is used to pay
off the principal.
annual percentage rate (APR)
This percentage reflects the true cost of borrowing money. The APR calculation takes into account the
true interest rate and all finance charges (loan fees, service charges, points, etc.) so a borrower can
better compare lenders. Due to the Truth-in-Lending Act, credit institutions must disclose this to
borrowers.
appraisal
An written estimate of a property’s fair market value to justify to the lender that the property is worth the
purchase price. It is usually based on the recent sales of comparable property.
appreciation
The increase in the value of a property due to economic changes or other causes.
ASHI - American Society of Home Inspectors
assessment
Determining the value of a property to impose a real estate tax on the property.
assumable mortgage
The borrower agrees to take over an existing mortgage on the property and makes the mortgage
payments.
balloon mortgage / balloon payment
A mortgage loan that is not fully amortized and requires a final lump sum payment that is considerably
larger than the monthly payments
bill of sale
A written document that transfers ownership of personal property such as a refrigerator that is to be left
in the house for the buyer.
broker
A broker is someone who acts as an agent to bring two parties together for any type of transaction and
earns a fee or commission. In real estate the most common are the real estate broker who brings
together buyers and sellers and the mortgage broker who bring together borrowers and lenders.
buydown
The seller or builder pays a lump sum to the lender to reduce the interest rate (and the monthly loan
payments) for the first few years of a loan. This can help the buyer qualify for a higher loan amount.
buyer’s agent
A real-estate agent that works for and represents the home buyer.
clear title
A title that is free of liens or legal questions as to ownership of the property.
closing
A meeting between seller, buyer, lender and any other party with interest in a property where all of the
documents are signed and money changes hands. The group reviews the settlement statement that
itemizes real estate commissions, loan fees, points, and other closing costs. In many cases the buyer
takes possession of the property at this time.
cloud on title
Any claim that may cause doubt about the title to real estate such as an unreleased lien or unpaid tax.
CMA - Comparable Market Analysis
Commission
Fees paid to a broker for services such as the sale or purchase of a house or for arranging financing of
the house.
Comparable Market Analysis (CMA)
A comparison of the sale prices of similar houses in the same general geographic area is used to help
estimate the value of a house. The CMA is usually done to help a seller price a house.
condominium (condo)
An owner has absolute ownership of a unit in a multi-unit housing complex and shares ownership of
the building and common areas with all other unit owners. The common areas can include the lobby
and elevator.
contingency
A condition that must be met before a contract becomes legally binding. Examples of contingencies are
"subject to the buyer obtaining a mortgage" or "subject to a satisfactory whole house inspection."
cooperative (co-op)
A resident of a multi-unit housing complex own shares in the cooperative corporation that owns the
property and has the right to occupy a specific unit or apartment. The resident does not own the
property but instead holds a lease.
deed
The legal written document conveying title to a property and determines ownership.
default
Failure to make the mortgage payment within 30 days of the due date.
depreciation
Loss of the value of a property due to physical deterioration, functional obsolescence such as only one
bathroom in a four bedroom house, or external obsolescence such as a house surrounded by factories.
discount point
A loan charge equal to one percent of the loan amount.
dual agency
When a real estate agent represents both the buyer and a seller in a transaction. In Illinois this must be
agreed to in writing by both the buyer and seller.
earnest money
Money given by the buyer as a show of good faith to indicate he or she is serious about buying the
house. The earnest money becomes part of the downpayment on the house.
easement
An easement can give another person the right use your property for a specific purpose such as a
driveway or utilities.
eminent domain
The right of the government or municipal boy to take private property for public use through
condemnation. The court decides whether it is for public use and determines the property's fair market
value to be paid to the owner.
encroachment
A building, fence, etc. that extends beyond the property line of the owner and intrudes illegally on
another’s property.
encumbrance
Anything that affects the value or enjoyment of a property, such as a mortgage, taxes, lease, easements,
or restrictions on the use of the property.
equity
The difference between the value of a property and the amount still owed on its mortgage and other
liens.
escrow
Funds held by the mortgage company to pay future taxes and homeowners insurance.
exclusive-right-to-sell listing
A written listing contract that gives a licensed real estate agent the exclusive right to sell a property for a
specified time.
fair market value
The highest price that a buyer would pay for a property and the lowest price the seller would accept.
Fannie Mae (FNMA)
The Federal National Mortgage Association buys mortgage loans from primary lenders so the lenders
have money to make more home loans.
Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD) that insures residential
mortgage loans made by private lenders.
fixed-rate mortgage
A mortgage where the interest rate does not change during the entire term of the loan.
fixture
Personal property that becomes real property by permanently attaching it to real estate. A window
bought at a home improvement store is personal property until it is installed in the house, then it
becomes a fixture.
Freddie Mac (FHLMC)
The Federal Home Loan Mortgage Corporation buys mortgage loans from primary lenders so the
lenders have money to make more home loans.
FSBO (For Sale By Owner) or "Unrepresented Seller"
Real Estate that is sold by the owner without the assistance of a real estate agent.
