Real Estate Definitions
Real Estate Definitions
Wanted to take a little detour & define some terms that we use daily in Real Estate. In no particular order & this is my personal definition of the terms so worth what you paid for it. Obviously, we are not attorneys or accountants & if you have an issue we recommend you consult a professional. That said, here goes!
1031 Exchange – Trading of properties amongst parties that allows deferring of capital gains taxes.
Addendum – A document changing the terms of the contract.
Appraisal – Valuation of the property by a certified appraiser. Usually ordered by the bank to protect their investment in the property.
Assign/Assignable/Assignability – The act of assigning a contract to a 3rd party. The 3rd party assumes all the terms of the original signing party.
Assumption – Occurs when buyer takes over seller’s existing mortgage and “assumes” the debt.
Closing Costs – The amount of money paid by the seller and buyer to close the property.
Closing Date – The date that title transfers from the seller to the buyer.
Contract – The written document identifying the terms of the sale.
Conveyance – The transfer of property from one party to another.
Deed – The document that conveys title from the seller to the buyer.
Default – The act of the buyer or seller failing to honor the terms of the contract.
Effective Date – The date the last party signed the contract.
Escrow Agent – The party holding the escrow deposit.
Escrow Deposit – The good faith amount put in escrow so seller will take property off the market
Final Walkthrough Inspection – Done the day before or day of closing to assure property is in condition agreed upon in the contract.
Financing – The money borrowed by the buyer to purchase the property.
Fixture – Something that was once personal property but has been attached to the real property.
Flood Zone – An area identified to of flooded within the last 100 years.
Force Majeure – Major act of God such as a hurricane.
Home Owner’s Association – An organization of home owners that is formed to enforce the standards defined in the association documents such as home colors & maintain common areas.
Home Warranty – A policy that fixes or replaces any of the home’s systems such as plumbing, electrical..etc
Ingress and Egress – Access to the property.
Lease – A document identifying terms of a tenant and landlord relationship for a period of time.
Legal Description – A description detailed enough that a surveyor can easily find the property.
Lien – A burden on the property that must be satisfied in order to transfer title such as a mortgage or tax obligation.
Mortgage – Pledging your property in exchange for money to buy it.
Parties – The buyer and the seller. This can be one person, multiple people, a corporation, or any other legal form of ownership.
Personal Property – Anything that is not attached to the property or does not convey in the contact.
Possession – Party holding the deed.
Property Inspection – Hiring of various professionals to inspect systems of a home and assure they are functioning properly.
Proration – The act of distributing or collecting funds that have either been paid or not yet been paid by either the buyer or the seller. For instance, the unpaid portion of taxes that are due in December. The seller’s portion is collected and credited to the buyer who will have to pay the entire tax at the end of the year.
Real Property – Anything attached to the property or conveying in the contract.
Rider – A document attached to a contact that specifies additional terms for the sale.
Seller Disclosure – A form competed by the seller that identifies known facts materially affecting the property. All known facts materially affecting the property must be disclosed according to law.
Seller Financing – Financing provided by the seller to the buyer at the time of the sale. The seller then has a mortgage/lien on the property until paid in full.
Short Sale – Selling of a home for less than what is owed to a lender or lien holder. The lienholder must agree.
Special Assessment – A tax levied on a specific property or group of properties for something that benefits only them. Such as new sidewalks, paving dirt roads, etc. The city/county pays for it up front and issues a special assessment tax until it is paid back in full.
Survey – Document identifying the boundaries and encumbrances on the property.
Tax ID# - A unique number the property appraiser uses to identify a parcel.
Title – The trail of ownership of a property. When a party “holds title” they are the current owners. When they “transfer title” they sell the property to another owner.
Title Evidence – Proof that the seller owns the property and has the right to sell it.
Title Insurance – A guarantee against any future claims against the title.
Waiver – A provision eliminating a part of the contract.
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