Ron Sitrin's Washington DC Real Estate Resource

Glossary...
For first time home buyers a real estate transaction can be a daunting process. Ron and his team have put together this glossary of often used real estate terms to help you better understand your real estate transaction.

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Appraisal
An assessment of your home's current market value conducted by a licensed professional (an appraiser). Mortgage companies require a current appraisal as part of the loan approval process. To determine your home's value the appraiser visits your home and takes into account factors such as: physical condition; neighborhood comparable's (based on average dollar per square foot); and construction comparable's (how much would it cost to rebuild the home).

Bid
The offer that a buyer makes to a seller to purchase their property. The details of the offer are laid out in the terms of the contract to purchase. When multiple buyers are interested in the same property bidding is the competitive process where the seller evaluates each buyer's offer to select the one that best meets his/her needs.

Borrowing Profile
A lender's term outlining how much you can borrow. Lenders will evaluate your income, assets, credit history and credit score.

Bottom Line
The final amount of money disbursed to the seller after all expenses are paid.

Buyer's Agent - Buyer Broker
A real estate agent who exclusively represents the buyer's interests in a transaction. The buyer's agent represents and advocates for the buyer and, in return, the buyer agrees to work exclusively with that real estate agent for a specified period of time. This relationship is outlined in a signed buyer representation agreement.

Closing
See settlement.

Closing Costs
The miscellaneous expenses paid by the buyer and seller when the real estate deal closes. These costs include the Realtor's commission, mortgage-related fees, attorney's settlement charges, transfer taxes,m appraisal fees, recording fees and title insurance.

Contract (to purchase)
A document initiated by the buyer that lays out a buyer's offer (or bid) to purchase a property. The contract details the purchase price and the condition of the transaction. The seller, accepting the terms of the contract, finalizes the sal of the home.

Contract Presentation
The meeting where the buyer's representative presents their client's offer to the seller and his/her agent. The presentation outlines the terms of the contract. The buyer does not attend this presentation because fair housing laws prohibit the seller from making a decision based on age, race, sex, nationality, etc. - which could be determined by the seller actually meeting the buyer.

Contract terms
The conditions - beyond the purchase price - of the real estate transaction as outlined in the contract to purchase (above). Terms are flexible variable that outline who does what, when, where and how. For example: when you take possession of the home and what repairs will be done beforehand. Terms can make a buyer's offer more appealing to a seller even if the actual price offered is lower. For example:
- Seller prefer buyers who are offering to pay cash or who have a strong financial position because there is less of a chance that the deal will fall through at the last minute due to financing problems.
- A settlement date that meets the seller's needs may make an offer very attractive.
- Sellers that prefer less rigorous inspection requirements (e.g., shorter time frame, number, type) that decrease the likelihood of finding expensive problems.
- The terms outline what conveys (what items are passed on to the buyer). So a seller might prefer a contract that doesn't require them to leave the buyer their fancy new curtains or Sub Zero refrigerator.

Counter Offer
A response to an offer - occurs when either party in a real estate transaction alters the contract's terms before the final signing. Typically, the counter offer is the seller's response to the buyer's initial offer.

Credit Score
An indicator used by lenders to determine how likely someone is to pay as agreed on a loan or credit card. Information from your application and credit report is used to determine if you'll make your payments in the future.
Credit score are derived from a computerized model based on a huge sample of actual credit profiles compared over time. A credit score takes into account:
- the length of the borrower's credit history;
- the relationship between the outstanding debt and available credit;
- credit inquiries, and
- whether the borrower has any delinquencies, collection accounts, judgments, or bankruptcies.

Discount Real Estate Services
Real estate offices that offer discounted sales commissions for reduced services.

Down Payment
The portion of the purchase price that the buyer pays in cash and does not finance with a mortgage. So the larger your down payment, the less you'll need to borrow and the smaller your mortgage payments will be.
Down payments may be as small as three percent of the purchase price. But lenders often view mortgages with larger down payments as more secure because more of the owner's money is invested in the property.

Earnest Money Deposit
Down payment money - usually three percent of the purchase price - deposited into an escrow account as a sign of "good faith." The deposit is made when the contract to purchase is presented to the seller. It demonstrates that the buyer seriously intends to purchase the seller's property. The deposit is credited to the buyer at closing or is returned if the contract is declared void.

Escrow Account
A separate, neutral account established by a real estate broker to hold documents and funds involved in a real estate transaction until all conditions of a sale are met.

Financing
The act of borrowing money to buy a home.

Hazard Insurance
Insurance for loss or damage to property caused by fire, tornado, flood or other disaster.

Home Inspector
A licensed expert who inspects a property for defects. The home inspector provides the buyer with a home operating manual - a guide outlining the proper operation, maintenance and repair of the systems in your home.

Inspections
Inspections are designed to evaluate the physical condition and financial value of a property. This information is important to both the buyer and the lender. Inspections and tests throughout the buying/selling process include:
- Home inspection: a check for defects in the home's structure and major systems such as plumbing, electrical, heating, AC, appliances, interior and exterior structure. May also include a lead paint and radon test.
- Termite inspection: check to see if there are/were termites and assess possible damage.
- Appraisal: a professional evaluation of the property's value (for the lender).
- Title search: a review of court documents to establish ownership and check if there are any claims against the property.

Interest Rate
The sum, expressed a s a percentage, that a lender charges you for using their money to finance your home. Interest payments on most home loans are tax-deductible.

Loan Program
Lenders establish specific qualifications for different loan terms. A loan term is the amount of a time the buyer has to pay back a mortgage (typically 15 to 30 years.) These qualifications, together with the loan regulations, are called loan programs.

