Farmland Real Estate Glossary
Farmland Real Estate Glossary
ABSTRACT OF TITLE – A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record, which may affect the marketability of the title. ACCEPTANCE – Consent to an offer to enter into contract.
ADJUSTABLE-RATE MORTGAGE (ARM) – mortgage that allows the interest rate to be changed and specified intervals.
AGENCY – A legal relationship in which an owner-principal engages a broker-agent in the sale of property or a buyer-principal engages a broker-agent in the purchase of property.
AMORTIZED LOAN – A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a Level Payments Loan.
ANNUAL PERCENTAGE RATE (APR) – The total finance charge expressed as a percentage of the mortgage amount.
APPRAISAL – An evaluation of a piece of property to determine its value. APPRECIATION – An increase in value of real estate.
ASBESTOS – A mineral fiber used in some building materials such as flooring, siding, insulation and roofing. It is presently banned for most uses in real property.
ASSESSED VALUE – The valuation placed on property by a public tax assessor as the basis of property taxes.
ASSUMPTION OF MORTGAGE – The taking of title to property by a grantee, wherein he or she assumes liability for payments of an existing note secured by a mortgage or deed of trust against the property, becoming a
co-guarantor for the payment of a mortgage or deed of trust note.
BALLOON MORTGAGE – A mortgage where the amount financed is not fully amortized over the period of the loan. When the loan becomes due, a large sum or “balloon” payment is required to satisfy the mortgage.
BRIDGE LOAN – A short-term mortgage made until a longer-term loan can be made; it is typically used when the purchase of a home occurs before the sale of the present home has been sold.
BROKER – A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business. Although requirements vary from state to state, an individual must usually have at least one year of experience in the industry and pass an examination to earn a broker’s license.
BUILDING CODES – State and local laws that regulate the construction of new property and the rehabilitation of existing property.
CLOSING – The final settlement of a real estate transaction between buyer and seller.
CLOSING COSTS – Fees and expenses, not including the price of the home, payable by the Seller and the Buyer at the closing (e.g. brokerage commissions, title insurance premiums, inspections, appraisal, recording fees and attorney fees).
CLOSING STATEMENT – A financial statement rendered to the Buyer and Seller at the time of transfer of ownership, giving an account of all funds received and expended.
CLOUD ON THE TITLE – Any condition which affects the clear title to real property. Also see liens and title opinions.
COMPARABLES – Properties similar in size & character to the one being bought or sold
CONDOMINIUM – A system of individual fee ownership of units combined with joint ownership of common area of the structure and the land.
CONSIDERATION – Anything of value to induce another to enter into a contract (i.e. money, services, a promise).
CONTINGENCY – A condition or conditions that must be satisfied before a contract is binding.
CONTRACT – An agreement to do or not do a certain thing.
CONTRACT FOR DEED – A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
CONVENTIONAL MORTGAGE – A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed.
COUNTER-OFFER – A rejection of an offer by a seller along with an agreement to sell the property to the potential buyer on terms differing from the original offer.
DEED – Written instrument which, when properly executed and delivered, conveys title. Also see warranty deed, quit claim deed.
DEBT-TO-INCOME RATIO – The relationship between the total amount of debt a borrower has to their income. Lenders do have set ratios they use as guidelines to approve a borrower.
DEPARTMENT OF HOUSING & URBAN DEVELOPMENT – A U.S. Government Agency established to implement certain federal housing and community development programs.
DISCLOSURE LAWS – State & federal regulations which require Sellers to disclose such conditions as whether a house is located in a flood plain or whether there are known defects in or affecting the property.
DISCOUNT POINTS – Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level.
EARNEST MONEY DEPOSIT – Down payment made by a purchaser of real estate as evidence of good faith.
EASEMENT – Created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one party has in the land of another. (Example: right of way)
ENCROACHMENT – A condition that limits the interest in the title to property such as a mortgage, deed, restrictions, easements, unpaid taxes etc. EQUITY – The interest or value which an owner has in real estate over and above the liens against real property.
EQUITY LOAN – Also known as HOME EQUITY LOAN. A mortgage based on the borrower’ equity in their home rather than on their credit worthiness. ESCROW – The deposit of instruments and funds with instructions to a third neutral party (Escrow Agent) to carry out the provisions of an agreement or contract; when everything is deposited to enable carrying out the instructions, it is called a complete or perfect escrow.
FHA LOAN – (FEDERAL HOUSING ADMINISTRATION) A loan which has been insured by the federal government guaranteeing its payment in case of default by the borrower.
FIXED RATE MORTGAGE – A loan that fixes the interest rate at a prescribed rate for the duration of the loan.
FMHA LOAN – A loan insured by the federal government similar to FHA loan used for residential properties in rural areas.
FEE APPRAISAL – The act or process of estimating values of real estate or any interest therein for a fee.
FORECLOSURE – Procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.
