THE KATZ GROUP

Glossary of Useful Terms

Amendment - A change (either to alter, add to, or correct) a part of an agreement without changing the principal or essence.

Amortized Loan - A loan that is paid off (both interest and principal) by regular payments that are equal or nearly equal.

Appraisal – A professional opinion of the value of a property based on a factual analysis.

Appraisal Methods – There are 3 appraisal methods used on residential property:

• The cost approach which determines the cost to build a new structure

• The replacement approach which determines the cost to replace the existing structure

• The market value approach which uses the sales price of comparable properties

Appreciation – An increase in the value of a piece of real estate.

Assumption of a Mortgage – Some loans are assumable.  This means that on taking title to a property, the new owner can assume the existing loan on the property and become liable for this lien against the property.

Beneficiary - The recipient of benefits, often from a deed of trust (usually the lender).

Close of Escrow (Closing) – The final settlement of the real estate transaction between the buyer and seller.  This is usually the recording of the title to the property in the buyer’s name.

Comparable Sales - Sales that have similar characteristics as the subject property, used for analysis in the appraisal. Commonly called "comps".

Conventional Mortgage – A mortgage securing a loan made by investors without government underwriting; i.e., non-FHA or VA insured or guaranteed.

Counter Offer – A response to an offer or a preceding counter offer, which changes or adds terms that supercede the terms offered in the preceding offer or counter offer.

Deed – Written instrument which, when properly executed and delivered, conveys title.

Deed Restrictions - Limitations in the dead to a property that dictate certain uses that may or may not be made of the property.

Discount Points – Additional charges made by a lender at the time the loan is generated.  Points are measured as a percent of the loan with each point being equal to one percent.  A buyer may pay more points and assume a lower interest rate for their loan.

Earnest Money Deposit – A down payment made by the buyer as a statement of intent and good faith.

Easement – A right, privilege, or interest which one party has in the land of another (such as with right of way).

Equity – The interest or value which the owner of a piece of real estate has over and above the value of all the liens on that property.

Escrow – The deposit of instruments and funds with instructions with a neutral third party, the escrow agent, to carry out the provisions of an agreement or contract.

F.H.A. Loan (Federal Housing Administration) – A loan which has been insured by the federal government guaranteeing its payment in case of default by the owner.

F.M.H.A. Loan – Similar to F.H.A. but for residential property in rural areas.

Hazard Insurance - Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. Buyer often adds liability insurance and extended coverage for personal property.

Impound Account – An account held by the lender on behalf of the owner in order to pay annual tax and insurance costs.  The owner contributes monthly to this account along with the payment of the principal and interest on the loan.

Joint Tenancy – A form of joint ownership which insures right of survivorship in the event of the death of one of the owners.  All owners have equal ownership and equal rights to the property.

Legal Description - A description of land recognized by law, based upon government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.

Lien – This is an encumbrance or debt levied against the property and makes the property security for its discharge or payment.

Marketable Title – A title free and clear of liens or encumbrances which would prevent its being transferred to a buyer.

Mortgage – An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation.

Mortgage Insurance – Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sales price. (Sometimes referred as Private Mortgage Insurance or "PMI".)

Origination Fee – A fee charged by a lender to create a loan.

Personal Property – Any property which is not real property and would not be considered part of a real estate transaction such as furniture.

PITI - A payment that combines Principal, Interest, Taxes and Insurance.

Power of Attorney - A written instrument whereby a principal gives authority to an agent.

Purchase Agreement – An agreement between a buyer and seller for the purchase of real estate.

Quitclaim Deed – A deed that releases a party from the title of a property.

Real Property – Land and whatever by nature or artificial annexation is part of it.

Recording - Filing documents affecting real property with the County Recorder as a matter of public record.

Special Assessment – A legal charge against real estate by a public authority to pay the cost of a public improvement, such as street lighting.

Sub-Division – A part of a parcel of land that has been divided into smaller parts.

Term of Mortgage – The period through which a mortgage is payable.

Trust Account – An account separate and apart from the broker’s own funds, into which the broker is required to deposit all funds collected on behalf of clients, such as earnest deposits.

V.A. Loan – A loan guaranteed by the Veterans Administration.

Warranty Deed – A deed used to convey real property which contains warranties of title and quiet possession and wherein the grantor agrees to defend the premises against the lawful claims of third persons.

1031 Exchange – Also referred to as a nontaxable sale. Enables property owner to trade one investment property for another "like" investment property without paying capital gains tax on the transaction.