Agent – a person authorized to act on another’s behalf. A real estate agent is a person licensed to advertise and negotiate the sale of real estate on behalf of the property owner
Appraisal – estimate of value based on the property inspection of a qualified appraiser. Mortgage companies usually require an appraisal before agreeing to loan money for a property.
Appreciation – increase in value of a property
Assessed Value – valuation of a property used by government to impose property tax
Back Up Offer – an agreement that gives a seller peace of mind in the event their first position (accepted) offer terminates, and this gives the second position (backup) buyer the assurance that they will automatically get their offer accepted into first position without the hassle of resubmitting a new offer and competing with other buyers.
Broker – A real estate broker is a person licensed under their state laws to act as an agent for another, negotiate the purchase, sale, and lease of real property. A broker has full authority to run a real estate company, whereas a real estate agent must have their license held under the auspices of a broker. Also see mortgage broker.
Buyer’s Agent – real estate agent, broker, or salesperson who represents the buyer’s best interest.
Closing – settlement of the real estate transaction when the title is passed onto buyer, and funds are transferred to seller.
Closing Costs – costs incurred throughout the real estate transaction that can include escrow fees, title insurance, recording documents, cost of drafting instruments, notary fees, condo and association transfer fees, cost of obtaining buyer’s consent, FHA and VA points and loan fees, conveyance tax, HARPTA, FIRPTA
Comps – short for Comparable Properties, used to give valuation of a home based on other available properties and previous sales of properties similar in size, location, condition, etc.
Conditional Loan Approval – when the mortgage underwriter is mostly satisfied with loan application file, but requires one or more conditions to be resolved prior to giving final loan approval
Conforming Loan – mortgage loan that complies with Fannie Mae and or Freddie Mac guidelines. General guidelines include loan amount, loan to value ratio, debt to income ratio, credit score, and document requirements.
Contingency – a condition placed upon the purchase agreement. If the condition is not met, the contingency may provide a way out of the agreement
Conventional Loan – mortgage loan that is not backed by a government agency and thus is typically more flexible as it only subject to the terms and requirements of the lending institution.
Conveyance – transfer of title (ownership) from one party to another
Counter Offer – rejection of the initial or previous offer, with the proposal of a slightly different offer
Covenants Conditions & Restrictions (CC&R’s) – legal document that lays out rules and guidelines for a planned community
Debt to Income (DTI) – ratio used by lenders to compare how much money you owe each month to how much money you make
Deed – document that seller and buyer sign to transfer title
Default – failure to fulfill an obligation
Depreciation – the decline in value of real estate due to deterioration and or market conditions
Discount Points – prepaid interest on a mortgage loan, which will lower the borrower’s subsequent payments
Down Payment – money from buyer paid upfront in addition to the home loan to amount to the total purchase price
Dual Agent – a real estate agent or broker that represents both the seller and buyer during a real estate transaction. Buyer and seller must consent to dual agency. The agent must remain neutral during negotiations. Dual agency can also occur if the buyer and seller are represented by individual agents that happen to work within the same brokerage firm. These individual agents need not remain neutral if representing only buyer or only seller.
Easement – a non-possessory right to use and or enter the property of another without owning it. Example: Public Beach Access, Private Driveway access to a landlocked parcel, Utility Easement – sewer, phone, electrical
Eminent Domain – the power of state or federal government to take privately owned real estate for public use, with fair compensation given to the owner
Equity – an owner’s share in property value, over and above the balance owed for the mortgage loan
Escrow Account – a temporary account setup by a neutral third party to hold funds throughout the real estate transaction
Escrow Company – a neutral third party agreed upon by buyer and seller to oversee their real estate transaction, protecting the interests of both buyer and seller throughout the transaction, and seeing it through completion
Fannie Mae (FNMA) – the Federal National Mortgage Association is a government agency that guarantees mortgages and purchases them on the secondary market as an investor.
FHA – Federal Housing Administration is a government agency that insures home mortgages. When the FHA insures a mortgage loan, lenders are willing to provide loans with lower qualifying requirements
Fiduciary – a relationship of trust. An agent is obligated to their client to be loyal, obedient, honest and ethical, disclose all relevant information, exercise reasonable care, account for all finances, and keep confidential facts that need not be disclosed.
