REAL ESTATE TERMS

ABRM^SM  (Accredited Buyers Representative Manager)     The ABRM^SM designation is the only Buyer Representation Designation for Managers, Brokers and Owners affiliated with the NATIONAL ASSOCIATION OF REALTORS.   The ABRM^SM designation is awarded by the Real Estate BUYER'S AGENT Council (REBAC) of the NATIONAL ASSOCIATION OF REALTORS to those members who meet the extensive specified educational and practical experience criteria.

Accounting      The fiduciary duty that requires the agent to promptly report to the principal/client all money and property received and paid out, and upon request, to tender an account of these actions.  This duty also requires the agent to safeguard money or property held on behalf of the principal/client.

Adjustable-rate Mortgage (ARM)      A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index.

Agent      A party who is authorized to act in the best interests of a principal/client, and is obligated to place the principals interests before the interests of any other parties, including the agents own interests regardless of whether the agency relationship is with the seller of the property or the buyer.

Amortization Schedule     A timetable schedule showing the amount of each payment applied to interest and principal and the remaining balance after each payment is made. 

Appraisal     A written analysis of the estimated value of a property prepared by a qualified appraiser. 

Biweekly Payment Mortgage      A mortgage requiring payments every two weeks instead of the standard monthly payment.  The result for the borrower is a substantial savings in interest. 

Broker      A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. 

Buyer's Representative   A real estate buyer's representative represents the consumer who is purchasing property in a real estate, not the seller.  State law varies but usually a  buyer's representative works for, and owes fiduciary responsibilities (see fiduciary duties) to, the real estate buyer and has buyer's best interests in mind throughout the entire real estate transaction.  

Buyer Representation Agreement     An that agreement specifies the duties and the scope of services a buyer representative agrees to provide to the buyer as well as specifying the buyers responsibilities.  In some states, where there is no written agreement required, the agent will be presumed to be representing the buyer.  Consult with your local REALTOR for complete details when you first start the search for any real estate property. 

Certificate of Title      A statement provided by an abstract company or attorney stating that the title to real estate is legally held by the current owner.

Certified International Property Specialist Network    NAR created the CIPS Network Certified International Property Specialist Network, comprised of 1,300 real estate professionals who deal in all types of real estate, but with one common element: They are focused specifically on the international market.  For more information, go to International tab in www.realtor.org  

Client     A party whose interests are to be served by the words and deeds of an agent with or without a contract according to state law.  Also referred to as a principal.  Regardless of whether the duties owed in a particular state are traditional, common law fiduciary duties or are statutorily defined, they are still owed to any principal/client.  

Closing       A meeting at which a sale of property is finalized by the buyer signing the mortgage documents, paying closing costs, and transfer of the deed to the property.

Closing Costs    The fees, costs and taxes associated with the purchasing of a home, the borrowing of money and the preparation of necessary paperwork to finalize the sale.  The total amount of the closing costs will vary depending on where the new home will be located, what type of property it is, the price of the home and the complexity of the transaction.  It is extremely important that the buyer work closely with your buyers representative and lender in the early stages of the home buying process to determine what these costs could be, since closing costs can easily represent thousands of dollars.  There are four categories of closing costs: (1) discounts points to buying down the mortgage; (2) the costs of originating the mortgage; (3) taxes and other local fees; (4) the cost of documentation.

CMA   See Comparative Market Analysis 

Code of Ethics    The Code of Ethics and Standards of Practice of THE NATIONAL ASSOCIATION OF REALTORS establishes obligations that a REALTOR must comply with to ensure that all parties to the transaction are treated fairly.

Collateral      An asset (such as a car or a home) that guarantees the repayment of a loan. 

Commission    The fee charged by a broker or agent for providing services related to a real estate transaction such as marketing the property, bringing the parties together, and negotiating a purchase contract or loan.  

Comparative Market Analysis (CMA)   A document provided by a real estate professional that surveys like properties in a given area or of a certain type for the purpose of determining the relative value of a given property.

Confidentiality    The fiduciary duty that prohibits the agent from communicating personal information about the principal that was given to or acquired by the agent within the scope of employment as an agent to the principal.  Personal information must be kept confidential unless the client releases the agent, or subagent, from this duty.  However, the material facts and defects of a property are not confidential.

