It doesn’t mater if you are a First Time Home Buyer, or your 5th real estate transaction. Purchasing a home is one of the largest investments you may make; and can be quite daunting. Every industry has its inside “jargon” and the Real Estate industry is no exception. Your Real Estate Agent may assume you know everything she is talking about… P&S, inspections, contingencies, pre-approvals… Wait what are we talking about here? Can you “talk the talk”? Below is a Glossary of some of the most common Real Estate words that will be helpful as you begin or re-aquatint yourself in the home buying process.
Addendum – A form describing a change or addition to the purchase agreement. Anything added in addendum should be looked at very carefully. Addendums are used for many changes, such as the extension of the closing date.
Appraisal – In a real estate transaction, the appraisal is a determination of the value of a house. The evaluation is required by the lender and prepared by the lender’s choice of an objective and impartial professional appraiser. The appraisal may not be the same amount as whatever selling price a real estate agent may have calculated. If the appraisal is lower, the buyer and seller have several options, including lowering the asking price.
Assessed Value – Typically the value placed on property for the purpose of taxation.
BOM- Back on Market. Property is available for sale. When a property was under agreement or had an accepted offer, and it is not longer under agreement.
Certificate of Title – The title certificate is a document that ensures the property being conveyed is legally owned by the seller(s) and that no other party owns any part of it or has any claims, such as liens, against it.
Closing – This is where the term “closing table” comes into play, and the process is also known as “settlement.” You, your agent or attorney and the escrow agent, along with the seller and her agent or attorney, sit at a table and finalize the purchase. Sometimes a lender’s representative is present as well.
Closing Costs – All the additional expenses incurred in financing and purchasing the home. These expenses typically include attorney’s fees, a loan origination fee, escrow impounds, and other miscellaneous charges.
CMA (Comparative Market Analysis) – A determination of a home’s market value for the purpose of determining a fair asking price. Real estate brokers compile the CMA by comparing the subject house to those that have recently sold within close proximity. Many times a buyer will request a CMA to ensure she is not overpaying for a house. Although the CMA is similar to an appraisal, it will not replace a lender-required appraisal.
Comps – Properties that are comparable to the property being analyzed.
Concession – Something given up or agreed to in negotiating the sale of a house. For example, the sellers may agree to help pay for closing costs.
Contingency – A condition that must be met before a contract is legally binding. For example, home purchasers often include a home inspection contingency and loan approval; the sales contract is not binding unless and until the purchaser has the home inspected, and the buyer is granted the mortgage commitment.
Cooperative (Co-op) Project – A project in which a corporation holds title to a residential property and sells shares to individual buyers, who then receive a proprietary lease as their title.
Counter Offer – A form that requests the addition or elimination of parts of the original purchase agreement.
CC&Rs – Covenants, conditions and restrictions. This is where you find out that, no, you can’t paint your front door blue. These documents set out the rules that homeowners must obey. This is often in a condominium, Town homes or subdivision.
Disclosures – Information about the home that a seller must provide, by law, to a buyer. The number and types of disclosures provided to the buyer depend on State.
Deed – The deed is the legal document that provides proof of the transfer of ownership as real property.
Down Payment – The down payment is the percentage of the purchase price that the buyer pays in cash. Depending upon lender, this percentage generally ranges from 3 to 20 percent.
Due Diligence – The responsibility of the buyer to exercise the appropriate care before closing on the purchase. Due diligence includes verifying all of the seller’s representations and uncovering any other pertinent facts that have not been disclosed but have a bearing on whether or not you want to purchase the property.
Earnest Money Deposit – The earnest money deposit is money provided by the home buyer to the seller to prove her earnest intent to purchase the property. The amount varies, and the check is typically submitted with the purchase agreement. If the sale goes through, the earnest money deposit is applied to the down payment. If the buyer walks away from the sale, through no fault of the seller, he may forfeit his earnest money deposit.
Easement – A right to the use of, or access to, land owned by another.
Escrow – The escrow process assures that the purchase funds are released and that the transfer of the house is completed. The escrow company is a neutral third party to the process, in MA it is generally the Real Estate Brokerage and uses the purchase agreement and other associated documents as instructions.
Fiduciary Duty – The broker under which your real estate agent works is your fiduciary. She/He is held to specific duties, outlined by state law, to her principal (you). Some of these duties include disclosure, confidentiality, reasonable care and diligence and loyalty.
Foreclosure – A legal action that ends all ownership rights in a home when the home buyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
Final Walk-Through – The buyer is allowed one last chance to walk through the home prior to the close of escrow. This inspection is not to turn up newly-discovered defects, but to ensure that the home is in the same condition as when the offer was tendered. Generally done up to 48 hrs or closing.
HOA Docs – Homeowner’s Association Documents. When purchasing a condo or a home in a managed community, you have a right to view recent HOA meeting minutes, a copy of their current budget, CC&Rs and other equally fascinating documents. They’re important, though, so set aside an hour or two to go over them, or have your legal council review.
HUD-1 Settlement Statement – A final listing of the closing costs of the mortgage transaction. It provides the sales price and down payment, as well as the total settlement costs required from the buyer and seller.
Mortgage – A legal document that pledges the house to the lender as security for the loan to purchase the house.
Mortgage Commitment Letter – A binding of-fer from your lender that includes the amount of the mortgage, the interest rate, and repayment terms.
Offer – A presentation of a bid on a home for sale, should include price, dates, contingencies and conditions of the purchase.Offer: A formal bid from the home buyer to the home seller to purchase a home.
P&S Purchase and Sale Agreement. It is A document that details the price and conditions for a transaction. In connection with the sale of a residential property, the agreement typically would include: information about the property to be sold, sale price, down payment, earnest money deposit, financing, closing date, occupancy date, and any special contingencies
It is a legal document that should have legal council prepare or review.
Power of Attorney – A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Pre-Qualification – The process of determining if a borrower qualifies for a loan and the approximate amount of money she may qualify to receive.
Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific
amount. It also shows a home seller that you’re a serious buyer.
Right of First Refusal – A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
Transfer Tax- State or local tax payable when title to property passes from one owner to another. For example in MA the rate is $4.56 per $1000.
Title Insurance – An insurance policy that protects against damages due to defects in the chain of title.
UAG- Under Agreement. When a property has an accepted offer also know as Under Contract.
Walk-Through – A common clause in a sales contract that allows the buyer to examine the property being purchased at a specified time immediately before the closing, for example, within the 48-24 hours before closing.
Content derived from the Federal Trade Commission
Laura Hall Sells real estate on the North Shore of Boston Ma. She works as a buyer or sellers agent and would be happy to have a conversation with YOU! Call her today