Glossary
A B C D E F G H L M N O P R S T U W
A
ABR® (Accredited Buyer’s Representative)
The ABR® designation is the benchmark of excellence in buyer representation. This coveted designation is awarded to REALTORS® who meet the specified educational and practical experience criteria, by the Real Estate Buyer’s Agent Council (REBAC) of the National Association of REALTORS®.
Why should you look for the ABR® designation before looking for a home? These three letters after a REALTORS® name tell you that you’ll be working with someone committed to your best interests, someone who has both made education a career priority, and has also demonstrated the experience needed to provide the finest in buyer representation.
ABRM(SM) (Accredited Buyer’s Representative Manager)
The ABRM(SM) designation is the only Buyer Representation Designation for Managers, Brokers and Owners affiliated with the National Association of REALTORS®. The ABRM(SM) designation is awarded by the Real Estate Buyer’s Agent Council (REBAC) of the National Association of REALTORS® to those members who meet the extensive specified educational and practical experience criteria.
Accounting
The fiduciary duty that requires the agent to promptly report to the principal/client all money and property received and paid out, and upon request, to tender an account of these actions. This duty also requires the agent to safeguard money or property held on behalf of the principal/client.
Adjustable-rate Mortgage (ARM)
A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index.
Agency
Any relationship in which one party (agent) acts for or represents another under the authority of the latter.
Agent
A party who is authorized to act in the best interests of a principal/client, and is obligated to place the principal’s interests before the interests of any other parties, including the agent’s own interests regardless of whether the agency relationship is with the seller of the property or the buyer.
Amortization Schedule
A timetable schedule showing the amount of each payment applied to interest and principal and the remaining balance after each payment is made.
Appraisal
A written analysis of the estimated value of a property prepared by a qualified appraiser.
B
Biweekly Payment Mortgage
A mortgage requiring payments every two weeks instead of the standard monthly payment. The result for the borrower is a substantial savings in interest.
Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
Buyer’s Representative
A real estate buyer’s representative represents the consumer who is purchasing property in a real estate transaction, not the seller. State law varies but usually a buyer’s representative works for, and owes fiduciary responsibilities (see fiduciary duties) to, the real estate buyer and has the buyer’s best interests in mind throughout the entire real estate transaction.
Buyer Representation Agreement
An agreement that specifies the duties and the scope of services a buyer’s representative agrees to provide to the buyer as well as specifying the buyer’s responsibilities. In some states, where there is no written agreement required, the agent will be presumed to be representing the buyer. Consult with your local REALTOR® for complete details when you first start the search for any real estate property.
C
Capital Gains
The profit obtained from the sale of an asset, such as real estate.
Certificate of Title
A statement provided by an abstract company or attorney stating that the title to real estate is legally held by the current owner.
Certified International Property Specialist Network
NAR created the CIPS Network Certified International Property Specialist Network, comprised of 1,300 real estate professionals who deal in all types of real estate, but with one common element: They are focused specifically on the international market. For more information, go to the International page on http://www.realtor.org/designations-and-certifications/cips-designation (link is external).
Client
A party whose interests are to be served by the words and deeds of an agent with or without a contract according to state law. Also referred to as a principal. Regardless of whether the duties owed in a particular state are traditional, common law fiduciary duties or are statutorily defined, they are still owed to any principal/client.
Closing
A meeting at which a sale of property is finalized by the buyer signing the mortgage documents and paying closing costs, and seller’s transfer of the deed to the property.
Closing Costs
The fees, costs and taxes associated with the purchasing of a home, the borrowing of money and the preparation of necessary paperwork to finalize the sale. The total amount of the closing costs will vary depending on where the new home will be located, what type of property it is, the price of the home and the complexity of the transaction. It is extremely important that the buyer work closely with his/her buyer’s representative and lender and title company (although in states where attorneys are used, the attorney usually works with the title company) in the early stages of the home buying process to determine what these costs could be, since closing costs can easily represent thousands of dollars. There are four categories of closing costs: (1) discounts points to buying down the mortgage; (2) the costs of originating the mortgage; (3) taxes and other local fees; (4) the cost of documentation.
CMA
See Comparative Market Analysis
Code of Ethics
The Code of Ethics and Standards of Practice of The National Association of REALTORS® establishes obligations that a real estate professional who is a member (a REALTOR®) must comply with to ensure that all parties to the transaction are treated fairly.
Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan.
Commission
The fee charged by a broker or agent for providing services related to a real estate transaction such as marketing the property, bringing the parties together, and negotiating a purchase contract or loan.
Comparative Market Analysis (CMA)
An analysis provided by a real estate professional that surveys like properties in a given area or of a certain type for the purpose of determining the relative value of a given property.
Confidentiality
The fiduciary duty that prohibits the agent from communicating personal information about the principal that was given to or acquired by the agent within the scope of employment as an agent to the principal. Personal information must be kept confidential unless the client releases the agent, or subagent, from this duty. However, the material facts and defects of a property are not confidential.
