Wacky Words in Real Estate
As with every industry there are words used often that many times people in the general public do not understand. Below is a list of words that are common in the real estate industry and we thought it would be worth sharing with our clients!
Agency – The relationship that is established between the real estate agent and buyer and/or seller in which they represent their interests. An agent can represent both buyer and seller with the knowledge and approval from their buyer and seller.
Appraisal – A written report made by a professional appraiser hired by the lender, to insure the property is at least the value of the sales price. The analysis is based primarily on comparable sales of similar homes with similar qualities and location.
Carrying Paper – Is when the Seller acts like a bank, they will provide the buyer with the loan and the buyer will pay them monthly principal and interest payments just like a bank for a certain predetermined amount of time. The buyer is responsible for insurance and taxes.
CC&Rs, Covenants Codes & Restrictions – Legal recorded documents with restrictions and rights that go with the property. (rules, regulations, easements)
Comparables – Properties that compare square footage, market value, lot size etc. Used in a market analysis or appraisal determining value of the property.
Contingencies - Conditions/terms on the real estate contract that have to be resolved or mutually satisfied prior to closing.
Deed of Trust – Legal document that transfers title to a 3rd party as security for loan and has details of terms and conditions of payment.
Disclosure – Applies to sellers and agents to tell in writing all material defects of the property.
Earnest Money – Money, chattel, or promissory note given to show the buyer is serious towards the purchase, which is applied toward the purchase price. It is usually deposited in escrow under a written time line from mutual acceptance & stays there till closing but, the earnest money is returned to buyer if a contingency is not satisfied.
Easements - The right to use another person’s property for a specific purpose. (ie a driveway)
Encroachment –A property or structure that is illegally overlapping onto another property.
Escrow – Is a neutral 3rd party, such as a title company, which follows instructions in the real estate contract and ensures all conditions are met before the release of funds and/or property.
Home Warranty – A 3rd party insurance policy usually for 1 year for systems/fixtures in the house to remain operable. Buyer or seller may generally purchase it.
Indemnify – To hold harmless
FIRPTA , Foreign Investment in Real Property Tax Act – A federal law that allows an escrow company to withhold 10% of the gross sales price of the Seller’s proceeds of a “foreign” seller, not a resident of the state. There are exceptions.
Material Defects – Any defect in a specific property that could either affect a buyer’s decision to purchase it or affect the property’s value, such as a cracked foundation. Material defects must be disclosed.
Mutual Agreement – Both parties agreement to a written real estate contract including all contingencies by signing and acknowledging the contract.
Open Escrow – Delivery of contract and instructions to escrow company, which is the neutral 3rd party that will handle funds and close the transaction. Generally the listing agent opens escrow.
PTR , Preliminary Title Report – A title company issued report describes recorded documents effecting condition of the title or such as easements, CC and R’s, etc
Ratification – The adoption or approval of act performed without one’s authorization. After the act is performed, if person then authorizes act, ratification makes the act binding on the person.
Sole Recourse – Only option
Specific Performance – Legal enforcement of terms of contract. (ie. A buyer has the right to sue for specific performance if the seller does not comply with the contract. )
Title – Is the document describing the legal description and legal ownership of a property and is recorded at the court house in the county where the property is located.
Title Insurance – Insuring title is free and clear of defects. Seller typically purchases title insurance for the buyer and buyer typically purchases it for the lender.