When you bought or sold your last property, did you feel like your Realtor was speaking a foreign language? If this has happened to you, have no fear. Here is a list of basic real estate definitions that hopefully will help you understand what your Realtor is talking about.
Annual Percentage Rate (APR)- This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual note rate on your loan.
Appraised Value- The opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
Broker- A broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
Closing- In different states this has different meanings. In Arizona, a real estate transaction is not considered “closed” until the all the documents are signed and recorded at the local recorders office.
Deed- The legal document conveying title to a property.
Escrow- An item of value, money or documents deposited with a third party to be delivered upon fulfillment of a condition.
Fixed-Rate Mortgage-A mortgage in which the interest rate does not change during the entire term of the mortgage.
Foreclosure- The legal process in which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Home Inspection- A thorough inspection that evaluates the structural and mechanical condition of a property.
Lien- A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
Owner Financing- A property purchase transaction in which the property seller provides all or part of the financing.
Principal-The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
Second Mortgage- A mortgage that has a lien position subordinate to the first mortgage.
Title-A legal document evidencing a person’s right to or ownership of a property.