ABR® (Accredited Buyer's Representative)
The ABR® designation is the benchmark of excellence in buyer representation. This coveted designation is awarded to REALTORS® who meet the specified educational and practical experience criteria, by the Real Estate Buyer's Agent Council (REBAC) of the
National Association of REALTORS®. Why should you look for the ABR® designation before looking for a home? These three letters after a REALTORS® name tell you that you’ll be working with someone committed to your best interests, someone who has both
made education a career priority, and has also demonstrated the experience needed to provide the finest in buyer representation.
ABRM (Accredited Buyer's Representative Manager)
The ABRM designation is the only Buyer Representation Designation for Managers, Brokers and Owners affiliated with the National Association of REALTORS®. The ABRM? designation is awarded by the Real Estate Buyer's Agent Council (REBAC) of the
National Association of REALTORS® to those members who meet the extensive specified educational and practical experience criteria.
Provision in a mortgage that allows the lender to demand payment of the entire principal balance if a monthly payment is missed or some other default occurs.
The fiduciary duty that requires the agent to promptly report to the principal/client all money and property received and paid out, and upon request, to tender an account of these actions. This duty also requires the agent to safeguard money or
property held on behalf of the principal/client.
Adjustable-rate Mortgage (ARM)
A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index.
Any relationship in which one party (agent) acts for or represents another under the authority of the latter.
A party who is authorized to act in the best interests of a principal/client, and is obligated to place the principal’s interests before the interests of any other parties, including the agent’s own interests regardless of whether the agency relationship
is with the seller of the property or the buyer.
A timetable schedule showing the amount of each payment applied to interest and principal and the remaining balance after each payment is made.
A written analysis of the estimated value of a property prepared by a qualified appraiser.
Biweekly Payment Mortgage
A mortgage requiring payments every two weeks instead of the standard monthly payment. The result for the borrower is a substantial savings in interest.
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them.
When the seller, builder or buyer pays an amount of money up front to the lender to reduce monthly payments during the first few years of a mortgage. Buydowns can occur in both fixed and adjustable rate mortgages.
Buyer Representation Agreement
An agreement that specifies the duties and the scope of services a buyer’s representative agrees to provide to the buyer as well as specifying the buyer’s responsibilities. In some states, where there is no written agreement required, the agent
will be presumed to be representing the buyer. Consult with your local REALTOR® for complete details when you first start the search for any real estate property.
A real estate buyer's representative represents the consumer who is purchasing property in a real estate transaction, not the seller. State law varies but usually a buyer's representative works for, and owes fiduciary responsibilities (see fiduciary
duties) to, the real estate buyer and has the buyer's best interests in mind throughout the entire real estate transaction.
Limits how much the interest rate or the monthly payment can increase, either at each adjustment or during the life of the mortgage. Payment caps don't limit the amount of interest the lender is earning and may cause negative amortization.
The profit obtained from the sale of an asset, such as real estate.
Certificate of Title
A statement provided by an abstract company or attorney stating that the title to real estate is legally held by the current owner.
A party whose interests are to be served by the words and deeds of an agent with or without a contract according to state law. Also referred to as a principal. Regardless of whether the duties owed in a particular state are traditional, common
law fiduciary duties or are statutorily defined, they are still owed to any principal/client.
A meeting at which a sale of property is finalized by the buyer signing the mortgage documents and paying closing costs, and seller’s transfer of the deed to the property.
The fees, costs and taxes associated with the purchasing of a home, the borrowing of money and the preparation of necessary paperwork to finalize the sale. The total amount of the closing costs will vary depending on where the new home will
be located, what type of property it is, the price of the home and the complexity of the transaction. It is extremely important that the buyer work closely with his/her buyer’s representative and lender and title company (although in states
where attorneys are used, the attorney usually works with the title company) in the early stages of the home buying process to determine what these costs could be, since closing costs can easily represent thousands of dollars. There are four
categories of closing costs: (1) discounts points to buying down the mortgage; (2) the costs of originating the mortgage; (3) taxes and other local fees; (4) the cost of documentation.
See Comparative Market Analysis
Code of Ethics
The Code of Ethics and Standards of Practice of The National Association of REALTORS® establishes obligations that a real estate professional who is a member (a REALTOR®) must comply with to ensure that all parties to the transaction are treated
An asset (such as a car or a home) that guarantees the repayment of a loan.
The fee charged by a broker or agent for providing services related to a real estate transaction such as marketing the property, bringing the parties together, and negotiating a purchase contract or loan.
Comparative Market Analysis (CMA)
An analysis provided by a real estate professional that surveys like properties in a given area or of a certain type for the purpose of determining the relative value of a given property.
The fiduciary duty that prohibits the agent from communicating personal information about the principal that was given to or acquired by the agent within the scope of employment as an agent to the principal. Personal information must be
kept confidential unless the client releases the agent, or subagent, from this duty. However, the material facts and defects of a property are not confidential.
