abstract of title: The shorter version of the history of a property’s title to that shows any transfers in property ownership, as well as any liabilities (liens) owed on the property
acceleration clause: The right by the lending institution to demand full payment of the principal and interest in the event of the loan being in default.
acceptance: The offeree’s agreement to enter into a legally binding contract according to the terms of the offer.
acre: A land measurement equal to 43,560 square feet.
ad valorem: The assessment of taxes “according to value”.
additional principal payment: A payment made by the borrower in addition to the minimum payment which reduces the balance of the loan by the amount of the additional payment.
adjustable rate mortgage (ARM): A mortgage with an interest rate that changes according to the changes of a market index or a market indicator. Usually there are limits set on how much the interest rate can fluctuate.
adjustment: A monetary credited by the buyers and sellers to each other at closing. A common example is the proration of real estate taxes.
affidavit: A written statement signed by and sworn by one person before another person who is authorized to take an oath.
agency: A legal relationship between an agent and an other person/entity (aka the principal) in which the agent certain rights to act on behalf of the principal. In a real estate transaction, the seller is the principal and the broker is the agent.
agent: The appointed person authorized to act on behalf of another person when dealing with third parties.
alienation clause (aka due-on-sale clause): A written statement (clause) in a mortgage that gives the lender the right to call the entire loan balance due if the property is sold.
amenities: Benefits and satisfactions based on property ownership which are non monetary. (Ex. mountain views, pride of home ownership)
amendment: A mutually agreed upon modification to a contract already in existance. (Ex. price, closing date, concessions)
amortization: The operation of paying off debt (ex. a mortgage) by payments (installments), typically 15 or 30 years for a home loan.
appraisal: In the case of real estate, an appraisal is a professional determination by a licensed appraiser of the value of a piece of real estate.
appraised value: The estimate of the present value of an asset, as determined by an appraiser
appreciation: The increase in value/worth of an asset.
asking price (aka list price): The price attached to a property for sale.
assessor: A government official who is responsible for determining the value of a property for tax purposes.
assignment: The transfer of property rights from one person to another person.
assumable mortgage: An existing mortgage that can be transferred to the buyer on the same terms applied to the original borrower.
attachment: The act of placing a debtor’s property in the custody of the law and held as security pending the outcome of a creditor’s lawsuit.
auction: A public sale of a property to the highest bidder.
balloon mortgage: A home mortgage in which the final payment is substantially larger than the preceding payments of the mortgage.
balloon payment: The large final payment due at the end of a balloon mortgage.
bill of sale: A written document which passes title to personal property.
blanket mortgage: A mortgage on more than one parcels of real property.
breach of contract: Failure of one of the parties in a legally binding contract to perform duties, without legal excuse, according to the contract.
bundle of rights: Ownership in real property implies a group of rights
- to occupy the property
- use and enjoyment of the property
- to sell
- the right to control the use of the property
- to bequeath
- to lease
- the right to the benefits occurred by occupancy and use
buy down: The purchase of a lower interest rate, measured in points, paid to the lender.
buyer’s agent: A licensed real estate agent who only represents the buyer in the purchase of real estate.
capital gains: The profits on the sale of a capital asset.
cash out: The process of receiving money back when you refinance your current mortgage. This is not allowed on homestead property in the state of Texas.
ceiling: In an ARM, the ceiling is the maximum allowable interest rate.
Certificate of Eligibility: The document for qualified veterans that entitles them to VA loans.
chain of title: A history of encumbrances and conveyances of a property.
clear title: A land title without liens against it.
closing: The actual sales transaction (usually at a title company) where the seller transfers title (ownership) to the buyer in exchange for payment (consideration).
closing costs: Costs the buyer or seller must pay at the time of the closing.
closing statement: A written summary of a real estate transaction, showing all debits and credits made, and all monies received and/or paid.
cloud on title: A claim or any encumbrance that might effect title to real estate.
collateral: The item of value deposited with a lender to secure repayment of a loan.
comparables (aka comps): Properties other than the subject property that are similar to the subject property which are used to compare and value a value the subject property.
consideration: The price (money, exchange, service, love) that is given for [in the case of real estate] real property.
contingency: A provision in the contract which allows some or all of the terms of a contract to be voidable.
conventional loan: A real estate loan not insured by the FHA or guaranteed by the VA.
counter offer: An offer in response to another offer given, which simultaneously rejects the prior offer.
covenant: A restriction governing the use of real estate often found in the written documents of a homeowners association.
covenants, conditions & restrictions (CC&Rs): The restrictions governing the use of a property normally enforced by a homeowners association in a particular development or subdivision which are passed on to the new owners of property.
creditor: The person or entity (such as a lending institution) to whom a debt is owed.
