Real Estate Terms
Simplifying Real Estate Talk
From legal jargon to industry colloquialisms, don’t let the words get in the way. Here’s a collection of words made clear, so you can read between the lines of industry professionals from Realtor to Property Inspector.
Adjustable Rate Mortgage
Real estate loan in which the interest rate is periodically (usually every six months) adjusted up or down to reflect the current market rates. ARMs usually specify limits as to how high or low the interest rate can go, and how frequently the changes can be made. Such loans usually start with an attractively low rate of interest (the ‘teaser rate’) to attract borrowers. Also called a variable rate mortgage. See also adjustable mortgage loan.
Appraiser’s opinion (not determination) of the current worth of a property based on factors such as area, location, improvements, and amenities. Generally, this value is arrived at by using one of three methods:
(1) Cost approach, (2) Income approach, or (3) Market comparison approach. Not to be confused with assessed value.
The value placed on real estate or personal property by government (or court appointed) assessors for determining ad valorem taxes, or to levy damages on the orders of a court. Assessed value is used rarely as a basis for appraisal value.
All costs and fees paid by a buyer in a real estate transaction, or by a borrower in mortgage loans. Expect these to be 2 to 5 percent of the purchase price of your home. Costs incurred may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges. Prepaid costs are those that recur over time, such as property taxes and homeowners’ insurance.
A fee paid to a real estate agent or broker for their services–sometimes a percentage of the sale price.
“Fiduciary” is a term that refers to a legal relationship that is confidential between two parties. This relationship gives one party the right to act and make important decisions for the other party. In the world of real estate, the real estate agent and his or her clients (buyers or sellers) participate in a fiduciary relationship.
When a real estate agent or broker acts in an agency capacity for a buyer or seller client in a transaction, the agent or broker functions under certain legally mandated duties called fiduciary duties, acting in the best interests of the client.
Fiduciary duties vary by state real estate statute, but one example common to all is “confidentiality” of the client’s information. In a fiduciary capacity, it is the duty of the real estate agent or broker to protect the clients’ privacy and keep all information confidential, unless required to divulge it by a court of law.
Fixed Rate Mortgage
A fixed-rate mortgage is a mortgage loan that has a fixed interest rate for the entire term of the loan. Generally, lenders can offer either fixed, variable or adjustable rate mortgage loans with fixed-rate monthly installment loans being one of the most popular mortgage product offerings.
A listing agreement is a document in which a property owner (as principal) contracts with a real estate broker (as agent) to find a buyer for the owner’s property. The owner executes the listing agreement to give a real estate broker the authority to act as the owner’s agent in the sale of the owner’s property, for which the owner agrees to pay a commission.
The List-To-Sell ratio is the final sale price (what a buyer pays for the home) divided by the last list price expressed as a percentage. If it’s above 100%, the home sold for more than the list price. If it’s less than 100%, the home sold for less than the list price. Looking at sale-to-list percentages can help buyers and sellers get a sense of how to negotiate on pricing. To calculate the average sale-to-list for a group of homes, add up each home’s sale-to-list ratio, then take the average of the total.
This term is often used when combined with mortgages, pre-qualification by an individual for a mortgage often determines the budget that a buyer has to spend when buying real estate. It is a very important factor for real estate salespeople to know about their clients.
Are there any specific terms or concepts you’d like us to add to our glossary?
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