Cost of Documentation
A closing cost for any research involving public records and the title history on the property that is being bought. This insures that the title on the property is unencumbered by other ownership or liens and can be delivered to the buyer
at closing. Other costs include Recording and Transfer fees that cover the legal recording of the deed to the buyer’s name.
Costs of Originating the Mortgage
A closing cost that generally includes a variety of fees such as the loan origination fee, the appraisal fee and the cost of credit reports. There are also other fees that will be expected to be paid at closing such as hazard and mortgage
insurance and interest accrued on the mortgage between closing date and the end of the month.
An assessment of a person’s ability (or history) of debt repayment. Most information in a credit rating comes from companies that an individual has credit with such as banks, department stores, finance companies etc. as well as from
certain public records such as lawsuits, tax liens, judgments and bankruptcies.
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. Credit reports are usually based on the individual's: (1) credit history; (2) who reviewed
the credit history; (3) information that has been given to the credit information company; (4) specific identification information; and (5) any explanatory notes and comments.
CTC (Clear to Close)
The underwriters final approval which state that you have satisfied all of the conditions. Your closing is still subject to approval of the closing figures.
A party with a non-agency relationship with a real estate professional in a transaction. Duties still may be owed to a customer, but not all of the traditional (fiduciary) duties owed to a principal/client.
The legal document conveying title to a property.
Deed In Lieu (DIL)
A Deed-in-Lieu of Foreclosure (DIL) is where you, the homeowner, voluntarily transfer the ownership of your property (the title and all property associated with it) to the owner of your mortgage in exchange for a release from your
mortgage loan and payments.
The party selected to represent a principal/client in a designated agency office. Designated agency has been legislatively created in many states, allowing the management of a brokerage to establish an office policy, whereby
the managing broker appoints, or designates, one licensee associated with that brokerage to act as the exclusive agent of the buyer and another to act as the exclusive agent of the seller. No other licensee in the brokerage
has an agency relationship to represent that principal/client.
Discounts Points (to Buying Down the Mortgage)
A closing cost that is optional and can vary significantly from 0.5 to 3 points on the total of the mortgage. It is a one-time charge that is calculated based on the amount of the mortgage loan. A buyer would pay this
amount up front to reduce the ongoing cost of the mortgage over the life of the loan. This charge is fully deductible as mortgage interest.
One that no longer acts as an agent between persons.
A broker who works with both parties in a real estate transaction buyer and seller, landlord and tenant. All jurisdictions require dual agency to be disclosed to the parties to the transaction.
Earnest Money Deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.
e-Buyer 1) Electronic buyer. 2) The collective that describes consumers who conduct research on and/or buy products via the Internet. 3) Customers the real estate industry has always worked with, who just
come to the table better informed and with clearer ideas about what they want, because they have Internet Information.
A homeowner’s financial interest in a property. It is the difference between the value of the home and the balance of outstanding mortgage loans on the home.
A deposit of value, money, or documents with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow, held by the broker, bank
or other party, until delivered to the seller when the transaction is closed. In mortgage transactions, an escrow agreement is held where the borrower adds a specified amount for taxes and hazard
insurance to the regular monthly mortgage payment. The money goes into an escrow account out of which the lender pays the taxes and insurance when they come due.
Facilitator and Transaction Broker
Some states have passed statutes/regulations that allow a real estate licensee to act as a non-fiduciary, neutral mediator to bring parties together, without representing either party as a client.
Some states allow real estate brokerages to act in a non-fiduciary capacity for both parties to a transaction. A facilitator or transaction broker has a duty to exercise reasonable care, provide
an accounting to all parties and, in some states, may have additional duties imposed by the statute.
Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit information by consumer/credit reporting agencies and establishes procedures for correcting mistakes on ones credit
Fair Housing Laws
Local, state, and federal fair housing laws that prevent discrimination against any individual or group of individuals based upon race, color, religion, sex, handicap, national origin or
familial status, as well as other groups protected by various local and state fair housing laws.
FICO® scores are the most widely used credit score in U.S. mortgage loan underwriting. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates
many types of information that are on your credit report. Higher FICO® scores represent lower credit risks, which typically equate to better loan terms.
The term fiduciary is defined as of relating to or involving a confidence of trust. Fiduciary duties are determined by state law and generally include: confidentially, undivided loyalty,
obedience, reasonable care and diligence, full disclosure, and accounting. Regardless of whether the duties owed in a particular state are traditional, common law fiduciary duties,
or are statutorily defined, they are owed to any principal/client.
Insurance coverage against damage caused by the rising or overflowing of bodies of water. This is available through a national insurance program and must be bought separately.
For Sale By Owner (FSBO)
A property for sale that is not listed by a real estate professional.
