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Some Helpful Real Estate Terminology

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ABSORPTION RATE

The ratio of the number of properties in an area that have been sold against the number available. Used to show the volatility of a market.

ABSTRACTION METHOD

This method of estimating the value of property uses similar properties available in the same market to extract the value of a parcel of land.

ACCELERATION CLAUSE

A provision in a mortgage that gives the lender the right to demand immediate payment of the outstanding loan balance under certain circumstances. Usually when the borrower defaults on the loan.

ACRE

43,560 square feet. A measurement of area.

AD VAL OREM TAX

Taxes assessed based on the value of the land and improvements

ADDENDUM

A supplement to any document that contains additional information pertinent to the subject. Appraisers use an addendum to further explain items for which there was inadequate space on the standard appraisal form.

ADJUSTABLE-RATE MORTGAGE (ARM)

A type of mortgage where the interest rate varies based on a particular index, normally the prime lending rate.

ADJUSTED BASIS

The value of an asset (property or otherwise) that includes the original price plus the value of any improvement, and less any applicable depreciation.

ADJUSTED SALES PRICE

An opinion of a property's sales price, after adjustments have been made to account for differences between it and another comparable property.

AMENITY

Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation.

AMERICAN SOCIETY OF APPRAISERS

An organization of appraisal professionals and others interested in the appraisal profession.

AMORTIZATION

The repayment of a loan through regular periodic payment.

AMORTIZATION SCHEDULE

The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees.

AMORTIZATION TERM

The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years.

ANNUAL PERCENTAGE RATE (APR)

The rate of annual interest charged on a loan.

ANNUITY

A sum of money paid at regular intervals, often annually.

APPRAISAL

A "defensible" and carefully documented opinion of value. Most commonly derived using recent sales of comparable properties by a licensed, professional appraiser.

APPRAISAL REPORT

The end result of the appraisal process usually consists of one major standardized form such as, the Uniform Residential Appraisal Report form 1004, as well as all supporting documentation and additional detail information. The purpose of the report is to convey the opinion of value of the subject property and support that opinion with corroborating information.

APPRAISED VALUE

An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals.

APPRAISER

An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is often the only independent voice in any real estate transaction with no vested interest in the ultimate value or sales price of the property.

ASSESSMENT

The function of assigning a value to a property for the purpose of levying taxes.

ASSESSOR

The jurisdictional official who performs the assessment and assigns the value of a property.

ASSUMABLE MORTGAGE

A mortgage that can be taken over by the buyer when a home is sold.

ASSUMPTION

When a buyer takes over, or "assumes" the sellers mortgage.

BALLOON MORTGAGE

A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment.

BALLOON PAYMENT

The final large payment at the end of a balloon mortgage term.

BANKRUPTCY

When a person or business is unable to pay their debts and seeks protection of the state against creditors. Bankruptcies remain on credit records for up to ten years and can prevent a person from being able to get a loan.

BIWEEKLY MORTGAGE

A mortgage where you make "half payments" every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage.

BRIDGE FINANCING

An interim loan made to facilitate the purchase of a new home before the buyer's current residence sells and its equity is available to fund the new purchase.

BROKER

An individual who facilitates the purchase of property by bringing together a buyer and a seller.

BUILDING CODE

Regulations that ensure the safety and material compliance of new construction within a municipality. Building codes are localized to ensure they are adequate to meet the risk of common hazards.

BUY DOWN

Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage.

CALL OPTION

A clause in a mortgage which allows the lender to demand payment of the outstanding balance at a specific time.

CAP

Associated with Adjustable Rate Mortgages. A limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage.

CAPE COD COLONIAL

A single-story house style made popular in New England. Often characterized by a steep roof with gables.

CAPITAL

Accumulated goods and money which is most often used to generate additional income.

CAPITAL EXPENDITURE

An outlay of funds designed to improve the income-producing capabilities of an asset or to extend its economic life.

CASH-OUT REFINANCE

Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash.

