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Assessed Value / Valuation:
Items that have a value. Assets that can be liquefied and turned into cash. (ex. Real Estate, Personal Property, Bank Accts., etc.)
Assumption of Mortgage:
The purchase of a financed property where the purchaser accepts the liability for the outstanding debt.
Auction:
Marketing the property to the highest bidder. The property will then be sold to the highest bidder at public auction, the bidders' identities are not hidden and anyone is welcome to attend the auction.
Back Taxes:
This is unpaid property taxes. This can become a lien on real estate. If they go unpaid for a certain amount of time, the property can be sold to satisfy the debt.
Balloon Mortgage:
This mortgage is structured to have a minimal payment per month with a balloon payment due at the end of the mortgage term. The last payment is usually in a lump sum of the original loan.
Bankruptcy:
This provides a temporary automatic stay to the foreclosure proceeding to stop the sale. A debtor can take court action to help pay off outstanding debt.
Bargain and Sale Deed:
A type of deed that is used to transfer title. This is when a buyer purchases the property at a discount, but the seller offers no warranty that the property is free of liens or any outstanding claims.
Basis Point:
This in one 100th of 1%.(ex. The mortgage rate is 6.75% but last week they were 6.25%. The increase was 50 basis points). The formula is (675 minus 625 equals 50).
Bid:
This is an amount someone offers to pay you for property.
Bill of Sale:
A written document that passes title of personal property from the seller to the buyer.
Binder:
This is an agreement that is accompanied with a deposit, for the purchase of real property. This is considered “Good Faith Money”.
Bi-Weekly:
A mortgage that is structured to be billed on two-week intervals. The rate is exactly half of a monthly mortgage payment, but it will amortize much faster.
Blanket:
A blanket mortgage or blanket deed or blanket insurance policy covers two or more parcels or real estate.
Blanket Mortgage:
This is one mortgage that covers more than one parcel of land or real estate.
Blighted Area:
This is an area of a city that is run down or dilapidated. This is a great investment opportunity to rehabilitate the property or demolish and rebuild.
Blind Pool:
This is an investment program where the investors invest a set amount of money without knowing the properties that will be purchased.
Bond:
This is a certificate that serves as evidences to the terms and conditions of debt that is owed.
Bridge Loan:
A type or mortgage that serves as financing between terminating one loan and begin another loan. This is used by homeowners who have not sold there homes but have found a property that they would like to purchase. These funds are used for the down payment or closing on the new property.
Broker:
A state-licensed agent who brings two parties together to perform a real estate transaction. By doing this they earn a commission of set fee.
Buy-Back Agreement:
This is a stipulation in the contract that the seller agrees to buy back the property within a certain period of time. Buyer’s usually asks the seller to agree to these terms due to a possible business transfer, applying for a construction permit, etc. This is definitely something to consider if you are looking for a loop hole investment opportunity, but buy back at a reduced rate.
Cash Buyer:
This is a private investor or company that is willing to purchase real estate for cash. This type of transaction is usually completed quickly and is sold at a discounted rate.
Capital Gain:
This is the monetary gain of a real estate sale.
Cash Out:
This term is used when an asset is completely liquidated.
Cash Purchase:
This is when the buyer pays all cash and does not finance the purchase. The benefits of this type of transaction are both good for the buyer and seller. This enables the buyer to purchase the real estate at a better price and the seller can close immediately.
Caveat Emptor:
“Let the Buyer Beware” The buyer purchases the property at their own risk.
Caveat Subscriptor or Caveat Venditor:
“Let the Seller Beware” If the sale of something is defective the seller is liable for it. The seller will have to repair or replace it.
Certificate of Occupancy (C/O):
This is a document that is issued by local government stating that all building codes are met and the structure can be occupied by the public.
Clear Title:
A title that is free of any type of lien. (This is extremely important when purchasing a property).
Closed-End Mortgage:
This type of mortgage cannot be increased during the life of the mortgage.
Closing:
The transferring of ownership from the property seller to the property buyer. This is where all documents are signed and financing is secured and money is transferred from buyer to seller.
