Real Estate Words, Terms and Acronyms. Oh My!

Most industries develop their own jargon and abbreviations for speaking about products and processes related to their business.  Real estate is no different. I started my career in timeshare resales. Thirteen years later I opened my own company.  I quickly became aware that my newly assembled staff was confused even though I was speaking English. I put together a list of words, terms and acronyms as reference. Soon we were talking with one another in what sounded like a foreign language to outsiders.

If you’re new to buying or selling property, navigating all the unfamiliar terms can feel overwhelming. A real estate transaction is one of the most significant emotional and financial undertakings a person can engage in. It is vital to have clear communication between all parties.   You may find the following list helpful to provide a clearer understanding of what is happening.  This knowledge may also help you feel more confident as you go through the process.

If you are a veteran in the real estate industry, how many of these terms do you use and know?

Acceptance: the date when both parties, seller and buyer, have agreed to and completed signing

and/or initialing the contract.

Adjustable Rate Mortgage: a mortgage that permits the lender to adjust the mortgage’s interest

rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as

market conditions change.

Amortized Loan: a loan that is paid in equal installments during its term.

Appraisal: an estimate of real estate value, usually issued to standards of FHA, VA and FHMA.

Recent comparable sales in the neighborhood is the most important factor in determining value

Appreciation: an increase in the value of a property due to changes in market conditions or other

causes. The opposite of depreciation.

Assumable Mortgage: purchaser takes ownership to real estate encumbered by an existing

mortgage and assumes responsibility as the guarantor for the unpaid balance of the mortgage.

Bill of Sale: document used to transfer title (ownership) of PERSONAL property.

Cloud on Title: any condition that affects the clear title to real property.

Consideration: anything of value to induce another to enter into a contract, i.e., money, services, a

promise.

Deed: a written instrument, which when properly executed and delivered, conveys title to real

property.

Discount Points: a loan fee charged by a lender of FHA, VA or conventional loans to increase the

yield on the investment. One point = 1% of the loan amount.

Easement: the right to use the land of another.

Encumbrance: anything that burdens (limits) the title to property, such as a lien, easement, or

restriction of any kind.

Equity: the value of real estate over and above the liens against it. It is obtained by subtracting the

total liens from the value.

Escrow Payment: that portion of a mortgagor’s monthly payment held in trust by the lender to pay

for taxes, hazard insurance and other items as they become due.

Fannie Mae: nickname for Federal National Mortgage Corporation (FNMA), a tax-paying

corporation created by congress to support the secondary mortgages insured by FHA or guaranteed

by VA, as well as conventional loans.

Federal Housing Administration: an agency of the U.S. Department of Housing and

Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by

private lenders. The FHA sets standards for construction and underwriting but does not lend money

or plan or construct housing.

FHA Insured Mortgage: a mortgage under which the Federal Housing Administration insures

loans made, according to its regulations.

Fixed Rate Mortgage: a loan that fixes the interest rate at a prescribed rate for the duration of the

loan.

Foreclosure: procedure whereby property pledged as security for a debt is sold to pay the debt in

the event of default.

Freddie Mac: nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally

controlled and operated corporation to support the secondary mortgage market. It purchases and

sells residential conventional home mortgages.

Graduated Payment Mortgage: any loan where the borrower pays a portion of the interest due

each month during the first few years of the loan. The payment increases gradually during the first

few years to the amount necessary to fully amortize the loan during its life.

Lease Purchase Agreement: buyer makes a deposit for future purchases of a property with the

right to lease property in the interim.

Lease with Option: a contract, which gives one the right to lease property at a certain sum with the

option to purchase at a future date.

Loan to Value Ratio LTV: the ratio of the mortgage loan principal (amount borrowed) to the

property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan

principal of $80,000 the loan to value ratio is 80%.

Mortgage: a legal document that pledges a property to the lender as security for payment of a debt.

Mortgage Insurance Premium MIP: the amount paid by a mortgagor for mortgage insurance.

This insurance protects the investor from possible loss in the event of a borrower’s default on a loan.

Note: a written promise to pay a certain amount of money.

Origination Fee: a fee paid to a lender for services provided when granting a loan, usually a

percentage of the face amount of the loan.

Private Mortgage Insurance PMI: see Mortgage Insurance Premium.

Second Mortgage  Second Deed of Trust Junior Mortgage Junior Lien: an additional loan

imposed on a property with a first mortgage. Generally, a higher interest rate and shorter term than a

“first” mortgage.

Settlement Statement: a financial statement rendered to the buyer and seller at the time

of transfer of ownership, giving an account of all funds received or expended.

Severalty Ownership: ownership by one person only. Sole ownership.

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.

Title Insurance: an insurance policy that protects the insured (buyer or lender) against loss arising

from defects in the title.

How did you do?

If these terms flow fluently across your tongue, you might consider a career in real estate. Let’s talk. 😊

Let’s develop this new skill and put your new-found knowledge into practice. Call me today to discuss your buying or selling needs. Now we can talk through the process. I can help you achieve your real estate goals.