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Real Estate Glossary

Adjustable-Rate Mortgage (ARM):: A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.
Amortization:: the payment of principal on a liability (including a mortgage), or the write-off of a non-depreciable asset over a scheduled term of years.
Annual Percentage Rate (APR):: The cost of the loan expressed as a yearly rate on the balance of the loan.
Appraiser:: an expert who renders an opinion of value. Generally, an appraisal is performed on behalf of a bank in the process of evaluating a property for a mortgage. The reason for an appraisal is to insure that the property, which is security for the loan, has adequate value to meet bank requirements.
Assessed value:: A tax assessor's determination of the value of a home in order to calculate a tax base.
Assessment:: an extraordinary payment called for by the board of directors of a co-operative or condominium building for the purpose of making a capital improvement, or to provide some other essential service for which funds in the reserve account are inadequate.
Balloon Mortgage:: a mortgage that matures with a balance still owed at the end of the term.
Board Approval:: a condition in the bylaws of a co-operative requiring that the seller obtain approval from the board of directors as a prerequisite to transferring the shares or, in the case of a condominium, obtaining a waiver of the right of first refusal.
Building Codes:: regulations established by the state or city government stating fully the structural requirements for the building.
By-Laws:: The rules and regulations that a homeowners association or corporation adopts to govern its activities.
Cancellation Clause:: a provision in a lease or other contract which confers upon one or more of all the parties to the lease the right to terminate the party's or parties' obligations there under upon the occurrence of the condition or contingency set forth in the said clause.
Capital Improvement:: a permanent improvement to real estate, usually extending the useful life and value of a property.
Certificate of Occupancy ("C of O"):: a document issued by a governmental authority that a building is ready and fit for occupancy.
Closing Statement:: A document which details the final financial settlement between a buyer and seller and the costs paid by each party.
Co-brokerage:: an agreement between two brokerage firms to share listings and commissions.
Collateral:: the security put up in exchange for a loan. It can be taken by the bank if the loan goes unpaid.
Commitment Letter:: the letter issued by a lending bank which legally binds it to provide funds as specified subject to written terms and conditions.
Common Charges:: Fees paid by the owners of a condominium project or planned-unit development to maintain, repair, improve or operate common areas.
Comparative Market Analysis:: An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.
Contract:: also known as a Purchase or Sales Agreement. This is a written agreement between seller and purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon conditions and terms set forth therein.
Conversion:: a change in ownership type or status of a building. Example: A rental housing building may be converted to co-operative or condominium ownership. A commercial loft building may be converted into residential apartments.
Co-signer:: A second party who signs a promissory note and takes responsibility for the debt.
Covenant:: an agreement(s) written into deeds promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property.
Deed Restriction:: an imposed restriction in a deed for the purpose of limiting the use of the land.
Default:: the act performed by either the buyer or seller that breaches the contract of sale and permits a claim for damages.
Discount Points:: Fees that a borrower pays at the time the lender makes the loan. A point equals 1 percent of the total loan amount.
Earnest Money:: also known as a Deposit or Down Payment. This deposit is made by a purchaser of real estate as evidence of good faith.
Escrow:: the means by which money (a deposit or down payment) is held by one person in trust for another, for the purpose of assuring performance under an agreement. Normally, in a residential real estate sale, the attorney for the seller is the "escrow agent" for the earnest money securing the deal until closing.
Exclusive Right to Sell Agreement:: an agreement between a broker and a seller which designates the broker as the seller's sole representative. Under this agreement, a commission is due to the broker even if the apartment is sold directly by the owner.
Fair Housing Act:: Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability.
FHA Loans:: Mortgages that are insured by the Federal Housing Administration. The FHA's 203(b) loan program provides low-rate mortgages to buyers who make a down payment as small as 3 percent. The agency also operates loan plans for investors and purchasers of rural property.
Financing Loan:: a loan secured by personal property. The stock and lease of a co-operative corporation constitute such personal property. Real estate brokers often refer to these financing loans as mortgages, though technically they are not.
Fixtures:: personal property attached to the land or improvements that become part of the real property.
Flip Tax:: a levy issued on the transfer of ownership by a co-operative corporation or condominium association against either the buyer or seller.
Good-Faith Estimate:: An estimate from an institutional lender that shows the costs a borrower will incur, including loan-processing charges and inspection fees.
Grantee:: the party to whom the title to real property is conveyed.
Grantor:: the party who conveys the title to real property.