Collateral:
A home is collateral when taking out a loan. If the owner defaults they risk losing the property to fulfill their loan balance.
Collection:
This is where the lender tries contact the borrower in efforts to bring the loan current. During this time the lender documents every effort that is made to collect this debt in case foreclosure is required.
Commitment Letter:
An official notice is sent to the borrower from a lender indicating that the loan application has been approved. This notice will also include the terms of the loan.
Common Areas:
Areas of property that is shared by all owners and tenants. (ex. In a development the common areas may be the pool, club house, park and green ways.)
Community Property:
This is property that was acquired during marriage. It is considered to be owned jointly (equal shares), except under certain circumstances. This doctrine of ownership now exists in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington State. Wisconsin has equivalent ownership.
Co-Mortgagor:
One of more parties signs a mortgage contract with another party or parties; they are both jointly responsible to repay the loan.
Comparable Sales:
This is used to determine the value of a home. They use the sales from comparable properties that are presently on market or homes that have been sold in the last few months.
Conditional Offer:
This is a contract that stipulates one ore more requirements to be satisfied before purchaser is obligated to buy property. (ex. Purchaser wants to rezone the property. The town rejects the rezoning request. The owner is then obligated to refund the earnest money).
Conditions:
Provisions that are stated in a contract that can alter or cease to exist under certain circumstances. (ex. A fire destroys a house before closing. The buyer is not obligated to close on that property.)
Contingency:
A stipulation in a contract that must be met before the contract is legally binding. (ex. Obtaining an inspection report that states the house is satisfactory.)
Contract:
An agreement of sale for real property between the buyer and seller. It states the terms and conditions of closing along with the date for closing on the property.
Conventional Loan:
A type of mortgage loan that is insured by the Federal Housing Administration or guaranteed by the Veterans Administration.
Convertible Arm:
This is an Adjustable Rate Mortgage that offers the borrower to convert payments to a fixed-rate mortgage within a specific period of time. This conversion is made for a nominal fee.
Cosigner:
One who accepts total responsibility for another’s debt.
Counteroffer:
A monetary offer that is rejected by a buyer or seller, with a counteroffer made by the buyer or seller.
Creative Financing:
Any financing that is not made through a traditional mortgage. (ex. Assumption of mortgage, land contracts, balloon payment loans etc.).
Credit History:
This is a history of ones past behavior in repayment of loans and use of revolving credit such as credit cards. These reports are recorded and used by lender to asses an applicant’s creditworthiness. (FICO Scores)
Credit Rating (Report):
A report that evaluates a person’s capability to repay a debt. (Three major credit bureaus are Equifax, Experian, and Trans Union).
Creditor:
A person whom money is owed.
Debt:
An obligation to repay amount owed.
Deed:
A written document that conveys title of property.
Deed in Lieu of Foreclosure:
This is a deed instrument in which a mortgagor (i.e., the borrower) conveys all interest in a real property to the mortgagee (i.e., the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.
The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossession, and additional advantages if the borrower subsequently files for bankruptcy.
Deed to Secure Debt:
This is a type of mortgage that is used to secure debt. This would help the lender to foreclosure on the property in case borrower defaults on the loan.
Deed of Trust:
This is used in many states in lieu of a mortgage. One or more TRUSTEES secure the repayment of the loan by securing the legal title.
Default:
Failure to fulfill mortgage payment on due date. There is a grace period with no interest penalty, but the payment is still considered to be late. If the loan payment is not received within 30 days most lenders will report this to credit bureaus as a late payment.
Deficiency:
A court order stating that the borrower still owes money after a foreclosure. This is the money that the mortgagor seeks to recover for shortages that was owed after the property is sold at public auction.
Deposit:
Money that is paid in “Good Faith” to assure performance of a contract. These are usually used with sales contracts and leases.
Distressed Property:
This is usually real estate that is under foreclosure or impending foreclosure.
Distress Sale:
This is a sale where the seller must sell the property to raise cash due to bankruptcy or the seller is a lender has a limit on REO inventory.
