ADDENDUM - An addition to the contract that must be signed by both parties to be binding.
AMORTIZATION - The payment of a financial obligation on an installment basis.
AMORTIZED LOAN - is a loan that is completely paid off, interest and principal rather than
interest-only, by a series of regular payments that are equal or nearly equal.
ANNUAL PERCENTAGE RATE (A.P.R.) - The total amount of the finance charge - including interest,
points and all loan fees (i.e. escrow, processing, etc.) - calculated as a
percentage of the borrowed amount and expressed as a yearly rate.
APPLICATION FEE - This is a fee that may be charged by the lender to cover the costs of
processing your loan application.
APPRAISAL - The professional examination of property for the purpose of estimating its
current market value.
APPRECIATION - The increase in value of a property due to any cause.
APPURTENANCE - That which "runs with the land"; anything incident to or attached to the land
that is part of the property.
ASSESSED VALUE - The value placed upon a property for property tax purposes.
ASSIGNMENT - The transfer over to another the whole of any property, real or personal, in
possession or in action, or any right or estate therein. ASSIGNEE is the person
receiving the right or property. ASSIGNOR is the owner of the right or property,
which is being transferred to another.
ASSIGNOR - - is the owner of the right or property, which is being transferred to another.
ASSUMPTION OF A MORTGAGE - A buyer's agreement to assume the liability under an existing
note that is secured by a mortgage or deed of trust. The mortgage or deed of
trust. The lender must approve the buyer in order to release the original
borrower (typically the seller) from liability. Not all loans or loan terms are
ATTORNEY IN FACT - A person holding power of attorney from another.
ATTORNEY REVIEW - For the state of New Jersey, there is a 3-day attorney review. For the state
of New York, there is a 5-day attorney review. Connecticut has no formal
attorney review period. During this timeframe either party may cancel the
contract for any reason without penalty.
BALLOON PAYMENT - Any payment on a note that is greater than the smallest installment payment. A
lump sum principal payment due at the end of some mortgages or other long-term
BENEFICIARY - The inheritor of a trust. The lender on a note and trust deed transaction.
BENEFICIARY STATEMENT - Statement of a lender, giving the remaining principal balance
and other information regarding the loan. Usually obtained when an owner wishes
to sell or refinance.
BINDER - Written evidence of insurance which covers a limited time; to be replaced
later with a permanent policy.
BUNDLE OF RIGHTS - The law designates the rights that accompany ownership to real property as the
bundle of rights. The right to own, possess, use, enjoy, encumber, dispose of,
and exclude those who do not share ownership of real property.
BUYDOWN - A permanent buydown is prepaid interest that brings the note rate down to a
lower permanent rate. A temporary buydown is prepaid interest that lowers the
note rate temporarily on the loan, allowing the buyer to more readily qualify
and increase payments as income grows.
BUYER AGENT - Agent acts solely on the buyer's behalf. The Agent has full fiduciary
responsibilities, which include reasonable care, individual loyalty,
confidentiality and full disclosure. This means the agent places the buyer's
interest above all else.
CALLED LOAN - A loan that is due and payable at the demand of the lender.
CAP - The limit on how much an interest rate or monthly payment can change, either
at each adjustment or over the life of the mortgage.
CAPITAL GAIN - The gain received on the sale of real or personal property, other than
property sold as stock-in-trade.
CAPITALIZATION - In appraising, determining value of property by considering net income and a
percentage of reasonable return on the investment. The conversion of income into
CAPITALIZATION RATE - Any rate used to capitalize income.
CHAIN OF TITLE - A history of all of the documents transferring title to a parcel of real
estate, beginning when it originally came from the government to a private
owner, through the latest document transferring title.
CHATTLE - An item of personal property.
CHATTLE REAL - A personal property right in real estate, such as a lease.
CLOSING - The same as Close of Escrow or COE. The final procedure in a real estate
transaction. This is the day the new owner can take possession of the house and
actually owns it.
CLOSING SERVICE NETWORK - A network of experienced Real Estate Attorneys who provide
efficient, reliable and responsive representation for homebuyers and sellers.
