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real estate terms and their definitions vary throughout the united states.
the terms defined here pertain specifically to lake county, illinois.
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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1031 Exchange: See "Tax-deferred Exchange"
1% Rule: A rule of thumb that some investors use is the 1% rule—to break even, the property's monthly income should be at least one percent (1%) of the sale price. This is useful when skimming through several potential properties. Be warned, however, that this is a rule of thumb that assumes average expenses, properties and markets.
12-MTA: The 12-Month Treasury Average Index (12-MTA) is based on the average annual yields on U.S. Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve. The 12 months average is determined by adding together the annual yields for the most recently available 12 months and dividing by 12. For more information and current 12-MTA Index, check here.
203(k): HUD-insured mortgage program for the rehabilitation and repair of single-family property. The loan includes purchase money plus projected rehab costs. May be limited to owner-occupied purchases.
5-Day Notice: A legal document served on a tenant for late payment of rent. Click here for the form.
80-10-10: A financing arrangement where the buyer provides 10% down payment, the primary lender provides 80% of the purchase money, and the seller (or lender through secondary financing) lends the final 10%.
Abstract of Title: A summary or digest of the conveyances, transfers and any other facts relied upon as evidence of title, together with any other elements of record which may impair the title.
Acceleration Clause: A provision of a mortgage requiring payment in full of the balance of the mortgage if payments are missed.
Accrued Depreciation: The difference between the cost of replacement new as of the date of the appraisal and the present appraised value.
Adjustable-rate Mortgage (ARM): A mortgage in which the rate of interest is adjusted based on a standard rate index. Most ARMs have a cap on how much the interest rate may increase. The mortgage rate of an ARM is typically tied to a specific market interest rate.
Agent: A person authorized to represent and act on behalf of another person, usually known as the principal, employer or client. Creates fiduciary obligations.
Agreement for Purchase and Sale: See "Contract for Deed."
Alias Summons: In evictions, the process where a tenant cannot be personally served, so instead is served via certified mail and posting.
Alienation Clause: See "Due on Sale."
Alta Survey: ALTA is the American Land Title Association. In addition to a standard boundary survey, the Alta survey shows all easements. Here is text from the ALTA survey minimum standards (with emphasis added):
(h) All easements evidenced by a Record Document which have been delivered to the surveyor shall be shown, both those burdening and those benefiting the property surveyed, indicating recording information. If such an easement cannot be located, a note to this effect shall be included. Observable evidence of easements and/or servitudes of all kinds, such as those created by roads; right-of-way; water courses; drains; telephone, telegraph, or electric lines; water, sewer, oil or gas pipelines on or across the surveyed property and on adjoining properties if they appear to affect the surveyed property, shall be located and noted.
For more information see http://www.alta.org/industry/ALTA2005_Standards.pdf.
Amortization: Liquidation of a financial obligation on an installment basis. "Negative amortization" occurs when monthly payments are too small to cover either the principal or interest reductions.
Amortization Schedule: A schedule of how mortgage debt is changed over time.
Amortized Loan: A loan which is completely paid off, interest and principal, by a series of regular payments which are equal or nearly equal.
Annual Percentage Rate (APR): The rate of interest to be paid on a loan over its projected life; sometimes referred to as the "true" rate of interest.
Appraisal: A professional evaluation of the value of real property. It is often required by a lender.
Appreciation: The amount by which the value of real property increases over time.
APR: See Annual Percentage Rate.
ARM: See Adjustable Rate Mortgage.
Articles of Agreement for Deed: See Contract for Deed
Assessment: The valuation of a property for the purpose of levying a tax. The amount of the tax levied.
Assessment Lien: A lien against specific property improved or benefited by improvements.
Assignment of Lease: The transfer of the interest, rights and use of the property, by the lessee, to another party.
Assignment of Rents: A right given to a mortgagee, as security interest, allowing the lender to collect the rents on an income-producing property, in the event the borrower defaults.
