Glossary of Real Estate Terms
Acceleration Clause - A clause that is written into a mortgage giving the lender the right to accelerate or "call" the remaining principal balance of the mortgage when the payments become delinquent.
Adjusted Cost Basis - This is an accounting term that attempts to establish the value of real property for tax purposes. It is calculated by starting with the original cost, plus any allowable capital improvements, plus certain acquisition costs, and less any allowable depreciation.
Amortization - Amortization is the reduction of a loan through periodic payments in which interest is charged only on the unpaid or remaining balance.
Caveat emptor - "Let the buyer beware."
Closing - The closing is the conclusion of the sales transaction when the seller transfers a real estate title to the buyer in exchange for consideration (payment).
Closing Costs / Closing Statements - A closing statement is a detailed financial summary of the total price of the real property being purchased. It includes the computations and adjustments of money for the buyer, seller and any other interested party such as the broker. Usually these costs are paid by the buyer at the time of the closing and usually include the down payment, mortgage points, mortgage insurance premium, homeowners insurance, title charges, credit report fees, home inspections, appraisals, prepayments and/or prorated property taxes, deed recording fees and document preparation fees.
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Consideration - Consideration is a legal term used for all contracts. It is anything of value and can be tangible or intangible. It can take many forms including money, objects or a service.
Debt Service - Debt service is the payment or payments toward a mortgage.
Deed - A deed is a written document in which title to real property is transferred from one person to another.
Default - A default occurs when one party to a contract fails to fulfill an obligation.
Depreciation - Depreciation is an accounting term that refers to loss of value of real property due to age, physical deterioration, or functional obsolescence. Also, it is the change in value of a real estate investment over the useful life of the investment.
Equity - Equity is an owner's financial interest in a property after deduction of the outstanding mortgage balance.
Escrow - Escrow funds are deposits of money, deeds or other consideration with an authorized third party to be held until completion of a real estate transaction.
Foreclosure - A foreclosure is a legal proceeding initiated by a lender (lien claimant) to force the sale of a property to pay the remaining balance due on the loan (mortgage). A foreclosure is usually initiated by the lender when the borrower is deliquent on his payments.
Legal Description - A real estate legal description is a formal description that identifies a specific piece of real property from all others. This document shows the precise location of the property and its dimensions.
Mortgage - A mortgage is a written document that pledges real property as collateral or security for repayment of a debt (loan).
Mortgagee - One who lends money for a mortgage.
Mortgager - One who borrows money with his real property being used as collateral or security.
Option Contract - A contract that gives the buyer the right to purchase (or not purchase) a property for a specific period of time. Should the buyer choose not to purchase the property then the seller retains both the property and the price (consideration) paid by the buyer for the option contract.
Personal Property (Chattel) - Personal property is other property attached to or inside real property and can include items such as carpeting, draperies and ceiling fans.
Real Property - The term real property includes land, buildings, improvements, and their permanent attachments.
Title - A title is evidence or proof of ownership.
Title Insurance - Title insurance is a type of insurance protecting the homeowner (buyer) against loss due to undiscovered title defects.
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