Real Estate Glossary

4-Point Home Inspection Report

A form is used by insurance companies to determine homeowners insurance coverage and prices. A licensed home inspector can fill out a 4-point inspection form, which details information on the home’s plumbing, electrical system, air conditioning, and roof.

A Buyer's Market

A local real estate market with more than 6 months of supply. A normal real estate market has 3 to 6 months of supply.

A Seller's Market

A local real estate market with less than 3 months of supply. A normal real estate market has 3 to 6 months of supply.

Addendum

An addition to a contract.

Adjustable-Rate Mortgage (ARM)

A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.

Adjusted Cost Basis

The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it’s sold.

ALTA - Closing Statement

A standardized closing statement by the American Land Title Association that details the final financial settlement between a buyer and seller and the costs paid by each party.

Appraisal Report

A report completed by a licensed appraiser determining the fair market value of a property based on recent comparable sales in the area. The appraised value of the home from this report is used by the lender in order to approve a loan.

Appreciation

An increase in the value of a home or property.

Assessed Value

A tax assessor's determination of the value of a home in order to calculate a tax base for real estate property taxes. The Assessed Value of a home is often lower, but sometimes higher than "market value."

Automated Valuation Model (AVM)

An algorithm used to estimate the value of a property based on available online data and market trends. The Zestimate AVM on Zillow.com is an example. AVMs are a quick estimation tool, but often differ from the appraised value or the actual sales price of a home.

Basis Point

A basis point is one one-hundredth of one percentage point. The difference between a loan at 5.25% and 5.37% is 12 basis points.

Bungalow Style Home

A popular style of home in Ybor City and Tampa, FL. Typically built with wood and featuring a gable roof and covered front porch.

Buyer's Agent - AKA Selling Agent

A real estate agent who exclusively represents the buyer's interests in a transaction. On Florida contracts you will see the term "selling agent" for the buyer’s Realtor© and "listing agent" for the seller's Realtor©.

Capital Expenditure (CapEx)

Costs associated with making capital improvements to a property.

Capital Gains Tax

A tax placed on the profits from the sale of real estate or investments.

Capitalization Rate (Cap Rate)

The percentage rate of return calculated by dividing the property's net operating income (NOI) by its market value.

Cash Flow - AKA Net Operating Income (NOI)

The amount of cash a rental property generates after deducting operating expenses and loan payments from gross income.

Cash-out Refinance

The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the extra funds in any manner.

Certificate of Sale

A document issued at a judicial sale, which entitles the buyer to receive a deed after court confirmation of the purchase of the property.

Close of Escrow (COE) - AKA Real Estate Closing

A title company typically handles a real estate transaction and closing. At closing, all documents are signed and recorded, the property title is transferred, and the funds from the buyer are disbursed to the seller from the title company's escrow account.

Closing Costs

Expenses incidental to the sale of real estate, including loan origination fees, title insurance, doc stamps on the deed, intangible taxes on the mortgage, and county transfer taxes.

Comparative Market Analysis (CMA)

An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.

Construction to Permanent Loan - Aka "Perm Loan"

A type of loan used to build a new home. The lender disburses funds in stages or "draws" to the contractor during construction. Once the home is completed, the loan is converted to a traditional long-term mortgage.

Contingency

A condition specified in a purchase contract, such as a satisfactory home inspection.

Contract Effective Date

The day all parties have signed and initialed the contract. Once the contract is fully executed, the timeline begins for any terms in the contract.

Conventional Loan - AKA QM Loan

A long-term conventional loan or mortgage that a lender offers a buyer for the purchase of a home. QM stands for qualified mortgage, which means it adheres to the CFPB's (Consumer Financial Protection Bureau) lending rules.

Covenants, Conditions and Restrictions (CC&Rs)

Rules and regulations for a development, HOA, or condo, such as acceptable landscaping or improvements that can be made to individual units. Covenants are typically recorded with a property deed.

Craftsman Style

An architectural style that evolved as part of the Arts and Craft movement near the turn of the 20th century. This style home is very popular in St. Petersburg, FL.

Deed

The legal document showing ownership of a piece of property.

Disclosure - AKA Seller’s Property Disclosure (SPD)

A statement to a potential buyer sharing information relevant to a piece of property, such as the presence of radon or lead paint.

Double Closing

Occurs when a property is sold twice in one day. Example: Seller(A) is under contract to Buyer (B). After getting an executed contract, but before closing, Buyer (B) finds Buyer (C) who offers to purchase the property. At closing, Seller (A) completes the sale to Buyer (B), who uses their own funds to close on the purchase. Immediately after, Buyer (B) sells the property to Buyer (C). A double closing can be done legally in Florida, but consult a local attorney and title company to ensure you are following all laws.