Due on Sale Clause:
This is a clause in a mortgage that states the loan is due immediately upon sale of the property.
Earnest Money:
This is a deposit that is made by a potential buyer to show they are serious in the purchase of the property. “Good Faith Money”
Easement:
The right one party has over another parties land. (ex. The right a utility company has to lay there equipment over others’ property).
Entity:
A legal form for which property is owned. (ex. Corporation, Partnership, Real Estate Investment Group (REIT), Joint Venture, Limited Partnership, etc.).
Equal Credit Opportunity Act:
A federal law that discourages lenders to discriminate based on sex, marital status, age, race, religion, color, etc.
Equity:
This is the value or interest the owner has on the property over and above the liens.
Equity of Redemption:
The right of an owner to redeem the property before the loan is foreclosed upon. The owner would need to pay back the principal, interest, and any legal expenses. Depending on the state the property owner may be able to reclaim the property after foreclosure has occurred.
EREIT:
This is a Real Estate Investment Trust, or REIT, that invests primarily in real properties, as opposed to investing in mortgages or construction loans on real property. EREIT stand for Equity Real Estate Investment Trust.
Escrow:
This is an agreement between two or more parties to place documents or money with a third party for safekeeping. (ex. When you deposit your Earnest Money “GOOD FAITH MONEY” it is placed in escrow until closing, it is then transferred to seller).
Eviction:
Is the removal of an owner from real property by a law enforcement officer. This may be necessary to obtain possession of the premises.
Examination of Title:
This is where a title search is performed through public records.
Execute:
The signing of a contract. (ex. This is where the buyer and seller sign a sales contract).
Executor:
The person who is named in a will to execute the deceased estate as it is stated in the will.
Extension:
An agreement between two or more parties to extend a time period.
Fair Credit Reporting Act:
Federal Law allows individuals to correct information that is used by Credit Reporting Services.
Fair Market Value:
This term is usually used in property tax. It is also the amount the buyer or seller may value a piece of property based on similar houses that are on the market or have been sold in the last few months.
Federal National Mortgage Association - Fannie Mae (FNMA):
This is the largest supplier of home mortgage funds in the nation. Fannie Mae, is a
corporation sponsored by the
United States Government. Created in 1938 to establish a
secondary market for
mortgages insured by the
Federal Housing Administration (FHA).
FDIC:
Federal Deposit Insurance Corporation.
Federal Housing Administration (FHA):
This is a
United States government agency created as part of the
National Housing Act of 1934. An agency that is part of U.S. Dept. of Housing and Urban Development. The administration was put together to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgages; and to make more housing available.
FHA Mortgage Insurance:
Mortgage insurance is available for housing loan lenders, protecting against homeowner mortgage default. For a small fee, lenders can obtain insurance for a value of ninety percent of the appraised value of the home or building. In the event of a mortgage default, this value is transferred to the FHA and the lenders receive a large percentage of their investment. The other ten percent is received from the original down payment for the home.
Fico Scores:
This measures the borrowers credit risk. This scoring is based on the applicants credit history and how frequently they use credit. The score can range from: 300 to 850. This not only determins if the loan is approved but also what the terms the lender is offering.
Financing:
Money that is borrowed to buy property.
First Mortgage:
This is also known as a Senior Mortgage. This is a mortgage that has priority as a lien over any and all other mortgages.
Flip:
This is an immediate purchase and resale of property at a quick profit. This can take hours or days.
Foreclosure:
This This is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that "the lender has foreclosed its mortgage or lien."
Forbearance:
A legal action taken to remedy a default or breach of contract in hopes to satisfy the default amount, and to give additional time.
Freddie Mac (FHLMC):
A
government sponsored enterprise, is a stockholder-owned, publicly-traded company chartered by the
United States federal government in
1970 to purchase
mortgages and related securities, and then issue securities and bonds in financial markets backed by those mortgages in secondary markets. Freddie Mac, like its competitor
Fannie Mae, is regulated by the
Office of Federal Housing Enterprise Oversight(OFHEO) in the
United States Department of Housing and Urban Development.