<Continued on Page 2>
A clause in your mortgage that allows the lender to make the entire outstanding loan balance due
immediately if you default on a payment.
adjustable-rate mortgage (ARM)
A loan where the interest rate can go up or down, according to corresponding changes in the lenders
cost-of-funds index.
agent
An individual who represents a buyer or seller in the purchase or sale of real estate.
amortization
The loan payment can be broken down into a part that is paid on the principal or the original amount of
the loan and a part that covers the interest charged on the loan. Over time, as the loan balance
decreases the amount applied to cover the interest decreases and more of the payment is used to pay
off the principal.
annual percentage rate (APR)
This percentage reflects the true cost of borrowing money. The APR calculation takes into account the
true interest rate and all finance charges (loan fees, service charges, points, etc.) so a borrower can
better compare lenders. Due to the Truth-in-Lending Act, credit institutions must disclose this to
borrowers.
appraisal
An written estimate of a property’s fair market value to justify to the lender that the property is worth the
purchase price. It is usually based on the recent sales of comparable property.
appreciation
The increase in the value of a property due to economic changes or other causes.
ASHI - American Society of Home Inspectors
assessment
Determining the value of a property to impose a real estate tax on the property.
assumable mortgage
The borrower agrees to take over an existing mortgage on the property and makes the mortgage
payments.
balloon mortgage / balloon payment
A mortgage loan that is not fully amortized and requires a final lump sum payment that is considerably
larger than the monthly payments
bill of sale
A written document that transfers ownership of personal property such as a refrigerator that is to be left
in the house for the buyer.
broker
A broker is someone who acts as an agent to bring two parties together for any type of transaction and
earns a fee or commission. In real estate the most common are the real estate broker who brings
together buyers and sellers and the mortgage broker who bring together borrowers and lenders.
buydown
The seller or builder pays a lump sum to the lender to reduce the interest rate (and the monthly loan
payments) for the first few years of a loan. This can help the buyer qualify for a higher loan amount.
buyer’s agent
A real-estate agent that works for and represents the home buyer.
clear title
A title that is free of liens or legal questions as to ownership of the property.
closing
A meeting between seller, buyer, lender and any other party with interest in a property where all of the
documents are signed and money changes hands. The group reviews the settlement statement that
itemizes real estate commissions, loan fees, points, and other closing costs. In many cases the buyer
takes possession of the property at this time.
cloud on title
Any claim that may cause doubt about the title to real estate such as an unreleased lien or unpaid tax.
CMA - Comparable Market Analysis
Commission
Fees paid to a broker for services such as the sale or purchase of a house or for arranging financing of
the house.
Comparable Market Analysis (CMA)
A comparison of the sale prices of similar houses in the same general geographic area is used to help
estimate the value of a house. The CMA is usually done to help a seller price a house.
condominium (condo)
An owner has absolute ownership of a unit in a multi-unit housing complex and shares ownership of
the building and common areas with all other unit owners. The common areas can include the lobby
and elevator.
contingency
A condition that must be met before a contract becomes legally binding. Examples of contingencies are
"subject to the buyer obtaining a mortgage" or "subject to a satisfactory whole house inspection."
cooperative (co-op)
A resident of a multi-unit housing complex own shares in the cooperative corporation that owns the
property and has the right to occupy a specific unit or apartment. The resident does not own the
property but instead holds a lease.
deed
The legal written document conveying title to a property and determines ownership.
default
Failure to make the mortgage payment within 30 days of the due date.
depreciation
Loss of the value of a property due to physical deterioration, functional obsolescence such as only one
bathroom in a four bedroom house, or external obsolescence such as a house surrounded by factories.
discount point
A loan charge equal to one percent of the loan amount.
dual agency
When a real estate agent represents both the buyer and a seller in a transaction. In Illinois this must be
agreed to in writing by both the buyer and seller.
earnest money
Money given by the buyer as a show of good faith to indicate he or she is serious about buying the
house. The earnest money becomes part of the downpayment on the house.
easement
An easement can give another person the right use your property for a specific purpose such as a
driveway or utilities.
eminent domain
The right of the government or municipal boy to take private property for public use through
condemnation. The court decides whether it is for public use and determines the property's fair market
value to be paid to the owner.
encroachment
A building, fence, etc. that extends beyond the property line of the owner and intrudes illegally on
another’s property.
encumbrance
Anything that affects the value or enjoyment of a property, such as a mortgage, taxes, lease, easements,
or restrictions on the use of the property.
equity
The difference between the value of a property and the amount still owed on its mortgage and other
liens.
escrow
Funds held by the mortgage company to pay future taxes and homeowners insurance.
exclusive-right-to-sell listing
A written listing contract that gives a licensed real estate agent the exclusive right to sell a property for a
specified time.
fair market value
The highest price that a buyer would pay for a property and the lowest price the seller would accept.
Fannie Mae (FNMA)
The Federal National Mortgage Association buys mortgage loans from primary lenders so the lenders
have money to make more home loans.
Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD) that insures residential
mortgage loans made by private lenders.
fixed-rate mortgage
A mortgage where the interest rate does not change during the entire term of the loan.
fixture
Personal property that becomes real property by permanently attaching it to real estate. A window
bought at a home improvement store is personal property until it is installed in the house, then it
becomes a fixture.
Freddie Mac (FHLMC)
The Federal Home Loan Mortgage Corporation buys mortgage loans from primary lenders so the
lenders have money to make more home loans.
FSBO (For Sale By Owner) or "Unrepresented Seller"
Real Estate that is sold by the owner without the assistance of a real estate agent.
<Continued on Page 2>
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GLOSSARY
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Glossary - Page 2
Sponsored by Dave McMillin, Jim Maloof/Realtor®, East Peoria, IL
Copyright© 2007-2008 Greater Peoria Homes
Copyright© 2007-2008 Greater Peoria Homes
