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This Glossary is divided into three sections.
(A Glossary of real estate definitions and terms to help you understand the "legalese" of real estate contracts and the conversation of real estate buying and selling.)
In South Carolina real estate brokers and their realtors are required to disclose the type of working relationship they have with the buyers in a real estate transaction. There are several types of relationships that are available to you. You should understand these at the time a broker provides specific assistance to you in buying real estate. Buyers Agent and Sellers Agent relationships are commonly referred to as agency relationships and carry with them legal duties and responsibilities for the broker as well as for the buyer and seller. the Transaction Broker relationship places the broker in the role of a middleman who assists both parties in the transaction. A buyer is advised to consult legal counsel before entering into any agency relationship.
Buyers Agent - A Buyers Agent acts solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty, and fidelity. The agent will negotiate on behalf of and act as an advocate for the buyer. The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to sellers all adverse material facts concerning the buyers financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property. A separate written buyers agreement is required which sets forth the duties and obligations of the parties.
Sellers / Listing Agent - A Sellers Agent acts solely on behalf of the seller and owes duties to the seller which include the utmost good faith, loyalty, and fidelity. The agent will negotiate on behalf of and act as an advocate for the seller. The seller is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to buyers or tenants all adverse material facts about the property known by the agent. A separate written listing agreement is required which sets forth the duties and obligations of the parties.
Dual Agency in South Carolina - A Dual Agency assists the buyer or seller or both throughout a real estate transaction with communication, advice, negotiation, contracting and closing without being an agent or advocate for any of the parties. The parties to a transaction are not legally responsible for the actions of a Dual Agent and a Dual Agent does not owe those parties the duties of an agent. However, a Dual Agent does owe the parties a number of statutory obligations and responsibilities, including using reasonable skill and care in the performance of any oral or written agreements. A Dual Agent must also make the same disclosures as agents about adverse material facts concerning a property or a buyers financial ability to perform the terms of a transaction and whether the buyer intends to occupy the property. For a Greenville SC real estate transaction a written agreement accepting dual agency is required.
(In real estate the relationships between all the parties involved can be very complicated and is governed by a mirade of laws and regulations by both the federal government and realtor boards. It is best to understand what role you play in these interactions and how they affect you.)
Amortized Loan - A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a Level Payments Loan.
Appreciation - An increase in value of real estate.
Assumption of Mortgage - The taking of title to property by a grantee, wherein he or she assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.
Balloon Payment - The final payment of a mortgage loan when it is larger than the regular payment. It usually extinguishes the note.
Capital Gains - The taxable profit derived from the sale of a capital asset. It is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, fixing-up expenses, capital improvements, allowable depreciation, etc.
Closing - The final settlement of a real estate transaction between buyer and seller.
Condominium - A system of individual fee ownership of units combined with joint ownership of common areas of the structure and land.
Contract for Deed - A contract ordinarily used in connection with the sale of a property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
Contract of Title - A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements or records which may affect the marketability of the title.
Conventional Mortgage - A mortgage securing a loan made by investors without governmental underwriting, i.e., not FHA-insured or VA-guaranteed.
Counter Offer - A sellers rejection of an offer made by a buyer accompanied by an agreement to sell the property to the potential buyer on terms differing from the original offer.
CRV - Certificate of Reasonable Value. A document of appraisal issued by the VA establishing their opinion of the maximum value.
Deed - The written instrument which, when properly executed and delivered, conveys title.
Discount Points - Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level.
Earnest Money Deposit - A down payment made by a purchaser of real estate as evidence of good faith.
Easement - Created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one party has in the land of another.
Equity - The interest or value an owner has in real estate over and above the liens against the real property.
Escrow - The deposit of instruments and funds with instructions to a neutral party (Escrow Agent) to carry out the provisions of an agreement or contract. When everything is deposited to enable carrying out of instructions, it is called a complete or perfect escrow.
Exchange - The trading of equity in a piece of property for equity in another property.
Fannie Mae - The nickname of the Federal National Mortgage Association (FNMA), a tax-paying corporation created by Congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.
Fee Appraisal - The act or process of estimating values of real estate or any interest therein for a fee.
FHA Loan - A loan which has been insured by the federal government guaranteeing its payment in case of default by the owner.
Firm Commitment - A lenders agreement to make a loan to a specific borrower on a specific property. An
FHA or PMI agreement to insure a loan on a specific property, with a designated purchaser.
FMHA Loan - A loan insured by the federal government similar to FHA loans, usually used for residential properties in rural areas.
Freddie Mac - The nickname for the Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
Investor - The holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.
Joint Tenancy - Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and have equal rights in the property.
Land Contract - A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
Lease Purchase Agreement - The buyer makes a deposit for the future purchase of property with the right to lease the property in the interim.
