GLOSSARY OF REAL ESTATE TERMS

ACCELERATION CLAUSE:
Is a legal clause contained within the mortgage note and trust deed that allows the bank or lender to declare the entire unpaid balance due immediately when certain conditions occur.

AMORTIZATION:
The liquidation of a financial obligation on an installment basis. Amortization is also the recovery of cost of value over a period of time.

AMORTIZATION LOAN:
A loan that is paid off by a series of regular payments that is equal or nearly equal. A fully amortized loan is one in which the installments fully retire the debt.

APPRAISAL:
An opinion establishing the value of real property.

APR:
An abbreviated term for “annual percentage rate.” The APR is the total cost of credit expressed as a percentage. The term is used in the truth in lending act.

ARM:
An abbreviated term for “adjustable rate mortgage.” An ARM is a type of mortgage where the interest owed is adjusted periodically.

AUTOMATED VALUATION MODEL (AVM):
An AVM is a program that is used to determine the value of real property based on certain pre-requisite specifications.

BALLOON PAYMENT:
The final payment of a loan that is greater than the preceding payments and it pays the loan in full.

BANKRUPTCY:
The condition of being legally bankrupt. A borrower may be legally judged financially impoverished, or broke, by the bankruptcy court. If the borrower files bankruptcy, the creditors may either have their loans reduced and reorganized at a different repayment schedule (chapter 13) or have the debts completely wiped out (chapter 7).

BENEFICIARY:
The lender under a note secured by a deed of trust. Also one who benefits from a trust?

BLANKET LIEN:
A loan secured with two or more pieces of real property.

BROKERS PRICE OPPINION (BPO):
A less complex way of determining the value of a property then an appraisal. Does not require an interior inspection of a property and is usually a less expensive way to determine the value of a property. Based on current market conditions as well as sold comparable properties.

CLOSING:
The final accounting of a sale given by escrow to the buyer and the seller.

CLOSING COSTS:
All of the charges and fees that are associated in refinancing or purchasing a new home. They include but are not limited to: Escrow fees, Title fees, appraisal fees, county recording fees, loan origination fees, property taxes, homeowners insurance and any courier or overnight mail fees related to the transaction.

CLOSING STATEMENT:
The final accounting of a real estate transaction that details all of the charges, credits and debits of the transaction.

CHARGE OFF:
A finance term meaning that the borrower has ceased to pay on a debt and that the lender has been unable to collect the debt and then charges or writes off the loan as uncollectible.

CLOUD ON THE TITLE:
Any condition which reflects an uncertainty or defect in the chain of title. When there is a cloud on the title, the title company will not insure the transaction. Usually the items included in a cloud on the title are serious and can be removed through court action, quitclaim deed, etc.

COMBINED LOAN TO VALUE:
The amount of all of the loans on title expressed as a percentage of the appraised value. CLTV.

COMMUNITY PROPERTY:
Property acquired by a husband and/or wife during a marriage, when not acquired as the separate property of either spouse.

COMPARABLES (Comps):
Houses that have sold in a close proximity to the subject property, with similar building statistics such as: Sq. footage, bedrooms, bathrooms, lot size, and year built. Accurate comparables are those which have sold within the last six months, and which are within a .5 mile radius of the subject property.

COMPOUND INTEREST:
Interest charged on the principal and on the unpaid interest, which has accumulated.

CONTINGENCY:
A clause in the contract that states certain actions that must be performed in order to make the transaction legal and binding.

DAMAR:
The name of the computer system that is used to get quick information about comparable sales of properties.

DEBT RATIO:
The ratio between a borrower’s monthly income and the monthly bills. The debt ratio is used to figure out how much available income the borrower has remaining each month after all of his bills are totaled up, including the payment of the new mortgage.

DEED IN LIEU OF FORECLOSURE:
Is offered by a bank to avoid continuing or commencing the foreclosure proceedings. The homeowner grant deeds their ownership in the house to the bank; in return the bank does not conduct the foreclosure proceedings.

DEED OF TRUST:
The document by which legal title is transferred from a trustor, or borrower, under a deed of trust, to a trustee, the person or corporation designated to hold that title as security for the loan.

DEFAULT:
When the terms of the loan agreement have been breached due to non payment.

DEFICIENCY JUDGEMENT:
A judgment awarded to the beneficiary of a security instrument that has not been fully paid in full. Lenders may seek deficiency judgments if they do not receive a full payoff of the existing mortgage balance along with any and all delinquent fees that may be due.