Cost of Documentation
A closing cost for any research involving public records and the title history on the property that is being bought. This insures that the title on the property is unencumbered by other ownership or liens and can be delivered to the buyer at closing. Other costs include Recording and Transfer fees that cover the legal recording of the deed to the buyer’s name.
Costs of Originating the Mortgage
A closing cost that generally includes a variety of fees such as the loan origination fee, the appraisal fee and the cost of credit reports. There are also other fees that will be expected to be paid at closing such as hazard and mortgage insurance and interest accrued on the mortgage between closing date and the end of the month.
Credit Rating
An assessment of a person’s ability (or history) of debt repayment. Most information in a credit rating comes from companies that an individual has credit with such as banks, department stores, finance companies etc. as well as from certain public records such as lawsuits, tax liens, judgments and bankruptcies.
Credit Report
A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness. Credit reports are usually based on the individual’s: (1) credit history; (2) who reviewed the credit history; (3) information that has been given to the credit information company; (4) specific identification information; and (5) any explanatory notes and comments.
Customer
A party with a non-agency relationship with a real estate professional in a transaction. Duties still may be owed to a customer, but not all of the traditional (fiduciary) duties owed to a principal/client.
D
Deed
The legal document conveying title to a property.
Designated Agent
The party selected to represent a principal/client in a designated agency office. Designated agency has been legislatively created in many states, allowing the management of a brokerage to establish an office policy, whereby the managing broker appoints, or designates, one licensee associated with that brokerage to act as the exclusive agent of the buyer and another to act as the exclusive agent of the seller. No other licensee in the brokerage has an agency relationship to represent that principal/client.
Discounts Points (to Buying Down the Mortgage)
A closing cost that is optional and can vary significantly from 0.5 to 3 points on the total of the mortgage. It is a one-time charge that is calculated based on the amount of the mortgage loan. A buyer would pay this amount up front to reduce the ongoing cost of the mortgage over the life of the loan. This charge is fully deductible as mortgage interest.
Disintermediated
One that no longer acts as an agent between persons.
Dual agent
A broker who works with both parties in a real estate transaction buyer and seller, landlord and tenant. All jurisdictions require dual agency to be disclosed to the parties to the transaction.
E
Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
e-Buyer
1) Electronic buyer. 2) The collective that describes consumers who conduct research on and/or buy products via the Internet. 3) Customers the real estate industry has always worked with, who just come to the table better informed and with clearer ideas about what they want, because they have Internet Information.
Equity
A homeowner’s financial interest in a property.
Escrow
A deposit of value, money, or documents with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow, held by the broker, bank or other party, until delivered to the seller when the transaction is closed.
F
Facilitator and Transaction Broker
Some states have passed statutes/regulations that allow a real estate licensee to act as a non-fiduciary, neutral mediator to bring parties together, without representing either party as a client. Some states allow real estate brokerages to act in a non-fiduciary capacity for both parties to a transaction. A facilitator or transaction broker has a duty to exercise reasonable care, provide an accounting to all parties and, in some states, may have additional duties imposed by the statute.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit information by consumer/credit reporting agencies and establishes procedures for correcting mistakes on ones credit record.
Fair Housing Laws
Local, state, and federal fair housing laws that prevent discrimination against any individual or group of individuals based upon race, color, religion, sex, handicap, national origin or familial status, as well as other groups protected by various local and state fair housing laws.
Fiduciary Duties
The term fiduciary is defined as of relating to or involving a confidence of trust. Fiduciary duties are determined by state law and generally include: confidentially, undivided loyalty, obedience, reasonable care and diligence, full disclosure, and accounting. Regardless of whether the duties owed in a particular state are traditional, common law fiduciary duties, or are statutorily defined, they are owed to any principal/client.
For Sale By Owner (FSBO)
A property for sale that is not listed by a real estate professional.
Full Disclosure
The fiduciary duty that requires the agent to disclose affirmatively and honestly all information the agent knows concerning the transaction (and property) which might affect the decisions a a client or customer makes.
G
Good-faith Estimate
An estimate of closing costs associated with the purchase of your home.
H
Home Buyer’s Kit
A REBAC-authored primer for home buyers. The kit contained instructions and worksheets on everything from assessing credit, determining wants and needs in a home, selecting a vendor, all the way to packing for the move. First-time and seasoned home buyers will find value in its checklists, self-assessment tools, and worksheets. Order a free copy.
Home Inspection
A thorough inspection that evaluates the structural and mechanical condition of a property. Could be environmental, energy-efficient, etc.
Home Ownership Cycle
The sequence that begins with assisting with property selection and contract negotiation, providing home improvement resources, and assisting in the sale when that time comes.
Home Warranty
A guarantee for mechanical systems and appliances, but not the structure, against repairs not covered by homeowner’s insurance; coverage is for a specific period of time.
