Real Estate Definitions
Wonder why you need real estate definitions? Buying a home is like being in a different culture, complete with its own language. You'll benefit from having a brief description of some of the terms you'll encounter.
Have you ever visited another country where English is not the language? I have. As a matter of fact, one of my first careers was as a linguist! So, no wonder this metaphor came to my mind.
In the case of real estate definitions, you need to be familiar with the language, the terms. You may already know a lot of the terms, but you'd be surprised at how many people don't really know what "earnest money" is or "closing" - a lot.
Unlike learning another language, it's really just your own language, if you're an English-speaker. You just need to make some additions to your vocabulary. Not a big deal! You don't even have to sit down and learn all these real estate definitions. Just remember this is here and come back to check when there's a term you aren't sure of.
This list of real estate definitions is far from complete. If you come across something you have a question about, contact me. If there's something you think I should include, let me know.
Because things seem to be changing so much lately with loans, I'm not going to include information here about financing. That may come at a later time, however, when things settle down a bit.
Just let me know if you have any questions.
So, here goes...
Agency: The relationship between a client and real estate agent that authorizes the agent to represent the clients interests in certain transactions.
Agent: One who acts for another.
Appraisal: An estimate of property value. This can refer to the process as well as the final report. Lenders require appraisals to determine property value before giving a loan. The buyer usually pays for it.
Appreciation: An increase in the value of property due to economic or related causes. It's the opposite of depreciation.
Assessment: The imposition of a tax, charge or levy according to established rates.
Bonus room: Homes sometimes have a room that may not have a closet and/or window, so it can't technically be classified as a bedroom. It could be used as one or have a number of other uses, however.
Broker: One who acts as an intermediary on behalf of others for a fee or commission.
Brokerage: Bringing together parties interested in making a real estate transaction.
Broker-in-charge: The person who responsible for the business of a real estate office begin conducted properly and for supervising all the agents.
Building code: Minimum standards for building construction to protect public health and safety.
Building permit: Written government permission for construction, alteration or demolition that shows compliance with building codes and zoning ordinances.
Buyer-agency agreement: A relationship between a buyer and a broker in which the broker is the buyer's agent, with fiduciary responsibilities to the buyer. This can be oral until the buyer is ready to make an offer; then it must be in writing.
Caveat emptor: Latin for "Let the buyer beware." In N.C., once ownership of property has been transfered, even if the buyer discovers something seriously wrong, s/he can't hold the previous owner responsible in any way.
Civil Rights Act of 1866: This prohibits racial discrimination in selling or renting housing.
Closing: Also called settlement in N.C., this is when the parties usually are gathered together to sign and exchange documents, with contract promises fulfilled and funds dispersed. Usually it takes place at the buyer's attorney's office.
Closing statement, settlement statement, HUD-1: A document detailing all cash received, paid, and charges and credits in a real estate transaction.
Commission: Payment to a broker for services rendered; usually a percentage of the selling price and paid by the seller.
Common elements: In the case of condominiums, certain parts of the property that are necessary or convenient for the maintenance, existence and safety, or in common use by residents, are owned by each owner with an undivided ownership interest.
Competitive or Comparative market analysis (CMA): A comparison of property prices based on property recently sold with similarities of location, style and amenities.
Condominium: Absolute ownership of a unit in a multi-unit building, which includes joint ownership of common elements.
Contingency: A provision in a contact requiring certain acts or events happen before the contract is binding.
Covenant: Written agreement between parties requiring a pledge to perform or not perform certain acts regarding property.
Deed (or deed of trust): A document that conveys title to or an interest in real estate, when signed and delivered.
Deed restriction: A clause in a deed that limits use.
Depreciation: Loss of value - could be for any reason such as deterioration, obsolescence. For tax purposes on investment property, it's an expense deduction calculated over time owned.
Dual agency: The legal practice in N.C. of representing both parties in a transaction, as long as both parties agree.
Earnest money: Money deposited by a buyer when contracted to purchase property. It is applied to the sale price if the transaction closes and forfeited if the buyer defaults.
Easement: The right to use the land of another for a specific purpose such as a right-of-way or for utilities.
Escrow: When a transaction is closed by a third party called an escrow agent, who receives certain documents and funds to be delivered when certain conditions are met in the escrow instructions.
Escrow account: Brokers create a trust account to hold funds for a client or other person until a contract is closed or terminated.
Encroachment: A building or some portion of it or other structure such as a fence or driveway, that extends beyond the land of an owner, illegally intruding on adjoining land.
Exclusive-right-to-represent buyer: An agreement between a buyer and agent in which the buyer agrees to only work with that agent for a certain period of time and that agent agrees to work for the best interest of the client.
Exclusive-right-to-sell listing: When a seller appoints a broker as the exclusive agent to sell the property for a set time and with established terms.
Fiduciary relationship: A relationship of trust and confidence. A fiduciary is one in whom trust and confidence is placed, referring to a broker employed under the terms of a listing contract or buyer agency agreement.
Foreclosure: When property pledged as security for a debt is sold to pay the debt in the event of default.
Grantee and grantor: The grantee is the one receiving the property from the grantor.
Homeowner's insurance policy: Standard insurance that covers a home owner from financial loss from common risks. Usually required when financing is involved.
Joint tenancy: Ownership of real estate by two or more parties. When one dies her/his interest passes to the surviving tenant(s) by right of survivorship.
Lease Purchase Agreement: When a buyer makes a deposit for future purchase of a property with the right to lease property in the interim. An attorney should be used.
Lease with Option or lease option: A contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date. An attorney should be used.
Listing agreement: A contract between an owner and a broker, employing the broker to sell the owner's property.
Market value: The most probable price property will sell for under current market conditions.
Multiple listing Service: A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing and able buyers for their properties more quickly than they could on their own.
Offer and acceptance: two essential components of a valid contact; A meeting of the minds.
Percolation test, perc test or soil suitability test: a test of the soil to determine whether it wil absorb and drain water adequately to use a septic system. Results determine how many bedrooms will be allowed in the home built in the area of that test.
Planned Unit Development (PUD): A combination of planned uses in one development, such as housing, recreation and shopping.
Power of attorney: A document authorizing a person to be the attorney-in-fact, to act for another person as indicated in the document.
Real estate: Land; a portion of the earth's surface extending downward to the center of the earth and upward infinitely into space, including all things permanently attached to it, whether naturally or artificially.
Real estate commission: The state governmental agency whose duty is to protect the public involved in real estate transations.
Realtor: A registered trademark term reserved for the sole use of active members of local Realtors boards affiliated with the National Association of Realtors.
Revenue stamps, tax stamps, transfer tax: N.C. requires the seller to pay a tax in the form of stamps which are affixed to a deed.
Right-of-way: Right given by one landowner to another to pass over the land, build a road or use a pathway without transferring ownership.
Reparian rights: Rights of a landowner whose land borders or includes a stream, river or lake to access and use of the water.
Severalty Ownership: Ownership by one person only. Sole ownership.
Subdivision: A tract of land divided by the owner into blocks, lots and streets according to a recorded subdivision plat, which must comply with local ordinances and regulations.
Survey: The process of measuring boundaries and land areas. It includes on-site lot line measurement, position and dimensions of buildings, and existing encroachments or easements.
Tenancy In Common: Ownership by two or more persons who hold an undivided interest without right of survivorship. (In event of the death of one owner, his/her share will pass to his/her heirs.
Time is of the essence: In a contract, this phrase means something must take place within a stated amount of time.
Title Insurance: An insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title.
Title search: The examination of public records to determine the current state of property ownership.
Zoning ordinance: a municipality's regulation and control of the character and use of property.
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