Down Payment

The amount of the purchase price a buyer will pay in cash toward the purchase of a home when using a loan. FHA loans typically require a 3.5% down payment, while most conventional loans require 20%.

Earnest Money Deposit (EMD)

A deposit a buyer gives to the title or escrow company with an offer contract to purchase a property. The EMD is "consideration," and is required to make a contract binding in Florida. The EMD is typically refundable during a buyer's inspections or "due diligence" period.

Easement

A right given to a third party to use a portion of the property for certain purposes, such as sidewalks, power lines or utilities.

Encumbrance

A claim or lien on a property which puts a cloud on the title, or restricts the owners ability to use the property.

Fair Housing Act

A federal law that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex, family status, disability, or national origin.

Fair Market Value (FMV)

The price a property would sell for on the open market.

Fannie Mae (FNMA) - Federal National Mortgage Association.

A government-backed, shareholder-owned company that buys mortgages from lenders, packages them together, and resells them as "mortgage-backed securities" to investors.

FAR/BAR AS-IS Residential Contract to Purchase

The standardized contract used for most real estate transactions in Florida. It was created by members of the Florida BAR Association & the Florida Association of Realtors. A buyer typically uses this contract to submit an offer to purchase a property from a seller.

Federal Housing Administration (FHA)

This government agency provides and insures home loan programs designed to help first-time and low-income buyers. FHA loans often have lower interest rates and allow buyers to put as little as 3.5% down on a new home loan.

Fee Simple

This type of ownership gives a person the maximum interest in a piece of real estate. They completely own the land and any buildings on the property.

First Mortgage - AKA First Position Mortgage

The primary mortgage on a property that has priority over all other voluntary liens.

Flood Insurance

Hazard Insurance for flood damage from rising water. This type of insurance is required by lenders if your home is in the Special Flood Hazard Area (SFHA).

Flood Zone

Flood zone maps are determined by FEMA. Properties in Zone X or X500 are considered low risk, and flood insurance is not required by lenders. If a property is in a Special Flood Hazard Area (SFHA) a lender will require flood insurance. In Tampa Bay, Florida, the most common flood zone codes we see for properties near the water are A, AE, V, or VE. Please see the FEMA website for details on each zone. Note: Flood zone codes and evacuation zones are different.

For Sale By Owner (FSBO)

When an owner of a property chooses to sell without the help of a Licensed Real Estate Professional. About 88% of these homes will switch over to a regular MLS listing with a licensed Realtor©.

Foreclosure

The legal process for a lender to terminate the borrower's interest in a property if they default on a loan. After receiving a summary judgment of foreclosure from the court, the lender will auction off the property and use the proceeds to satisfy the mortgage plus fees and legal costs. Any excess proceeds will be used to satisfy second position liens or be returned to the borrower. If the property does not sell at auction, it becomes an REO property that the bank will sell on the open market.

Freddie Mac (FMCC) - Federal Home Loan Mortgage Corporation

The Federal Home Loan Mortgage Corporation, Freddie Mac, buys mortgages from lenders, packages them together, and resells them as "mortgage-backed securities" to investors.

Grantee

A person who receives or is conveyed an interest in a piece of property.

Grantor

The person who conveys an interest in a piece of property to another person.

Home Equity Conversion Mortgage - AKA a Reverse Mortgage

A loan used to convert a home’s equity into monthly cash payments. Based on the value of the home, the loan is repaid when the home is sold, or the owner passes away.

Home Equity Line of Credit (HELOC)

A line of credit secured by your home’s equity.

Homeowners Insurance (HOI)

This insurance includes hazard coverage for damages that may affect the value of a house, in addition to personal liability coverage. All lenders require you to keep homeowners insurance during the life of your loan. Common policy types are HO3, HO6, DP3, or DP1.

HUD Uniform Settlement Statement - Closing Statement

Outlines all closing costs on a real estate transaction that is being purchased with all cash.

Impounds

A portion of the monthly P.I.T.I mortgage payment placed in an escrow account by a lender and used to pay the property insurance and property taxes.

Interest Rate Reduction Refinancing Loan (IRRRL) - AKA “No cash-out refinance"

A loan used to refinance an existing loan at a lower interest rate without taking any additional cash out.

Interest-only Loan

A type of non-QM loan used by investors where the borrower only pays interest on the loan each month. The loan has a large "balloon" payment for the entire principle at the end.

Investment Property

Real estate that generates income, such as an apartment building or vacation rental.

Judgment

The decision of a court of law. If a court rules a person must repay a debt, a judgment can be issued and a lien placed against that person's property for the amount owed.

Jumbo Loan

Loans exceeding the conforming loan limit set by Fannie Mae and Freddie Mac. As of June 2022, the conforming limit is $647,200 in Pinellas County, FL.

Junior Mortgage - AKA Second Position Mortgage

A loan that is subordinate to the primary loan.