Assumability: A loan which may be assumed by a new buyer. Lenders generally require credit review of the new borrower and may charge a fee for the assumption. Assumability may help you attract buyers when you sell your home.
Assumed Business Name: See "Fictitious Name."
Assumption: When a buyer assumes the loan payments and obligations of the seller. If the buyer defaults, however, both the buyer and seller are responsible for the debt.
Attorney in Fact: A person who is authorized to perform acts, for another, under a power of attorney. The power of attorney may be limited to a specific act or acts, or be general in nature. The person is the "attorney in fact." The authority and the document is the "power of attorney."
Attornment Letter: Letter informing a tenant that the property has been sold and future rent is payable to the new landlord.
Back-up Offer: Any secondary offer received pending the finalization of a previous offer.
Balloon Mortgage: A real estate loan in which some portion of the debt will remain unpaid at the end of the term of the loan. A balloon will usually result in a single large payment (balloon payment) due when the loan ends.
Balloon Payment: See "Balloon Mortgage."
Basis: The cost of a property including purchase costs and improvements, less depreciation.
Basis Point: 100th of one percent. Fifty basis points would be 1/2%.
Blanket Mortgage: Using several parcels of property as collateral for a single loan.
BOCA: Building Officials and Code Administrators whose property maintenance code is nationally accepted by many cities and villages. The BOCA Code requires that every room occupied for sleeping purposes by one person have at least 70 square feet of floor area. Every room occupied for sleeping purposes by more than one person is required to have at least 50 square feet of floor area for each person sleeping in that room. The only access to a bedroom cannot be through another bedroom.
Boot: Profit gained in exchange of properties on which income tax is not deferred. May be anything of value, including mortgage relief.
Bridge Loan: A short term loan that allows a buyer to buy a new home before selling the old home.
Buy-down: A method of financing in which the initial payments, for a specified period of time, are reduced. Typically, used by a builder-developer to assist buyers in purchasing a home and to move the builder’s inventory.
Buyer’s Broker (Agent): A contractual arrangement in which the broker is employed specifically to represent the buyer.
Cap: A limit on how much a mortgage interest rate may increase or decrease for an adjustable-rate mortgage.
Capitalization: In appraising, determining value of property by considering net income and percentage of reasonable return on the investment.
Capitalization Rate: A percentage figure which reflects the recapture of the original investment, over the economic life of the improvement, to give the investor an acceptable rate of return on the original investment.
Cash Flow: Cash left at the end of a period of time (usually a year) from the operation of income property or a business. Do not subtract depreciation when computing cash flow.
CC&Rs: Covenants, conditions and restrictions affecting the use of a property.
Closing: The process of transferring the legal title from the seller to the buyer, upon an appropriate accounting of the financial matters, involved in the transaction. At the time of closing, all debts are paid, adjustments made and money disbursed, and a deed is prepared in the new owner’s name. Also called "Settlement."
Closing Costs: Costs associated with the purchase of real property that must be paid at the sale closing. May include mortgage fees, title insurance, appraisal/inspection fees and points. For points, see "Discount Points" and "Loan Origination Fee."
Closing Statement: The final accounting of a sale, given by escrow or other agent, to the buyer and seller.
Cloud on Title: Any document, claim, lien, encumbrance which impairs or injures or causes doubt as to the status of the property’s title.
CMA: See "Comparative Marketing Analysis."
Coinsurance Clause: A requirement which stipulates that the borrower must maintain property and casualty insurance on the collateral property in an amount equal to eighty percent (80%) of the value of the property.
Collateral: A thing of value, given or pledged, to ensure the payment of a debt. Security.
Commercial Mortgage: Mortgage for multi-family properties (five or more rental dwelling units).
Commercial Property: Buildings containing five or more residential units, or non-residential use property used for business or industry.
Comparable Sales: Sales which have similar characteristics as the subject property and which are used for analysis in the appraisal process.
