The Real Estate Alphabet: 26 Terms Every Realtor Needs to Know

Posted by Premier Commission on February 12, 2014 in Real Estate

These are the 26 terms that every agent needs to know. Let us know if knew all 26. If you want to help us add to the list share your ideas in the comments section.

Adjustable Rate Mortgage is a mortgage that permits the lender to periodically adjust the interest rate so that the rate reflects fluctuations in the cost of money. Also called an ARM.  Don’t worry, they get harder.

Balloon Payment a final payment at the end of a loan term to pay off the entire remaining balance of principal and interest not covered by payments during the loan term.

Commission Advance is the best way to ensure that you are paid your commission as soon as possible. Obtaining a commission advance helps Realtors to continually finance their business while waiting for deals to close.

Defeasance Clause is a clause used to defeat or cancel a certain right upon the happening of a specific event (e.g. upon final payment, words of grant in a mortgage are void and the mortgage is thereby cancelled and title is reverted to mortgagor). This clause may also be used to give a borrower the right to redeem real estate after default on a note, by paying the full amount due plus fees and court costs.

Escheat is when property reverts to the state after a person dies without leaving a valid will and without heirs.

Fee Simple Absolute the greatest estate (ownership) one can have in real property because it is freely transferable and inheritable, and of indefinite duration, with no conditions on the title. Often called fee simple or fee title.

Good Faith Estimate is an estimate made by the lender of the closing costs that the borrower must pay for a real estate loan.  The lender must give this to the borrower at the time the loan application is made.  This statement is often referred to as a Good Faith Statement.

Home Mortgage Disclosure Act a law requiring all institutional mortgage lenders with assets of more than $10 million to make annual reports of all mortgage loans made in a given geographic area where they have at least one office.  This law is designed to help the government detect patterns of redlining.

In Rem is a lawsuit or legal action directed toward property, rather than toward a particular person. Judgments are binding to all persons who claim title to the property.

Just Compensation is appropriate or fair value for private land taken by the government for public use.

Kickbacks are fees or other compensation given for services not performed, but as a means of undisclosed commission for business referrals.  (These are prohibited by RESPA by the way.)

London Interbank Offering Rate (LIBOR) An index used by lenders when making ARM loans; the rate (in Eurodollars) that international banks charge each other for loans.

Mrs. Murphy Exemption is an exemption to the Federal Fair Housing Act which holds that the rental of a unit or a room in an owner-occupied dwelling containing four units or less is exempt from the Fair Housing Law, provided rental ads are not discriminatory and a real estate agent is not used to locate tenants. 

Novation is 1. When one party to a contract withdraws and a new party is substituted, with the consent of all parties, relieving the withdrawing party of liability.  2. The substitution of a new obligation for an old one.

Open Mortgage – not Open Marriage – is a general term to describe a mortgage that can be prepaid at any time without a penalty.

Panic Selling c’mon did you really think I was going to give you the definition?

Quiet Enjoyment is a guarantee that a buyer or tenant has the right to exclusive, undisturbed possession of a leasehold estate, and will not be disturbed by the previous owner, the lessor, or anyone else claiming an interest in the property.

REO is property acquired by a lending institution through foreclosure & held in inventory.

Sale-and-Leaseback is a method for financing commercial or industrial properties in which a company constructs the building then becomes a tenant by selling the building to an investor.

Tax Depreciation is calculating depreciation that can be used to determine any expense that can be deducted from income and determine net profit.

Undisclosed Dual Agency is very often practiced unintentionally, possibly by implying to a party that, for example, an agent’s loyalty is to them when the agent’s duty is actually to someone else. Be aware of this one!!

Variance is a permit obtained from the local zoning authority allowing the holder to use property or build a structure in a way that violates the zoning ordinance.

Wraparound Mortgage is when an existing loan on a property is retained, while the lender (or seller) gives the buyer another, larger loan. (Often seller keeps existing mortgage, still pays on it and gives buyer another mortgage.)

X is where your client signs at the closing table.

Yield is the total amount of money that a lender can make from a loan.

Zoning Ordinances are local laws that divide a city or county into different areas or zones. These zones determine how land can be used, subdivided, or improved along with the specific requirements for compliance.

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