Cost of Documentation     A closing cost for any research involving public records and the title history on the property that is being bought.  This insures that the title on the  property is unencumbered by other ownership or liens and can be delivered to the buyer at closing.  Other costs include Recording and Transfer fees that cover the legal recording of the deed to the buyers name.

Costs of Originating the Mortgage     A closing cost that generally include a variety of fees such as the loan origination fee, the appraisal fee and the cost of credit reports.  There are also other fees that will be expected to be paid at closing such as hazard and mortgage insurance and interest accrued on the mortgage between closing date and the end of the month.

Credit Rating     An assessment of a persons ability (or history) of debt repayment.   Most information in a credit rating comes from companies that an individual has credit with such as the banks, department stores, finance companies etc. as well as from certain public records such as lawsuits, tax liens, judgments and bankruptcies. 

Credit Report   A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.  Credit reports are usually based on the individuals: (1) credit history; (2) who reviewed the credit history; (3) information that has been given to the credit information company; (4) specific identification information; and (5) any explanatory notes and comments. 

Customer    A party with a non-agency relationship with another party in a transaction.  Duties still may be owed to a customer, but not all of the traditional (fiduciary) duties owed to a principal/client.

Deed    The legal document conveying title to a property.

Designated Agent      The party selected to represent a principal/client in a designated agency office.  Designated agency has been legislatively created in many states, allowing the management of a brokerage to establish an office policy, whereby the managing broker appoints, or designates, a licensee associated with that brokerage to act as the exclusive agent of a principal/client, buyer or seller.  No other licensee in the brokerage has an agency relationship to represent that principal/client.

Discounts Points (to Buying Down the Mortgage)   A closing cost that is optional and can vary significantly from 0.5 to 3 points on the total of the mortgage.  It is a one-time charge that is calculated based on the amount of the mortgage loan.  A buyer would pay this amount up front to reduce the ongoing cost of the mortgage over the life of the loan. This charge is fully deductible as mortgage interest.

Disintermediated     One that no longer acts as an agent between persons.  

Dual agent    A broker who works with both parties in a real estate transaction buyer and seller, landlord and tenant. 

Earnest Money Deposit    A deposit made by the potential home buyer to show that he or she is serious about buying the house.  

e-Buyer    1) Electronic buyer.  2) The collective that describes consumers who conduct research on and/or buy products via the Internet.  3) Customers the real estate industry has always worked with, who just come to the table better informed and with clearer ideas about what they want, because they have Internet Information.

Equity      A homeowners financial interest in a property.

Facilitator and Transaction Broker    Some states have passed statutes/regulations that allow a real estate licensee to act as a non-fiduciary, neutral mediator to bring parties together, without representing either party as a client.  Some states allow real estate brokerages to act in a non-fiduciary capacity for both parties to a transaction.  A facilitator or transaction broker has a duty to exercise reasonable care, provide an accounting to all parties and, in some states, may have additional duties imposed by the statute.

Fair Credit Reporting Act       A consumer protection law that regulates the disclosure of consumer reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on ones credit record.   

Fair Housing Laws      Local, state, and federal fair housing laws that prevent discrimination against any individual or group of individuals based upon race, color, religion, sex, handicap, national origin or familial status.  A real estate agent may not lawfully disclose the racial, ethnic or religious composition of any neighborhood, community, or building, nor whether persons with disabilities are housed in any home or facility, except that the agent may identify housing facilities meeting needs of a disabled buyer.

Fiduciary Duties     The term fiduciary is defined as of relating to or involving a confidence of trust.  Fiduciary duties include: confidentially, undivided loyalty, obedience, reasonable care and diligence, full disclosure, and accounting.  Regardless of whether the duties owed in a particular state are traditional, common law fiduciary duties, or are statutorily defined, they are owed to any principal/client.  

For Sale By Owner (FSBO)     A property for sale that is not listed by a real estate professional.  

Full Disclosure   The fiduciary duty that requires the agent to disclose affirmatively and honestly all information concerning the transaction (and property) which might affect the decisions a principal/client  makes, informing the principal/client what the agent knows.