Full Amortization Term:
This is the amount of time it will take to pay off a mortgage through periodic payments of principal and interest.
Gain:
This is an increase in money or property value. This usually results over time because the value of the property appreciates each year from the time it was purchased.
General Lien:
This is a lien that secures all of the property owned by the debtor, rather than just a specific property.
Government National Mortgage Association - Ginnie Mae (GNMA):
This type of mortgage was created by the
United States Federal Government through a 1968 partition of the
Federal National Mortgage Association. The GNMA is a wholly owned corporation within the
United States'
Department of Housing and Urban Development (HUD). Its main purpose is to provide financial assistance to low- to moderate-income homebuyers, by promoting
mortgage credit.
Grantee:
The party with whom the Title to Real Property is given.
Grantor:
This is the individual who gives a Deed. (ex. Former Owner, Guardian for someone who may be Incompetent, Bankruptcy Trustee, etc.)
Guarantee:
The guarantor will take liability of the loan if the borrower defaults. The guarantor is now responsible for paying this back.
Habitable:
Appropriate conditions for human habitation.
Home Equity Conversion Mortgage (HECM):
This is considered a Reverse Mortgage insured by the Federal Housing Administration FHA).
Home Equity Line of Credit:
This is a type of Home Equity Loan that allows the borrower to draw money from an account that draws against the equity in their home. There is a predetermined amount that they are allowed to borrow. Interest is accrued based on the amount of money that is actually borrowed.
Home Inspector:
This is a professional who evaluates the property for structural and mechanical defects. This is usually done after Contract and before Closing. Some states require these inspectors be licensed and bonded.
Homestead:
This applies to a homeowner’s principal residence by some state statues. This protects the homeowner against judgments up to specific amounts.
Housing and Urban Development (HUD):
HUD wants to assure safe and decent housing. They want to increase homeownership and support community development. They lend money to developers that can offer affordable housing at a reduced or low-interest rate.
Impound:
To take possession of, or take by court order.
Inspection:
Physically checking the property or documents to determine if it is sound.
Interest-Only Loans:
Only the interest is paid until the maturity of the loan and then the remaining balance is due.
Involuntary Lien:
A lien that is put on a property without consent of the owner. (Unpaid Taxes, etc.)
Judgment Lien:
This is claim that is put on a piece of property resulting from a judgment.
Junior Lien/Junior Mortgage:
A claim against the property that will be satisfied only after prior mortgages have been satisfied.
Judicial Foreclosure:
Using a "deed in lieu of foreclosure," the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract. A proceeding simply known as foreclosure.
The property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward the lender receives title to the immovable property in return.
Late Charge, Late Fee:
This is a penalty that a lender charges for payments made after a due date.
Legal Notice:
This is a recorded notification.
Letter of Intent:
This is a letter that expresses interest in a piece of property with a desire to enter into contract.
Liability:
This is a financial obligation to a debt.
Lien:
The broadest term for any sort of charge or encumbrance against an item of property that secures the payment of a debt.
Lien Avoidance:
An action taken to clear title to land from a judgment lien arising out of pre-petition activity in a state court.
Like-Kind Property:
This term is associated with a 1031 exchange. This is property that has the same type of nature. This allows an investor to swap properties to avoid capital gains.
Lis Pendens:
The Latin word meaning “Suit Pending” This is a recorded notice which may affect title to on a certain piece of land. This lets others know that a suit is pending on your property.
Mechanics Lien:
A contractor or worker that was hired to improve the property can place a mechanics lien for nonpayment on a work that was performed for them.
Mortgage:
A written agreement that creates a lien upon real estate to ensure payment of a specified debt.
Mortgagee:
The lender of a loan.
Mortgagor:
The borrower of a loan.
Multiple Listing Service (MLS):
This is an association of Real Estate Brokers that agree to share real estate listings with one another.
No Bid:
A decision by a VA Loan. This is when a guaranteed goes into default, to pay the guarantee amount to the lender. This is done to avoid foreclosing on a property. This usually results in the lender obtaining the property at the sale.