Comparative Marketing Analysis: Estimate of value reached by evaluating comparable sales.
Condemnation: The process of exercising the government’s right to eminent domain to take private property for the good of the public. It requires the "taking" authority to pay the owner "just" compensation.
Conforming Loan: The mortgage conforms to the requirements of the secondary market (i.e. Fannie Mae and Freddy Mac).
Consideration: Anything of value given to induce a person to enter into a contract. It may be money, personal services, or even love and affection.
Constructive Eviction: Any action, by a lessor, which materially disrupts or impairs the lessee’s enjoyment or possession of leased property. It permits the lessee to terminate the lease without further liability.
Contingent: Dependent upon an uncertain future event.
Contract for Deed: A contractual arrangement in which the seller holds the legal title (deed) to the property until such time as the buyer fulfills the contractual obligations. The buyer holds an equitable interest in the property. It is a financing instrument and is also known as a land contract, installment contract, articles of agreement, etc.
Conventional Loan: A loan made without government backing.
Conventional Mortgage: A home loan that follows a fixed rate.
Conversion: (1) Changing the use of a property, such as converting apartments to condominiums. (2) The unlawful application of others' funds for personal use.
Cost Approach: Evaluation of property based on the property’s reproduction or replacement cost. It is an estimate or opinion of value.
Convertible ARM: An adjustable-rate mortgage that is convertible to a fixed rate at a future date, usually for a fee.
Credit Report: A full listing of debts and credit. Credit reports are kept by several companies, and are ordered by a lending company when you apply for a mortgage.
Curtailment: A payment that shortens or ends a mortgage, thereby paying off the entire debt.
DBA: "Doing business as." See "Fictitious Name."
Debt Service: The payment of a loan, including principal and interest.
Debt-to-income Ratio: A ratio used by lending institutions to determine whether a person is qualified for a mortgage. Debt-to-income is the total amount of debt, including credit cards and other loans, divided by total gross monthly income.
Deed: A document transferring real estate from one party to another. Officially recorded in government records.
Default: Failure to pay mortgage payments over a specified period of time.
Deferred Maintenance: Existing but unfulfilled requirements for repairs and rehabilitation. Usually due to the ravages of "nature."
Deficiency Judgment: A judgment granted, the injured party, for the balance of a debt owed when the proceeds from the foreclosure sale of the security or collateral are insufficient to satisfy the remaining unpaid debt.
Delinquency: Being late with loan payments.
Depreciation: Loss of value in real property brought about by age, physical deterioration or functional or economic obsolescence. Broadly, a loss in value from any cause.
Discount Points: A percentage of the mortgage paid to the lender to lower the interest rate on a loan. One point equals 1 percent of the loan amount, or 1/8% interest.
Down Payment: The amount of money required up front by a lending institution in order to get a mortgage. This can be as low as 3 percent depending on the type of loan.
Due-on-sale Clause: A limited form of acceleration clause which allows the lender to accelerate all sums due and owing to be paid immediately. The lender may only use this clause in the event the collateral or security property is conveyed or attempted to be conveyed, without the lender’s written permission.
Earnest Deposit: Valuable consideration offered by a prospective buyer or lessee as the security and indication of the buyer’s or lessee’s good faith in entering into a contract.
Easement: A non-possessory right to enter and use another’s lands within the specified limits. It constitutes a "legal" right to use another’s land.
Economic Obsolescence: Any loss in value from factors which exists outside the property itself.
Effective Gross Income: Arrived at by subtracting vacancy and collection losses from the scheduled gross income.
Effective Interest Rate: The percentage of interest which is actually being paid, by the borrower, for the use of the money.
Eminent Domain: The right of government and other agencies, such as state, county, city, municipality, railroad, school district, etc., to take property for the good of the general public. See "Condemnation."
Encroachment: An unauthorized intrusion of real property as a trespass upon another’s property.
Encumbrance: Anything which affects, limits or burdens title to property.
Equitable Title: An interest held by a buyer under a contract.