DBA: Acronym for Doing Business As.
debenture: Bonds issued without security.
debt service: The total amount of debt to which you are required to pay.
debt-service ratio: Debt payments vs. gross household income, usually displayed as a percentage (%).
deed: A written instrument by which title (ownership) to land is conveyed.
deed in lieu (of foreclosure): The act of forfeiting or transferring ownership of a property to the lienholder.
deed of trust: A legal instrument used in Texas in lieu of a mortgage, in which the property is conveyed in trust to a trustee to be held as security for a loan.
deed restrictions: Deed restrictions determine the allowable land uses and home types and sizes within a neighborhood.
default: Non-performance of a duty stated in a contract.
depreciation: A decrease in an asset’s value.
disclosure: The process of making known of a fact that had previously been unknown.
discount points (aka points): An amount paid either to keep or lower the interest rate being charged. One point is equal to one percent of the loan amount.
discount rate: 1. The interest rate charged to member banks for borrowing from the Federal Reserve System. 2. The rate that is used to convert future income into present value.
down payment: Purchase price minus loan amount.
due on sale: A clause written in a mortgage agreement stating that, if the borrower sells or transfers the property, the lender has the right to demand that the balance be paid in full.
duress: The condition of forcing of an action or inaction against a person’s will.
earnest money: A deposit which is made by a buyer as evidence of good faith in offering to purchase real estate which is held by the title company
earnest money contract (EMC): A real estate contract in which the buyer is required to give earnest money to evidence that he intends to complete the contractual obligations.
easement: The right by another to use a person’s real estate for a specific purpose.
effective interest rate: The actual cost of credit, given as a percentage, on a yearly basis.
El Paso Central Appraisal District (EPCAD): The local governing agency responsible for assessing property values within El Paso County.
eminent domain: The government’s right, through condemnation, to take private property for public use.
encroachment: A fixture or structure that crosses into a portion of a property belonging to another.
encumbrance: A cloud against free and clear title to the property which does not prevent conveyance of the property.
equity: A property’s value minus the amount owed.
exclusive right to sell (ERS): A listing agreement that gives a listing agent the right to sell a particular property for a specified amount of time, with the right to collect a commission or fee if the property is sold by anyone, including the owner, during the listing period.
first mortgage: A lien which is in first lien position, which takes priority over all other liens/financial encumbrances.
fixed rate mortgage: A mortgage with an interest rate (and monthly payment) that won’t change.
fixture: Personal property which has been attached to real estate so as to become part of the real property. To be a fixture, the item must meet at least 1 of these 3 conditions:
1. Be attached to the property in a permanent manner.
2. Be specially adapted to/for the property.
3. Be intentionally made part of the real property.
flood plain: Areas which are subject to periodic flooding.
GEPAR: Acronym for the Greater El Paso Association of Realtors
hazard insurance: A policy/contract between a property owner and an insurer, to compensate the insured for loss of property in the event of a covered peril.
HOA: Acronym for Homeowner’s Association
homeowners’ association (HOA): An organized group comprised of neighbors concerned with managing common areas and the Covenants, Conditions, and Restrictions of a subdivision or condominium complex.
homeowners’ insurance: An insurance policy that protects homeowners from financial losses related the ownership of real property, including liability claims.
improvements: Valuable additions to land, such as buildings, fences, or roads which increase the property’s value.
inspection clause: A stipulation in an offer to purchase that makes the sale contingent on the report of a home inspector.
interest: 1. The cost of borrowing money. 2. The type and extent of ownership of a property.
interest rate: The periodic charge for borrowing money, expressed as a percentage,
intermediary: As of January 1, 1996, a broker may act as an intermediary between the parties if the broker complies with the The Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than than the asking price unless authorized in writing to do so by the owner;
(3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and
(4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License act or a court order or if the information materially relates to the condition of the property.
