Glossary of Terms

Adjustable Rate Mortgage - Also called an ARM or adjustable, this type of mortgage typically starts off with a lower interest rate that stays fixed for a specific time, then adjusts periodically depending on changes in the market interest rate.

Appraisals - A report made by a certified or licensed real estate appraisal expert that states an opinion of the fair market value and quality of the property, following a personal visit and examination of the property.

Appraiser - A certified or licensed expert who states his or her opinion of the fair market value and quality of the property following a physical review of the property and the market condition.

Appreciation - An increase over time in the market value of a property, further adding to the equity one may have in the property.

Assumable Mortgage - A type of mortgage that is set up so that the buyer can take over the seller’s payments.

Bill of Sale - An instrument conveying title to personal property ( i.e. Window furnishings, kitchen appliances, etc.).

Closing (Settlement) - The final step of a property sale transaction, in which the legal documents (i.e. Deed, note, mortgage, affidavits) are executed and funds disbursed in accordance with the terms of the purchase contract or loan commitment.

Closing Agent - The agent (real estate attorney) who oversees and conducts the many steps involved in the real estate transaction during the closing, including the down payment and all documents related to the sale.

Clouds on Title - A lien or encumbrance that, if valid, would adversely affect the title to the real property.

Commitment Letter - A written agreement in which the lender agrees to lend money if the borrower meets certain conditions.

Comparative Market Analysis (CMA) - A written CMA compares a home to comparable homes in the neighborhood that either are presently on the market or have sold in the last six months. This is not an appraisal.

Contingencies - Conditions (or escape clauses) in a contract where, if the contingency is not fulfilled, the affected party may walk away from the deal.

Contract - A legally binding document in which the buyer agrees to purchase specific property and the seller agrees to sell under stated terms and conditions. Also called a contract for purchase and sale, purchase and sale agreement, binder, or earnest money contract.

Curb Appeal - The attractiveness of a property and its improvements to prospective buyers viewing it from the street as compared with other such properties on that same street, neighborhood, or development.

Deed - The formal written document that transfers real property ownership rights from the seller to the buyer. It contains an accurate, specific legal description of the property and is delivered at closing.

Default - The failure of a buyer to pay the monthly mortgage payment which includes the loan principal, interest, and possibly additional charges for taxes and insurance.

Discount Broker - A transactional agent who works at a discount by providing only certain services.

Equity - The fair market value of a property minus what the property owners still owes on it. Homeowners sometimes borrow against their equity, taking out a home equity loan (also called a second mortgage), with tax-deductible interest, to pay for whatever they choose.

Escrow - Money that is set aside so that the lender can pay taxes; hazard, flood, and mortgage insurance; and other special costs connected with owning property.

Fair Market Value - There are many different variations on the precise definition of this term. It is basically the value of a property on the open market that represents what a seller would reasonably sell the property for and what a reasonable buyer would purchase the property for given the presumed value of other similar properties that have recently sold in the same or similar market.

FHA Loan - Federal Housing Administration. A federal agency within the U.S. Department of Housing and Urban Development (HUD). Using loan insurance programs to insure mortgages for lenders, the FHA stimulates the availability of housing for low and moderate-income families.

Fixed-Rate Mortgage - A type of mortgage in which the interest rate remains the same, or fixed, throughout the term of the loan. Lenders typically charge a higher interest rate for these mortgages. The most common fixed-rate mortgages are 15 year and 30 year.

Foreclosure - When the lender gets a judgment ordering a public sale of the property to pay off the loan because the borrower has defaulted on the mortgage payments.

Homeowners Insurance - Required for all homeowners with a mortgage, it generally covers accidents, damage, and theft that might occur on their property.

Homestead Tax Exemption - A tax credit for Florida residents on their principal residence. The exemption basically takes $25,000 off the tax-assessed value of the property, giving the homeowner a tax reduction of about $500.

HUD-1 - This is a document required by the Federal Department of Housing and Urban Development on all federally assisted loans. It is typically used in all residential real estate closings as the settlement statement which identifies how all of the money obtained at or before the closing is disbursed. The money is disbursed by the closing agent.

Inspection - Examination of a property to see that it meets the standards of the contract, the lender, and the buyer.

Interest - A charge for a loan is usually a percentage of the amount lent. The IRS lets homeowners deduct mortgage interest and real property taxes, within limits, on annual income tax returns.

