Realtor

A Realtor is a real estate agent who is a member of the National Association of Realtors. The term Realtor is a registered trademark of the National Association of Realtors, and may only be used my it's members. The term can often be confusing for buyers and sellers unfamiliar with the real estate industry, and many incorrectly use the term interchangeably with real estate agent. However, not all real estate agents are Realtors. Realtors must all adhere to a code of ethics, and face disciplinary actions from the association for any violations. This is intended to hold them to a higher standard than regular real estate agents, and offer buyers and sellers a method of satisfying any problems or issues that arise. 2009-10-09T23:56:09Z A Realtor is a real estate agent who is a member of the National... 1 R Realtor Realtor

2009-10-17T01:45:19Z

AAA tenant, pronounced as "triple A tenant", is a commercial tenant with the highest credit rating and also the lowest likelihood of default. The more AAA tenants in a commercial property, the more valuable the property. The term is similar to AAA bonds used in the investment industry. 2009-10-17T01:45:01Z AAA tenant, pronounced as "triple A tenant"... 2 A AAA Tenant AAA-Tenant

2009-10-21T20:22:09Z

A common term used to mean insolvency. Insolvency means that a person or company's liabilities exceed the assets, or where current cash flow is insufficient to pay current debts. When this happens, the debtor can choose to take advantage of protections offered by the Bankruptcy Code. After filing for bankruptcy, the law provides an automatic stay on all collection activities. There are three major types of Bankruptcy: <ul> <li>Chapter 7 Bankruptcy</li> <li>Chapter 11 Bankruptcy</li> <li>Chapter 13 Bankruptcy</li> </ul> Chapter 7 Bankruptcy: Liquidating all assets with the purpose of paying down as much of the liabilities as possible, then receiving a discharge of any remaining debts and a "fresh start". Chapter 11 Bankruptcy: Also referred to as reorganization, a debtor usually sells some assets, forgiveness of some debt, and a long term repayment schedule to repay the remaining debt. Chapter 11 is similar to Chapter 13 but for businesses or individuals who exceed the financial limitations of Chapter 13. Also referred to as "wage earner's bankruptcy", the debtor proposes a repayment plan usually lasting between 3-5 years, takes government approved credit counseling, and if they meet the conditions of their repayment plan, receive a discharge of the remaining debts at the end. 2009-10-17T01:52:42Z A common term used to mean insolvency... 3 B Bankruptcy Bankruptcy

2009-10-17T02:02:31Z

Commonly referred to as the "cap rate". It is ratio used by real estate investors to help estabilish the value of an income producing property. To find the capitalization rate, divide the sales price of the building by the yearly net operating income. A $1,000,000 with NOI of $50,000 would have a cap rate of 5%. In general the cap rate is used in reverse to estimate the value of real estate based off the type of property. For example, higher quality, multi-tenant buildings might generally have a cap rate of 6-7%, whereas lower quality buildings with high tenant turnover may have cap rates of 9-10%. To estimate the value of a property, a potential buyer would divide the yearly net operating income (NOI) by the cap rate to arrive at an estimate. For example, a building type that generally has a 10% cap rate, with a NOI of $200,000 per year, would be estimated to be worth $2,000,000. 2009-10-17T02:11:07Z Commonly referred to as the "cap rate". It is ratio... 4 C Capitalization Rate Capitalization-Rate

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The process of deducting some portion of the cost of a property over time as an expense against income. The purpose is to reflect the fact that the property is becoming less valuable and will eventually require replacement. Depreciation is also used in appraisals, to reflect the current value of a building and improvements. There are a few methods for calculating depreciation. The most common method is straight line method, in which an equal amount is depreciated or deducted each year until the property or improvement has been fully depreciated. Another method is the double declining balance method. In this method, more is deducted in the first year than with the straight line method. 2009-10-17T02:31:38Z The process of deducting some portion of the cost... 5 D Depreciation Depreciation