DISCOUNT:
Any amount less the full amount due.

DIVORCE DECREE:
A legal document that is filled out by both the husband and wife during a divorce proceeding. The divorce decree shows who got what and who is responsible for the payment of the bills, alimony, etc.

DUE ON SALE CLAUSE:
A legal clause in the mortgage note that allows the bank to begin the foreclosure proceedings, if the property has had any change in ownership interest without paying off the existing mortgage.

ENCUMBRANCE:
Anything that affects or limits the fee simple title to the property, such as mortgages, easements, or restrictions of any kind. Liens are special encumbrances that make the property security for the payment of as debt.

EQUITY:
The market value of real property minus the total amount of all the existing liens or mortgages.

ESCROW:
The neutral third party which delivers the written instruments and money between two parties in which an agreement to sell, encumber or leasing real estate is involved.

EVICTION:
The legal process used to remove a tenant from a real property, which has defaulted on payment or breached the legal agreement.

FEDERAL HOUSING AUTHORITY (FHA):
Federal government agency that administers the FHA insured loans.

FIXED RATE:
Interest rate does not change during the term of the loan.

FOREBEARANCE:
Forbearance is an agreement made between the bank and the owner to repay the delinquent amount owed over a period of time. The forbearance agreement does not stop the foreclosure proceedings; it simply freezes them until the agreement has been completed.

FORECLOSURE:
The legal procedure used by lenders when the borrower has defaulted on the original contract with the lender (such as failure to pay property taxes, failure to make payment, etc.).

FORECLOSURE CONSULTANT:
Any non real estate licensed individual who agrees to assist the homeowner; postpone or stop the foreclosure sale, advance funds to the owner, arrange a loan for the owner, or help the owner reinstate the loan or receive an extension of the rein statement period.

GRANT DEED:
Gives the grantee the rights of possession and occupancy. Most homeowners have a grant deed as proof of ownership to their property.

HARD MONEY LOAN:
Also known as Private Equity Loans are loans that are offered to homeowners in foreclosure, bankruptcy, or with credit problems that cannot qualify for traditional financing. The loans are usually privately funded and have high loan fees and interest rates.

HARDSHIP LETTER:
A letter written by the owner of a house to the bank detailing the financial hardship and details leading to the hardship. Required when requesting a short pay from the bank.

HOME EQUITY PURCHASING:
The term used to define a buyer which is attempting to purchase a home in foreclosure.

HUD:
United Stated Department of Housing and Urban Development.

IMPOUNDS:
A trust-type account established by lenders for the accumulation of funds to meet certain expenses such as taxes, insurance, and homeowner association fees.

INVESTOR:
Anyone who seeks to invest in property in the hopes of gaining an equitable return.

JOINT TENANCY:
Ownership of property by two or more persons with the right of survivorship. All joint tenants own equal interest and have equal rights in the property.

JUDGEMENT:
The final determination from a court, of competent jurisdiction, of a matter presented to it.

JUDICIAL FORECLOSURE:
A foreclosure process in which the lender must first file a lawsuit to obtain a court order to foreclose on the property.

JUNIOR LIEN:
Any lien that does not have first priority to make property security for the payment of a debt or financial obligation. Any lien recorded subsequent to the initial lien.

LIEN:
A type of encumbrance or burden. It makes the property secured for the payment of a debt or obligation.

LIS PENDENS:
A recorded notice of an existing lawsuit against the subject property.

LISTING AGREEMENT:
A contract that allows an individual or a company to legally market to sale a property. The agreement contains the price of the house along with all of the other pertinent details.

LOAN MODIFICATION:
Any changes made to the terms and conditions of repayment to the original note secured by a deed of trust.

LOAN TO VALUE RATIO (LTV):
The amount of the loan expressed as a percentage of the appraised value. LTV.

LOSS MITIGATION:
A department of the mortgage bank that is responsible for recovering funds from a delinquent or defaulted account. They are in charge of mitigating the loss that may result from the defaulted loan.

MARKET VALUE:
The highest price the property will bring, in an open and competitive market. The is requires no undue influences on either the buyer or seller.

MATURITY:
The ending of the loan.

MECHANIC’S LIEN:
A lien against property in favor of persons who have performed work or furnished material for the improvement of that property.

MORTGAGE:
An instrument by which property is hypothecated to secure the payment of a debt or obligation.