Lien - An encumbrance on the property which usually names the property as security for the payment of a debt or discharge of an obligation. Examples: Judgments, taxes, mortgages, deeds of trust, etc.
Loan Commitment - A written promise by a lender to make a loan under certain terms and conditions. These include interest rate, length of the loan, lender fees, annual percentage rate, mortgage and hazard insurance and other special requirements.
Loan to Value Ratio - The ratio of the mortgage loan principal (amount borrowed) to the properties appraised value (selling price). On a $100,000 home with a mortgage loan principal of $80,000, the loan to value ratio is 80%.
Marketable Title - Merchantable title, free and clear of objectionable liens or encumbrances.
Mortgage/Deed of Trust - An instrument recognized by law by which property is pledged as security or collateral for debt without transfer of title or possession, to secure the payment of a debt or obligation to the lender. Title transfers to the lender during the foreclosure process which occurs in the event that the debtor defaults on the loan obligation to the lender.
Mortgage Insurance Premium (MIP) - The consideration paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance (PMI) company. On an FHA loan, the payment is one-half of one percent annually on the declining balance of the mortgage. It is a part of the regular monthly payment and is used by FHA to meet operating expenses and provide loss reserves.
Mortgagee - The lender of money or the receiver of the mortgage document.
Mortgagor - The borrower of money or the giver of the mortgage document.
Note - A written promise to pay a certain amount of money with or without specific terms.
Origination Fee - A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan. Origination fees are paid by the borrower to the lender.
Personal Property - Any property which is not real property. For instance, money, savings accounts, appliances, cars, boats, etc.
Point - One percent of the loan amount.
Prepayment Penalty - The fee paid to the mortgagee for paying the mortgage before it becomes due. Also known as prepayment fee or reinvestment fee.
Prepayment Privilege - The right given a purchaser to pay all or part of a debt prior to its maturity. The mortgagee cannot be compelled to accept any payment other than those originally agreed to.
Private Mortgage Insurance (PMI) - Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.
Privately Insured Mortgage - A conventional mortgage loan on which a private mortgage insurance company protects the lender against loss.
Promissory Note - Following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment.
Purchase Agreement - An agreement between a buyer and seller for the purchase of real estate.
Real Property - Any land and whatever by nature or artificial annexation is a part of it.
Rent with Option - A contract which gives one the right to lease property at a certain sum with the option to purchase it at a future date.
Second Mortgage/Second Trust - Also known as a Junior Mortgage or Junior Lien. An additional loan imposed on property with a first mortgage, generally at a higher interest rate and shorter terms than a first mortgage.
Special Assessment - A legal charge against real estate by a public authority to pay the costs of public improvements such as street lights, sidewalks, street improvements, etc.
Straight Loan - A loan with periodic payments of interest only; the principal sum is due in one lump sum upon maturity.
Subdivision - A parcel of land that has been divided into smaller parts.
Tenancy in Common - Ownership by two or more persons who hold undivided interest, without the right of survivorship. Interests need not be equal.
Term of Mortgage - The period during which a mortgage must be paid.
Title - Often used interchangeably with the word ownership. It indicates the accumulation of all rights in a property.
Title Insurance - An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title.
Trust Account - An account separate and apart and physically segregated from a brokers own funds, in which the broker is required by law to deposit all funds collected for clients.
VA (Veterans Administration) 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 the grantor agrees to defend the premises against lawful claims of third persons.
(Real estate foreclosures are a whole new ball game and have a complete dictionary of terms explain and understand these transactions. We tried to list some of them here to help you understand the process.)
"AS IS" - The property will not be undergoing repairs prior to selling.
Fannie Mae / Freddie Mac - Government sponsored entity that buys mortgages from the primary lenders and either holds them in their portfolio or repackages and resells them as a guaranteed product. Due to the mortgage crisis of 2007-08, the U.S. government took legal control over the privately held Fannie Mae and Freddie Mac.
HUD (Housing & Urban Development) - Also holds many REO properties that were originally financed with a government issued FHA loan. Foreclosed HUD homes can be found listed online at the HUD website
Loss Mitigators - Person who is responsible for processing short sale accounts at the banks.
Mortgage - Describes something of value that provides security to the bank should the purchaser default on the note and describes the conditions that create default of the note and how the bank can take legal title and possession.
Minimum reserve - Minimum price that the bank will accept for the real estate property at a real estate auction.
Note - Describes the amount borrowed and the terms by which it will be repaid, including the amount of interest charged, the time frame, and payments per month.
Owner - Refers to the party that originally borrowed funds to purchase the house and signed the note.
Real Estate Owned (REO) - An REO property is then marketed and sold through traditional real estate channels, and assigned to a real estate broker that generally specializes in REO properties.
Short Sale - A short sale is a situation where the bank agrees to sell the property and receive less than what it is owed. Usually occurs in cases where the property is going into foreclosure.