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A non-possessory right to use another's property. An easement may be created by: <ul> <li>- Express words of grant in a written document or contract.</li> <li>- Prescription, where unresetricted use over time leads to property rights, for example by someone crossing another's property openly for a certain period of time.</li> <li>- Neccessity, for example when the law forces the grant of ingress and egress for a piece of landlocked property.</li> </ul> Easements are either appurtenant or in gross. Appurtenant means they stay with the land, regardless of who owns the land or how many times the land is bought or sold. An easement in gross benefits a person, not a particular property. The property being benefited by an easement is called the dominant estate, dominant hereditament, or dominant tenement. The property being burdened by the easement is called the servient estate, servient hereditament, or servient tenement. 2009-10-17T02:38:23Z A non-possessory right to use another's property... 6 E Easement Easement

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The act of choosing not to exercise a right, or not declaring a default when entitled to. The term is commonly seen in contracts, specifying that a forbearance by one party who chooses not to declare a default does not entitle the other party to rely on the future forbearances or a waiving of any rights of the first party. Lenders will sometimes enter into formal forbearance agreements with borrowers. For example, a lender might agree to a forbearance stating they will not foreclose if the borrower agrees to a new payment plan, additional charges, etc. 2009-10-17T03:07:13Z The act of choosing not to exercise a right... 7 F Forbearance Forbearance

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Ginnie Mae is the popular term for the Government National Mortgage Association (<a href="http://www.ginniemae.gov">Ginnie Mae Website</a>). Ginnie Mae guarantees large pools of mortgages, which makes them easier to resell on the secondary market to investors. Ginnie Mae does not actually buy or sell loan or issue mortgage backed securities. Instead, Ginnie Mae guarantees loans insured by the Federal Housing Administration, the Department of Veterans Affairs, and other federally insured loans. Unlike the FHA or VA, which insure individual loans, Ginnie Mae guarantees the timely payment of interest and principal on mortgage backed securities, or a pool of loans. Ginnie Mae I MBS (mortgage backed securities) require all the mortgages in a pool to be of the same type, for example condominiums or single family homes. The interest rates must all also be the same, and the minimum pool size is $1,000,000. Ginnie Mae II MBS allow more variety, including multiple issuers, a wider range of coupons, and various service fees. The minimum pool size is $250,000. 2009-10-17T03:33:54Z Ginnie Mae is the popular term for the Government... 8 G Ginnie Mae Ginnie Mae

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Unlike traditional mortgages which are used to finance a specific real estate purchase, a hard money mortgage is where a buyer receives the actual money. A first mortgage executed in exchange for cash would be described as a hard money mortgage. There are many possible origins of the term "hard money". The most likely origin is that the lenders are lending their own cash, or "hard money", whereas most institutions are loaning borrowed cash, or "soft money". Another possible explanation is that it is for "hard to get" loans. Generally, hard money loans are used when a regular bank will not provide financing. Because of this, the interest rates are usually substantially higher, because there is a higher risk of borrower default. More information about <a href="http://en.wikipedia.org/wiki/Hard_money_lender">Hard Money Lenders</a> can be found at wikipedia. 2009-10-20T16:14:17Z Unlike traditional mortgages which are used to finance... 9 H Hard Money Mortgage Hard-Money-Mortgage

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Often, residential real estate lenders require borrowers to deposit a reserve of funds in an escrow account to pay for property taxes and insurance. Depending on the borrower's creditworthiness, the lender may make this a requirement of the loan, or make it optional for the borrower. This is referred to as an impound account or impound funds. The reason for this is to ensure that the property taxes and insurance are paid, even if the borrower runs into financial difficulty. Some borrowers choose to set up an impound account for convenience, even if it is optional for them. Lenders collect the impound funds the same way they collect principal and interest payments, and it is commonly called PITI: principal, interest, taxes, insurance. The funds are held in an escrow account, which is a neutral third party that holds the funds. In this sense, they are not really paid to the lender, they are set aside as reserves. 2009-10-20T16:21:30Z Often, residential real estate lenders require borrowers... 10 I Impound Funds Impound-Funds