MULTIPLE LISTING SERVICE (MLS):
The web based application used by real estate agents and real estate companies to advertise properties for sale or lease.

NET WORTH:
Assets less liabilities.

NON JUDICIAL FORECLURE:
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. Foreclosure proceedings can be initiated and processed without enacting any court order.

NOTARIZE:
To witness a signature on a document and to place a Notary Public’s sea; on the document.

NOTICE OF DEFAULT:
A document that is recorded and delivered to the borrower when default has occurred under a deed of trust. This initiates the foreclosure process, and the information is now public knowledge.

NOTICE OF TRUSTEE SALE:
A document that is recorded 90 following the Notice of Default. The homeowner is notified that they have 25 days prior to their house being sold at a public auction.

OPTION:
A right given to a buyer to purchase a property within a certain amount of time under specified terms. The buyer has the right to purchase or sell the house, but is not required to perform under contract.

POINTS:
A term used in reference to mortgage origination fees. One point is equivalent to 1% of the loan amount.

POSTPONEMENT:
The beneficiary’s right to establish a new time for the trustees sale.

POWER OF ATTORNEY:
A legal instrument authorizing a person to act in place of another.

POWER OF SALE CLAUSE:
Is the clause in a deed of trust, in which the borrower pre-authorizes the sale of the property to pay off the balance of the loan in the event of a default.

PRELIMINARY TITLE REPORT:
A report issued by a title company that shows the present condition of title prior to the issuance of a title policy. This report contains a list of the legal vesting of the property, all liens that are attached to the house as well as the amount of the county property taxes.

PREPAYMENT PENALTY:
The charge payable to a lender if the borrower pays off the outstanding principal balance of the loan prior to its due date.

PROPERTY TAXES:
A tax on real property charged by the county in which a property is located.

QUIT CLAIM DEED:
A deed used to relinquish any interest in property, which the owner may have.

REAL ESTATE OWNED (REO):
Also known as “Real Estate Owned’ is Real Estate that the beneficiary is given title to via a Trustee’s Deed. If no bidders purchase the house at a foreclosure sale, the property becomes an REO.

REALTOR:
A real estate broker or sales agent that is also a member of the National Association of Real Estate.

RECISSION PERIOD:
The time in which the owner with a defaulted mortgage must be given after signing a purchase agreement. This is a 5 business day clause in the State of California.

RENT SKIMMING:
Is the practice of a homeowner collecting rent from a non owner occupied property which is in default, and not applying the rent to the outstanding mortgage balance.

RIGHT TO REINSTATE:
After the Notice of Default has been filed, the owner has the right to reinstate the loan up to 5 business days prior to the trustee’s sale.

SEASONED LOAN:
A loan that has been in existence long enough to show a predictable pattern of repayment.

SELLER LEASE BACK:
A transaction in which the owners of home sellers the house to a third party, and then agrees to lease back the same property over a predetermined amount of time. The original owner is given the right to buy the property back once the lease period has expired.

SEPARATE PROPERTY:
Property owned by a husband and a wife, which is not community property. This could be property owned by either spouse prior to the marriage, or properly acquired as a “separate property” during the marriage. Just to be safe, we require a grant deed from the spouse releasing interest in the separate property.

SHORT SALE:
Is the sale of real property at a price which is less then the balance of the mortgage on the loan of record.

SUBJECT TO PURCHASE:
Refers to a process of purchasing a house subject to specified existing terms and conditions.

TENANCY IN COMMON:
Ownership by two or more persons who hold an undivided interest without right of survivorship. Ownership interest, in a tenancy in common, need not be equal.

TITLE:
The instrument that is evidence of a person’s right in real property (i.e., a deed).

TITLE INSURANCE:
Insurance written by a title company to protect the owner or lender against loss if the title should prove defective.

TRUSTEE:
One who hold property in trust for another.

TRUSTEE’S DEED:
A deed given to a beneficiary after a Trustee Sale in which no bidder successfully purchased the home.

TRUSTOR:
One who signs a trust deed conveying legal title of the property to a trustee to be held as security for the payment of a debt? (legal owner)

WRIT OF EXECUTION:
An order issued by the court. In a Judicial Foreclosure, when the bank prevails in its lawsuit to recover finds from a defaulted borrower, the judge issues the writ of execution which details how much money is owed and to whom. This must be served to the borrower in person.