Financial Planning 100 Point Learning Contract
Real Estate Vocabulary - Related to Purchasing

Agreement of Sale
An agreement of sale is a contract in which a seller agrees to sell and a buyer agrees to buy. The agreement of sale has specific terms and conditions and is signed by both buyer and seller. It is also called a contract of purchase, purchase agreement, or sales agreement.

Appraisal Purchase
An appraisal is an estimate by an expert (called an appraiser) of the value of property as of a given date.

Binder or "Offer to Purchase"

This is the first step in buying the property. The buyer gives earnest money, like a deposit, saying that he will buy the property within a certain period of time. If the buyer changes his mind or cannot buy the property, the seller gets to keep the earnest money, unless the binder or offer to purchase stated that the buyer would get his money back.

Broker
(See real estate broker)


Closing Costs
Closing costs are the expenses for buyers and sellers that normally happen when property is bought and sold. These costs are not included in the price of the property and have to be paid at the closing day. This is a typical list:

BUYER'S EXPENSES
SELLER'S EXPENSES
Documentary Stamps on Notes
Cost of Abstract
Recording Deed and Mortgage
Documentary Stamps on Deed
Escrow Fees
Real Estate Commission
Attorney's Fee
Recording Mortgage
Title Insurance
Survey Charge
Appraisal and Inspection
Escrow Fees
Survey Charge
Attorney's Fee

The sales contract states in writing who will pay each expense.

Closing Day
Closing day is the day all the paperwork is finished and the sale is finished. The buyer signs the mortgage, and closing costs are paid. The final closing confirms the original agreement from the agreement of sale.

Commission
Money paid to a real estate agent or broker by the seller as payment for finding a buyer and completing the sale. Usually it is a percentage of the sale price- - 6 to 7 percent on property with buildings, 10 percent on land.

Condominium
Individuals own the apartment-like units (the space between the walls), and together all the owners of the units own the buildings and the common areas.

Contract of Purchase
(See agreement of sale)

Contractor
A person who agrees in writing (contracts) to build buildings or parts of them. There are also contractors for each part of construction: heating, electrical, plumbing, air conditioning, and others.

Cooperative Housing (Co-op)
Co-ops are similar to condominiums but with a different legal set-up. An apartment building or a group of buildings is owned by a corporation, and the stockholders are all the residents of the apartments. Owning the stock gives you an absolute right to occupy your unit for as long as you own the stock.

Depreciation
Depreciation is decline in the value of a property.

Documentary Stamps
Documentary stamps are required stamps on deeds and mortgages when property title passes from one owner to another.

Downpayment
The downpayment is amount of money to be paid by the buyer to the seller when the agreement of sale is signed.

Earnest Money
Earnest money is the deposit money given to the seller by the buyer when they sign the offer to purchase. It shows that he is serious about buying the property. If the sale goes through, the earnest money becomes part of the downpayment. If the sale does not go through, the seller gets to keep the earnest money unless the offer to purchase says he doesn’t.

Hazard Insurance
Hazard insurance protects against damages caused to property by fire, windstorms, and other common hazards.

Plat
A map or chart of an area showing boundary lines, buildings, improvements on the land, and easements.

Purchase Agreement
See agreement of sale.

Real Estate Broker
A real estate broker is a person who buys and/or sells real estate for a company, firm, or individual for a commission. The broker represents the owner, but does not have title to the property.

Sales Agreement
See agreement of sale.

Special Assessments
Special assessments are special taxes on property in the immediate area, to provide money for road construction, sidewalks, sewers, street lights, etc.

State Stamps
See documentary stamps

Survey
A map made by a licensed surveyor showing the land with its elevations, buildings, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender.

Zoning Ordinances
Local government laws about how a property can be used. For example, areas are zoned for just single family houses, apartments and condos, retail business, or industrial.