2009-10-21T20:23:23Z

A jumbo loan is a loan that exceeds the limit for a "conforming loan". The definition of a conforming loan is set by <a href="http://www.fanniemae.com">Fannie Mae</a> and Freddie Mac. There are two types of conforming loan limits right now: general conforming loan limits, and high cost area conforming loan limits. The 2009 general conforming loan limit is $417,000, and the high cost area conforming loan limit is $729,750. These numbers change frequently, and were recently increased as part of the economic stimulus. A jumbo loan or mortgage is a loan that is higher than these amounts. Because these loans are above the limit, or "non-conforming", Fannie Mae and Freddie Mac don't purchase them. Thus, they generally have a higher interest rate and are harder to qualify for than conforming loans. Another reason is that loans on luxury homes are generally riskier, as the homes are more sensitive to the market and are usually harder to sell. Jumbo loans have become substantially more difficult to qualify for and get due to the current credit markets and economy. 2009-10-20T16:31:42Z A jumbo loan is a loan that exceeds the limit for a "conforming... 11 J Jumbo Loan Jumbo-Loan

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A mortgage is a pledge of real estate as collateral to a note. A mortgage instrument almost always includes a copy of the note attached to it, or at least a reference to the note. A mortgage usually includes the following: Recording Information, so that the lender can record the mortgage at the office of the recorder and notify the world that there is a lien on the property. Without this recording, no one else would know of the existence of the lien and the owner could attempt to sell the property or borrow more money from an unknowing party. Patricipants, the borrower-mortgagor and the lender-mortgagee. Pledge, usually the pledge of the property's fee simple ownership. Property Description, or the legal description of the property. Most mortgage forms also include the pledge of all buildings on the property currently and in the future, along with many other items such as rents, property rights, etc. Covenant of Seisin, a clause stating that the borrower has title to the property and the authority to pledge the property as collateral. It also specifices that the borrow warrants, or guarauntees, the title, which is often included but not of much practical use in the case of default. Note Attachment. The note is usually attached or at least referenced in the mortgage. 2009-10-21T18:56:47Z A mortgage is a pledge of real estate as collateral to a note... 12 M Mortgage mortgage

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A variation of the option to buy. The buyer agrees to purchase... 13 Lease With Option To Buy Lease-With-Option-To-Buy

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Part of the secondary mortgage market, mortgage backed securites are created by pooling together a large amount of similar loans, and using them as collateral for issuing marketable securities. For example, a pool of 30 year fixed rate loans at 6% would be packaged together, and serve as collateral for a security such as a bond paying a specific interest rate. These securities are then sold and traded in the financial markets. The benefits to this arrangement are that loan originators can resell their loans quickly, and replenish their funds to make more loans. Plus, they usually keep a fee to continue servicing the loan, which adds additional income. Banks aren't stuck holding on to loans for several years, tying up their funds. Unfortunately, the downsides to this arrangement recently became clear with the economic crisis. Because banks were no longer holding on to the loans they made, there was much less quality control, and few repercussions for loan originators that made bad loans. Basically, the more loans they made, the more money they made. This fed the cycle of easy money, which much like a Ponzi Scheme eventually collapsed. 2009-10-21T20:34:50Z Part of the secondary mortgage market, mortgage... 14 M Mortgage Backed Securities mortgage-backed-securities