CAVEAT EMPTOR

Literally translated:" Let the buyer beware." A common business tenet whereby the buyer is responsible for verifying any and all claims by the seller of property.

CERTIFICATE OF DEPOSIT

A document showing that the bearer has a certain amount of money, at a particular amount interest, on deposit with a financial institution.

CERTIFICATE OF ELIGIBILITY

A document issued by the Veterans Administration that certifies eligibility for a VA loan.

CERTIFICATE OF REASONABLE VALUE (CRV)

Usually based on an independent appraisal, a CRV for a particular property establishes the maximum amount which can be secured by a VA mortgage.

CERTIFICATE OF TITLE

A document designating the legal owner of a parcel of real estate. Usually provided by a title or abstract company.

CLEAR TITLE

Ownership of property that is not encumbered by any counter-claim or lien.

CLOSING

A torturous process designed to induce cramping in a home buyer's hands by requiring signature on countless pieces of documentation that nobody has ever read. Or, the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS).

CLOSING COSTS

All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal.

CLOSING STATEMENT

The document detailing the final financial arrangement between a buyer and seller and the costs paid by each.

COLLATERAL

An asset which is placed at risk to secure the repayment of a loan.

COLLECTION

The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.

COMMISSION

A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property.

COMMON AREAS

Any areas, such as entryways, foyers, pools, recreational facilities or the like, which are shared by the tenets or owners of property near by. Commonly found in condominium, PUD or office spaces.

COMPARABLES

An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property whose value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property.

COMPOUND INTEREST

Interest paid on the principal amount, as well as any accumulated interest.

CONSTRUCTION LOAN

A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed.

CONTINGENCY

Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one. Or, when a buyer makes an offer that requires a complete home inspection before it becomes official.

CONVENTIONAL MORTGAGE

A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.).

CONVERTIBLE ARM

A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe.

CORPORATE RELOCATION

A situation where a person's employer pays all or some of the expenses associated with moving from one location to another, usually over a substantial distance. Relocation expenses often include the amounts, such as brokerage fees, incurred in the selling and buying of the employee's primary residence.

CREDIT HISTORY

A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals.

CREDITOR

A person to whom money is owed.

CREDIT REPORT

A detailed report of an individuals credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.

DEBT EQUITY RATIO

The ratio of the amount a mortgagor still owes on a property to the amount of equity they have in the home. Equity is calculated at the fair-market value of the home, less any outstanding mortgage debt.

DEED-IN-LIEU (OF FORECLOSURE)

A document given by a borrower to a lender, transferring title of the property. Often used to avoid credit-damaging foreclosure procedures.

DEED OF TRUST

A document which transfers title in a property to a trustee, whose obligations and powers are stipulated. Often used in mortgage transactions.

DEED OF RECONVEYANCE

A document which transfers ownership of a property from a Trustee back to a borrower who has fulfilled the obligations of a mortgage.

DEED OF RELEASE

A document which dismisses a lien or other claim on a property.

DEED OF SURRENDER

A document used to surrender any claim a person has to a property.

DEFAULT

The condition in which a borrower has failed to meet the obligations of a loan or mortgage.

DELINQUENCY

The state in which a borrow has failed to meet payment obligations on time.

DEPOSIT / EARNEST MONEY

Cash given along with an offer to purchase property.

DEPRECIATION

The natural decline in property value due to market forces or depletion of resources.

DISCOUNT POINTS

Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.

DISTRESSED PROPERTY

A mortgaged property which has been foreclosed on.

DUE-ON-SALE PROVISION

A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property.

EASEMENT

The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines.

ECONOMIC DEPRECIATION

The decline in property value caused by external forces, such as neighborhood blight or adverse development.

EQUAL CREDIT OPPORTUNITY ACT (ECOA)

U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex etc

EQUITY

The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property.

ESCROW

An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property.

ESCROW ACCOUNT

An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that go into the escrow account each month.

ESCROW ANALYSIS

An analysis performed by the lender usually once each year to see that the amount of money going into the escrow account each month is correct for the forecasted expenses.