Lead Paint
Lead is a metal found in older homes poses a health risk, particularly to children. Lead was used in paint (up until 1978), gasoline and water pipes. If you have lead in your home you can follow lead abatement procedures to avoid or minimize the health risks.
- Read more about lead and renovations at http://www.nsc.org/ehc/nlic/ledrep.htm
- Read more about lead and children at http://www.nsc.org/ehc/nlic/ledepa.htm

Letter of Pre-Approval
A letter from your lender that says you are pre-approved for the loan up to a specific dollar amount. See pre-approval.

Lien
A claim laid by a person or company on the property of another, as security for money owed (such as for unpaid services or back taxes). All liens must be satisfied before a house can be sold. To fins outstanding liens a title search is conducted. If no liens are found the seller is given a "certificate of clear title."
Buyers must purchase title insurance to protect them from liens not found in the initial title search. Title insurance is a one-time fee, usually around $3.50 per $1,000 of home value.

Listing Agreement
An agreement between a seller and a real estate agent outlining the time frame and the conditions under which the property will be made available for sale. Listing a property means placing it on the real estate market.

Local Market Condition
The combination of economic, social and political factors that influence the sale of homes in particular area.

Mortgage
A legal contract you sign to promise that you'll pay back the money you borrowed to buy your new home - plus interest. The mortgage specifies the loan term (the number of years you'll take to repay), interest rate and other costs like taxes and insurance. Your home is the collateral for your loan and the mortgage document gives the lender a legal claim against your house if you default on the loan's terms. This means that if you don't pay your mortgage the lender can take back the property and sell it to cover the debt.
There are many types of mortgages with different terms to suit your situation. During your pre-qualification interview with your lender you'll have a chance to ask questions and explore these options.
Common types of mortgages include:
- Fixed: The interest rate does not change during the entire term of t loan; typically come in 15/20/30 year terms.
- Adjustable-rate (ARM) - The interest rate that varies; it may increase or decrease based on market interest rates.

Multiple Listing Service (MLS)
An organization that collects, compiles and distributes data about all of the homes available for sale in an area - except For-Sale-By-Owner (FSBO) properties. Although MLS data may be sold to real estate web sites the actual MLS isn't open to the general public. MLSs are local or regional.

Offer
The proposal that a buyer makes to a seller to purchase their property. The details of the offer are laid out in the terms of the contract to purchase. An offer can be accepted, rejected or countered. Also called a bid.

Points - Discount Points - Loan Discount
Money paid to your lender at settlement so that you can obtain a lower interest rate on your mortgage. One point is equivalent to one percent of the mortgage amount.
Paying points may save you money over time - it depends how long you will hold your mortgage. To determine if it is beneficial to pay points, you must estimate how long you will hold the mortgage. Your lender can help you make these calculations.

Pre-Approval
Pre-approval is the process of securing guaranteed mortgage approval before you've found the property you want to purchase. This strengthens your bargaining position and eliminates a lot of the stress involved in buying a new home because you've taken care of much of the paperwork up front - now you can focus on looking!
To be approved, your lender will look at your credit score, debts and assets. Then they'll issue a "Pre-Approval Letter" guaranteeing in writing that they'll grant you a loan for a specified amount.*
Pre-approval demonstrates that you have a strong financial position - giving you a competitive advantage in the bidding process. Pre-approval also allows you to construct an offer with contract terms that meet the seller's needs. Not to be confused with pre-qualification.
* There's one catch - final disbursement of the loan is subject to terms outlined by the lender (usually including an appraisal and review of the sales contract). If the property you've bid on does not meet your lender's guidelines you'll need good negotiation skills and creative thinking. Don't worry Ron and his team will guide you through this unlikely scenario.

Pre-Qualification
Pre-qualification is a verbal, non-verified interview with a lender to determine how much you can borrow. This is the time to ask the lender questions to determine the best loan options for your situation.
During pre-qualification the lender will perform a cursory check of your credit, asset and debt status - usually in less than an hour.
Though pre-qualification gives any offers you make an added stamp of approval and may lead to a full pre-approval, final approval takes more time and there's no guarantee that you'll be approved for a mortgage.

Purchase Price
The final price both parties agree on to sell the property.

Radon Test
A test to determine the amount of radon gas in a home.
Radon is a toxic odorless radioactive gas that comes from the earth rock beneath a home, well water and building materials. It seeps into homes through basement drains, sump pumps or cracks in the foundation. Radon is a common occurrence: usually it moves up through the soil and escapes harmlessly into the atmosphere.
Radon is only hazardous in insufficiently ventilated homes where it can accumulate and be inhaled for long periods of time, contributing to lung cancer.
Radon became as issue in the mid-70's with the construction of energy efficient homes That did a better job of heating and cooling but also retained radon gases. The solution to high radon levels in a home is to install or upgrade the ventilation system.

Ratification
When both parties have signed and received a copy of the real estate contract.

Rent Back
When the seller rents the property back from the new owner for a specified period of time.

Seller's Proceeds
The final amount of money disbursed to the seller after all expenses are paid.

Settlement
The process where all parties in a real estate transaction (buyer, seller, agents, settlement attorney) meet to complete the financial dealing and contractual agreements. At settlement all debts are paid, adjustments made and money disbursed, and a deed is prepared in the new owner's name. Get ready to scribble your signature on a slew of papers! Also called closing.

Staging
Preparing your home to be put on the market for sale. preparations may include thorough cleaning, organizing and removing clutter, paining, replacing old fixtures, replacing carpet, and exterior landscaping.

Tax Incentives
Local tax rebates or reductions that a buyer receives for purchasing a home. For example, first time home buyers in DC receive a $5,000 tax rebate.

Termite Inspector
A professional who will look for termites and/or termite damage.

Term
The number of years it will take to pay off your loan, assuming that you're making regular payments.