For those of us who really love our jobs, “talking real estate” never gets old, and sometimes we forget that our audience may not be familiar with the terms we are throwing around (shame on us!). So, we’ve compiled a list of some common real estate terms that might come up in a real estate transaction.
You certainly don’t need to memorize the list before buying a home (your real estate agent should be happy to explain these things to you along the way!) but it’s here as a reference if you need it. Hope it helps! And hey…if you need some help call us at 217.552.0700 and we will get your questions answered!
amortization: The process by which debt (such as a home loan) is eliminated over a period of time. Here is an amortization calculator based on the information you input.
appraisal: An estimate of the value of something, in this case, a house and the land it sits on. The person conducting the appraisal is an appraiser. If you plan on securing a home loan (a mortgage), the bank will require an appraisal on the home you choose to make sure that the loan is a good investment.
appurtenance: A part of the real property which will transfer with the land, but which is not necessarily physically connected. This can include parking spaces, easements, or other rights that pass along with the property.
buyer’s agent: The real estate salesperson or broker who represents the person or people buying a property in a transaction. Buyers typically pay nothing to their agent. The sellers pay usually 5-6% of the home selling price and this is split betweem the buyer’s agent and the seller’s agent. We can act as either or both for you.
capital gain: Profit from the sale of an asset, such as a home.
chattel: Personal property. Items such as chairs, clothing, paintings on the wall, etc. that you would take with you if you were to move. These are sometimes included in the sale of a home.
closing: A meeting at the end of a successful real estate transaction; during this time the final papers are signed, payments are made, and keys are handed over to the new owners.
comparables: Properties very similar to the subject property in terms of location, style, features, etc. which are used to help determine the value of the subject property.
comparative market analysis (CMA): A study conducted by the real estate agent to determine a list price for a property by evaluating recent sales of similar properties (or comparables).
conventional loan: A loan which is not guaranteed or insured by the federal government.
deed: A legal document that transfers the ownership of, or interest in, real estate from one person to another.
earnest money: A sum of money which the buyer pays to the seller when they sign a purchase contract. The money is deposited when the seller accepts the contract. If the sale is completed, then the money is applied towards the purchase, but if the buyer defaults on the contract then the seller keeps the money.
easement: The right to use land belonging to someone else for a specific purpose. For instance, if the only way to access your property is by crossing over someone else’s land, then an easement would be necessary. A title search should reveal easements on a property.
encroachment: A portion of a building, wall, fence, etc. that extends past the legal boundaries of the owner’s property onto another’s property.
FHA loan: A loan insured by the Federal Housing Administration which follows the guidelines of that administration.
foreclosure: A legal process in which the bank takes possession of a home, usually after the owners have defaulted on their home loan. The home is then sold in an attempt to pay off the debt. (See “short sale” below to discover the difference between these two terms!)
homestead: Property that is owned and occupied by a family. In many states, including Illinois, there are homestead laws which protect a portion of the value of the property from being used to pay judgments for debt.
listing agreement: The contract between the owner of a property and a real estate broker which allows the broker to sell the property within the terms of the agreement.
loan origination fee: A fee charged by the lender to the borrower for making the loan (sort of an administrative fee). The fee is usually a percentage of the loan amount.
mortgage: The pledge of property as security for the repayment of a loan. In essence, a mortgage is a home loan.
personal property: Things that are movable and that will not be considered part of the real estate. These items, also called chattels, are taken with you when you move.
private mortgage insurance (PMI): Insurance that protects the bank against losses if the homeowner defaults on their mortgage. If you make less than a 20% down payment on a conventional loan when you purchase property, you will be required to pay a monthly fee which covers the cost of the PMI.
REALTOR®: An active member of the National Association of REALTORS®. Most members are real estate sales agents or brokers, though there are other types of membership for banks, contractors, etc.
short sale: A transaction in which the bank allows the homeowner to sell the property for less than the amount owed to the bank. Often the homeowner will negotiate a short sale to avoid foreclosure. In a short sale, the individual still owns the property, but in a foreclosure the property is owned by the bank.
title: 1. Rights to the land, or 2. a document that proves ownership of the land. Before the purchase of property is completed, a title search will be conducted in which public records are investigated. Then title insurance is issued to protect the owner’s and the bank’s financial interest in the property.
transfer tax: A fee imposed when property is sold and title is passed from one person to another. In Champaign County this tax is paid by the seller.
Again–if we can help you, just call 217.552.0700 or email firstname.lastname@example.org.