Home Buyers Kit    A REBAC authored primer for home buyers.  The kit contains instructions and worksheets on everything from assessing credit, determining wants and needs in a home, selecting a vendor, all the way to packing for the move.  First-time and seasoned home buyers will find value in its checklists, self-assessment tools, and worksheets.   

Home Inspection     A thorough inspection that evaluates the structural and mechanical condition of a property.  

Home Ownership Cycle    The sequence that begins with assisting with property selection and contract negotiation, providing home improvement resources, and assisting in the sale when that time comes. 

ICREA     See International Consortium of Real Estate Associations

International Consortium of Real Estate Associations (ICREA)     An alliance of leading national real estate organizations in the world's major markets, founding membership in 2001 was 25 national associations.

Lien     The legal claim against a property that must be satisfied before the property may be sold. 

Lock-in     A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time.

Mortgage     A legal document that pledges a property to the lender as security for payment of a debt.  

Mortgage Insurance     A contract that insures the lender against loss caused by a mortgagors default of a government mortgage or conventional mortgage.    

Multiple Listing Services (MLS)    A database of all properties for sale listed by members of a specified MLS. 

NATIONAL ASSOCIATION OF REALTORS (NAR)     Since its inception in 1908, the NATIONAL ASSOCIATION OF REALTORS has worked successfully to advance home ownership, real estate investment, private property rights and the free enterprise system in the halls of Congress and the Federal agencies.  NAR is the acknowledged leader in developing standards for efficient, effective, and ethical real estate business practices.  It is widely recognized as one of America's strongest, most effective lobbying organizations.  With more than 760,000 members representing every city, township and community across America, NAR is the "Voice for Real Estate" in the nation's capital. 

Net Worth    The value of all of a persons assets, including cash, minus all liabilities. 

Obedience   The fiduciary duty that requires the agent to follow and abide all lawful instructions, subject to the principals continuous control, but not exceeding the scope of authority conferred by the principal/client.   

Prime Rate    The interest that banks charge to their preferred customers.  

Principal   The amount borrowed or remaining unpaid.  

Purchase Contract    The purchase contract is the legally binding document that sets forth the terms of the sale, establishes the rights and obligations of the parties involved, specifies the actions to be taken in order to close the sale, and establishes the time frames for those steps to be completed. 

Real Estate Agent    A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.  

Real Estate BUYERS AGENT Council (REBAC)     The Real Estate Buyers Agent Council was founded in 1988 to promote superior buyer representation skills and services.  An affiliate of THE NATIONAL ASSOCIATION OF REALTORS (NAR) since 1996, REBACs is the worlds largest organization of real estate professionals concentrating on buyer representation.  Members who meet all course and professional experiential requirements are awarded the ABR (Accredited Buyers Representative) and/or ABRM^SM (Accredited Buyers Representative Manager) designation(s).  Both are the only designations of their type recognized by NAR.

REALTOR   A registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS and subscribes to its strict Code of Ethics. 

Reasonable Care and Diligence   The fiduciary duty that requires the agent to protect the principal/client from foreseeable risks of harm, recommending that the principal obtain expert advice or assistance when the principals needs are outside the scope of the agents expertise.

REBAC    See Real Estate BUYERS AGENT Council.

Single Agent   A broker who works for just one party-client in a real estate transaction the buyer or the seller, the landlord or the tenant, not both with primary fiduciary duties to that party only.

Subagent    A party who is authorized to act on behalf of, traditionally, a sellers agent, which is to say, an agent for an agent.  A subagent owes the same fiduciary duties to the principal/client as the agent does.

Survey     A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and the other physical features. 

Taxes and Other Local Fees     A closing cost that will vary according to the requirements of local governments.  Some may demand that the property taxes be pro-rated according to when the buyer will officially become the owner of the house. There can also be personal property taxes, homeowner's association dues, and other assessments that are specific to the area that you are moving into.

Title Search    A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding. 

Truth in Lending     A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentages rate and other charges. 

Underwriting    The process for evaluating a loans application to determine the risk involved for the lender.  

Undivided Loyalty   The fiduciary duty that prohibits the agent from advancing any interests adverse to the principals interest or conducting the principals business in such a way as to benefit a customer, a subagent, the agent or any other party to the detriment of the principals interest.