Glossary of Real Estate Topics

Real estate law includes lots of jargon and legalese that can be intimidating or at least confusing, especially to first-time homebuyers. An attorney with experience in real estate law can help a buyer or seller understand the terms and concepts involved in real estate transactions. Read on to learn more about the terminology of this specialized area.

Appraisal

An appraisal is the estimate of value of real property made by a third party not involved in the transaction. Appraisals usually involve comparing the sales price to the value of similar properties in the area. Mortgage lenders typically require an appraisal before they will make a loan.

Assessment

An assessment is a charge for improvements made by the local government that are beneficial to adjoining property. Sidewalks and roadwork are common examples of improvements which give rise to an assessment charge. Property owners who receive a benefit from the improvement are assessed a proportional share of the cost of the improvement.

Broker

A real estate broker is a licensed person or organization who negotiates real estate contracts, mortgages, leases, and other agreements between the parties in a real estate transaction. Real estate agents (or realtors) are also licensed representatives who work for brokers.

Closing

A closing (sometimes called a settlement), is the last stage of a real estate transaction. At the closing, the buyer finalizes his or her mortgage and pays any closing costs for which he or she is responsible, while the seller finalizes and hands over the deed and the keys to the property.

Condominium

Condominium (condo) owners own their individual residential unit and also have a right to use the common areas in the development, which are owned by the condominium association. The association maintains the property, pays taxes and insurance, and deals with improvements. A condo owner will probably have to pay association fees in addition to mortgage payments.

Contract for Deed

A contract for deed allows a seller to keep legal ownership of property while the buyer uses the property and makes monthly payments until the purchase amount is paid.

Deed

A deed is a document that transfers an interest in real property. A warranty deed is a deed in which the seller promises that the title to the land is good and complete. A quit claim deed transfers only the rights that the transferor has, with no promise that the transferor has full title or that there are no liens against the land.

Foreclosure

When a homeowner defaults by failing to make payments on his or her mortgage, the bank or financial institution that holds the mortgage note may foreclose on the property. Foreclosure gives the legal ownership of a property to the bank to allow the bank to recoup its investment. Foreclosure proceedings vary by state but usually involve court appearances to ensure the foreclosure is warranted.

Mortgage Loan

A mortgage loan is a loan secured by the real estate the loan is allowing the buyer to purchase. Mortgage terms may allow for fixed or adjustable interest rates or may include balloon payments. The functioning, legal effect, and foreclosure of mortgages vary greatly from state to state.

RESPA

The Real Estate Settlement Procedures Act, or RESPA, imposes obligations on mortgage lenders and other vendors involved in real estate transactions. Under RESPA, borrowers must receive disclosures detailing the costs associated with the transaction, copies of the lender's servicing and escrow account practices, and a description of the relationships among the service providers to the transaction. Mortgage lenders must also give borrowers a fair estimate of the service charges for which he or she may be responsible.

Survey

A survey is a mapping of land boundaries, improvements, and easements on real property. A lender will frequently require a survey of property, especially commercial or un-platted property, and will require the parties to address any irregularities that show up on the survey.

Title Insurance and Title Opinions

Title insurance protects against title defects not excluded by the policy. A title opinion is a lawyer's written statement of the current condition of the title. Title insurance, a title opinion, or both can help a buyer to feel comfortable with the validity of the title.

Conclusion

A real estate buyer or seller will encounter most, if not all, of the above topics when involved in a real estate transaction. Each of the above topics is complex, with details that vary greatly from state to state and transaction to transaction. An attorney who has experience in real estate law can help a buyer or seller interpret and analyze the application of all of the laws related to the above topics to his or her transactions.

Deeds

A deed is usually a simple piece of paper that has a big legal impact. A deed transfers an ownership interest in real property, and no real estate transaction where ownership is transferred is finished until the deed is delivered to the buyer to be recorded in public records. A deed must include the names of the buyer and seller and the property's legal description. The deed is signed by the person transferring the property and may or may not make that person responsible to the buyer for other claims against or conditions on the property. A knowledgeable real estate attorney can review the deed to ensure that it is accurate and properly executed.

Deed Requirements

A deed for property must always be in writing, and it must follow state laws for property transactions. Different states may require different deed language, forms, or even paper sizes, so it's important to make sure the rules of the jurisdiction in which the property is located are followed. Even if not strictly required, it is a good idea to record a deed to make the change in ownership a public record.

Types of Deeds

There are many varieties of deeds. Two of the most common are quit claim and warranty deeds. A quit claim deed lets the transferor give away whatever rights he or she has to the property, but does not guarantee the extent of the interest transferred. Quit claim deeds are common in divorces when one spouse grants his or her rights in real estate from the marriage over to the other spouse.

A warranty deed contains one or more of the covenants of title. A warranty transfers ownership and explicitly promises the buyer that the seller has good title to the property. A warranty deed offers the greatest protection for buyers since a seller must warrant good title to the property, with no liens and encumbrances not disclosed in the deed. The seller also agrees to defend against any defects found in the deed. A special warranty deed is similar to a general warranty deed, but contains only the covenant and guarantee against claims that may arise only during the time the seller was the legal owner of the property.

When buying or selling real estate, the choice of deed defines exactly what the buyer is getting for his or her money or the seller is agreeing to give. Each type of deed includes different rights, guarantees, and legal protections. Contact a real estate attorney to determine which type of deed is most appropriate for your situation.

