REAL ESTATE LINGO

1031 EXCHANGE: Allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes.

Active: An active status is the most common for homes currently listed for sale in the Multiple Listing Service (MLS). It means it is not under contract.

Addendum: A document included with a Purchase and Sale Agreement that lists additional information and/or requests made by the buyer to the seller for other items not stated in the agreement. It’s important to know that any language in an addendum can override terms stated in the purchase and sale agreement. An addendum is not an amendment.

Amendment: An amendment is a document that is added to the purchase and sale agreement after mutual acceptance, that changes items or clarifies items on a contract, or other documents.

Appraisal: The estimation of a home’s market value by a licensed appraiser based on comparable recent sales of homes in the neighborhood. Appraisals are ordered by a home buyer’s lender to protect the interests of the lender. The lender’s underwriter will compare the appraisal price to the final sale price of the home to ensure the value of the home is equal to or greater than the loan amount.

Assessed Value: The value assigned to your home by a government tax assessor to determine property tax payments.

Back-Up Offer: When a home seller has accepted an offer from a buyer, but is accepting backup offers from other buyers. Sellers may state that they are accepting backup offers if they think the current offer will fall through.

Closing Costs : Fees incurred in addition to the purchase price of a home that will be listed on the final settlement statement before closing. Closing costs cover fees associated with the sale of the home, such as title and settlement services, title insurance, appraisal, lender fees, and other services carried out during closing. Closing costs are typically 3%–5% of the home’s price.

CMA: An evaluation of similar, recently sold homes (called comparable) that are near a home intended to be bought or sold. Comparative market analysis establish the current market value of the home and are prepared by real estate agents.

Contingency : Conditions included with an offer on a home that must be fulfilled before the deal can close. If a buyer or seller is unable to satisfy a contingency, then the offer on a home may become void. Examples are financing, inspection, sale of current home, title, and appraisal.

Escrow Agent: A neutral third party or attorney that handles the exchange of money and documents once mutual acceptance is reached on an offer. Escrow handles the transfer of the buyer’s loan documents and property taxes and works with a buyer’s lender and real estate agent to make sure that the title of the home is clear of liens before the transfer of ownership.

Federal Housing Administration Loan (FHA Loan): One of two types of alternatives to a conventional loan (the other is a Veterans Affairs (VA) loan), FHA loans are insured by the Federal Housing Administration. If the homebuyer can’t pay the loan, the government pays the lender for any losses.

Foreclosure: Foreclosure is a process that transfers the right of home ownership from the homeowner to the bank or lender. A home goes into foreclosure when the owner defaults on his mortgage loan payments.

Inspection: A thorough investigation of a home by a licensed inspector to discover any issues or repairs that need to be made before buying the home.

Multiple Listing Service (MLS): A local or regional service that compiles available real estate for sale by member brokers along with detailed information brokers and agents can access online.

Private Mortgage Insurance: Mortgage insurance protects the mortgage lender against loss if borrowers default on their loans. Private mortgage insurance is required for borrowers of conventional loans with a down payment of less than 20%.

Short Sale: A home that is listed for sale at a price lower than the amount owed on the mortgage, with approval from the lienholder. Homeowners hope to sell their home as a short sale to avoid going into foreclosure.

Survey: An assessment of property lines to determine the exact amount of land that a homeowner owns. Surveys show any easements or encroachments on a property that is noted on the title of the home.

Title: The right to, or ownership of, a specific real estate property.

Underwriter: An individual working for mortgage lenders who determines whether or not a borrower’s loan is approved.

Walkthrough: The final inspection of a home by the buyers before it’s sold. Buyers will complete a final walkthrough of the home to make sure any requests for repairs or appliances have been fulfilled before the closing papers are signed.