Equity: The difference between the market value of a property and the amount still owed on the mortgage.
Escalator Clause: A clause in a mortgage or trust deed permitting the lender to increase the agreed-upon interest rate based on fluctuations of the prime or prevailing interest rate.
Escrow: Money and documents deposited in a trust account to be held by one party for another. Often used by brokers to hold deposit money prior to closing. Also used by lenders to hold money for taxes and insurance on a property.
Eviction: Putting out a tenant when the tenant’s right to possess the property has ended. Usually must comply with specific state requirements, including a court order.
Extended Coverage: A title insurance policy that covers risks normally excluded by most standard coverage policies. The standard policy normally insures the title only as shown by the public records. It does not cover unrecorded matters that might be discovered by an inspection of the premises. Most lenders require extended coverage mortgage title insurance policies. Extended coverage indemnifies the insured against such things as mechanic's liens, tax liens, miscellaneous liens, encumbrances, easements, rights of parties in possession and encroachments, which may not be disclosed by the public records.
Fair Market Value: The theoretical value which a property would bring on the "open market" with knowledgeable buyers and sellers. It presumes that neither party is under any pressure to conclude the transaction.
Federal Fair Housing Law: A federal law (Title III, Civil Rights Act of 1968) enacted to declare a national policy of providing fair housing throughout the United States. It makes it illegal to discriminate on the basis of race, color, sex, religion and national origin.
FHA Loan: A loan guaranteed by the Federal Housing Administration. FHA issues specific guidelines for mortgages. Non owner-occupied properties are not usually eligible for FHA loans.
Fictitious Name (Person): "Made up" name for a business ("DBA"). The name must be registered within the state where the business is conducted. For information on local procedures, click here.
Fiduciary Relationship: The legally binding relationship of trust, loyalty and confidence when a party is acting as the agent for another.
First Mortgage: The lender has a security right over all other mortgages on the property.
Five Day Notice: See "5-Day Notice."
Fixed-rate Mortgage: A loan with an interest rate that never changes.
Fixtures: Items of personal property which have been affixed, legally or physically, to property and are now considered real property.
Float: The period of time between the day a mortgage payment is due and the day the lender imposes a late charge.
Floatdown Option: Guarantees that if rates should fall during loan processing, the lender will lower the rate accordingly.
FMV: See "Fair Market Value."
Forced Inflation: The practice of constantly improving rental property so rents can be increased more than the general rate of inflation.
Forcible Entry: The part of the eviction process where the owner retakes physical possession of the property or dwelling unit.
Foreclosure: The legal process that occurs when a buyer defaults on a loan. The lending institution takes back the property because of a lack of payments.
Frontage: Land bordering a street, river, lake, etc.
Functional Obsolescence: Loss in value resulting from poor style and design or lack of modern facilities. Loss occurs within the property boundaries.
Government-insured Mortgage (GIM): Loans in which the government promises to make good on the insured portion, should the borrower default on the loan. Generally, government-insured loans do not require large down payments. They do, however, have strict eligibility requirements. See "FHA Loan" and "VA Loan."
Graduated Payment Mortgage (GPM): A mortgage with an interest rate that starts out low and increases gradually at a predetermined rate.
Gross Rent Multiplier (GRM): In estimating market value of income-producing properties, a rule of thumb used by appraisers. It is arrived at by dividing the sales price of a property by actual or estimated annual rentals to arrive at an acceptable average (price / gross annual rent = GRM).
Gross Scheduled Income (GSI): Gross rents expected from income property before adjustments for vacancy and other income.
Highest and Best Use: An appraisal phrase meaning that use which, at the time of an appraisal, is most likely to produce the greatest net return to the land and/or buildings over a given period of time. It is that use which will produce the greatest amount of amenities or profit for a particular property.
Holdover Tenant: A person who remains in possession of leased property after the lease has expired.