L
Lien
The legal claim against a property that must be satisfied before the property may be sold.
LTV (loan to value)
The ratio of the amount of a mortgage loan to the appraised value or sales price of the property mortgaged, whichever is lower.
Lock-in
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time.
M
Mortgage
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. Generally, the mortgage document pledges the mortgaged property to the lender as security for the loan.
Mortgage Insurance
A policy that insures the lender against loss caused by a mortgagor’s default on a mortgage.
Multiple Listing Services (MLS)
A database of all properties for sale listed by members of a specified MLS.
N
National Association of REALTORS® (NAR)
Since its inception in 1908, the National Association of REALTORS® has worked successfully to advance home ownership, real estate investment, private property rights and the free enterprise system in the halls of Congress and the Federal agencies. NAR is the acknowledged leader in developing standards for efficient, effective, and ethical real estate business practices. With more than 1,200,000 members representing every city, township and community across America, NAR is the “Voice for Real Estate” in the nation’s capital.
Net Worth
The value of all of a person’s assets, including cash, minus all liabilities.
O
Obedience
The fiduciary duty that requires the agent to follow and abide by all lawful instructions of the principal/client within the scope of authority conferred by the principal/client.
P
PITI
Principal, Interest, Taxes and Insurance: four components of a monthly payment on mortgage loans.
PMI
Private Mortgage Insurance is coverage provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Coverage is usually required for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Points
A point is one percent of the amount of the mortgage. At closing, Lenders sometimes charge borrowers a percentage of the loan amount equal to the number of points to cover the lender’s cost. Sometimes borrowers pay higher points in exchange for a lower interest rate.
Prime Rate
The interest that banks charge to their preferred customers, usually large corporations, for short-term loans.
Principal
- The amount borrowed or remaining unpaid.
- The client in a real estate agency relationship.
- In other contexts, the term principal can mean an owner. (For example, the principals of a corporation means the owners of the corporation.)
Purchase Contract
The purchase contract is the legally binding document that sets forth the terms of the sale, establishes the rights and obligations of the parties involved, specifies the actions to be taken in order to close the sale, and establishes the time frames for those steps to be completed.
R
Real Estate Agent
A person licensed by a state to negotiate and transact the sale of real estate on behalf of a property owner/seller or buyer.
Real Estate Buyer’s Agent Council (REBAC)
The Real Estate Buyer’s Agent Council was founded in 1988 to promote superior buyer representation skills and services. An affiliate of THE National Association of REALTORS® (NAR) since 1996, REBACs is the world’s largest organization of real estate professionals concentrating on buyer representation. Members who meet all course and professional experiential requirements are awarded the ABR® (Accredited Buyer’s Representative) and/or ABRM? (Accredited Buyer’s Representative Manager) Designation(s). Both are the only designations of their type recognized by NAR.
REALTOR®
A registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.
Reasonable Care and Diligence
The fiduciary duty that requires the agent to protect the principal/client from foreseeable risks of harm, recommending that the principal obtain expert advice or assistance when the principal’s needs are outside the scope of the agent’s expertise.
REBAC
See Real Estate Buyer’s Agent Council.
S
Sales Contract
Also known as a purchase contract, the legally binding document that sets forth the terms of the sale, establishes the rights and obligations of the parties involved, specifies the actions to be taken in order to close the sale, and establishes the time frames for those steps to be completed.
Senior Real Estate Specialist (SRES®)
A Senior Real Estate Specialist (SRES®) is a designation for REALTORS® to address the needs of home buyers age 50+.
Settlement Statement
A document prepared by a broker, escrow company, or lender detailing the complete breakdown of the costs and disbursements in a real estate transaction.
Single Agent
A broker who works for just one party-client in a real estate transaction — the buyer or the seller, the landlord or the tenant, and not both, with primary fiduciary duties to that party only.
Subagent
A party who is authorized to act on behalf of, traditionally, a seller’s agent, which is to say, an agent for an agent. A subagent owes the same fiduciary duties to the principal/client as the agent does.
Subprime Loan
A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.
Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and the other physical features.
T
Taxes and Other Local Fees
A closing cost that will vary according to the requirements of local governments. Some may demand that the property taxes be pro-rated according to when the buyer will officially become the owner of the property. There can also be personal property taxes, homeowner’s association dues, and other assessments that are specific to the area that you are moving into, as well as transfer taxes in some locations.
Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
Truth in Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate and other charges.
U
Underwriting
The process for evaluating a loan’s application to determine the risk involved for the lender.
Undivided Loyalty
The fiduciary duty that prohibits the agent from advancing any interests adverse to the principal’s interest or conducting the principal’s business in such a way as to benefit a customer, a subagent, the agent or any other party to the detriment of the principal’s interest unless required by statute, regulation or common law – e.g., disclosing material facts and defects of a property.
W
Walk Through
A final inspection of a home before closing to verify that the condition of the property and contents are as contracted.
