A mortgage that allows the interest rate to be changed periodically.
A legal relationship
in which an owner-principal engages a broker-agent in the sale of property
or a buyer-principal engages a broker-agent in the purchase of property.
American Society of Home
A professional trade association that provides training and
education in home inspections. Members must meet qualification
requirements to join.
repayment of a mortgage by periodic installments.
Annual percentage rate
The total finance charge (interest, loan fees, points) expressed as a
percentage of the mortgage amount.
An evaluation of a
piece of property to determine its value.
A mineral fiber used
in some building materials such as flooring, siding, insulation and
roofing. It is presently banned for most uses in real property.
placed on property by a public tax assessor as the basis of property
Assumption of Mortgage:
agreement whereby the buyer assumes responsibility for a mortgage owed by
the seller; the seller remains liable to the lender unless the lender
agrees to release the seller from the liability.
where the amount financed is not fully amortized over the period of the
loan. When the loan becomes due, a large sum, or "balloon" payment, is
required to satisfy the mortgage.
mortgage made, until a longer-term loan can be made; it's sometimes used
when a person needs money to build or purchase a home before the present
one has been sold.
A person licensed by a
state real estate commission to act independently in conducting a real
estate brokerage business. Although requirements vary from state to
state, an individual must usually have at least one year of experience in
the industry and pass an examination to earn a broker's license.
State and local
laws that regulate the construction of new property and the rehabilitation
of existing property.
The maximum amount an
interest rate or monthly payment can change, either at adjustment time or
over the life of the mortgage.
The final step in the
sale and transfer of ownership of a property. The title is transferred
from the seller to the buyer; the buyer signs the mortgage and pays costs
of settlement; and any money due the seller and purchaser are paid.
expenses, not including the price of the home, payable by the seller and
the buyer at the closing (e.g., brokerage commissions, title insurance
premiums, and inspection, appraisal, recording, and attorney's fees).
institution authorized to provide a variety of financial services,
including consumer and business loans (generally short-term), checking
services, credit cards, and savings accounts.
similar in size and character to the one being bought or sold.
Ownership of a
unit only, rather than of the entire building with the land.
that must be satisfied before a contract is binding.
rate, fixed-term mortgage not insured by the federal government.
A legal document conveying
title to a property.
A deed that
transfers only that title or right to a property that the holder of that
title has at the time of the transfer. It does not warrant or guarantee a
Department of Housing and
Urban Development (HUD):
A U.S. Government agency established to
implement certain federal housing and community development programs.
federal regulations which require sellers to disclose such conditions as
whether a house is located in a flood plain or whether there are known
defects in or affecting the property.
A portion of a
down payment given to the seller by a potential buyer indicating the
buyer's intent to complete the purchase of the property.
that exists when a permanent structure encroaches or lies across a
property line, or beyond the allowed buildable area of property.
that limits the interest in a title to property such as a mortgage, deed
restrictions, easements, unpaid taxes, etc.
based on the borrowers' equity in their home rather than on their
The placement of money
or documents with a third party for safekeeping pending the fulfillment or
performance of a specified act or condition.
An agency within the Department of
Housing and Urban Development (HUD) that administers loan guarantee
programs and loan insurance programs to make more housing available.
A mortgage that starts with low monthly
payments and increase at a predetermined rate.
or company that obtains mortgages for others by finding lending
institutions, insurance companies, or private sources to lend the money;
may also make collections and handle disbursements.
that provides protection for the lender in case of default and guarantees
repayment of the mortgage if the borrower becomes disabled or dies.
increase in the outstanding balance of a mortgage resulting from the
failure of periodic debt service payments to cover required interest
charges on the loan.
A dollar amount paid
to a lender as a consideration for making the mortgage. A point is 1
percent of the loan amount; also called discount points.
Taxes, and Insurance (PITI) Payment:
A periodic (typically monthly) payment
that includes the principal and interest payment plus a contribution to
the escrow account established by the lender to pay insurance premiums and
property taxes on the mortgaged property.
Private Mortgage Insurance
Insurance issued to a lender by a private company to protect the lender
against loss on a defaulted mortgage loan. Its use is usually limited to
loans with high loan-to-value ratios. The borrower pays the premiums.
