R EA L E STAT E T ER MS Nearly everyone, at some point in life, will have the opportunity of buying and selling real estate. The purchase of a home is probably the largest single investment a person will ever undertake and careful consideration should be given to the technical issues involved in the transfer of real estate before any action is taken. Whether you are a seller or a buyer, you should understand the contract terms and how they affect you.
AGENCY A legal relationship in which an owner-principal engages a broker-agent in the sale of a property or a buyerprincipal engages a broker-agent in the purchase of a property. AGENCY RELATIONSHIP Agreement between an agent and a client in which the agent acts in the client’s best interest in a real estate transaction. APPRAISAL Process of determining a property’s market value. ARM (ADJUSTABLE RATE MORTGAGE) A mortgage with an interest rate that changes over time in conjunction with movements in a given index. ASSESSED VALUE The valuation placed on property by a public tax assessor as the basis of property taxes. ASSUMPTION OF MORTGAGE An agreement whereby the buyer assumes responsibility for a mortgage owed by the seller. The seller remains liable to the lender unless the lender agrees to release the seller from liability. BALLOON PAYMENT A lump sum principal payment due at the end of some mortgages or other long-term loans. BINDER An agreement, accompanied by a deposit, whereby the buyer evidences good faith. BRIDGE LOAN A short-term loan made until a longer-term loan can be arranged; it is sometimes used when a person
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needs money to build or purchase a home before the present one has been sold. BROKER A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business. BROKER AGENT An agent often from another company other than the listing company working with the home buyer but who legally represents the seller. BUYDOWN Prepaid interest that brings the note rate on the loan down to a lower, permanent rate. BUYER’S AGENT Acts exclusively on behalf of the buyer. CAP The maximum amount an interest rate or monthly payment can change, either at adjustment time or over the life of the mortgage. CLIENT The buyer represented by a Buyer’s Agent or the seller represented by a Seller’s Agent, also called the “principal.” CLOSING The “closing” of the purchase of your home is the transaction in which you receive all the documents required to convey the title of your property. At the closing these documents are reviewed to be sure that the conditions and promises of the purchase contract are fulfilled. Also at this time, the balance of the purchase price is paid to the seller. Arrangements are made at the closing for the date when you
D ouglas Elliman Real Estate BuRe yearl’ sE sGta u ite d e Te rm9s