Recording the Deed

The new deed should be recorded in the appropriate office, usually the land records office in the county where the property is located. This office may be called, among other names, the recorder's office, the land registry office, or the register of deeds.

The broker or closer may handle recording, but parties to the transaction should make sure that this important step takes place, regardless of who handles it. The purpose of recording the deed is to give notice to the world that the buyer now has an ownership interest in the property. Recording also creates a chronological chain of title so the history of ownership can be researched.

Home Inspections

Buying a home can be stressful and time consuming. Obtaining a home inspection can take some of the worry out of the process. An independent home inspector will provide the buyer with a report on the physical condition of the property he or she is considering buying. Most houses are not perfect, and the inspector's detailed report gives the buyer an unbiased evaluation of the property letting him or her know what needs work now and what will probably need work in the near future. Obtaining a home inspection and reviewing the results with an experienced real estate attorney can assist a homebuyer when negotiating his or her purchase.

The Inspection

The type of inspection that a buyer needs depends on many factors. Of course, every buyer should make his or her own basic inspection. A buyer should also obtain a professional whole-house inspection by a reputable person to uncover defects that may not be readily apparent. If the buyer is using an FHA or VA loan, a third, somewhat less thorough, inspection occurs at the time of the appraisal. The appraisal required by the lender is not as thorough and focuses on the value, not the condition, of the property. It does not substitute for an inspection.

An inspector does not evaluate whether or not a buyer is getting good value for his or her money. Rather, the inspector checks the safety of the home, focusing on the structure, construction, and mechanical systems to determine whether any repairs are necessary. Generally, an inspector checks the electrical system, plumbing and waste disposal systems, water heater, insulation, ventilation, heating and air conditioning systems, water source, water quality, potential for pests, and foundation, doors, windows, ceilings, walls, floors, and roof. If the home inspector discovers a serious problem, the inspector may suggest a more specific inspection. A buyer should also consider having the home inspected for the presence of a variety of health-related risks, such as radon gas, asbestos, or lead, if not included in the basic inspection.

Although a buyer need not attend the inspection, many buyers prefer to be present. Following the inspection, many home inspectors will answer questions about the report and any problem areas. The inspection also provides an opportunity to hear an objective opinion on the home's quality.

The Inspector

A buyer should hire a home inspector who is qualified and experienced. In many states, home inspectors must be licensed. A buyer should obtain an inspection before signing a written offer. If that is not possible, a buyer may include an inspection clause in the offer when negotiating for a home, giving the buyer an opportunity to back out of the contract if the inspection discloses serious problems. An inspection clause can also specify that the seller must fix certain problems or make monetary concessions for any problems before the buyer will purchase the property. A real estate attorney will understand the interaction between the inspection and the purchase agreement, and can assist the homebuyer in negotiating the most appropriate terms regarding the inspection.

Conclusion

A wise buyer realizes that an extensive home inspection is a necessity, not a luxury, and that the cost of the inspection (typically $200 to $500) is money well spent. Inspections are designed to disclose defects that could materially affect the property's safety, livability, or resale value. Contact an experienced real estate attorney to guide you through the inspection process and assist you in interpreting the inspection results and its implications.

What to Expect at Closing

A closing, or settlement, is the time when ownership of the property is officially transferred from the seller to the buyer. The buyer and the seller, their attorneys, both real estate sales professionals, a representative of the lender, and the closing agent typically attend the closing. The closing involves settling any open issues, balancing and verifying the closing statement, and signing all documents necessary to complete the transaction. An attorney with experience in closing Florida real estate transactions will guide you through the closing to ensure that your rights are protected.

Closing Costs

Closing costs are one of the least-understood aspects of the home purchase procedure. Although a good closer will take time to walk a buyer through the numbers, an experienced attorney will provide additional insight and verify that the costs are being appropriately allocated between the buyer and the seller.

Closing costs vary somewhat by community, but they generally are between two and five percent of the home's purchase price and include:

• Attorney fees
• Escrow fees
• Property taxes to cover the period to the closing date
• Interest from the closing date to one month before the first monthly payment
• Loan origination fees
• Recording fees
• Survey fees
• Mortgage insurance, if applicable
• Title insurance, both for the buyer and the lender
• Loan discount points
• The first escrow payment for future real estate taxes and insurance
• Homeowner's insurance policy payment or receipt
• Appraisal fees
• Pest or other specific inspection fees
• Document preparation fees

What Happens at Closing?

At closing, the buyer typically presents his or her paid homeowner's insurance policy or a binder and receipt showing a paid premium. The closing agent will then list the amounts the buyer owes the seller and the amounts the seller owes the buyer. The seller will provide any items the contract requires him or her to provide. Once the parties have verified that the numbers are correct, the parties sign the closing statement, the buyer signs the mortgage note and the mortgage, and the seller gives the buyer title to the property in the form of a signed deed.

The buyer often pays the lender's agent all closing costs, and the closer provides the buyer with a settlement statement listing all the monetary items. Immediately after closing, the closing agent should record the deed and mortgage.

Documents the Buyer Receives

The buyer typically receives:

• Settlement statement, itemizing the services provided and the fees charged
• Truth-in-lending statement
• Mortgage note
• Mortgage or deed of trust
• Sales contract
• Any required affidavits, if any
• Copy of the deed
• Keys to the home

Conclusion

A closing can move very quickly, with both parties discussing and sometimes disagreeing about the numbers, all of which ultimately represent your hard-earned money. An attorney who is knowledgeable in real estate law can help you protect your rights.