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 involved in real estate transactions. Read on to learn more about the terminology of this specialized area.
Appraisal: An appraisal is the estimate of value of real property made by a third party not involved in the transaction. Appraisals usually involve comparing the sales price to the value of similar properties in the area. Mortgage lenders typically require an appraisal before they will make a loan.
Assessment: An assessment is a charge for improvements made by the local government that are beneficial to adjoining property. Sidewalks and road work are common examples of improvements which give rise to an assessment. Property owners who receive a benefit from the improvement are assessed a proportional share of the cost of the improvement.
Broker: A real estate broker is a licensed person or organization who negotiates real estate contract sale terms such as pricing, inspection periods, and closing dates between the parties in a real estate transaction. Real estate agents are also licensed representatives who work for brokers. In Missouri, realtors are not licensed to draft contract language or provisions. They may only fill in blanks on board approved sale contract forms.
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 for which he or she is responsible, while the seller executes the transfer deed and hands over the keys to the property.
Condominium: 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. Condo owners will have to pay association fees in addition to mortgage payments and their own insurance.
Contract 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. A Contract for Deed is never recommended and can cause numerous legal problems. The preferable route is either a seller-financed transaction, with the seller taking back a promissory note and deed of trust (mortgage), or a lease with an option to purchase.
Deed: A deed is a document that transfers an interest in real property. A warranty deed is a deed in which the seller promises that the title to the land is good and complete. A quit claim deed transfers only the rights that the transferor has, with no promise that the transferor has full title or that there are no liens against the land. An easement deed is for a legal right of access to a property.
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; in Missouri, these rarely involve the judicial system or court appearances.
Mortgage Loan: A mortgage loan is a loan secured by the real estate that the buyer is purchasing. Mortgage terms may allow for fixed or adjustable interest rates or may include balloon payments. At closing, the buyer signs a promissory note and deed of trust (mortgage), among other closing documents.
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, 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 for which he or she may be responsible.
Survey: A survey is a mapping of land boundaries, improvements and recorded easements on real property. A lender will frequently require a survey of property, especially commercial or rural property. There are several types of surveys available that you will want to discuss with your Real Estate lawyer. A survey is almost always recommended and can reveal legal issues concerning the property, such as encroachments, that should be resolved by the parties before closing.
Title Insurance and Title Report: Title insurance protects against title defects not excluded by the policy. A title report is a written statement of the current condition of the title. A title commitment sets forth the requirements for the title company to insure the title. A title insurance policy can protect and help insure good marketable title for peace of mind. In addition, our law firm provides counsel and assistance with reviewing title insurance commitments and submitting title insurance claims.
Speak to a Real Estate Lawyer
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 who has 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 concerning his or her transaction.
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