Glossary of Real Estate Terms
Accelerate: This term often refers to an "acceleration clause" option that may or may not be in your mortgage or deed of trust that requires you to pay the entire loan balance if the loan is in default.
Affidavit: Is a sworn statement, usually given under oath and in the presence of a notary.
Appraisal: A valuation of a property determined by a licensed appraiser.
Appreciation: Increase in value since your property was purchased
Assignment: The process of transferring property to be held in trust or used for the benefit of lenders.
Bid: The amount offered for a property that is for sale at auction.
BPO aka Broker Price Opinion: An estimated value of a property determined by a licensed real estate Broker.
Certificate of Sale: A document given to the winning bidder at a foreclosure sale. It includes their rights to the property.
Clear Title: The title to the property is not burdened by defects.
Credit Bid: A bid placed on behalf of a lender at a foreclosure sale and must be the same as or less than the balance of the defaulted loan.
Creditor: An entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real". Those people who loan money to friends or family are personal creditors. Real creditors (i.e. a bank or finance company) have legal contracts with the borrower granting the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan.
Decree: An official judicial decision
Deed: A document that allows the transfer of property ownership from one party to another.
Deed-In-Lieu of Foreclosure: A potential option taken by a mortgagor (a borrower) to avoid foreclosure under which the mortgagor deeds the collateral property (the home) back to the mortgagee (the lender) in exchange for the release of all obligations under the mortgage. Both sides must enter into the agreement voluntarily and in good faith.
Deed of Trust: A three party security instrument between the borrower, the lender and the trustee, that conveys the legal title to property as security for loan payment.
Default: When a borrower fails to make payment as originally agreed in the promissory note, the mortgage or deed of trust is said to be in default.
Deficiency Judgment: This follows a foreclosure sale and requires the borrower to pay the remaining balance of the loan. Idaho allows deficiency judgments to be entered against homeowners after foreclosure.
Delinquency Rate: The percentage of loans within a loan portfolio that have delinquent payments. The delinquency rate is simply the number of loans that have delinquent payments divided by the total number of loans an institution holds. Typically, delinquency rates on loans are affected by the credit quality of the borrower and macroeconomic factors such as unemployment.
Equitable Title: The right to possession and the right to obtain the legal title if a preceeding condition has been sufficiently met.
Equity: The difference between the mortgage amount on a propery and the property's current value.
Escrow: An item, money or documents that are deposited with a third party and that are to be delivered once a condition is fulfilled. For example, a deposit paid by a borrower to a lender to pay taxes and insurance premiums when they are due, or the deposit of funds of documents with an escrow agent or attorney that are disbursed once the sale of real estate is closed. In some areas of the country, escrows of taxes and insurance premiums are referred to as reserves or impounds.
Escrow Accounts: A segregated trust account where escrow funds are held.
Escrow Analysis: The occasional examination of escrow accounts in order to determine if the current monthly deposits will be enough to pay the taxes, insurance and other bills when they are due.
Fair Market Value: The value of a property if if was sold on the open market.
Forbearance: A postponement of loan payments, granted by a lender or creditor, for a temporary period of time. This is done to give the borrower time to make up for overdue payments.
Foreclosure: A situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract.
Free and Clear: Property not encumbered by any debt.
Hazard Insurance: A form of insurance that compensates the insured in case of damage or property loss.
HOA (Home Owners Association) Liens: A lien placed against the homeowner (not just the property) which can be pursued legally against the owner. These liens do not have to be paid by the lender at foreclosure. The owner is liable personally.
Impaired Credit: The deterioration of a borrower's credit rating
Investment Property: A property other than the borrower's primary residence, one that is purchased to generate income from rental, tax benefits or a profitable resale.
Investor: A person or institution that invests in mortgages or mortgage-backed securities.
Involuntary Foreclosure: When a borrower defaults on a home mortgage loan and the lender initiates proceedings to take possession of the house and sell it to recover the debt. In an involuntary foreclosure, the borrower typically remains liable for the full amount of the debt. If the house sells for less than the amount the borrower owed on the mortgage, the borrower may still be required to pay the remaining balance.
Judicial Foreclosure: Foreclosure proceedings in which a mortgage lacks the power of sale clause. In such an instance, many states require the foreclosure to be processed through the state's courts. If the court confirms that the debt is in default, an auction is held for the sale of the property in order to acquire funds to repay the lender. This differs from non-judicial foreclosures, which are processed without court intervention.
Lender: Someone who makes funds available to another with the expectation that the funds will be repaid, plus any interest and/or fees. A lender can be an individual, or a public or private group. Lenders may provide funds for a variety of reasons, such as a mortgage, automobile loan or small business loan.
Lien: When a creditor or bank has the right to sell the mortgaged or collateral property of those who fail to meet the obligations of a loan contract.
Loan: The act of giving money, property or other material goods to a another party in exchange for future repayment of the principal amount along with interest or other finance charges. A loan may be for a specific, one-time amount or can be available as open-ended credit up to a specified ceiling amount.
Mortgage Forebearance Agreement: An agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. A forbearance agreement is not a long-term solution for delinquent borrowers; it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems.
Writ of Seizure and Sale: A court order that permits a creditor to instruct a sheriff to seize and sell assets/property of a debtor in order to pay off a debt.
Zero Payment Assumption: The supposition that scheduled principal and interest will be paid off with no installments. This is typically done as a means of providing a benchmark to gauge other, more complex assumptions. By determining what a product or service will cost without financing, individuals or companies can better budget their resources and plan for future expenditures and/or revenue growth.