Real estate law includes lots of jargon and “legalese” that can be intimidating or at least confusing, especially to first-time homebuyers. An attorney with experience in real estate law can help a buyer or seller understand the terms and concepts pervasive in real estate. Read on to learn more about the terminology of this specialized area.
Appraisals: An appraisal is the estimate of value of real property made by a third party not involved in the transaction, usually comparing the sales price to the value of similar properties in the area. Mortgage lenders usually require an appraisal before they will make a loan.
Assessments: An assessment is a charge for improvements completed by the local government that are beneficial to adjoining property (such as sidewalks or road work). The assessment is each benefited property owner’s proportional share of the cost of the improvement.
Brokers: A real estate broker is a licensed person or organization that represents either one of the parties in a real estate transaction. Real estate agents (or realtors) are also licensed representatives who work for brokers.
Closing: A closing (sometimes called a settlement), is the last stage of a real estate transaction. At the closing, the buyer finalizes his or her mortgage and pays any closing costs he or she is responsible for, while the seller finalizes and hands over the deed and the keys to the property.
Condominiums: Condominium (“condo”) owners own their individual residential unit, and also have a right to use the common areas in the development, which are owned by the condominium association. The association maintains the property, pays taxes and insurance, and deals with improvements. A condo owner will probably have to pay association fees in addition to mortgage payments.
Contracts for Deed: A contract for deed allows a seller to keep legal ownership of property while the buyer uses the property and makes monthly payments until the purchase amount is paid.
Deeds: A deed is a document that transfers ownership of real property. A warranty deed is a deed in which the seller promises that the title to the land is good and complete. A quitclaim deed transfers to the buyer only the rights that the transferor has, with no promise that the seller has full title or that there are no liens against the land.
Foreclosure: When a homeowner defaults by failing to make payments on his or her mortgage, the bank or financial institution that holds the mortgage note may foreclose on the property. Foreclosure gives the legal ownership of a property to the bank to allow the bank to recoup its investment. Foreclosure proceedings vary by state, but usually involve court appearances to ensure the foreclosure is warranted.
Mortgage Loans: A mortgage loan is simply a loan secured by the real estate the loan is allowing the buyer to purchase. Mortgage terms may allow for fixed or adjustable interest rates, or may include balloon payments. The functioning, legal effect, and foreclosure of a mortgage varies greatly from state to state.
RESPA: The Real Estate Settlement Procedures Act (RESPA) imposes obligations on mortgage lenders and other vendors involved in real estate transactions. Under RESPA, borrowers must receive disclosures detailing the costs associated with the transaction, and must also receive copies of the lender’s servicing and escrow account practices and a description of the relationships among the service providers to the transaction. Mortgage lenders must also give borrowers a fair estimate of the service charges he or she may be responsible for.
Surveys: A survey is a mapping of land boundaries, improvements and easements on real property. A lender will frequently require a survey of property, especially commercial or unplatted property, and will require the parties to address any irregularities that show up on the survey.
Title Insurance and Title Opinions: Title insurance protects against title defects not excluded by the policy. A title opinion is a lawyer’s written statement of the current condition of the title. Either title insurance or a title opinion can help a buyer comfortable with the validity of the purchase.
Conclusion
A real estate buyer or seller will encounter most, if not all, of the above topics when involved in a real estate transaction. Each of the above topics is complex, with details that vary greatly from state to state and transaction to transaction. An attorney with experience in real estate law can help a buyer or seller interpret and analyze the application of all of the laws related to the above topics to his or her transaction.
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