A colorless, odorless gas
formed by the breakdown of uranium in subsoils. It can enter a house
through cracks in the foundation or in water and is considered to be a
Registered collective membership marks
that identify real estate professionals who are members of the National
Association of Realtors and who subscribe to its strict Code of Ethics.
Savings and Loan
Depository institutions that specialize
in originating, servicing, and holding mortgage loans, primarily on
owner-occupied residential property.
institution organized to hold individual depositors' funds in
interest-bearing accounts and to make long-term investments, such as home
Shared Equity Mortgage:
loan in which an investor is granted a share of the equity, thereby
allowing the investor to participate in the proceeds from resale.
A document that provides
evidence of ownership.
claim or encumbrance on property that affects marketability.
lenders and homeowners against financial loss resulting from legal defects
in the title.
government agency that provides services for eligible veterans of the
armed forces. Among other programs, it guarantees mortgage loans made by
private lenders to veterans.
A special suspension of zoning laws to allow the use of property in a
manner not in accord with existing laws.
Local municipal ordinances that classify property according to specific
uses (single family, residential, commercial, industrial, multi-family,
Definitions of Agency
Agency laws vary from
state to state--
and are continuing to evolve. The goal is to provide competent and
professional service to the consumer. When there are potential conflicts
in those fiduciary duties, the obligation of each agent is to disclose the
nature of that conflict and to obtain the consent of the parties involved
in the transaction. The following are some of the common terms.
is a framework that developed in the law to allow individuals to act
through another person or representative. This particularly occurs in
commercial transactions. Examples might include hiring an attorney to
represent you in a business transaction, working with a stock broker to
purchase stocks or other investments, or working with a real estate broker
to buy or sell real estate. Your legal agent may have unlimited or
limited powers on your behalf. Your legal agent owes you certain
fiduciary-like statutory duties which include such things as
confidentiality, promoting your best interests, and exercising reasonable
skill and care.
buyers of residential real estate worked with a real estate brokers or
sales associates on a non-agency basis. In other words, the sales
associate you work with acts as the legal agent of the seller and not as
the buyer’s legal agent. In contrast, buyers in commercial transactions
often work with a real estate sales associate as their agent. Now, you
may contract with the agent you are working with to represent you. As a
buyer, you have access to listings available to your buyer’s agent through
the Multiple Listing Service. As a buyer, you will also receive other
services from your buyer’s agent, such as financing information,
assistance in determining your particular price range, and assistance in
facilitating the closing. Typically, the buyer and the brokerage company
will enter into a written brokerage agreement. In addition, the buyer’s
agent will owe you all of the fiduciary duties as defined in agency law,
including loyalty, confidentiality, accountability, and reasonable care
and skill. The buyer’s agent will represent your best interests during
Seller’s (Listing) Agent--A
seller’s agent works to assist the seller in locating a buyer and in
negotiating a transaction suitable to the seller’s specific needs. A
seller’s agent has fiduciary duties to the seller, which include loyalty,
full disclosure, confidentiality, diligence, obedience, reasonable care,
and holding safe moneys entrusted to the agent. Although a seller’s agent
represents the seller in the fiduciary capacity, they owe the buyer
fairness and honesty. If your sales associate is representing the seller,
just what kind of service can you, the buyer, hope to get? Plenty. As
agent of the seller, real estate professionals fulfill that agency
relationship by assisting buyers in all aspects of the home purchase. The
law requires that all sales associates treat buyers with honesty and
fairness. In addition to the law, there is strong motivation to do so
because buyer satisfaction means repeat and referral business. Sales
associates want you to think of them the next time you or a friend is
selling a home.
Limited or Dual Agency--In
this type of situation, both the seller and buyer in a transaction are
represented by the same legal agent. In this case, there are
specific statutory duties that the dual agent owes to both buyer and
seller. However, those duties have a “limitation.” Most notably is
the duty not to disclose confidential information of one party to the
other. Dual Agency is allowed only with your consent. Upon
entering into a brokerage agreement (whether as buyer or seller) you will
be given a form explaining dual agency that seeks your consent to allow
your agent to act as dual agent should the situation arise. If you
consent at that time and a dual agency situation actually arises, you will
be asked to confirm your prior consent before entering into a contract for
the purchase or sale of property.