GROWING-EQUITY MORTGAGE – A mortgage loan in which the monthly payments increase by a specific amount each year, with the
over-payments applied to principal.
INVESTOR – The holder of a mortgage or the permanent lender for whom the mortgage maker services the loan. Any person or institution that invests in mortgages.
LEASE TO BUY AGREEMENT or LEASE PURCHASE AGREEMENT – An agreement where the buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.
LIEN – A legal claim against a property that must be paid when it is sold. LOAN-TO-VALUE – The relationship between the amount of a home mortgage and the total value of the property. Lenders may limit their maximum mortgage to 80-95 percent of the value of the property. JOINT TENANCY – Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and has equal rights in the property.
LAND CONTRACT – A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
LIEN – A form of encumbrance which usually makes property security for the payment of a debt or discharge of an obligation.
Example: judgments, taxes, mortgages, deeds of trust, etc.
MARKET VALUE – The highest price a buyer will pay for a property and the lowest price the seller will accept.
MARKETABLE TITLE – Merchantable title; title free and clear of objectionable liens or encumbrances.
MORTGAGE – An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; procedure for foreclosure in event of default is established by statute.
MORTGAGE BROKER – An individual or company that obtains mortgages for others by finding lending institutions, insurance companies or private sources to lend the money.
MORTGAGEE – The lender of money or the receiver of the mortgage. (E.g. BANK OF AMERICA, WELLS FARGO etc)
MORTGAGOR – The borrower of money or the giver of the mortgage document. (Person buying the property or taking a loan)
MULTIPLE LISTING – Multiple Listing is the name given a service performed by the Local Board of Realtors (Multiple Listing Service). MLS provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the Service to expose properties to a wider market base. NEGATIVE AMORTIZATION – An increase in the outstanding balance of a mortgage resulting from the failure of periodic debt service payments to cover required interest charges on the loan.
NOTE – A written promise to pay a certain amount of money. ORIGINATION FEE – A fee charged the borrower by the lending institution.
PERSONAL PROPERTY – Any Property which is not real property, e.g., money, savings accounts, appliances, cars, boats, etc.
PREPAYMENT PENALTY – A fee paid to the mortgagee for paying the mortgage before it becomes due.
PRIVATE MORTGAGE INSURANCE (PMI) – Insurance issued to a lender by a private company to protect the lender against loss on a defaulted mortgage loan. It is used typically for loans that have a high loan to value ratio. The borrow pays a monthly premium
PROMISSORY NOTE – Following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment. PURCHASE AGREEMENT – An agreement between a buyer and seller for the purchase of real estate.
QUIT CLAIM DEED – A deed that transfers only that title or right to a property that the holder of that title has at the time of the transfer. It does not warrant or guarantee a clear title.
REAL PROPERTY – Land and whatever by nature or artificial annexation is a part of it.
REALTOR® – Registered collective membership marks that identify real estate professionals who are members of the National Association of REALTORS and who subscribe to its strict Code of Ethics.
RENT WITH OPTION – A contract giving the right to lease property at a certain sum w/ the option to purchase at a future date.
SECOND MORTGAGE – (Also Second Deed or Trust, Second Lien, Junior Mortgage, Junior Lien) An additional loan imposed on a property with the first mortgage. Generally a higher interest rate and shorter term than the “first” mortgage.
SPECIAL ASSESSMENT – Legal charge against real estate by a public authority to pay cost of public improvements such as: street lights, sidewalks, street improvements, etc.
SHORT SALE – A sale that does not produce sufficient funds to cover the existing monetary encumbrances against Property, closing costs, real estate commissions, and other financial requirements of closing.
SURVEY – The process by which a parcel of land is measured and its area ascertained.
TENANCY IN COMMON – Ownership by two or more persons who hold undivided interest; without right of survivorship; interests need not be equal. TERM OF MORTGAGE – The period during which a mortgage must be paid. TITLE – A document that is evidence of ownership.
TITLE DEFECT – An outstanding claim or encumbrance on property that affects marketability.
TITLE INSURANCE – Protection for lenders and homeowners against financial loss resulting from legal defects in the title.
TRUST ACCOUNT – An account separate and apart and physically segregated from broker’s own funds, in which broker is required by law to deposit all funds collected for clients.
VA LOAN – (VETERANS ADMINISTRATION) A loan guaranteed by the Veteran’s Administration insuring payment in case of default by the borrower. Available to qualified veterans.
VARIANCE – A special suspension of zoning laws to allow the use of property in a manner not in accord with existing laws.
WARRANTY DEED – A deed used to convey real property which contains warranties of title and quiet possession, and the grantor agrees to defend the premises against the lawful claims of third persons.
ZONING RESTRICTIONS – Local municipal ordinances that classify property according to specific uses such as single family, residential, commercial, industrial, multi-family etc.
David Whitaker | IowaLandGuy