ESCROW DISBURSEMENTS

The payout of funds from an escrow account to pay property expenses such as taxes and insurance.

ESTATE

The total of all property and assets owned by an individual.

EXAMINATION OF TITLE

The report on the title of a property from the public records or an abstract of the title.

EXECUTOR

The person named in a will to administer the estate.

FAIR CREDIT REPORTING ACT

A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history.

FANNIE MAE

A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

The U.S. Government agency created in 1933 which maintains the stability of and public confidence in the nation's financial system by insuring deposits and promoting safe and sound banking practices.

FEDERAL HOUSING ADMINISTRATION (FHA)

A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders.

FHA MORTGAGE

A mortgage that is insured by the Federal Housing Administration (FHA).

FINAL VALUE ESTIMATE

The opinion of value of a piece of property resulting from an appraisal following the USPAP guidelines.

FIRST MORTGAGE

The primary loan or mortgage secured by a piece of property.

FIXED-RATE MORTGAGE (FRM)

A mortgage which has a fixed rate of interest over the life of the loan.

FLOOD INSURANCE

Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones.

FORECLOSURE

The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.

FORFEITURE

The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.

GENERAL LIEN

A broad-based claim against several properties owned by a defaulting party.

GINNIE MAE

A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers.

GOVERNMENT MORTGAGE

Any mortgage insured by a government agency, such as the FHA or VA.

GRANTEE

Any person who is given ownership of a piece of property.

GRANTOR

Any person who gives away ownership of a piece of property.

HAZARD INSURANCE

Insurance covering damage to a property caused by hazards such as fire, wind and accident.

HOME EQUITY CONVERSION MORTGAGE (HECM)

Also known as a reverse annuity mortgage. It allows home owners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECM's typically do not have to be repaid until the borrower is no longer occupying the home.

HOME EQUITY LINE OF CREDIT

A type of mortgage loan that allows the borrower to draw cash against the equity in his home.

HOME INSPECTION

A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value.

HOME INSPECTOR

A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them.

HOMEOWNER'S ASSOCIATION

An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants.

HOMEOWNER'S INSURANCE

A policy which covers a home owner for any loss of property due to accident, intrusion or hazard.

HOMEOWNER'S WARRANTY

An insurance policy covering the repair of systems and appliances within the home for the coverage period.

HUD MEDIAN INCOME

Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 STATEMENT

A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase.

INDEPENDENT APPRAISAL

An estimation of value created by a professional, certified appraiser with no vested interest in the value of the property.

INSPECTION

The examination of a piece of property, its buildings or other amenities.

INSURABLE TITLE

The title to property which has been sufficiently reviewed by a title insurance company, such that they are willing to insure it as free and clear.

INTEREST RATE

A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

JUDGMENT

An official court decision. If the judgment requires payment from one party to another, the court may put a lien against the payee's property as collateral.

JUDICIAL FORECLOSURE

A type of foreclosure conducted as a civil suit in a court of law.

JUMBO LOAN

A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans.

LATENT DEFECTS

Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects.

LEASE

A contract between a property owner and a tenant specifying the payment amount, terms and conditions, as well as the length of time the contract will be in force.

LEASEHOLD ESTATE

A type of property "ownership" where the buyer actually has a long-term lease on the property.

LEASE OPTION

A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment.

LEGAL DESCRIPTION

The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.

LIABILITY INSURANCE

Insurance that covers against potential lawsuit brought against a property owner for alleged negligence resulting in damage to another party.

LIEN

Any claim against a piece of property resulting from a debt or other obligation.

LIFE CAP

A limit on how far the interest rate can move for an Adjustable Rate Mortgage.

LOCK-IN

An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.

MATURITY

The date on which the principal balance of a financial instrument becomes due and payable.

MERGED CREDIT REPORT

A credit report derived from data obtained from multiple credit agencies.

MORTGAGE

A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral.

MORTGAGE INSURANCE

A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.