Non-Judicial Foreclosure:
Procedures, in which the mortgagee, or more commonly the mortgagee's attorney or designated agent, gives the debtor a notice of default and the mortgagee's intent to sell the immovable property in a form prescribed by state statute. This type of foreclosure is commonly referred to as "statutory" or "non-judicial" foreclosure, as opposed to "judicial". With this "power-of-sale" type of foreclosure, if the debtor fails to cure the default, or use other lawful means.
Non-Recourse:
A lender is able to take property that was pledged as collateral to satisfy the outstanding debt, but they are not able to take property of other assets.
Offer:
A willingness to buy or sell a piece of property.
Open Mortgage:
This is a mortgage that has matured or may be overdue this is turn may fall into foreclosure.
Option to Purchase:
This is a type of agreement (contract) that gives someone the right but is not obliged to purchase the property, within a specified amount of time, for the agreed amount, which is subject to certain conditions.
Payback Period:
This is the number of years it would take for the estimated future income to equal the amount that was initially invested.
Payoff:
The remaining money that is due on a loan.
PMI (Private Mortgage Insurance):
This protects the lender against default. This Lenders usually require this if you are putting less than 20% down on the total loan.
Power of Sale:
This is a clause in a mortgage which gives the lender or trustee the right to sell the property. This happens when the property falls into default.
Predatory Lending:
These are lenders that look to take advantage of borrowers. This is often associated with home equity lending, refinancing, home improvement lending. They trick the borrower into a loan with high rates and junk fees, and even overcharging for required services.
Public Auction/Public Sale:
This is an (auction) sale of property that was advertised in the local newspaper.
Public Record:
These records pertain to land transaction records that are kept in the county courthouse.
Purchase Price:
The dollar amount that was paid for the property.
Qualified Buyer:
This is a buyer who has evidence of being financially able to purchase a piece of property within a specific price range.
Qualified Intermediary:
A person or entity that is legally able to hold funds in order to complete a 1031 exchange.
Real Estate:
A piece of land including the air above and the ground below and everything attached to it.
Real Estate Owner (REO):
This is property that is owned by the lender due to a foreclosure.
Real Property:
A piece of land and anything that is perminantly attached to it.
Realtor:
A professional in real estate who is a member of the National Association of Realtors along with local and state boards.
Recording:
This is referred to the book of public records. In this instance recording is giving notice to the public of facts recorded. Entering in the book of public records can affect the title to real property.
Redeem (Mortgage):
Satifying all over due loan payments and penalties after receiving a notice of default. This is done before a lender can foreclose on the property.
Redemtion Period:
A period of time that your state will allow a former owner to reclaim foreclosed property.
Rehabilitate:
Restoring a property that is is bad condition.
Rider (Addendum):
This is an amendment or attachment to a contract.
Second Mortgage:
A mortgage that has a lien position subordinate to the first mortgage.
Survey:
A document showing the measurement, contours, and boundaries of a parcel of land.
Tax Foreclosure:
A lien that was placed against a property for nonpayment of property taxes.
Tax Lien:
A lien imposed on a property by law to secure payment of taxes.
In most jurisdictions it is customary for the foreclosing lender to obtain a title search of the immovable property and to notify all other persons who may have liens on the property, whether by judgment, by contract, or by statute or other law, so that they may appear and assert their interest in the foreclosure litigation. In all US jurisdictions a lender who conducts a foreclosure sale of immovable property which is the subject of a federal tax lien must give 25 days' notice of the sale to the Internal Revenue Service: failure to give notice to the IRS will result in the lien remaining attached to the immovable property after the sale. Therefore, it is imperative that the lender obtain a search of the local Federal Tax Liens so that if the persons or companies involved in the foreclosure have a federal tax lien filed against them, the proper notice to the IRS will be given.
Title:
The written evidence of ownership to the land and is in lawful possession.
Urban Renewal:
This is when blighted areas of the city do not meet housing codes and are rehabilitated or demolished and a new building is then constructed.
VA Loan or Mortgage:
This is a home loan that is guaranteed by the U.S. Veterans Administration. The VA Guarantees restitution to the lender in the event of default.
