Glossary - Colorado Springs Real Estate

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Real Estate Glossary

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abstract	A statement that summarizes the important points of a larger document.

abstract of title	A summary of the history of the ownership of a property, starting with the original grant, and including all subsequent encumbrances and conveyances.

addendum	A document used to correct or modify one or more of the terms of a purchase agreement, without changing the remaining terms.

adjustable rate mortgage (ARM)	A mortgage with an interest rate that changes in parallel to some kind of index, such as the prime rate.

agent	A licensed person who represents participants in real estate transactions.

amenity	Any positive characteristic of a property. This includes natural amenities, such as scenic views and attractive settings, and man-made amenities such as swimming pools.

amortization	The payment of the principal and interest of a loan, in regular increments over time.

annual percentage rate (APR)	A loan's yearly percentage rate, including the cost of obtaining the loan.

appraisal	An estimate of the market value of a property, made by a qualified professional.

appreciation	Increase in the value of a property.

assessment	A valuation made by the county assessors office for tax purposes.

assumable loan	A loan agreement that permits responsibility for repayment to be transferred from one party to another.

balloon mortgage	A loan where the monthly payments are set at a rate insufficient to pay off the principle. At the end of the loan term, a "balloon" payment must be made, to pay off the loan.

breach of contract	Failure to honor the terms of a contract.

broker	A state licensed real estate professional who represents one or more parties in a real estate transaction. A broker helps clients to determine market values, lists properties for sale, advertises properties for sale, shows properties to prospective buyers, prepares offers and counter offers, negotiates on behalf of their clients, and ensures that their client(s) comply will all applicable laws governing the transfer of property. A broker may employ other brokers or agents.

cap	The maximum interest rate that an adjustable rate mortgage (ARM) may rise to over the life of the loan.

CC and R	Abbreviation for Covenants, Conditions and Restrictions---a document filed by a property developer with the county recorder that sets forth permitted uses, rules and restrictions for all properties within a development.

certificate of title	A document issued by a title company certifying that the current owner holds title to the property.

chain of title	A historical reconstruction of how title to a property came to be held by the current owner.

close of escrow	The final step in a real estate transaction, when ownership passes from seller to buyer. On this date, the deed and deed of trust are recorded with the county recorder's office in the buyer's name and the proceeds of the sale are given to the seller after paying off any outstanding loans and fees.

close, closing	See close of escrow.

cloud on title	A problem with the title of a property that makes it difficult to transfer ownership.

commission	Payment to a broker, usually from the seller, for finding a buyer and facilitating the sale. The commission is usually based on a percentage of the sale price.

community property	Property that is owned jointly by a husband and wife. The laws regarding community property vary from state to state.

contingency	A condition in a contract that must be satisfied for the transaction described by the contract to be carried out. In the case of a loan contingency, the buyer expects to get the loan, but since the possibility exists that they won't, they make the offer contingent on their getting a loan.

co-ownership	Two or more people sharing ownership of a property. Forms of co-ownership include community property, joint tenancy, and tenancy in common.

deed	A legal document that shows the current legal owner of a property.

deed of trust	A document that pledges a property as security for a loan. It involves a borrower a lender, and a trustee who holds the property in trust until the loan is paid off.

delinquent	Said of a loan that is overdue in payments.

deposit	Money put towards the purchase of a property. An initial deposit (also called a good faith, or earnest money deposit) accompanies an offer to buy, as a gesture of sincerity. Initial deposits range from $1000 to 3% of the purchase price. As the sale of the property progresses, one or more additional deposits, called increased deposits, are made.

disclosure	Information given to a buyer by the seller or agent in a real estate transaction about conditions affecting the property. Generally, a seller must disclose any known material facts concerning the property to the buyer.

due-on-sale clause	A clause in a mortgage or deed of trust that allows the lender to demand full re-payment of the loan when the property is sold.

earnest money	See deposit.

easement	The legal right to use or enter land belonging to another for a specific purpose. Most common are utility easements allowing utility companies to construct pipes, wires, poles, etc., on, under, or over a property.

encroachment	A condition where part of a structure extends across a property line, or onto an adjacent property.

encumbrance	A condition affecting clear title to a property. Encumbrances can include mortgages or deeds of trust, liens, easement rights, unpaid taxes and assessments. Encumbrances do not prevent the transfer of title, but the buyer must decide whether to buy the property subject to encumbrances that will not be removed prior to the change in ownership.

escrow	A process where a neutral third party acts as an intermediary for the buyer and seller. The escrow company carries out instructions from both parties, handles all the paperwork, prepares and records the deed, and distributes funds.

equity	An owners share of the fair market value of a property, after accounting for all liens on the property.

fee simple	The highest level of property ownership, with the unrestricted right to dispose of it by sale or inheritance.

FHA loan	A loan insured by the Federal Housing Administration.

fixed rate mortgage	A mortgage with an interest rate that remains unchanged during the entire term of the mortgage.

fixture	Something that is attached to a property, and is considered a part of it, such as plumbing or light fixtures.

foreclosure	The exercising, by a lender, of its right to force the sale of a property to pay off a defaulted loan. Any money left over after the loan is paid off is given to the defaulting borrower.

grant deed	A deed that includes a warranty that the seller (grantor) has the unencumbered right to transfer ownership to the buyer (grantee).

grantee	In a transaction involving a grant deed, the buyer.

grantor	In a transaction involving a grant deed, the seller.

hazard insurance	Insurance against damage to a property by fire, windstorm and other specified hazards.

home inspection report	A written report made by a professional home inspector. The report usually includes evaluations of structural, electrical and mechanical systems. Typically, it does not include inspections that require drilling or opening inaccessible areas.

homeowners insurance	An insurance policy for homeowners that combines hazard insurance, personal property and liability coverage.

home warranty plan	An insurance policy that typically covers failures of plumbing, electrical and heating systems and breakdowns of major appliances.