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A note is a promise to pay a debt, as opposed to a mortgage, which is a pledge of real estate as collateral to secure the promise. A note is a complete contract in and of itself. It's terms state the amount of money being borrowed, along with the conditions under which it will be repaid, such as interest rate, time periods, etc. Once it is signed by the borrower, it becomes a legally enforceable instrument without any additional signatures, once it is in the possession of its bearer. If the terms of the note are broken, the note holder (lender) can either sue on the note or if it is a note and a mortgage (pleding property as collateral), the note holder may foreclose on the property. When a note doesn't have any collatteral, it is referred to as an unsecured note. An example of this might be a personal loan from a bank. Real estate loans are almost always secured by a mrotgage or deed of trust on real property. The note is almost always attached to the mortgage. A note usually includes the following: <ul> <li>Date Signed</li> <li>Identities of Participants</li> <li>Promise to Pay</li> <li>Payment Due Dates</li> <li>Amount and Terms</li> <li>Reference to Security</li> <li>Signatures and Endorsements</li> <li>Cosigners</li> </ul> 2009-10-21T21:14:19Z A note is a promise to pay a debt, as opposed to a mortgage... 15 N Note Note

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The <a href="http://www.fha.com">Federal Housing Administration</a>, or FHA, was organized in 1934 as part of the National Housing Act. The purpose was to stimulate the construction industry, thus creating more jobs. It was also intended to help stabilize the real estate mortgage market. In essence, the FHA guarantees mortgages, putting the credit of the United States Government behind an individual buyer. The FHA operates under the direction of the Department of HOusing and Urban Development (HUD). Any lender participating in the FHA insurance program must follower certain conditions. The FHA designates "qualified lenders" to underwrite loans directly without submitting applications to the FHA each time. Previously in the late 80's, the FHA was hit hard by economic recession and was actually technically bankrupt before the United States Treasury stepped in and provided additional funds. The FHA is again in bad shape due to the current recession. 2009-10-23T01:34:18Z The Federal Housing Administration, or FHA, was... 16 F Federal Housing Administration federal-housing-administration

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compared to the total available for rent. The opposite of this term is the vacancy rate. For example, if 70 units are rented in a 100 unit apartment building, the occupancy rate is 70%. Occupancy rate can also be calculated based off square footage, or the dollar value of rentals. For example, if a building has 10,000 square feet of total space, and 9,000 square feet are rented, it has an occupancy rate of 90%. Another example: if a building has a total possible monthly rent income of $5,000, and the current income is $4,000 per month, it has an occupancy rate of 80%. 2009-10-23T15:46:36Z The occupancy rate is the ratio of rented property... 17 O Occupancy Rate occupancy-rate

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A term used by the Internal Revenue Service (<a href="http://www.irs.gov">)IRS Passive Income</a> that means either: 1. A trade or business activity in which the taxpayer does not materially participate in during the year. 2. A rental activity, even if the taxpayer does participate in it. One important exception to this is if the taxpayer is a real estate professional, in which case it is not considered passive activity. The reason for this term is that passive income has more limits on deductions that can be taken versus active income. Passive activity expenses are only deductible from passive activity income. If the expenses are greater than the income, the taxpayer can't then use these additional expenses to offset other forms of income (payroll, etc.). This is the main benefit to active income: any losses from active income sources can offset other forms of income. Generally, there are two types of passive activities: 1. Trade or business activities in which the taxpayer participates less than 500 hours per year (referred to as material participation). 2. Rental activities, even if the taxpayer does materially participate in them. There are a few exceptions to this rule, one of which is for active real estate professionals. As with all tax issues, it is best to consult your accountant or contact the IRS directly with questions. 2009-10-23T17:43:23Z A term used by the Internal Revenue Service (IRS) that... 18 P Passive Income passive-income

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A quiet title action is a court action to determine the true owner of a property. The purpose is to "quiet the title", especially if there is a dispute about the true owner, so that any clouds on the title will be removed and the title is clear. It is also used in cases where there might be an adverse claim by parties that cannot be found. For example, in a case where a prior owner may have caused a technical defect in the title, but has died and no heirs can be found. A quiet title action is filed in court that has jurisdiction over the property, and amongst other things public notices are required to be published attempting to find any individuals who may have a claim to the property. Quiet title does not necessarily clear the title completely, and can be a complicated legal process lasting months. 2009-10-23T18:07:56Z A quiet title action is a court action to determine the true... 19 Q Quiet Title Action quiet-title-action

