Buying & Selling Simplified:
Glossary of Terms
Agent: A person acting on behalf of another, called the principal.
Agreement of Sale: Known by various names, such as contract of purchase, purchase agreement, sales agreement, or binder, according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy under certain specific terms and conditions spelled out in writing and signed by both parties.
Appraisal: An expert judgment or estimate of the quality or value of real estate, completed by a licensed appraiser, as of a given date.
Assessed Value: The valuation placed upon property by a public tax assessor as the basis for taxes.
Certificate of Title: A document signed by a title examiner or attorney, stating that the seller has a good marketable and insurable title.
Closing Statement (Settlement): The computation of financial adjustments between the buyer and sellers as of the day of closing a sale to determine the net amount of money which the buyer must pay to the seller to complete the purchase of the real estate and seller’s net proceeds. Also, settlement sheets or HUD-1.
Commission: Payment of money or valuable consideration to a real estate broker for services performed.
Convey: To deed or transfer title of property from one person to another.
Deed: A formal written instrument by which title to real property is transferred from one owner to another. Also, conveyance.
Deed of Trust: Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender or beneficiary.
Earnest Money: The money given to the seller by the potential buyer (usually held in escrow) upon the signing of the agreement of sale to show that buyer is serious about buying the house. Also, deposit.
Equity: The interest or value which the owner has in real estate over and above the debts against it. (Sales Price - Mortgage Balance = Equity).
Escrow: Funds, property or other things of value left in trust to a third party. The escrow may be released upon the fulfillment of certain conditions or by agreement of the parties.
Listing Contract: Between a homeowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to market the real estate within a given time for which service the owner agrees to pay a commission. Also, listing agreement.
Market Value: The highest price which a buyer, ready, willing and able but not compelled to buy, would pay, and the lowest price a seller, ready, willing and able but not compelled to sell, would accept. Basis for listing price or asking price.
Market Price: The actual amount for which a piece of property is sold. Also, sales price, purchase price.
Mortgage: A lien or claim against real property given by the buyer to the lender as security for money borrowed.
Prorate: To allocate between the seller and buyer their proportionate share of an obligation paid for due. For example, a prorate of real property taxes, utilities, or HOA/condominium fee.
Sales Associate: A person with a real estate license and associated with a specific real estate broker.
Survey: A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A review of the survey is often required by the lender to assure a building is actually sited on the land according to its legal description.
Time is of the Essence: Many contracts call for a specific time by which the agreed on acts must be completely performed. This means that the contract must be performed within the time limit specified. A party who fails to perform on time is liable for breach of contract.
Title: As generally used, a document that indicates rights of ownership and possession of particular property.
Transfer/Recordation Tax: State tax, local tax (where applicable), and tax stamps (in some areas) required by law when title passes from one owner to another.