Housing-to-income Ratio: A ratio used by lending institutions to determine whether a person is qualified for a mortgage. Housing-to-income is the total cost of housing divided by gross monthly income.
HUD1: Settlement Statement prescribed by the Department of Housing and Urban Development. Click here for an example.
Improvements: Things built on land which become a part of the real property.
Income Approach: An evaluation of real property by estimating the amount of net income the property will produce over its remaining economic life.
Income Property: Property which produces rent or other profits.
Installment Note: A note which provides that payments, of a certain sum or amount, are to be paid on the dates specified on the instrument.
Installment Sales Contract: See "Contract for Deed."
Interest: The amount charged per year on a loan. The rate varies according to the type of loan.
Interest Rate Cap: A limit on the amount interest can rise or fall during a specified period of time on an adjustable-rate mortgage.
Intermediary: The party (Qualified Intermediary) who coordinates a non-simultaneous tax-deferred exchange, by holding the sale proceeds from the first property until the closing for the purchase of the second property.
Jumbo Loan: See "Non-conforming Loan."
Junior Lien: A lien which does not have first priority.
Junior Mortgage: Any mortgage which is not a first mortgage. Secondary financing.
Kickout: The process of disqualifying a prior purchase contract by allowing a certain time period, usually 48 or 72 hours, for the purchaser to remove any contingencies. If the buyer is unable to remove the contingencies, the contract is declared null and void, and a subsequent purchase contract can be accepted by the seller.
Land Contract: See "Contract for Deed."
Late Charge: A fee assessed for late payments on a mortgage. Usually calculated as a percentage of the principal and interest payment, excluding taxes and insurance.
Lease-option: A method of financing in which a person leases the property from the owner with an option to buy.
Legal Description: Property description recognized by law. A description by which property can be definitely located by reference to government surveys or approved recorded maps.
Lessee: A person who contracts to rent property under a lease agreement. Tenant.
Lessor: An owner, or other person, who enters into a lease with a tenant.
Letter of Attornment: See Attornment Letter
Leverage: Making money with borrowed money.
LIBOR: London Inter-Bank Offered Rate. This is a favorable interest rate offered for U.S. dollar deposits between a group of London banks. There are several different LIBOR rates, defined by the maturity of their deposit. The LIBOR is an international index that follows world economic conditions. LIBOR-indexed ARMs offer borrowers aggressive initial rates and have proven to be competitive with popular ARM indexes like the Treasury bill. Current LIBOR rates available at Bankrate.com.
Lien: A charge or claim imposed upon a specific property by which it is made security for the payment of a debt.
Lifetime Cap: A limit on how high the interest rate on an adjustable-rate mortgage (ARM) can rise over the lifetime of the loan.
Lis Pendens: Suit pending, usually recorded so as to give constructive notice of pending litigation. It is a "notice" of a possible future lien interest.
Loan Commitment: See "Mortgage Commitment."
Loan Origination Fee: Fee charged by a lender to cover initial cost of document preparation, credit report, inspection, appraisal fee, etc., for granting a loan. Cannot be written off if for the owner's personal residence.
Loan-to-value Ratio (LTV): The amount of the loan divided by the purchase price of the house.
Lock In: Prior to closing, allows the borrower to be assured a given rate of interest for a mortgage. This usually involves paying a fee to the lender. Mortgage rates not "locked in" are subject to changing market conditions.
LTV: See "Loan-to-value Ratio."
Margin: A set number of percentage points a lender adds to the index rate to determine the interest rate for an ARM.
Market Value: See "Fair Market Value."
MIP: Mortgage insurance premium. See "Mortgage Insurance."
Mortgage Banker: Any individual or business entity, who with the entity’s own funds provides loans to qualified buyers.
Mortgage Broker: A person or business entity who provides a loan origination service on behalf of specific lenders.
Mortgage Commitment: Lender’s contractual commitment to a loan based on the appraisal and underwriting of the collateral property.
Mortgagee: The lender. The lender receives a mortgage from the borrower to secure a loan or performance of an obligation.