CLOSING STATEMENT - (HUD-1 STATEMENT) - The financial disclosure statement prepared by the escrow holder
(attorney, broker, escrow company, or lender) that accounts for all of the funds
received and expected at closing, including deposits for taxes, hazard insurance
and mortgage insurance.
CLOUD ON TITLE - Any condition that affects the clear title of real property.
COMMISSION - An amount paid by the seller to the listing and selling agent for handling the
real estate transaction.
COMMUNITY PROPERTY - Property acquired by husband and wife during marriage, when not
acquired as separate property.
COMPARATIVE ANALYSIS - A method of appraisal in which selling prices of similar
properties are used as the basis for arriving at the value estimate (a.k.a. the
Market Data Approach).
COMPOUND INTEREST - Interest paid on original principal and on the accrued and
unpaid interest, which has accumulated.
CONCIERGE SERVICE - The Coldwell Banker Concierge® Service is a resource to help
buyers and sellers find the service providers need before, during and after the
sale or purchase of a home.
CONDITION - A stipulation or qualification in the deed which, if violated or not performed,
defeats the deed and places the title back in the hands of the original grantor.
CONDOMINIUM - A form of real estate ownership in which the owner receives exclusive title to
a particular unit and shares ownership in certain common areas with other unit
owners. The unit itself is generally a separately owned space whose interior
surface (walls, floors and ceiling) serves as its boundaries.
CONSIDERATION - Anything of value given to induce another to enter into a contract including
money, service or a promise. This is essential to a valid contract.
CONTINGENCY - A condition that must be satisfied before a
contract is binding. For example, a sales agreement or offer may be contingent
upon the buyer obtaining financing.
CONTINGENCY REMOVAL - Must be signed by the buyer to remove any contingency and create
a binding contract.
CONTRACT - A deliberate agreement, based upon legal consideration, between two or more
parties who have legal capacity, to perform a legal act. A binding promise.
CONVENTIONAL LOAN - A loan that is not underwritten by a government agency.
CONVEYANCE - 1) The transfer of a title. 2) The document, such as a deed, by which the
title is officially transferred.
CO-OP - (Co-operative housing) A form of multiple ownership in which a corporation or
business trust entity (made up of the occupants) holds title to a property and
grants occupancy rights to shareholders by means of proprietary leases or
similar arrangements. As such, no real property is owned by the individuals,
only shares in the corporation allocated to particular apartments.
COVENANT - A clause in a contract; an agreement contained in a deed for the performance
or non-performance of certain acts.
CURABLE DEPRECIATION - Items of physical deterioration and functional obsolescence that
can be repaired or replaced by a prudent property owner.
DEBT RATIO - The comparison of a buyer's housing costs to gross or net effective income.
DEED - A document which, when properly executed, conveys title of real property.
DEFERRED PAYMENT - A payment under which the total balance of principal and an
amount for finance charge is put off until the future. This balance is paid by
means of installments over a long period.
DEPRECIATION - As used in appraisal, loss in value due to any cause. As used in taxation, a
capital cost recovery out of income.
DISCLOSURE - To make known or public. By law, a seller of real property must disclose facts
that affect the value or desirability of the property. Unless exempt, the seller
completes and signs specific disclosure forms, including the Real Estate
Transfer Disclosure Statement, to disclose those material facts.
DISCLOSED DUAL AGENT - When an agent shows properties that are listed with Coldwell
Banker, or if Coldwell Banker is representing more than one buyer on a
particular property, the Coldwell Banker agent then becomes a disclosed dual.
The agent will not be able to disclose confidential information to either party,
such as price, terms or motivation to sell or buy. The dual agent must treat all
parties fairly, act in good faith and disclose all appropriate property facts.
DISCOUNT POINTS - A negotiable fee paid to the lender to secure financing to the buyer. Discount
points are interest charges paid up-front to reduce the interest rate on the
loan over the life or a portion of the term.
DOCUMENTARY TRANSFER TAX - A method of taxing real property transfers. State law requires
that a tax be paid prior to recording a deed.
EARNEST MONEY - The portion of the down payment delivered to the seller or escrow agent by the
purchaser with a written offer as evidence of good faith.
EASEMENT - A right to use all or part of the land owned by another.