Homeowners' Association:: A group that governs a modern subdivision or planned community. An association collects monthly fees from all owners to pay for maintenance of common areas, handle legal and safety issues, and enforce the covenants, conditions and restrictions set by the developer.
Homeowners' Insurance:: This insurance includes hazard coverage for any damages that may affect the value of a house, in addition to personal liability and theft coverage.
HUD-1 Uniform Settlement Statement:: A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.
Insurance Binder:: A temporary insurance arrangement usually put in force until a permanent policy can be obtained.
Interest-only Loan:: The pays only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment.
Landmark:: a designation given to a building that is under New York City protection for the purpose of historical preservation.
Lien:: a legal right or claim upon a specific property that attaches to the property until a debt is satisfied.
Listing:: the term used by brokers for an apartment for sale after it has been "listed" by the broker in its system.
Listing Agent:: also known as the Exclusive Broker. The Listing Agent is the broker who represents the interests of the seller.
Maintenance:: the monthly charge paid by cooperative tenant/shareholders to cover the building's operating costs, real estate taxes and debt service on the building's underlying mortgage.
Market Value:: the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.
Mortgage Broker:: the real estate professional who represents an array of banks seeking to issue mortgages. This person meets with a buyer, assists with the mortgage application and effectuates the mortgage process on behalf of the borrower and the bank. Generally, the mortgage broker is paid a fee by the bank for this service.
Negative Amortization:: The situation occurs when a borrower's monthly payment is not large enough to cover both the principal and interest of a loan. As a result, the outstanding balance of the loan actually grows larger with each payment rather than smaller. Most fixed-rate loans are not subject to negative amortization, but many adjustable-rate mortgages are susceptible.
Net Worth:: one's assets, less one's liabilities. Liquid net worth (that which is cash or can be immediately converted to cash) is what cooperatives look at.
PITI:: this acronym stands for Principal, Interest, Taxes, Insurance. When a buyer applies for a loan, the lender will calculate the principal, interest, taxes and insurance. The figure is designed to represent the borrower's actual monthly mortgage-related expenses.
Private Mortgage Insurance (PMI):: A special type of loan insurance that many lenders require borrowers to purchase if the borrower's down payment is less than 20 percent of the home's purchase price.
Offering Plan:: also known as a Prospectus, is a document issued by a sponsor in the process of converting a building to cooperative or condominium ownership (or developing a new building). Its purpose is to provide full disclosure of all relevant data associated with evaluating an investment in the property.
Points:: payment made to a bank as consideration for issuing a mortgage. These are usually based upon a percentage of the loan amount.
Power of Attorney:: a written instrument duly signed and executed by a person who authorizes an agent to act on his/her behalf to the extent indicated in the instrument.
Pre-payment Clause:: a clause in the mortgage that gives the borrower the privilege of paying the mortgage indebtedness before it becomes due.
Proprietary Lease:: the lease issued by a cooperative corporation to each tenant/stockholder prescribing the right to occupy a specific apartment. It includes general obligations.
Real Property:: land and generally whatever is erected upon or affixed thereto.
Recognition Agreement:: also known as an Aztech Form. This Agreement is generally provided by the lender to be issued by the cooperative and recognizes the secured rights of a lender to the shares of stock and the proprietary lease on an apartment.
Right of First Refusal:: a condition found in many condominium by-laws which permits the board to review any party seeking to purchase or rent an apartment. It gives the board permission to refuse the applicant. If the applicant is refused, the condominium must purchase or rent the apartment under the same terms and conditions stipulated in the contract or lease.
Schedule A:: the list in the Offering Plan of all the apartments being sold in a newly-constructed building or one that is in conversion. It presents allocated shares or unit percentage interest, room count, prices and other material cost elements including the projected maintenance charges and the tax-deductible portion of the maintenance.
Schedule B:: the projected estimated cost of operating a co-operative or condominium during its first year.
Subject to Financing:: also known as Financing Contingency. This term stipulates that the agreement is conditioned upon the buyer obtaining financing from a financial institution in an agreed upon amount.
Tax Abatement:: a reduction in the amount of real estate tax due over a period of time.
Title Insurance:: an insurance policy indemnifying the holder for any loss sustained by reason of defects in the title.
Title Search:: an examination of the public records to determine the ownership and encumbrances affecting real property.
Transfer Tax:: An assessment by state or local authorities at the time a piece of property changes hands.
Waiver:: the renunciation, abandonment or surrender of some claim, right or privilege