Final Loan Approval – borrower has met all conditions of the mortgage underwriter and the loan application has been approved
FIRPTA – income tax witholding that foreign sellers are subject to based on the Foreign Investment Real Property Tax Act of 1980. Witholding is 15% of sales price
Foreclosure – a legal process initiated by a lender when a borrower has defaulted on their loan, failing to make payments for a mortgaged property. If the borrower cannot correct the default, this will usually result in a forced sale of the mortgaged property.
Freddie Mac (FHLMC) – the Federal Home Loan Mortgage Corporation is a publicly held corportation that buys mortgages to keep money flowing to lenders and thereby encourage home ownership
Grantee – individual to whom real estate is conveyed or transferred to
Grantor – individual who is conveying or transferring ownership of real estate
HARPTA – Hawaii Real Property Tax Act – the buyer is responsible to withhold 5% of the sales price (from seller’s proceeds) if the seller is not a resident of Hawaii.
Home Exemption – a reduction in assessed tax value, which will reduce the amount of property tax due, for a homeowner’s principal residence
Home Inspection – a general inspection conducted by a third party to examine the current condition of the home to be purchased. The home inspector may also point out potential issues for the new homeowner to be. Many purchase agreements include a home inspection contingency allowing the buyer the option to back out of the agreement if they do not approve of the home inspection results.
Home Owners Association (HOA) – an association with monthly or annual dues collected from residents to maintain and manage the properties within the association, and insure the enforcement of the association rules.
Home Warranty – a service agreement that covers the repair or replacement of many major home appliances and components
HUD – United States Department of Housing and Urban Development. This agency is responsible for enforcing the fair housing act, supporting community development, improving affordable home ownership opportunities, and increasing affordable rental options.
Interest – amount a lender charges to borrow money
Investment Property – real estate that is purchased with the intent to produce a return on investment through rental income, future resale, or both.
Joint Tenancy – the holding of a property or estate by two or more parties. The interest share of one party passing to the other surviving owner(s) upon death.
Jumbo Loan – a mortgage loan amount exceeding the conforming loan limits set by Fannie Mae and Freddie Mac. In 2017, the Jumbo Loan limit for Honolulu was $721,050.
Junior Loan – a second mortgage loan taken using ones home as collateral when they already have a mortgage secured by that home. The junior lender would have lower priority than the first mortgage, should that individual default on their loan(s).
Lanai – a Hawaiian word for porch or balcony
Lead Based Paint – paint that was commonly used prior to 1978, later banned by federal government due to it’s hazardous properties. Lead Based Paint is still present in millions of homes, sometimes under layers of newer paint. For more information visit the US Environmental Protection Agency website.
Lessee – a tenant; a person to whom property is rented
Lessor – a landlord; a person who rents or leases property to another
Lien – a secured interest in a property, usually given to secure payment of a debt
Listing Agent – real estate agent representing the seller of a property
Listing Agreement – document in which a property owner(s) employs a real estate broker to find a buyer for the owner’s property. This document is signed by an owner to give a broker the authority to act as the owner’s agent in the sale, for which the owner agrees to pay a commission.
Loan Application – A form used to apply for a mortgage loan that a borrower must complete in order to secure the loan. It has questions about the borrower’s income, assets, debts, and includes required disclosures.
Loan Originator – person who assists a borrower in obtaining a new loan
Loan to Value (LTV) – ratio used by lenders comparing the loan amount to the home sale price
Makai – ocean side (Hawaiian term for)
Mauka – mountain side (Hawaiian term for)
Mechanics Lien – financial claim created to enforce payment for materials supplied and work performed to improve, repair, or maintain real property.
Mortgage – a legal instrument in which a borrower pledges their property to the lender as security for a loan.
Mortgage Broker – an intermediary who works with the borrower and lender, while qualifying the the borrower for a mortgage loan
Mortgage Insurance – insurance paid by borrower to protect lender in the event the borrower should default on their loan
Mortgage Interest – interest charged on a loan to purchase a home
Mortgage Loan – a type of loan in which a bank will lend money to a borrower, using the borrower’s home as collateral
Mortgagor – borrower who pledges property as security for a loan
Multiple Listing Service (MLS) – a marketing service in which member brokerages input and pool their listings and agree to share fees to the brokerage who finds a buyer. The MLS is the source from which many websites such as Zillow and Trulia pull their data from.