EFFECTIVE AGE - Age of a structure as estimated by its condition rather than actual age. Takes
into account rehabilitation and maintenance.
EGRESS - As applied to an easement, a way out or exit.
ENCUMBRANCE - Anything that affects or limits the ownership of real property, such as
mortgages, liens, easements, or restrictions of any kind.
EQUITY - The difference between what is owed and the amount for which the property
could be sold.
ESCROW - The temporary holding by a third neutral party of deposited money pending
completion of agreed terms in the sales contract. This third party acts as
stakeholder for both parties' instructions and assuming responsibility for the
handling of all paperwork and distribution of funds.
ESCROW FEES - The fee that the title company (the third party) charges for doing the paper
ESTATE - The ownership interest of a person in real property; also used to refer to the
property left by a deceased person.
EXCLUSIVE AGENCY LISTING - A written instrument giving one agent the "authorization to
sell" property for a specified time, but reserving the right to collect a
commission if the property is sold by anyone during the term of the listing.
EXECUTED - A contract that has been fully performed.
EXTENDED COVERAGE - A form of title insurance that is available to homeowners.
FHA LOAN - (Federal Home Loan Mortgage Corp.-FHLMC) Often referred to as "Freddie Mac", a
part of the secondary market and used to purchase loans from savings and loan
lenders within the Federal Home Loan Bank Board.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - Popularly known as
"Fannie Mae", a privately owned corporation formed by the congress to support
the secondary mortgage market. It purchases and sells residential mortgages
insured by FHA or guaranteed by the VA, as well as conventional home mortgages.
FEE SIMPLE - An estate in which the owner has unrestricted power to dispose of the property
as he or she wishes, including leaving by will or inheritance.
FIDUCIARY - A person holding a position of trust; agents, trustees, attorneys, etc.
FINANCE CHARGE - The total cost that a borrower must pay (directly or indirectly) to obtain
credit according to Regulation Z, the set of rules governing consumer lending
issued by the Federal Reserve Board.
FINANCIAL STATEMENT - A statement in writing often required of a borrower of money
from a bank, stating fully all of the borrower's assets, liabilities and net
FIXED EXPENSES - The regular recurring costs or charges required in the holding
of a property, such as taxes and fire insurance.
FIXED RATE MORTGAGE - A conventional loan with the same interest rate for the life of
FIXTURE - Personal property that is attached to real property and is legally treated as
real property when its attached-such as light fixtures and window treatments.
FULLY INDEXED RATE - The maximum interest rate on an ARM that can be reached at the
FUNCTIONAL OBSOLESCENCE - A loss of value due to out-of-date, old-fashioned or poorly
designed equipment; a type of depreciation.
GIFT LETTER - A letter from a relative stating that an amount will be gifted to the buyer,
and that said amount is not to be repaid.
GOVERNMENT NATIONAL MORTGAGE (GNMA) - Known as "Ginnie Mae", a governmental part of the secondary
market that deals primarily with recycling VA and FHA mortgages, particularly
those that are highly leveraged.
GRANT DEED - Customary document used to transfer title to real property; contains two
GRANTEE - Receiver of the title being granted.
GRANTOR - Owner of title being granted; the person who makes the grant.
GUARANTEE OF TITLE - A guarantee by an abstract company or title company that the
title is vested as shown on the guarantee, backed only by the assets or reserves
of the guarantor.
HAZARD INSURANCE - Insurance protection for the borrower and lender against property loss due to
fire, wind or natural hazards.
HOME INSPECTION SERVICE - A qualified inspector's report on the overall condition of a
property. The report typically includes an evaluation of both the structure and
HOME WARRANTY PLAN - Protection against failure of mechanical systems within the
property, and usually includes plumping, electrical, heating and cooling
systems, and installed appliances.
HOMEOWNER'S ASSOCIATION (HOA) - An organized group of homeowners
whose members help to regulate and enforce the rules and standards of their
IMPOUND ACCOUNT - An account held by the lender for payment of
taxes, insurance and other periodic debts against a property. The borrower pays
an apportioned amount with each monthly loan payment and the lender pays the
bills with the accumulated funds.
INDEMNIFY - To secure against hurt, loss or damage; to make
compensation to for hurt, loss or damage.