HUD	The U.S. Department of Housing and Urban Development.

joint tenancy	Property that is owned equally by two or more parties who acquired their interests at the same time. The owners have the right of survivorship: if one of them dies, their ownership is automatically transferred to the surviving owner or owners.

lien	An encumbrance against a property, to secure a loan, assessment, judgment, or tax bill.

liquidated damages	A provision in a purchase contract that specifies the amount of damages a seller will recover from the buyer if it is proven that the buyer breached the contract.

listing agreement	An agreement between a real estate broker (agent) and a property owner employing the agent to find a buyer for the property.

loan conditions	Conditions imposed by a lender on a loan, which must be satisfied before the lender will release the funds.

loan contingency	A condition in a purchase contract that allows a buyer to back out of the contract if the buyer is unable to obtain a loan. The buyer must remove the loan contingency (agree to proceed with the transaction) within a specified amount of time, or withdraw from the contract.

loan-to-value ratio	The ratio between the amount of a loan and the appraised value of the property.

lock box	A small, securely locked box that is placed on a property to hold the front door key for easy access by real estate agents. Only licensed real estate professionals who are members of the local real estate board have the key or combination to open the lock box. Modern lock boxes are electronic, and are opened with a code that is different for each agent. This way, there is a record of who has entered the property.

mechanic's lien	A lien on a property issued to secure payment for labor and material used in construction or improvement of that property.

mortgage	A lien against property given by the borrower to the lender as security for money borrowed. Mortgages generally run from 10 to 30 years, during which the loan is paid off according to the terms of the note.

Mortgagee	The lender in a mortgage agreement.

mortgager	The borrower in a mortgage agreement.

MLS	Abbreviation for Multiple Listing Service---a computer database of properties for sale, maintained by a local real estate board. The MLS is composed of property descriptions submitted by member brokerages.

origination fee	A fee paid to a lender for originating (making) a loan.

parcel	An individual piece of land, with its own legal description.

PITI	Abbreviation for the four usual parts of a monthly house payment: Principal, Interest, Taxes and Insurance.

points	Also called discount points, a point is one percent of the total amount of a loan. A lender charges points on a loan to make the yield competitive with other types of investments. Usually, borrowers can lower the interest rate by paying more points, or lower the number of points by paying a higher interest rate.

pre-approval	A commitment made by a lender, to make a loan to a borrower, before the borrower has committed to the purchase of a particular property.

preliminary title report	A report prepared by a title company to show the state of the title to a property, as the basis for issuing a title insurance policy.

pre-qualification	A lenders informal evaluation of a potential borrowers borrowing ability.

quitclaim deed	A document that releases any interest or claim that the grantor of the quitclaim may have in a property. It doesn't warrant that the there was a claim to begin with, but is usually used to clear a cloud on title.

quiet title action	A legal action to eliminate adverse claims on a property: to "quiet" the title.

real estate	Land, and any buildings or trees on the land.

real property	Land, and any buildings or trees on the land.

reconveyance	The releasing of a property owner from a deed of trust by the trustee when the underlying loan has been paid off. The release is in the form of a deed of reconveyance, which cancels the deed of trust.

recording	The filing of documents with the county recorder's office. This officially makes the documents a matter of public record.

right of way	The right, based on an easement, to pass over or through a property owned by others.

second mortgage	A mortgage that is in second position to a first mortgage. If the property goes into foreclosure, the first mortgage must be paid in full before the second mortgage holder is entitled to be paid.

section 1031	A provision of the Internal Revenue Code that allows owners of investment property to exchange a property for other like-kind property, and to defer any capital gains into the acquired property. Also called a 1031 Exchange or a Starker Exchange.

subdivision	A tract of land where lots, blocks, and building sites are divided and streets, parks, easements, and public utilities are laid out.

sole ownership	Ownership of property by a single person or entity.

tenancy in common	Property that is owned by two or more individuals in undivided fractional interests. Each Tenant in Common owns a share of the property. The shares need not be equal, can be acquired or transferred at different times. Each share can be disposed of at the death of a tenant in common through a will, trust or by operation of law to heirs at law.

termite inspection	A property inspection that looks for damage caused by any kind of organism, including termites, beetles, and mold.

title	The proof of ownership of a property.

title insurance	Insurance that protects the insured against loss in a property ownership dispute involving the insured title.

transfer tax	A tax on the transfer of ownership of a property. The transfer tax is charged by the city, county, or both, and is usually a percentage of the sale price.

trustee	A person or company that controls ownership of a property for the benefit of another party. In the case of a deed of trust, the trustee holds the property title for the lender, and is responsible for enforcing the terms of the deed of trust.

Truth in Lending	A federal law requiring lenders to provide borrowers with a written itemization of the costs, terms and conditions of a loan. It is also known as Regulation Z.

underwriting	The process where a lender decides on the terms and conditions of a loan based on an assessment of the credit risk of a particular loan applicant.

variable interest	Another name for adjustable rate: see adjustable rate mortgages.

zoning	The practice, by a city or county, of restricting what kind of use property in specific areas can be put to. Some areas are restricted, "zoned," for residential use only, while others are set aside for commercial use.

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