Mortgage Insurance: Insurance designed to cover the lender should the borrower default on the loan. Depending on the mortgage, this may be required by the lender if the borrower’s downpayment does not meet a minimum threshold (usually 20%). MIP (Mortgage Insurance Premium) refers to FHA loans; PMI (Private Mortgage Insurance) refers to conventional loans.
Mortgagor: The borrower. The borrower gives a mortgage to the lender as security for a loan or performance of an obligation.
Multifamily: A building with five or more dwelling units.
Multiunit: A building with two to four dwelling units.
Negative Amortization: See "Amortization."
Net Operating Income (NOI): The gross income of income property minus the vacancies and allowable expenses equals the net income. Also the net profit of a business.
Non-conforming Loan: The mortgage does not conform to the requirements of the secondary market (i.e. Fannie Mae and Freddy Mac). Also called "jumbo" loan.
Nonconforming Use: Continuing use of a property in a manner which is now prohibited by a zoning change. Usually it is a "pre-existing" condition.
Operating Income: See "Net Operating Income."
Option: A written agreement to keep open, for a period of time, an offer at a specified price to sell, purchase or lease property. It requires that some amount of valuable consideration must pass from the optionee (buyer) to the optioner (owner).
Overcrowding: Exceeding the living capacity, generally established by BOCA, of a residential dwelling. See "BOCA."
Over-improvement: An improvement which is not the "highest and best use" for the site on which it is placed, by reason of excess size or cost.
Partially Amortized Note: See "Balloon Mortgage."
Perc Test: Percolation test to determine the capability of the soil to absorb liquid, both for construction and septic systems.
PIN: Property Identification Number. Example: 05-04-402-048-0000.
property identification number
PITI: Principal, interest, taxes and insurance.
Plat: A map that shows all boundaries of a piece of property.
PMI: See "Mortgage Insurance."
Points: An interest fee charged by the lender. One point is equal to 1 percent of the mortgage. The use of points allows the lender to raise its yield above the apparent interest rate.
Power of Attorney: See "Attorney in Fact."
Pre-approval: A process whereby a potential buyer secures a guaranteed mortgage approval before making a real estate offer. A lender guarantees in writing to grant a loan for a specified amount, subject to appraisal. Differs from "Prequalification."
Pre-foreclosure: A situation where the borrower is delinquent but the lender has not yet commenced foreclosure proceedings.
Prepayment Penalty: A fee imposed on a borrower who pays off a mortgage before it is due.
Pre-qualification: A process by which a potential buyer finds out how much of a mortgage a lender would be willing to grant, based on the borrower’s income and debts. Differs from pre-approval in that the lender makes no commitment to make the loan.
Prime Rate: The best interest rate available to a lender’s most qualified customers. Current prime rates available at Bankrate.com.
Principal: The amount of a loan.
Private Mortgage Insurance (PMI): See "Mortgage Insurance."
A written estimate that
projects a property's rental income,
other income, vacancy, fixed and
operating expenses and net operating
income on an annual basis.
Promissory Note: Following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for repayment. Enforceable anywhere in the U.S.
Proration: To divide or prorate equally or proportionately over time.
Prorations: Adjustments at closing which benefit the buyer, such as unpaid property taxes, tenant security deposits, prepaid rent, etc.
Purchase Money Mortgage: A mortgage given by the buyer to the seller as part of the purchase consideration, as opposed to a hard money mortgage.
Quit Claim Deed: A deed operating as a release; intended to pass any title, interest, or claim which the grantor may have in the property.
Real Estate: Property that consists of land, that which is affixed, and rights, privileges and improvements which benefit the property and pass on when the property is transferred. Generally considered immovable.
Real Property: See "Real Estate."
Recording Fee: Fee charged by the Recorder of Deeds to enter real estate transaction documents into the public record.
Refinancing: Obtaining a new loan to pay off the old mortgage, such as a balloon payment. A way of obtaining a better interest rate and lower monthly payments.