Nonconforming Loan – mortgage loan that does not comply with Fannie Mae and or Freddie Mac guidelines or limits
Note – a statement borrowers sign at loan closing that include the borrower’s promise to repay and the terms of repayment
Offer – a proposal usually initiated by the buyer to purchase real property
Origination Fee – a fee lenders charge to put together loan documentation
Planned Unit Development (PUD) – high density residential development on a large tract of land
Points – also known as discount points are fees paid at closing by borrower to mortgage broker in exchange for a lower interest rate. One point is one percent of the loan amount.
Preapproval – the lender has approved the borrower for a certain loan amount, which may be subject to an appraisal. Preapproval is stronger than a prequalification.
Prequalification (Prequal) – the initial step in determining loan qualification. The loan officer considers the borrower’s income, assets, credit history, and debt.
Principal – the outstanding balance of a loan, not including interest
Principal Broker – a broker who is responsible for overseeing a brokerage firm and its licensees.
Private Mortgage Insurance (PMI) – insurance charged to a borrower when their downpayment is less than 20% of the purchase price
Quit Claim Deed – a document in which a party releases their interest (if any) in a property without any warranties
Real Estate Owned (REO) – property that is sold through a foreclosure auction in which the highest bidder is the lender who foreclosed on the property
Real Estate Settlement Procedures Act (RESPA) – federal law protecting potential homeowners from unfair practices regarding settlement of residential properties and requiring lenders to provide borrowers with more information throughout the loan settlement process
Realtor® – a real estate broker or agent that is a member of the National Association of Realtors (NAR). Realtors are held to a higher standard and are bound to NAR’s Code of Ethics. All Realtors are real estate agents, but not all agents are Realtors.
Recordation – putting a real estate document into official records at the Bureau of Conveyances. Recordation gives public notice of ownership claims on property as well as other legal or financial claims.
Refinance – strategy to obtain a new loan with a lower interest rate, change the duration for repayment of the loan, or take out equity from the property
Reserves – money that mortgage companies set aside in separate, non-interest bearing accounts to pay taxes, homeowners’ association dues and insurance premiums.
Reserves is also commonly used in reference to extra funds an association (HOA) has set aside in case of emergency repairs.
Return on Investment (ROI) – a measurement of performance; ratio comparing profits to capital
Second Mortgage – a 2nd mortgage loan is taken using ones home as collateral when they already have a mortgage secured by that home. The 2nd mortgage lender would have lower priority than the first mortgage, should that individual default on their loan(s)
Seller’s Agent – listing agent or broker who acts on behalf of the owner trying to sell their property
Selling Agent – cooperating agent or broker who acts on behalf of the buyer
Seller Financing – instead of borrowing from the bank, the buyer borrows from the seller with a promissory note including a repayment schedule, interest, and consequences of default.
Special Assessment – in reference to condos and HOAs, a special assessment is a charge to unit owners for repairs or upgrades that exceed the HOA’s current budget. A special assessment can also refer to a charge from government against real estate parcels for public projects such as street maintenance, or public sewer installation
Survey – a measurement of a real estate parcel conducted by a surveyor. It shows the size and location of properties, and includes all existing easements, encroachments, dedicated streets, and existing improvements
Tax Assessed Value – value determined for real property tax purposes
Tax Lien – a lien arrising from unpaid real property tax
Tax Map Key (TMK) – a number that identifies a specific parcel of real property
Tenancy – a form of ownership for real property
Tenants in Common – a shared ownership of property between two or more parties. Each owner can will their share of the property to any beneficiary of their choosing upon their death
Tenants by Entirety – a type of ownership that allows spouses to jointly own property as a single entity.
Term – specified length of time to repay a loan
Title – legal document declaring ownership of real estate
Title Company – company that supplies a preliminary title report, title insurance, and ensures the proper recordation of conveyance documents. Many escrow companies have a Title division.
Title Insurance – protects the insured against loss due to defects, liens, encumbrances, or other matters adversely affecting the title to the land covered in the policy
Truth in Lending Act (TILA) – regulation designed to protect consumers in credit transactions and residential related transactions by requiring disclosures from creditors about the terms and costs of credit
Underwriter – individual who carefully reviews a loan application and supporting documentation, weighs the risks and makes a final determination to approve or deny the loan
VA Loan – 100% loan-to-value, 0% downpayment, loan for eligible veterans, backed by the United States Department of Veteran Affairs
Warranty – a binding promise that certain statements are true
Yield – profit or return on investment
Zero Lot Line – a lot with a building or home positioned on the boundary line. This is done to create more usable space within a high density community
Zoning – regulations upon land usage and physical dimensions