REAL ESTATE TERMS

 AGENCY:  Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter.

AGENT:  One who is authorized to act for or represent another (principal), usually in business matters.

CLOSING:  The final procedure in which documents are executed and/or recorded, and the sale is complete.

CONTINGENCY:  Commonly, the dependence upon a stated event which must occur before a contract is binding.  For example:  The sale of a house, contingent upon the buyer obtaining financing.

CONVENTIONAL LOAN:  A mortgage or deed of trust not obtained under a government insured program, (such as F.H.A. or V.A.)

COUNTER OFFER:  An offer (instead of acceptance) in response to an offer.  For example: A offers to buy B’s house for X dollars.  B, in response, offer to sell to A at a higher price. B’s offer to A is a counter offer.

DEED:  A conveyance instrument, given to pass fee title to property upon sale.

EARNEST MONEY:  Money given by the buyer with an offer to purchase.  Shows good faith.

EARNEST MONEY AGREEMENT:  An agreement between a buyer and seller of real property, setting forth the price and terms of the sale.  Also called a purchase agreement.

ENCROACHMENT:  Generally, construction onto the property of another, such as a wall, fence, building, etc.

ENCUMBRANCE:  A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of title.

ETHICS:  With regard to professions, a code of professional standards, containing aspects of fairness and duty to the profession and the general public.

FULL DISCLOSURE:  In real estate, revealing all the KNOWN facts which may affect the decision of a buyer.  An agent must disclose known defects in the property for sale.

GRANDFATHER CLAUSE:  The clause in a law permitting the continuation of a use, business, etc., which, when established, was permissible but, because of a change in the law, is now not permissible.

LIQUID ASSETS:  Cash, or assets immediately convertible to cash.

LISTING:  An agreement between an owner of real property and a real estate agent, whereby the agent agrees to secure a buyer for specific property at a certain price and terms in return for a commission.

MULTIPLE LISTING:  An exclusive listing, submitted to all members of an association, so that each may have an opportunity to sell the property.

OFFER:  A presentation or proposal for acceptance, in order to form a contract.  To be legally binding, an offer must be definite as to price and terms.

PROMISSORY NOTE:  A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to the bearer.

PROPERTY TAX:  A tax levied on real property; the amount of the tax is dependent on the value of the property.  Oregon has property tax.

SEPTIC SYSTEM:  A sewage system, whereby waste is drained through pipes into a septic tank and then into a drain field.  Found in areas where city or county sewers have not yet been installed.

ZONE:  An area of a county or city in which the use of the land is restricted by law (zoning ordinance).


Bank Financing Terms

AMORTIZED LOAN:  A loan which is paid off in equal installments during its term.

ASSUMABLE MORTGAGE:  Agreement by a buyer to assume the liability under and existing note secured by a mortgage or deed of trust.  The lender usually must approve the new debtor in order to release the existing debtor (usually the Seller) from liability.

BALLOON PAYMENT:  The final payment of a mortgage loan when it is larger than the regular payment.

CLOSING COSTS:  Expenses incurred in the closing of a real estate transaction.  The lender has fees separate from the title company, such as 1%-2% charge on the dollar amount borrowed to purchase the property (loan origination fee).   The title company’s fees include such things as; costs of title examination, premiums for title policies, typing of documents, mailing of documents and recording charges.

EQUITY:  The difference between the market value of the property less the amount of existing liens.

LOAN COMMITMENT:  A written promise by a lender to make a loan to the buyer under certain terms and conditions.  These include: interest rate, length of the loan, lender fee, percentage rate, mortgage and hazard insurance and any other special requirements.
 
LOAN TO VALUE RATIO:  Determined by dividing the loan amount by the property value.  Example: The LTV of a property appraised at $100,000, secured by a loan of $90,000, is 90%. 

MORTGAGE:  The pledge of real property to secure the debt (loan) by a written document given to the borrower (mortgagor).  Should be recorded.
 
MORTGAGEE: The party lending the money and receiving the mortgage. 

MORTGAGOR:  The party who borrows the money and give the mortgage.
 
MORTGAGE INSURANCE PREMIUM (MIP):  Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sales price.  The Federal Government writes this form of insurance through the FHA and VA. 

NOTE:  A written promise to pay a certain amount of money. 

ORIGINATION FEE:  A fee made by a lender for making a real estate loan.  Usually a percentage of the amount loaned, such as one percent.
 
POINT:  One per cent of loan amount. 

PREPAYMENT PENALTY:  A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due. 

TITLE:  The evidence one has of right to possession of land. 

TITLE INSURANCE:  Insurance against loss resulting from defects of title to a specifically described parcel of real property.