THE LANGUAGE OF REAL ESTATE
San Francisco

Selling a present home and buying a new one can be a confusing period of time. That confusion can be compounded if the technical jargon used by real estate professionals is not fully understood by the buyers and sellers. The following "mortgage dictionary" from Merrill Lynch Realty translates into everyday language some of the specialized vocabulary common to real estate transactions.

ABSTRACT OF TITLE: A written summary of the title history of a particular piece of real estate.

ACCELERATION CLAUSE: A provision of a mortgage or note which provides that the entire outstanding balance will become due and payable.

AMORTIZATION: Repayment of a loan by installment payments. As the payments are made, the debt is reduced so that at the end of a fixed period or term, no money will beowed.

APPRAISAL: A report made by a qualified person as to the value of a property as of a given date.

ASSESSED VALUE: The value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.

BINDER: A preliminary agreement to purchase, often secured by the payment of earnest money. Also called a purchase offer.

BUYDOWN: Money advanced by an individual (e.g., builder, seller, buyer, developer) to lower monthly mortgage payments for a few years or for the whole term.

CERTIFICATE OF TITLE: A statement that shows ownership of property, stating that the seller has clear legal title.

COMPARABLE: Refers to similar properties used for comparison purposes in the appraisal process. These properties will be reasonably the same size and location, with similar amenities and characteristics, so that the approximate fair market value of the subject property can be determined.

CONDOMINIUM: Ownership of a single unit, from the sheetrock in, in a multi-unit building or complex of buildings. Along with this goes a share of ownership of the common areas.

COOPERATIVE: Ownership of shares in a corporation that owns a building, including the apartments and all common areas such as lobbies and parking lots. Occupancy of particular apartments is determined by means of proprietary leases.

DUE-ON-SALE: A clause in a mortgage which gives the lender the right to require immediate repayment of a mortgage balance if the property changes hands.

EARNEST MONEY: The deposit money given to the seller or his agent by the potential buyer at the time of the purchase offer. If the offer is accepted, the money will become part of the down payment.

EASEMENT: A right to the limited use of land owned by another. An electric company, for example, could have an easement to put up electric power lines over someone's property.

ENCUMBRANCE: Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid back taxes.

EQUITY: The value which an owner has in real estate over and above the mortgages against it. When the mortgage and all other debts against the property are paid in full, the owner has 100% equity in his property.

FIXTURES: Personal property, such as a hot water heater or plumbing fixture, that becomes permanently attached to a piece of real estate and goes with the property when it is sold.

HOMEOWNER'S POLICY: An insurance policy that covers the dwelling and its contents in the case of fire or wind damage, theft liability for property damage, and personal liability:

INCOME PROPERTY: Real estate that is owned for investment purposes and not used as the owner's residence.

LOAN-TO-VALUE RATIO: The relationship between the amount of the mortgage and property value, usually shown as a percentage.

MORTGAGE: A contract in which a borrower's property is pledged as security for a loan which is to be repaid on an installment basis.

MORTGAGE NOTE: A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.

MORTGAGEE: The lender is a mortgage contract.

MORTGAGOR: The borrower is a mortgage contract.

ORIGINATION FEE: A fee charged for the work involved in the evaluation, preparation and submission of a proposed mortgage loan.

PLAT: A map of a piece of land showing boundary lines, streets, actual measurements and easements.

PIKE (PRIVATE MORTGAGE INSURANCE): Insurance written by a private company to protect the lender against loss caused by mortgage default.

REALTOR: A real estate broker or sales associate affiliated with the National Association of Realtors.

REFINANCING: Repaying a debt with the proceeds of a new loan, using the same property as collateral or security.

SALES CONTRACT: A written agreement between buyer and seller stating the terms of a sale.

SECOND MORTGAGE: A loan on a property which already has an existing mortgage (the first mortgage). The second mortgage is subordinate to the first.

SURVEY: A map prepared by an engineer or surveyor charting a particular piece of real estate.

TITLE: Ownership of a property. A cloud on title refers to any outstanding claim or encumbrance which could impair the title. A clear title is one without any outstanding claims or encumbrances.

TITLE INSURANCE: Protection against financial loss arising from defects in the title occurring before purchase.

TITLE SEARCH: A check of public records to disclose the past and current facts regarding ownership of a particular piece of property.

TRANSFER TAX: In some areas, city, county, or state taxes imposed when property passes from one person to another.