Latent Defect

An unseen problem in a property such as bad wiring, termite damage, or lead paint. A seller is required to disclose any latent defects they are aware of.

Lease Option

A lease that contains the right to purchase the property for a specific price within a certain time frame.

Lien

A claim laid by one person or company on the property of another as security for money owed.

Lis Pendens

A notice filed with the courts that a lawsuit is pending against a property. When a borrower does not pay their mortgage, typically the lender waits 90 days for the borrower to catch up on payments. After 90 days, the lender files Lis Pendens and begins the foreclosure process.

Loan Application

Application where the borrower provides financial, tax, and income information to the lender. In Florida, this is required within 5 days of an accepted contract.

Loan Commitment

A promise by a lender to make a loan with specific terms for a specified period to a borrower if they meet certain conditions.

Loan Estimate (LE) - formerly called a Good Faith Estimate

An estimate from a lender that shows the breakdown of all estimated costs a borrower will incur to get a mortgage to purchase a specific property.

Loan Origination Fee

Lenders charge borrowers an origination fee for preparing and processing paperwork for a loan application.

Loan-to-Value Ratio (LTV)

Used by lenders to measure the relationship of the loan amount to the value of the property. If you buy a home with a 20% down conventional loan, your LTV would be 80%.

Long Term Rental Property (LTR)

A rental property leased for a minimum term of 6 months.

Mechanic's Lien

Contractors or suppliers can file a mechanic's lien against a property to seek repayment.

Mortgage & Note

Two different legal documents. A note specifies the terms of a loan that a borrower may use to purchase a property. The mortgage is a promise to repay a note, where the property is used as collateral. The mortgage gives the lender the right to foreclosure on the property if the note is not paid.

Mortgage Broker

A mortgage broker matches prospective borrowers with lenders. They receive a commission from the lender after closing. Mortgage brokers can be helpful to buyers since they typically shop multiple lenders for the best loan product for their client.

Mortgagee

A bank or other financial institution that lends money to the borrower.

Mortgagor

The person who borrows money to purchase a property.

Multiple Listing Service (MLS)

Online platform where all properties listed by Realtors are shared. The MLS has information on all Active, Pending, Closed, Canceled & Expired listings. It contains extensive property tax and market information.

Non-QM Loan - AKA Non-Conforming Loan

A loan that does not require verification of income. These include investor loans, bank statement loans, and Debt Service Coverage Ratio (DSCR) loans.

Notice of Default

A lender’s notice to a borrower that they have missed multiple loan payments and are in Pre-Foreclosure. The notice of default will show up on a credit report and is the last step before the lender files Lis Pendens with the county courts.

Points

A point equals 1% of the total loan amount. Lenders can charge borrowers points at closing for certain loans. Borrowers can “buy points down” to reduce the interest rate on a loan.

Pre-Foreclosure - AKA Delinquent Mortgage

A mortgage where a borrower is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings and file Lis Pendens.

Private Mortgage Insurance (PMI)

Required by lenders on loans with less than 20% down to protect from a possible default.

Real Estate Agent

A person licensed by the state to conduct real estate transactions. Many real estate agents join a local board to become a licensed Realtor©.

REO Property (Real Estate Owned)

A property owned by a lender after an unsuccessful foreclosure auction.

Return on Investment (ROI)

The ROI on an investment property is calculated as a percentage by dividing a property's net operating income (NOI) by the total cash investment. Experienced investors will use data from the MLS, AirDNA, Rent-o-meter, etc. to calculate their expected ROI before purchasing an investment property.

Short Term Rental Property (STR) - AKA Vacation Rental Property

A property rented for periods less than 30 days at a time and more than 3 times a year. STRs are popular in Florida and can be found on websites like Airbnb, VRBO, and FlipKey. Florida has a long history with vacation rental properties and well-established rules in most municipalities. Be sure to check all county, city, and HOA rules for any property before you decide to list it as an STR. Mangrove Bay Realty specializes in STR properties in Pinellas County, including Largo and Indian Shores.

Tenants in Common vs. Tenants in Survivorship

In Florida, two or more people may take title on a deed for a property as joint tenants with the right of survivorship, or they can take title as tenants in common. If one owner passes away, joint tenancy would automatically pass the full ownership of the property to the surviving owner, regardless of what a will may say. Tenants in common would allow the deceased owner’s will to determine what to do with their percentage ownership of a property.

Title Company - AKA Escrow agent

Facilitates real estate closings and ensures clear title to a property is conveyed. They hold documents and funds involved in a real estate transaction to ensure all conditions of a sale are met before releasing funds to a seller, or keys to a buyer. During the transaction the EMD is held in the title company's insured escrow account.

Title Insurance Policy

A policy insuring against defects in title or liens against the property from the previous owners.

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