2009-10-23T18:07:56Z

Also referred to by it's abbreviation RESPA, this act was passed in 1974 to protect consumers. It requires a range of disclosures to be provided to consumers so they can make informed decisions when purchasing settlement/ closing services. Another purpose of the act was to eliminate kickbacks between real estate, mortgage and settlement professionals. It applies to mortgage loans on single family homes on up to 4 unit buildings, regardless of whether it is a purchase loan, refinance, or HELOC. The major aspects of the act are: Borrowers must be given a special information booklet along with a good faith estimate of settlement costs. There must be disclosures for all affiliated business arrangements. The closing company can't require the use of a specific third party, but the lender can in order to protect it's interests. The consumer must be provided with the HUD-1 Settlement Statement, which shows all reciepts, disbursments, credits and charges, and fees. The borrower can request this one day before closing. Loan servicing companies must provide an annual statement to borroers that summarizes all account activity such as taxes, insurance, and other items. If loan servicing is transferred, the servicer must give the borrower notice at least 15 days before the effectivve date, and if the borrower makes timely payments tot he older servicer during the first 60 days they can't be penalized. Sellers can't specify the use of a specific title insurance company as a condition of sale. If they do so, the buyer may sue them for an amount equal to three times the charges made for title insurance. RESPA is a complex act, and a lawyer should be consulted for any specific legal questions regarding RESPA. 2009-10-27T17:54:15Z Also referred to by it's abbreviation RESPA, this act... 20 R Real Estate Settlement Procedures Act real-estate-settlement-procedures-act

2009-10-27T17:56:42Z

A silent second is a second mortgage placed on a home so that a purchaser can buy the home even without a sufficient down payment. The reason they are called silent is that the first lender doesn't know about the second mortgage, and most likely wouldn't have approved the first mortgage if they had known. It is usually done when the buyer doesn't have enough money for a down payment. The term can also be used for shared equity mortgage programs offered by various housing assistance programs. In this case, a loan is ade to the home purchaser, with repayment due only when the home is sold or refinanced. Silent second mortages can often constitute fraud. One example would be when the first lender agrees to loan 80% of the home's value, believing the buyer will be putting a 20% down payment. If the buyer then borrows most or all of this 20% from the seller in secret, the lender is at greater risk because they relied on the buyer having some "skin in the game". An even more fraudulent example is when the buyer and seller conspire to inflate the price of the property to take out a larger first mortgage than the the lender otherwise would. For example, the lender may only be willing to loan 80% of the value, but the buyer and seller agree to a sale at a higher price with the seller loaning a second. After the sale, though, the seller forgives the second mortgage, leaving the first lender with a loan on potentially 100% of the value of the property. 2009-10-27T18:16:35Z A silent second is a second mortgage placed on a... 21 S Silent Second silent-second

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Tencancy in Common is when two or more parties have joint ownership of an undivided interest in real property. Tenants in common may sell their shares to another party. If a tenant dies, their share goes to their heirs, as opposed to joint tenancy, where the property goes to the other tenants/ owners. An undivided interest means that each owner has a percentage ownership of the entire property, not ownership of a specific part of the property. TIC's are common with investment properties. TIC's allow people to purchase a small share of a large investment property, such as an office building or shopping mall. Triple net lease properties are also popular. No more than 35 investors may jointly own one property due to tax laws. This industry has grown substantially in the past few years. 2009-10-27T19:28:22Z Tenancy in Common is when two or more parties... 22 T Tenancy In Common tenancy-in-common

2009-10-27T20:29:06Z

The term for evaluating the risk of a person, company, or situation. Almost always done by lenders to determine the borrower's financial health and ability to repay a loan. Within a bank, "underwriters" conduct the research and put together a package on a potential buyer to be reviewed by the loan decision maker. The term can also refer to guaranteeing a sale, for example an investment banker might underwrite the sale of securities and agree to buy any that don't sell on the open market. To Underwrite can also mean to assume liability, for example an insurance company that underwrites an insurance policy. 2010-01-07T23:44:33Z The term for evaluating the risk of a person, company, or situation... 23 U Underwrite Underwrite

