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Common Real Estate Terms

Appraisal – The process of estimating or setting the market value of a piece of property, partially based on an analysis of comparable sales of similar homes in the area. An appraisal usually takes the form of a written report. Appraisals are usually required during the mortgage loan approval process.

Closing Costs – For buyers, closing costs consist of expenses that must be paid in addition to the purchase price of the home, like… For sellers, closing costs include expenses that will be deducted from the proceeds of the sale, like…

Commission – Compensation paid to real estate professionals for services rendered in connection with the sale or exchange of real property.

Comparative Market Analysis (CMA) – An in-depth analysis of nearby comparable home sales done by a real estate agent to estimate a home’s market value, usually performed to help select the most appropriate sale price.

Contingencies – Conditions written into a real estate contract that specify that the contract will cease to exist in the event of certain conditions. Contingencies, like requiring an acceptable property inspection report within a certain time period, must be met for a contract to be legally binding and carried out as written

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Contract – An oral or written agreement between competent parties who agree to perform or refrain from performing a certain thing. In real estate there are many different types of contracts, including listings, contracts of sale, options, mortgages, assignments, leases, deeds, escrow agreements, and loan commitments, among others.

Deed – A written, legal document that conveys or transfers property.

Escrow – The process in which an item of value, money or documents is deposited with and held by a trusted third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow the transaction is closed, at which time it is delivered to the seller.

HUD-1 or Settlement Statement – A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form gives a picture of the closing transaction, and provides each party with a complete list of incoming and outgoing funds. “Buyers” are referred to as “borrowers” on this form even if no loan is involved.

Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). The Closing Disclosure is a new form.  For most kinds of mortgages, borrowers who apply for a loan on or after October 3, 2015 will receive a Closing Disclosure.  The lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from the lender. The three days also gives you time to ask your lender any questions before you go to the closing table.

Survey – A map or plat drawn by a licensed-surveyor after measuring a piece of land, to show its area, boundaries, contours, elevations, improvements, and its relationship to the surrounding land. A property survey confirms that a particular piece of land or building is sited in accordance to its legal description.

Encroachment – A situation in real estate where a property owner violates the property rights of his neighbor by building something on the neighbor’s land or by allowing something to hang over onto the neighbor’s property. Encroachment can be a problem along property lines when a property owner is not aware of his property boundaries or intentionally chooses to violate his neighbor’s boundaries. This is also known as structural encroachment.

Short Sale – Happen when the bank agrees to accept a payoff for less than the balance of its loan. The amount of your mortgage is not important. What is important is the market value of your home. It is important to understand the bank is no under any obligation to allow the borrower to do a short sale and to accept the price listed on the MLS even if the short sale was previously approved.

Foreclosure – A situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract.

REO – Property owned by a lender – usually a bank – after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank: the minimum bid in most foreclosure auctions equal the outstanding loan amount, the accrued interest and any fees associated with the foreclosure sale.

Lien – In law, a lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation.

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