Glossary

A member of the American Institute of Real Estate Appraisers, which is affiliated with the National Association of Realtors. The MAI designation is one of the most coveted ones in real estate. Many appraisals of large commercial properties are done by MAIs.

Routine expenses required to keep a property operating and in good repair, such as painting, lawn maintenance and replacement of roofing and heating equipment. When putting together a housing budget, it is important to estimate and include periodic maintenance costs, which can be a significant expense.

A charge levied on homeowners to maintain common areas in a subdivision or condominium development. It may be included in a general homeowners’ association fee or condominium fee. See homeowners’ association fee and condominium fee.

The age at which one is no longer a minor and is fully able to conduct one’s own affairs; in Texas, majority is 18. A contract with a minor is voidable by the minor.

Homes produced in a factory and transported to and installed on a site. Before 1976, manufactured homes were referred to as mobile homes. Since then, all manufactured homes are covered by a uniform federal inspection standard that supercedes local building codes.

Property that is barely profitable. For example, the sale of cotton that has been efficiently raised yields $100; yet the cotton cost $99.99 to raise. The land, therefore, is considered marginal land.

See market comparison approach.

The most often used of the three appraisal approaches. Value is estimated by analyzing sales prices of similar properties (comparables) recently sold. Virtually all appraisals of homes and many appraisals of other properties rely most heavily on the market approach. The two other approaches are cost and income.

See market comparison approach.

The actual price paid in a market transaction, a historical fact. Market value is a theoretical concept, whereas market price is what actually occurred.

The highest price a buyer, willing but not compelled to buy, would pay, and the lowest price a seller, willing but not compelled to sell, would accept. Many conditions are assumed to exist, including: 1. Open and competitive market, 2. Typically motivated principals, acting prudently and knowledgeably, 3. Normal time on the market for the type of property, 4. Payment to seller in cash or equivalent, 5. Buyer may arrange typical financing terms available in the market. In theory, property would sell for its market value.

A title that a court will consider so free from defect that it will enforce its acceptance by a purchaser. Similar to insurable title.

A fact that is germane to a particular situation; one that participants in the situation may be reasonably expected to consider. In a contract, a material fact is one without which the contract would not have been made.

The largest dollar amount that a lender can loan given the borrower’s income or that the FHA will insure. A lender determines the maximum size of the loan by applying a maximum loan-to-value ratio to the value of the house. If the borrower does not qualify for a loan of that size, the loan amount must be reduced. If the loan requires FHA insurance, different rules are used for setting maximum size and for qualifying borrowers. In addition, FHA loans have maximum size limits that vary by location.

A lien given by law upon a building or other improvement upon land, and upon the land itself, as security for the payment for labor done upon, and materials furnished for, the improvement. A mechanic’s lien protects those who helped build or supply materials.

Agreement by all parties to a contract to its terms and substance. When there is a meeting of the minds, the contract is not based on secret intentions of one party that were withheld from another.

A land description method that relates the boundary lines of land, setting forth all the boundary lines together with their terminal points and angles from an initial reference point. One can follow a metes and bounds description on a plat or on the ground.

One tenth of a cent, used in expressing tax rates on a per-dollar basis. For example, a tax rate of 60 mills means that taxes are six cents per dollar of assessed valuation.

A person under an age specified by law; in Texas, one under age 18. Real estate contracts entered into with minors are voidable by the minor.

Putting forth an untrue statement or other act. Can be intentional, whereby wrong information is given in an attempt to deceive a party who then will enter the agreement; or it can be an innocent mistake. Misrepresentation may allow a party to rescind a contract.

The monthly payment required by a mortgage contract. The payment usually includes interest on outstanding principal accrued during the previous month, a contribution to principal reduction and a contribution to an escrow account used to pay insurance premiums and property taxes. Sometimes called "PITI." This is one of the major expenses of owning a home. The interest portion of the payment can be taken as an itemized deduction against taxable income. The principal portion directly reduces the amount of debt outstanding on the loan. Escrow amounts are collected and paid out as necessary.

Same as monthly mortgage payment.

A fixed object and point established by surveyors to establish land locations, such as posts, pillars, stone markers, unique trees, stones, pipes or a watercourse.

A written instrument that creates a lien upon real estate as security for the payment of a specified debt. The mortgage allows a defaulted debt to be satisfied by forcing a sale of the property.

A business firm that originates home loans and sells them in the secondary market. A mortgage bank has no depositors but must raise funds by selling the loans it originates. Mortgage bankers are important sources of loans, especially those backed by the FHA and VA.

A lender who originates mortgage loans and sells them to investors and other purchasers of mortgages.

Firms engaged in loaning money for homes and other property.

An agreement between a lender and a borrower to lend money at a future date, subject to the conditions described in the agreement. The terms of the commitment are important, especially the interest rate lock-in, if there is one.

Firms that engage in mortgage banking.

Debt secured by one or more mortgages. Mortgage loans carry lower interest rates than unsecured credit because the rights provided to the lender under the mortgage lower the risk of the loan. On the other hand, the property could be lost if payments are not made on time to the lender by the buyer-owner.

Insures, to the lender, the top 10 to 20 percent of the loan in the event of default. Generally costs one to two discount points at closing plus an annual fee of one fourth to one half of 1 percent.

A private firm that insures mortgage loans.

An official request for a mortgage loan commitment of a specific amount for the purpose of buying (or refinancing) a specific property. After a sales contract is signed, the buyer usually applies for a mortgage loan. This requires contacting a lender and completing a loan application form, providing a copy of the sales contract and additional information about the borrower’s income and financial status. An application fee may be charged for expenses related to the approval process. If the loan is approved, the buyer will receive a loan commitment and can proceed with the closing.

A note secured by a mortgage. A borrower taking a mortgage loan signs a mortgage note that establishes the debt and a mortgage that pledges the property against default on the note.

Same as loan term.

The process of approving (or disapproving) a loan based on an analysis of the borrower’s credit history and the quality of the collateral. See loan processing.

One who holds a lien on or title to property as security for a debt. The mortgagee receives the mortgage; the mortgagor receives the loan.

One who pledges his or her property as security for a loan.

An arrangement among a group of real estate brokers who agree in advance to provide information about some or all of their listings to the others and also agree that commissions on sales of such listings will be split between listing and selling brokers.