Rehabilitation: The restoration of a property to satisfactory condition without drastically changing the plan, form or style of architecture.
Reissue Rate: Discount for title insurance policy when a property is refinanced. The average reissue discount for a refinancing is 50 percent to 60 percent. The borrower must request the discount, because attorneys and title companies rarely offer.
REO: Real Estate Owned. Real estate held by the lender following a foreclosure proceeding.
Replacement Cost: The cost of replacing a building with another building having the same functional ability, but which can be of different size, design, etc.
An escrow fund required by a
lender into which a borrower makes
periodic deposits that will ultimately
be used for the payment of capital
expenditures as such occur.
Reproduction Cost: The cost to reproduce a building as an exact duplicate.
Rescission A legal remedy for canceling, terminating or nullifying a contract and restoring the parties to their original position. Return to status quo.
Residential Property: Buildings which contain one to four dwelling units.
RESPA: Real Estate Settlement Procedures Act. A federal statute requiring disclosure of certain costs in the sale of residential improved property which is to be financed by a federally insured lender. For more information click here.
Riparian Rights: Rights to a body of water such as a lake or stream.
Sales Contract: A contract by which buyer and seller agree to terms of sale. It is the result of the offeree accepting an offer from an offeror.
Scheduled Annual Income: See "Gross Scheduled Income."
Secondary Financing: A loan secured by a junior mortgage or trust deed on real property. An inferior lien according to the lien position.
Second Mortgage: An additional mortgage on a property. It often carries a shorter term and a higher interest rate than the original mortgage.
Secondary Mortgage Market: A market in which existing mortgages are resold.
Security: See "Collateral."
Security Instrument: Document used when property is used as security for a loan. Includes trust deeds, mortgages, land contracts, etc.
Seller Take-back: An arrangement in which the seller becomes mortgagee on a home purchase. Usually, but not always, a form of "junior" financing.
Seller Financing: When the current owner of a property holds the mortgage loan for the buyer.
Settlement: See "Closing."
Short Sale: A distressed property sale where the lender(s) agrees to accept less than the full amount owed.
Specific Performance: Legal action brought to compel a party to carry out the terms of a contract. When filed in conjunction with a Lis Pendens, a "cloud" is placed on the owner’s title, thus foiling owner’s efforts to sell until the lawsuit is resolved.
Starker Exchange: See "Tax-deferred Exchange."
Take-back Mortgage: See "Seller Take-back."
Tax-deferred Exchange: An exchange of "like" for "like" properties for the purpose of deferring income tax. A Starker Exchange involves transactions which are not simultaneous.
Tick: The smallest unit of measure for mortgage interest, 1/32nd of one percent.
Title: Evidence that the owner of land is in lawful possession of the property. It is an instrument evidencing such ownership.
Title Company: A company that searches for titles and insures title claims.
Title Insurance: A policy that protects the owner of a title from loss resulting from disputes over ownership claims. Usually, the purchaser and lender both acquire title insurance, with the purchaser’s policy paid by the seller, and the lender’s policy paid by the borrower.
Truth-in-lending Act: A federal law requiring lenders to reveal all of the terms of a mortgage; applicable to residential property.
VA Loan: A low income loan guaranteed by the Veterans Administration. To obtain a VA loan, the borrower must have served in the U.S. armed forces.
Variance: An exception to current zoning laws. Typically applied for when a party wants to make improvements which violate current zoning restrictions.
Wraparound Mortgage: A junior mortgage in which the mortgagee agrees to make the payments on the first mortgage. It allows the borrower to buy property without refinancing the first mortgage at usually substantially higher current rates. May trigger "Due-on-sale Clause."
Yield Maintenance: A prepayment penalty that provides a lender a yield equivalent to the interest rate in the note until the loan's maturity date. Yield maintenance usually states that the lender will use U.S Treasury securities as the basis for determining the amount of the penalty.