INDEX - A measure of interest rate changes used to determine changes in an ARM's
interest rate over the term of the loan.
INTEREST RATE - The percentage of a sum of money charged for its
INVOLUNTARY LIEN - A lien imposed against property by operation
of law without the consent of the owner, such as a tax lien, judgment lien or
JOINT TENANCY - An equal, undivided ownership of property by two or more persons. Upon the
death of any owner, the survivors take the descendant's interest in the
JUMBO LOAN - Mortgage loan that exceeds the loan amount acceptable for sale in the
secondary market. Jumbos are packaged and sold differently to investors, and
have separate underwriting guidelines.
LIEN - A legal hold or claim on a property as security for a debt or
charge. It can be voluntary such as a mortgage or involuntary such as for back
LIST-TO-SALE RATIO - The ratio between the price at which a property is listed and the amount for
what it is actually sold.
LOAN COMMITMENT - A written promise to make a loan for a specified amount on
LOAN ORIGINATION FEE - A fee charged by the lender for Evaluating, preparing, and
submitting a proposed mortgage loan.
LOAN-TO-VALUE (LTV) RATIO - The amount of the loan as a percentage of the property's
appraised value. An 80% loan, for example, is determined by subtracting a 20%
down payment from the property's appraised value.
LOCK-IN - The fixing of an interest rate or points at a certain level during the loan
application process. It is typically fixed for a specified amount of time, such
as 20-30 days or some other period of time determined by the lender.
MARGIN - The number of percentage points the lender adds to the index to
calculate the ARM interest rate at each adjustment. For example, an index rate
of 8% plus a margin of 2.5% could result in a home loan rate of 10.5%. The fixed
margin over the index covers the lender's operating expenses and profit margin.
MARKET VALUE - The current value of real estate that a buyer is willing to pay and a seller
is willing to accept.
MARKETABLE TITLE - Title to property that is free of objectionable encumbrances and liens.
MECHANIC'S LIEN - A statutory lien on a specific property for labor or materials contributed to
a work of improvement.
MORATORIUM - A temporary suspension, as in the payment of a debt.
MORTGAGE (DEED OF TRUST) - A legal document between the lender and borrower providing
security for and stipulating the terms of repayment of a loan for a specific
MORTGAGE INSURANCE PREMIUM (MIP) - The mortgage insurance required on FHA loans for the life of
MULTIPLE LISTING SERVICE (MLS) - The pooling in a central bureau of all properties listed for
sale. Listings are held individually by members of a group of real estate
brokers, with the agreement that any member may sell the property and the
commission will be divided between the listing and selling broker.
NEGATIVE AMORTIZATION - Monthly payments fail to cover the cost of the interest on a loan, which is
then added to the principal balance. As a result, a borrower could owe more than
at the beginning of the loan even after making several payments.
OFFSET STATEMENT - Statement of owner setting forth the present status of title and all liens
against the property.
OPTION - A right given to a person to buy, sell or lease property within a stated
period and under certain specified terms. A contract to keep an offer open.
OPTIONEE - receives an option.
OPTIONOR - owns the title who gives an option.
PAYMENT CAP - This cap places an annual limit on the amount that a monthly payment can
increase. This feature is offered by some ARM lenders instead of an annual
interest rate cap.
PITI - The term for a mortgage payment that includes principal (P), interest (I),
taxes (T), and insurance (I).
PLANNED UNIT DEVELOPMENT (PUD) - A zoning designation for property developed at the same or
slightly higher density than conventional development, often with improvements
clustered between open or common areas.
POINT(S) - An amount equal to one percent of the principal loan amount. For example, two
points equal 2% of the amount.
POWER OF SALE CLAUSE - A clause in a trust deed that gives the trustee the right to
sell borrower's property publicly, without court procedure, if the borrower
defaults on the loan.
PREPAID INTEREST - Interest paid before accrued.
PREPAYMENT PENALTY - A fee charged to a borrower who pays a loan in full before the
stated due date.
PRIVATE MORTGAGE INSURANCE (PMI) - Insurance written by private companies to protect a lender
against loss if the borrower defaults on a mortgage. PMI is often required on
mortgage loans with less than 20% down payment.