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A variance is when permission is granted to use a property in a manner not... currently allowed by zoning ordinances. In order to get a variance, the owner of the property usually has to show that there would be a hardship on the property (as opposed to the owner) unless the variance is allowed. Examples of a hardship on the property would be if the property would remain vacant, or if a structurally sound piece of property would need to be torn down otherwise. Often times, buyers will petition for a variance, since they are allowed to once they have a signed contract, and usually there is a contingencee that the variance must be allowed before the buyer will buy the property. 2010-01-08T00:05:42Z A variance is when permission is granted to use a property in a manner not... 24 V Variance Variance

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A wraparound mortgage is when the seller leaves their current mortgage in place and finances the sale themselves. The new mortgage "wraps around" the old mortgage, with the buyer making payments to the seller and the seller making payments to the original lender. Because most loans now have a "due on sale" clause, wraparound mortgages are relatively infrequent. A due on sale clause means the entire loan balance is due when the property is sold, preventing the seller from keeping the loan in place. 2010-01-08T00:21:45Z A wraparound mortgage is when the seller leaves their current mortgage in place and... 25 W Wraparound Mortgage wraparound_mortgage

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The Federal Reserve System, also called the "Fed", is the central bank of the United States. It was created in 1913. The main purpose of the federal reserve is to regulate credit by managing the interest rate it charges for short term loans to member banks. It also acts as a clearing house for member banks, allowing banks to accept checks from other banks. The Federal Reserve is run by a seven member Board of Governors appointed by the president. The primary responsibility of the Fed is the formation of monetary policy. The system is also made up of Federal Reserve Banks, which are spread throughout the country. They handle deposits for such items as income taxes, unemployment taxes, etc. 2010-02-12T20:07:43Z The Federal Reserve System, also called the "Fed"... 26 F Federal Reserve Federal Reserve

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The back end ratio is used by lenders in conjunction with the front end ratio as one method of examining a borrower's financial strength and ability to repay if given a loan. The ratio is determined by adding up existing debt payments plus the proposed loan payment, in order to arrive at a percentage of income that will be devoted to paying debts every month. Lenders typically want this percentage, or back end ratio, below 36 percent of take home pay. Example: If a borrower's monthly take home pay were $4,000, and they had a car payment of $400 and the proposed mortgage payment would be $1,200, then their combined payments of $1,600 would be 20% of their take home pay. Example 2: borrower's take home pay: $10,000. Car loan: $500 per month. Proposed Mortgage: $2,500 per month. In this case the backend ratio would be 30%. 2010-02-12T20:14:42Z The back end ratio is used by lenders in conjunction... 27 B Back End Ratio Back_End_Ratio

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The term closing costs can either refer to only the fees and costs necessary to close a sale/ mortgage, or more generally to refer to all the expenses associated with purchasing a property. In different areas, there are different customs for whether the buyer or seller pays various closing costs. Some examples of closing costs include: <ul> <li>Preparing the closing documents <li>Preparing the Deed <li>Costs associated with clearing title, if necessary <li>Deed recordation fees <li>Preliminary Title Report <li>Owners Title Insurance <li>Lenders Title Insurance <li>Lender required policy endorsments <li>Mortgage Recordation Fees <li>Transfer taxes <li>HOA fees/ Transfer Fees <li>Listing agent's commission <li>Selling agent's commission <li>Insepctions/ reports <li>Appraisal <li>Escrow Fees <li>Prorated real estate tax, insurance </ul> Because who pays what varies by area and custom, it is important to work with a local, experienced real estate agent familiar with the local customs. It is not uncommon for out of town buyers with an out of town real estate agent to pay more than necessary by volunteering to pay for certain closing costs that would customarily be paid for by the seller. 2010-02-12T20:33:57Z The term closing costs can either refer to... 28 C Closing Costs Closing_Costs

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