Glossary of Real Estate Terms:
Acceptance
The date that both parties have consented to and received a final, binding contracting by affixing their signatures to an agreement and all counter offers.
Agreement
The purchase contract, all counter offers and addendums fully executed. Also referred to RPA or Residential Purchase Agreement.
Amendatory Clause
An amendatory clause must be included in the sales contract when the borrower is getting an FHA loan and has not been informed of the appraised value before signing the sales contract.
Appraisal
What is an appraisal? Why do I need an appraisal? The appraisal definition is an opinion of market value by an expert. Lenders order a property valuation or land valuation to determine the properties market value prior to lending money to the borrower. The Lender then uses the appraised value to determine if the buyer is paying the true market value. An appraisal is required in a refinance, short sale, foreclosure, bankruptcy and probate sale to determine market value. Is there an appraisal fee? Yes, there is a fee for every appraisal. Who pays the appraisal fee is determined in the purchase contract.
Appreciation
The increase in value of a property over time due to inflation, supply and demand, capital improvements and/or other factors.
Assumable Mortgage
A type of financing arrangement in which the outstanding mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage. This must be approved by the mortgage holder.
BPO
A BPO stands for "broker price opinion," and it involves using a process very similar to an appraisal. Companies hire a real estate broker to prepare an opinion of value. The representative of the broker, generally a real estate agent, compares three similar properties that have recently sold and three similar properties that are available to the subject property and adjusts up or down for differences. The final result in an Agent or Broker’s opinion of market value.
Bridge Loan
A bridge loan is a way for a home buyer to fund a down payment for another home while still owning his old one. There are two types of bridge loans for home mortgages. In the first, you borrow the money needed to pay off the mortgage on your old home plus provide a down payment for your new one. In the second, you keep your old mortgage and borrow against the equity you've built up in your old home. That equity is then used to provide a down payment for the new home. Usually you are in the process of selling the old property and the bridge loan is only for a few weeks or up to a year while you are waiting for the property sale to be complete.
Closing Costs
Closing costs are the costs associated with selling or buying a house. Both Buyer and Seller have closing cost obligations at the close of the escrow. How much are closing costs? Typical closing costs are 3% of purchase price for buyer and 8% of sales price for seller.
CIC
Common Interest Community formerly known as the HOA (Homeowners Association). Still referred to HOA in escrow process and some State Disclosures.
Deed
A deed is the instrument that conveys ownership from the old buyer to the new buyer.
Deed-in-lieu of Foreclosure
A deed in lieu of foreclosure 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.
Down Payment
The down payment becomes part of the buyers closing costs and amount of down payment depends on what type of loan the buyer is approved for.
Due Diligence
EMD
EMD also known as earnest money deposit is required when writing an offer for purchase on a property. Once there is an agreement between the buyer and the seller the EMD is deposited into an escrow account with the title company.
Escrow
Documents or something else of value, often money(EMD), held by a neutral third party in order to be used at a later date to fulfill an obligation. In the State of Nevada escrow is handled by the Title Company with an Escrow Officer assigned to handle the process from open to close of the sale.
Escrow Account
The term escrow is used again to describe accounts your lender sets up in order to pay your home insurance and property taxes when they become due. Tax and insurance bills are typically sent directly to your lender. Both of those bills are paid annually, but most lenders require you to pay 1/12th of the annual bill each month. The lender deposits the partial payments in an escrow account, where they'll accumulate until it's time to pay your taxes and insurance the following year. You'll begin funding your your escrow accounts by making a payment into them at closing. P.I.T.I. P, Principal - I, Interest - T, Taxes - I, Insurance
Escrow Fees
The title company charges escrow fees for the escrow process. The escrow fees are paid with closing costs and in the state of Nevada the fee is split 50/50 between the buyer and seller.
Escrow Officer
You'll hear the term escrow used to describe the title company, attorney or another person who is hired to handle your closing transaction. That person is often called an escrow agent, because she maintains all documents and funds related to the transaction until the day of closing.
Estimated Net Sheet
Worksheet that your Real Estate agent can put together to estimate what your closing costs and Net from the sale will be.
Equity
Equity is a positive amount over and above the current balance on the mortgage and the market value. This is the amount the seller will net.
FIRPTA
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding.
FHA Loan
Government loan where a buyer only needs to put 3.5% down.
Financial Affidavit
A financial Affidavit is needed in a short sale process showing your financial picture to the mortgage holder
GFE
A GFE is a good faith estimate disclosure from your lender of what all your closing costs and lender fees will be at closing.
HOA Demand
The HOA demand is the final bill from the HOA showing the proration balance due or credit to the seller and the upfront HOA fees and prorations to be charged to the buyer through escrow. The average cost of a HOA Demand ranges from $0 to $180. Each management company sets their own fees.