PROMISSORY NOTE - A written contract containing a promise to pay a definite amount of money at a
definite future time. The evidence of a debt.
PRORATE - To divide proportionally to time or use.
PURCHASE AGREEMENT - A written document in which the purchaser agrees to buy a
certain real estate and the seller agrees to sell under stated terms and
conditions. May also be called a sales contract, earnest money contract, or
agreement for sales.
QUITCLAIM DEED - A deed used to transfer any interest in real property that the grantor may
have. It contains no warranties of any kind.
RATE CAP - The rate cap defines rate limits, either from one adjustment period to the
next or over the life of the loan.
RATE GAP - The difference between the current rate and the rate to which it could adjust
on an ARM.
RATIFY - The agreement of both the buyer and seller to the terms offered in the real
REAL ESTATE AGENT (REALTOR) - A person licensed by the state who represents a broker in real
REAL PROPERTY - Land, that which is affixed to the land, incidental or
appurtenant to land and that which is immovable by law.
REAL ESTATE TRANSFER DISCLOSURE STATEMENT - This must be provided
by the seller, listing any known defect or problem with the house. Both agents
must reveal anything they know that might be a problem with the property. See
RECORDING FEES - Charged by the County or Town Clerk to record documents in public records. May
be included in the borrower's closing costs.
RECURRING COSTS - Expenses that the buyer can expect again, year after year, such as property
taxes, fire insurance, earthquake insurance, interest.
REFINANCE - The securing of a new loan either to pay off an existing lien or mortgage on
the property, or to access your equity.
RESCIND - To cancel a contract from the beginning, restoring the parties to their
original positions. Referred to as an annulment.
SALES ASSOCIATE (Agent) - A person who for compensation or expectation of compensation acts for
another in a real estate or related transaction. A real estate license is
required, and individual for a real estate broker.
SALE-LEASEBACK - A transaction in which at the time of sale the seller retains occupancy by
concurrently agreeing to lease the property from the purchaser. The seller
receives cash while the buyer is assured a tenant and a fixed return on the
SECONDARY MORTGAGE MARKET - Market place for the sale and purchase of existing trust deeds
SELLERS' AGENT - Agent acts solely on the sellers' behalf. Agent has full fiduciary
responsibilities that include reasonable care, undivided loyalty,
confidentiality, and full disclosure. This means the agent places the sellers'
interest above all else.
SETTLEMENT - See "Closing."
SUBORDINATION CLAUSE - A clause in a junior lien permitting retention of priority for prior liens OR
it may be used in a first deed of trust permitting it to be subordinated to
subsequent liens as, for example, the liens of construction loans.
SURVEY - This may be required by the title company to insure that the house is properly
situated on the property.
TENEMENT - All rights in land that pass with a conveyance of the land.
TENENCY IN COMMON - A type of joint ownership of property by two or more persons
with no right of survivorship.
TITLE - The rights of ownership recognized and protected by law. A combination of all
elements that constitute the highest legal right to own, possess, use, control,
enjoy, transfer, and dispose of real estate. A title spells out who has the
right of ownership of a property.
TITLE COMPANY - The company that issues Title Insurance and employs the escrow
TITLE INSURANCE POLICY - A clear title has no liens or claims against it. This policy
protects the purchaser, mortgagee, or other party against defects or losses
associated with the title.
TOWNHOUSE - Architectural term for a two or more story unit with no units above or below,
but with one or more shared walls. Ownership may be in the form of condominium,
planned unit development or stock cooperative.
TRUSTEE - The third person that holds legal title to property for a special purpose
without being the actual owner. A trustee is one of the parties to every trust
UNDERWRITING - These are standards set by the lender which the borrower must meet in order to
qualify for the loan.
USURY - Charging interest in excess of the maximum rate as set by law.
VA LOAN - A loan made by a private lender that is partially guaranteed by the Veterans
VESTING - Conveying ownership.
WAIVER - The intentional or voluntary relinquishment of a known right,
essentially a unilateral act.
WOOD DESTROYING PEST AND ORGANISM INSPECTION - An inspection
identifying existing or potential pest, dry rot, fungus, and other
structure-threatening infestation or conditions. Sometimes referred to as
ZONING - Laws passed