Liens - A legal claim on the property that acts as a security for the payment of a debt. If the debt is not repaid as promised, the lender or the lien holder can foreclose its claim on the property and force a public sale to pay the debt.

Marketable Title - Property is said to have marketable title when the title or rights to a property have no problems or only minor problems that any well-informed and prudent buyer would accept.

Material Defect - Defects, including any property damage, malfunctions of major systems, and environmental hazards affecting the condition of a property, which should be readily disclosed to a buyer.

Mortgage - A document that places a lien on property. The lender holds the lien as security for the money borrowed.

Mortgage Note - A promissory note that is secured by a mortgage. A legal document that promises or pledges to pay back a loan.

Mortgage Policy - A title insurance policy issued to the lender. It protects the lender for the amount of the mortgage loan.

Multiple Listing Service (MLS) - a computer-based resource used by real estate agents that lists and contains descriptions of improved and vacant properties for sale in a particular area.

Owner’s Policy - A title insurance policy issued to a property owner; it protects the owner’s equity against hidden title defects.

Points - Up-front interest to compensate the lender for processing a mortgage. Also, known as “loan origination fees.” Each point equals 1 % of the loan amount. Points are also referred to as “discount points” because usually the more points paid, the lower the interest rate charged by the lender for the mortgage.

Principal - The amount of money borrowed in a loan on which interest is charged.

Pre-Approval - Initiating the loan approval process before finding a property to buy. Pre-approval involves providing information regarding employment, income, and debts to a lender to prove the buyer is a good risk. A more complex process than pre-qualification, pre-approval sometimes involves a fee.

Pre-Qualification - Pre-qualifying entails speaking with a lender who offers an opinion of the loan amount the buyer is eligible to borrow, without providing any supporting paperwork or credit history. There is typically no charge for pre-qualification.

Property Taxes - Taxes paid by property owners annually to local and state governments, on average about 1.5% to 2% of the assessed (appraised) value of the home, as determined by the county property appraiser. The assessed value is typically lower than a fair market appraisal would find.

Real Estate Sales Agent / Broker - A person tested and licensed by the state to put buyers and sellers together for a commission. Brokers have taken an additional test, generally following several years in the business, and are authorized to operate a private real estate agent firm. The commission is a specified percentage of the sales price of the property which is paid at the closing.

Real Property - Refers to a parcel of land and to any permanent improvements to the land.

Realtor - A licensed real estate professional who is a member of the National Association of REALTORS ®, a trade organization with its own educational standards and ethics in addition to those required by the state.

Seller Disclosure - Requires sellers to inform buyers about known problems with the property or improvements that would lower its value.

Survey - A procedure whereby land is located and measured, and its boundaries are verified by a registered land surveyor.

Title - Title can refer to two things: 1) the rights of ownership and possession of a particular property; 2) the document that shows evidence of those rights.

Title Agency - Similar to other insurance agents, a title agency is authorized to issue title policies and prepare documents in connection with transactions for which it issues policies. Staff members of the title agency do not represent either party and can not give any legal advice.

Title Defect - Any legal right to a property claimed by a person other than the owner. Examples include unpaid real estate taxes, or claims to the property such as those of an unknown heir.

Title Examination - An examination of public records, laws, and court actions to make sure that a property’s seller is the legal owner and to disclose all other claims or encumbrances on the property affecting its ownership.

Title Exception - As part of the title search, a real estate attorney will list any “exceptions” to the title; situations where the title owner relinquishes control or use of some part of their property.

Title Insurance - A type of insurance that protects the policyholder against loss sustained through title defects.

Title Insurance Underwriter - The title insurance underwriter is the entity that authorizes and issues authority for its agents to write title insurance policies. It is the entity that actually insures the property against title defects. Two well known title insurance underwriters are the Attorney’s Title Insurance Fund and Lawyer’s Title Insurance Company. An agent for the underwriter must qualify with the underwriter and meet very strict standards to remain an agent for any particular underwriter. The Law Offices of Paul A. Blucher, P.A., are qualified agents of these two companies.

Transfer Tax - One of the expenses typically paid by the seller on closing day as part of the closing costs, the transfer tax is based upon a property’s sale price (i.e. Documentary stamp tax).

Trust Account - Escrow maintained by an attorney.

This information is not intended as a conclusive explanation of the Law of Real Estate Transactions in Florida. It is to be considered only a summary for clients or prospective clients of this law firm. If you have any questions concerning a specific real estate transaction, you should consult an attorney experienced in the practice of real estate law.

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