An agreement by the lender to not exercise the legal right to foreclose in exchange for an agreement by the borrower to a payment plan that will cure the borrower’s
The fiduciary duty that requires the agent to disclose affirmatively and honestly all information the agent knows concerning the transaction (and property)
which might affect the decisions a a client or customer makes.
Good Faith Estimate
An estimate of closing costs associated with the purchase of your home.
A thorough inspection that evaluates the structural and mechanical condition of a property.
A guarantee for mechanical systems and appliances, but not the structure, against repairs not covered by homeowner's insurance; coverage is for a specific
period of time.
The legal claim against a property that must be satisfied before the property may be sold.
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time.
LTV (Loan to Value)
The ratio of the amount of a mortgage loan to the appraised value or sales price of the property mortgaged, whichever is lower.
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. Generally, the mortgage
document pledges the mortgaged property to the lender as security for the loan.
A policy that insures the lender against loss caused by a mortgagor’s default on a mortgage.
Multiple Listing Service (MLS)
A database of all properties for sale listed by members of a specified MLS.
The value of all of a person’s assets, including cash, minus all liabilities.
The fiduciary duty that requires the agent to follow and abide by all lawful instructions of the principal/client
within the scope of authority conferred by the principal/client
Principal, Interest, Taxes and Insurance: four components of a monthly payment on mortgage loans.
Private Mortgage Insurance is coverage provided by a private mortgage insurance company to protect
lenders against loss if a borrower defaults. Coverage is usually required for a loan with a loan-to-value
(LTV) percentage in excess of 80 percent.
A point is one percent of the amount of the mortgage. At closing, Lenders sometimes charge borrowers
a percentage of the loan amount equal to the number of points to cover the lender's cost. Sometimes
borrowers pay higher points in exchange for a lower interest rate.
The interest that banks charge to their preferred customers, usually large corporations, for
The amount borrowed or remaining unpaid. The client in a real estate agency relationship.
In other contexts, the term principal can mean an owner. (For example, the principals of
a corporation means the owners of the corporation.)
The purchase contract is the legally binding document that sets forth the terms of
the sale, establishes the rights and obligations of the parties involved, specifies
the actions to be taken in order to close the sale, and establishes the time frames
for those steps to be completed.
Real Estate Agent
A person licensed by a state to negotiate and transact the sale of real estate
on behalf of a property owner/seller or buyer.
A registered collective membership mark that identifies a real estate professional
who is a member of the National Association of REALTORS® and subscribes to
its strict Code of Ethics.
Reasonable Care and Diligence
The fiduciary duty that requires the agent to protect the principal/client
from foreseeable risks of harm, recommending that the principal obtain
expert advice or assistance when the principal’s needs are outside the
scope of the agent’s expertise.
Also known as a purchase contract, the legally binding document that
sets forth the terms of the sale, establishes the rights and obligations
of the parties involved, specifies the actions to be taken in order
to close the sale, and establishes the time frames for those steps
to be completed.
A document prepared by a broker, escrow company, or lender detailing
the complete breakdown of the costs and disbursements in a real
A broker who works for just one party-client in a real estate
transaction -- the buyer or the seller, the landlord or the
tenant, and not both, with primary fiduciary duties to that
A party who is authorized to act on behalf of, traditionally,
a seller’s agent, which is to say, an agent for an agent.
A subagent owes the same fiduciary duties to the principal/client
as the agent does.
A type of loan that is offered at a rate above prime
to individuals who do not qualify for prime rate loans.
Quite often, subprime borrowers are often turned away
from traditional lenders because of their low credit
ratings or other factors that suggest that they have
a reasonable chance of defaulting on the debt repayment.
A drawing or map showing the precise legal
boundaries of a property, the location of improvements,
easements, rights of way, encroachments, and
the other physical features.
Taxes and Other Local Fees
A closing cost that will vary according
to the requirements of local governments.
Some may demand that the property taxes
be pro-rated according to when the buyer
will officially become the owner of the
property. There can also be personal property
taxes, homeowner's association dues, and
other assessments that are specific to
the area that you are moving into, as well
as transfer taxes in some locations.
A check of the title records to
ensure that the seller is the legal
owner of the property and that
there are no liens or other claims
Truth in Lending
A federal law that requires
lenders to fully disclose,
in writing, the terms and conditions
of a mortgage, including the
annual percentage rate and
The process for evaluating
a loan’s application to
determine the risk involved
for the lender.
The fiduciary duty
that prohibits the
agent from advancing
any interests adverse
to the principal’s
interest or conducting
the principal’s business
in such a way as to
benefit a customer,
a subagent, the agent
or any other party
to the detriment of
the principal’s interest
unless required by
or common law – e.g.,
facts and defects of
A final inspection
of a home before
closing to verify
that the condition
of the property
and contents are