With the parties’ consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under the Act and associated with the broker to communicate with and carry out instructions of the other party.
latent defects: Hidden defects and flaws in a property.
legal description: An acceptable indicator by the courts of that state of the location of a specific parcel of real estate.
listing agreement: The legal agreement between the listing agent/broker and the vendor, setting out the services to be rendered, describing the property for sale, and stating the terms of payment.
loan-to-value ratio (LTV): The ratio of the amount being loaned on a property vs. the appraised value of the property, usually expressed as a percentage.
lock or lock In: An interest rate commitment obtained from a lender for a definite time period.
market value: The price a buyer(s) would be willing to pay a seller for a particular property, determined by supply and demand in a specific market.
mechanic’s lien: A lien placed on real estate by someone who is owed money for a service or for a good.
mediation: A method to dispute resolution through the use of a mediator designed to avoid court.
misrepresentation: A false statement, or omission, of a material fact with the intention of inducing action or inaction of another.
option fee: An amount of money paid by a prospective buyer to a seller in order to receive an option period, as specified in Paragraph 7 of a TREC promulagated earnest money real estate contract.
option period: A negotiable period of time in which the Buyer has a right to terminate the contract for any reason without penalty
origination fee: A fee charged (usually as a percentage) by a lender for services fir granting a loan.
personal property (aka chattel): Owned property which is tangible, movable, and unable to be fixed to the land.
PITI: Acronym for Principal, Interest, Taxes and Insurance.
PMI: Acronym for Private Mortgage Insurance
points: See “discount points”
prepayment: The paying off of all or part of the mortgage before the scheduled date.
prepayment penalty: A fee paid to the lender for paying on a loan prior to the scheduled maturity (pay-off) date.
prime rate: The interest rate charged by a lender to its best qualifying customers.
principal: The amount of money owed to the lender minus interest.
private mortgage insurance (PMI): Insurance on conventional loans to protect the lender against default by the borrower.
promulgated forms: Forms written by The Texas Real Estate Commission which must be used by all real estate licensees when acting as agents in real estate transactions with a few limited exceptions.
property taxes: Annual taxes paid real property according to the property’s value (ad valorem), as assessed by the County Appraisal District.
pro-rate: To split proportionally between the buyer and seller. Pro-rated expenses include taxes, insurance, and interest.
qualify (qualified): To meet a lender’s mortgage approval standards.
real estate: Land and improvements and the rights to use and own them.
real property: Refers to the right to own land and improvements.
REALTOR®: A real estate broker or associate who is an active member of a local real estate board that is affiliated with the NATIONAL ASSOCIATION OF REALTORS®.
realty: This refers to land and buildings and other improvements from a physical standpoint.
recording: The act of placing the written record of title to real property in the public records in order to give notice to the public.
refinancing: Obtaining a new mortgage, usually in order to attain a loan with better terms or a different principal amount.
sales contract: A written agreement containing the terms of the sale agreed upon by both the buyers and sellers.
setback: The distance a structure must be away from the property lines.
short sale: The process of purchasing a home for less then the loan amount in which the lender releases the lien and does not hold the owner responsible for the deficit.
specific performance: The carrying out of the explicitly specified terms agreed upon in a contract.
succession: Passing of property and/or legal rights after death.
title: The right of ownership of property.
title company: A company that provides title insurance policies. Texas title companies also act as escrow agents and conduct closing procedures.
title insurance: Insurance for lenders or homeowners against financial losses resulting from defects in a property’s title
title search: The process of checking the records of a property to determine whether the seller can actually sell the property free of liens.
underwriting: The process of verifying an applicant’s data and records and approving a loan.
VA: The Veterans Administration
variance: An exception to the current zoning ordinance, usually granted by a local government agency
vendee: The purchaser.
vendor: The seller.
void: Legally invalid and without effect.
voidable: An apparently valid contract which may be declared invalid by one of the parties to the contract.
walk through: 1. A Buyer’s inspection of the property being purchased, usually prior to closing. 2. An inspection of a new construction home, in which cosmetic items are noted and addressed.
zoning: Regulating the character or use of property.