HOA Resale Package
State of Nevada law requires the seller to order, pay for and deliver the HOA Resale package from the HOA to the buyer. Seller must order the HOA resale package within 2 business days after the contract agreement acceptance by all parties and deliver to the buyer within 1 business day of receipt. Once received the buyer has 5 days to read, review and accept in writing on a resale certification disclosure form. The average cost of a resale package ranges from $25 to $250. Each management company sets their own fees.
HOA Transfer Fee
All HOA management companies have a HOA transfer fee. The fee is to transfer the internal file and billing system from the sellers name to the buyers names. The average cost of a HOA Transfer fee ranges from $125 to $250. Each management company sets their own fees.
Home Inspections
It is always a good idea to get have a home inspection performed when you are purchasing a new home and when you are selling your property. A Home Inspector will inspect all mechanical systems in the property. You will receive a full report to be able to review. A buyer will be able to review the report during the due diligence period and cancel the purchase agreement if there are issues that are above and beyond what the buyer wants to take on. A Seller can use the report to repair and update any issues prior to putting the property on the market.
HUD - 1
A HUD-1 is a document the escrow officer puts together with the final numbers from the lender, escrow fees, down payment, insurance fees, prorations, taxes, HOA, title fees, and any other items of the transaction to be paid through escrow. The HUD-1 contains the final closing figures the Buyer will need to bring into the Title to close. It also discloses to the Seller what figure they will net or what figure they will need to bring in to title to close. The Buyer and Seller are both required to sign off on the figures prior to closing.
Lease Option
A lease option (more formally Lease With the Option to Purchase) is a type of contract used in both residential and commercial real estate. In a lease-option, a property owner and tenant agree that, at the end of a specified rental period for a given property, the renter has the option of purchasing the property.
Multiple Offer Counter Offer
Sometimes when you write an offer you are not the only offer. If this happens the Seller has choices based on the offers received and the advice of their Real Estate Agent. The Seller can accept one offer and reject the other offers. The Seller can counter only one offer and reject the other offers. The Seller can write a multiple counter offer to all buyers. This must be disclosed to all buyers involved. There will be a deadline for buyer’s response and then the Seller will review all multiple counter offers received and accept one.
Preliminary Title Report
The Title Company that Escrow has been opened will perform a title search. This search will disclose any clouds or liens on the title.
Proof of Funds
Proof of Funds are required from all buyers to show in a bank monies for down payment or full cash offers. It is presented in a form of a bank statement with the buyers full name, account number, balance, dated within the last 30 days with the banks/financial institutions information.
Proof of Occupancy
Proof of Occupancy can be determined from the occupant submitting an utility bill in their name or siging a proof of occupancy disclosure that will be notarized.
Prorations
During the escrow process the Escrow Officer disburses all fees due and credited for the date of close of escrow. In other words the seller pays for the days the property is in their name and the buyer starts to pay fees due on the day it is recorded into their name.
Real Property Transfer Taxes
The State of Nevada charges a Real Property Transfer Tax as part of the closing costs. Currently the fee is $5.10 for every $1000 dollars.
Reverse Mortgage
A reverse mortgage is a qualified mortgage for persons of retirement age. You can either purchase a new home on a reverse mortgage or you can refinance a current mortgage into a reverse mortgage.
Seller’s Real Property Disclosure
Also known as a SRPD the seller must fill out this disclosure to the best of their knowledge about all the mechanical systems to the property.
Short Sale
A short sale can be done when you are underwater and owe more on your mortgage than the current market value. You and your agent put together a short sale package with financials to present to the mortgage holder to accept the short payoff.
Short Sale Approval Letter
The short sale bank will forward a short sale approval letter to your agent once they have approved the short sale terms and timelines. You as the seller will be able to read and approve the short sale approval letter prior to the close of escrow. All the terms of the sale and the requirements from the borrower/seller will be spelled out in the short sale approval letter.
Statement of Information
Sometimes when Title performs a title search liens or judgments are found under your name that may or may not be valid. The Title Company will request a statement of information from all parties to remove the non valid items.
VA Loan
A loan given to a Veteran who qualifies. The Veteran pays 0% down payment.
VOE
VOE is a verification of employment. During the final stages of the loan process your employer will have to fill out a form sent from the lender to verify your employment and current pay amount
1031 Exchange
In a 1031 Exchange an investor can take the proceeds from one investment and invest it into another investment at equal or greater value without paying taxes. The 1031 Exchange must be set up prior to the close of escrow of the first investment property and all funds must be deposited into a 1031 exchange account. None of the funds can go to the investor.