MORTGAGE INSURANCE PREMIUM (MIP)

A fee that is often included in mortgage payments that pays for mortgage insurance coverage.

MORTGAGE LIFE INSURANCE

A policy that fulfills the obligations of a mortgage when the policy holder dies.

NEGATIVE AMORTIZATION

When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest.

NO-COST LOAN

Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

NO-POINT LOAN

A loan with no "points". The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan.

NOTE

A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

NOTE RATE

The interest rate stated on a mortgage note.

NOTICE OF DEFAULT

Formal written notice from a lender to a borrower that default has occurred.

ORIGINAL PRINCIPAL BALANCE

The total amount of principal owed on a mortgage loan at the time of closing.

ORIGINATION FEE

Refers to the total number of points paid by a borrower at closing.

OWNER FINANCING

A transaction where the property owner provides all or part of the financing.

POINT

A percentage of a mortgage amount (one point = 1 percent).

PRE-APPROVAL

The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.

PREPAYMENT

Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized.

PREPAYMENT PENALTY

A fee that may be charged to a borrower who pays off a loan before it is due.

PRIME RATE

The interest rate that banks and other lending institutions charge other banks or preferred customers.

PRINCIPAL

The amount owed on a mortgage which does not include interest or other fees.

PRINCIPAL BALANCE

The outstanding balance of principal on a mortgage. Does not included interest due.

PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)

The most common constituents of a monthly mortgage payment.

PRIVATE MORTGAGE INSURANCE (PMI)

A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.

PURCHASE AGREEMENT

A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

QUITCLAIM DEED

A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear.

RATE LOCK

A guarantee from a lender of a specific interest rate for a period of time.

REALTORĀ®

A real estate agent or broker who is a member of the NATIONAL ASSOCIATION of REALTORSĀ®.

RECORDING

The filing of a real estate transaction with the appropriate government agent (normally the RECORDER). A real estate transaction is considered final when it is recorded.

REFINANCE TRANSACTION

A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.

REMAINING BALANCE

The amount of principal, interest and other costs that has not yet been repaid.

REPAYMENT PLAN

A plan to repay delinquent payments, agreed upon between a lender and borrower, in an effort to avoid foreclosure.

REO

Real Estate Owned property, that have gone through forclosure and are now owned by Mortgage company or Bank.

RIGHT OF FIRST REFUSAL

An agreement giving a person the first opportunity to buy or lease a property before the owner offers it for sale to others.

SECOND MORTGAGE

A loan secured by the equity in a home, when a primary mortgage already exists.

SECURED LOAN

A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house.

SECURITY

The property used as collateral for a loan.

SURVEY

A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements.

TAX-EXEMPT PROPERTY

Any property which is not taxed.

TITLE

A specific document which serves as proof of ownership.

TITLE COMPANY

An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction.

TITLE INSURANCE

A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise.

TITLE SEARCH

The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist.

TRANSFER OF OWNERSHIP

Any means by which the ownership of a property changes hands.

TRANSFER OF TAX

Taxes payable when title passes from one owner to another.

TRUSTEE

A fiduciary that holds or controls property for the benefit of another.

TRUTH IN LENDING

A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.

UNENCUMBERED PROPERTY

Any property which has no outstanding claims or liens against it.

UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP)

Developed in 1986 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal Foundation, USPAP forms the guidelines followed by every licensed and certified real estate appraiser in the United States. The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting. The intent of these Standards is to promote and maintain a high level of public trust in professional appraisal practice.

VA MORTGAGE

A mortgage that is guaranteed by the Department of Veterans Affairs (VA).

VETERANS AFFAIRS, DEPARTMENT OF (VA)

The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans.

WALK-THROUGH INSPECTION

A process whereby an appraiser examines a property in preparation for estimating its value. Also, the process of inspecting a property for any damage prior to that property being bought or sold.

WARRANTY

An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue.

ZONE

A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use.

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Woodland Realty
2018 Indian Hills Drive
Sioux City, IA 51104
Phone: 712-239-3820 or 800-341-3597

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