Real Estate Terms the Consumer Should Know

When I first became a licensed real estate agent one of the local title companies gave me this nifty little 191 page, pocket sized, real estate dictionary. It had all kinds of cool terms in it, like lis pendens and replevin. Words my spell check refuses to recognize. There may be times the consumer, the non-real estate professional, may need to understand these terms. There are also real estate terms the consumer should make an attempt to learn before embarking on a real estate transaction.

Here are twenty real estate terms that will help you become a more savvy consumer.

Adverse Possession: This is a sneaky way of acquiring title, without purchasing the property. It is the open, actual, hostile, notorious, and continuous possession of someone else's land, and can result in assuming ownership of the land. If a neighbor is using a portion of your property, you may want to consult with an attorney, to prevent a future claim by the neighbor.

Amortized loan: many people think of this as the traditional loan, where the interest and principle is wrapped up in equal (or nearly equal) and regular payments, ending when the loan is paid off.

Amendment: when a change is made to a contract, either during or after the acceptance period, is done by an amendment. An amendment may make a correction, clarification or change. All principle parties would need to sign the amendment, to make it valid.

Assumption: This is when a buyer takes over a property and assumes the seller's financial responsibility in the property. Many lenders do not allow assumptions.

Beneficiary: The person (or persons) who is the receiver of a benefit, which might include a deed of trust from the lender.

Close of Escrow: This is the news every buyer and seller wants to hear. It is when the documents have been recorded and the title passes from the seller to the buyer.

Cloud on Title: This is the news no buyer or seller wants to hear. This means there is some claim or condition on the title, which prevents it from passing from one owner to the other, without any possible future claims of ownership or infringements.

Comparable Sales: This is when the subject property is compared to other similar properties, to determine it is a realistic purchase price.

Conveyance: This is a written document used to convey title of property from one entity to another. This might be a deed or trust deed.

Deed Restrictions: Properties have restrictions on what they be used for. Some might allow horses, another may not. Before purchasing a piece of property, it is important to understand any possible deed restrictions, which might restrict your use of the property.

Earnest Money Deposit: Before making a purchase offer, be prepared to put up an earnest deposit. It shows good faith, that you are a serious buyer. When the deal closes, the money is normally applied to the purchase of the house. In many contracts a buyer has a specific time frame when they can get their earnest deposit back if they cancel the deal.

Hazard Insurance: This is the insurance property owners purchases to protect against fire, vandalism, and other damages.

Homestead Exemption: Affords certain protections to the buyer, against certain attachments, claims or forced sale of their property. The protection is automatic in some states, and homeowners should investigate if their home qualifies, and what the protection will afford them.

Impounds: these are usually funds that are collected by the lender to pay property tax or sales tax. When homeowners have an impound account attached to their home loan, it will normally be the lender who pays the homeowners' insurance and property tax from this account.

Legal Description: This is the legal definition of the boundaries of the property, based on government surveys, and specifying the boundaries.

Lien: This is a financial encumbrance on a piece of property, which normally needs to be paid off before the property can change title. It might be unpaid taxes, or legal judgments.

Mortgage: This is similar to a promissory note, given to the lender by the borrower. It is the lender that has the mortgage, not the borrower.

PITI: This is a payment that includes the principle, interest, taxes and insurance.

Point: A point is 1% of the loan amount.

PMI: This stands for Private Mortgage Insurance . A borrower who puts down less than 20% in a conventional loan, will often be required to pay PMI to protect the lender.

There have been many recent changes to the real estate industry, especially in home loans. For the buyer and seller, this is a time to be as informed as possible.