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This glossary of real estate terms is a continuation of the page: Real Estate Glossary. This page covers the terms starting with M through Z.
Manufactured home: a house that is built (at least partly) in a factory, and not on-site. These include modular homes and mobile homes. They are sometimes harder to finance (especially mobiles), and the loans on them typically have higher interest rates than "stick-built" homes.
Manufacturer loans: mortgage loans from manufactured-home companies (or arranged and guaranteed by them). They often allow buyers to buy with 5% or less down.
Margin: an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Market Analysis: see Comparative Market Analysis.
Market value: the price a property should sell for at a particular point in time.
Merged credit report: a credit report that uses information from the three main credit-reporting agencies (Equifax, Experian and Trans Union).
MLS listings: the real estate for sale through the Multiple Listing Service. Most of these are on the website www.realtor.com.
Mobile home: a class of manufactured home that is factory-built and transported to the homesite. There are single-wide mobiles, which are built and transported in one piece, and are usually 16-feet wide or less, and doublewides, which are built and delivered in two pieces.
Modular home: a manufactured home, generally with 80% or more of it built in a factory. Unlike most mobile homes, modulars are built to standards that equal or exceed typical stick-built homes, with 2 x 6 walls, and good insulation the norm.
Monthly association dues: see Homeowners association dues.
Mortgage: a lien on the property that secures the promise to repay a loan. Also more commonly used to mean the loan itself.
Mortgage acceleration clause: see Acceleration clause.
Mortgage banker: a company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.
Mortgage broker: a firm that originates and processes loans for a number of lenders.
Mortgage insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.
Mortgage insurance premium (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance. You can usually have the mortgage insurance premium removed (it only protects the lender, not you) once you have reached 20% equity in your property, but you have to ask, and you may have to get an appraisal.
Mortgage interest deduction: a tax deduction the IRS allows most homeowners to claim for annual interest payments made on mortgage loans.
Mortgagee: the person, bank or financial institution that lends money to a borrower, and takes back a mortgage for collateral. The borrower is considered the mortgagor.
Mortgagor: the person who borrows money and gives a mortgage as collateral. The lender is called the mortgagee.
Mortgage Modification: a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.
Motivated seller: a man about to lose his business if he can't quickly sell his home, or a landlord about to go crazy if he has one more tenant eviction, or any seller with a strong need to sell a property soon.
Multiple listings: see MLS.
Negative amortization: when the monthly payment is too small to cover the principal and interest of a loan, and the balance grows larger with each payment. This can happen with some adjustable rate mortgages.
Negative cash flow: more money going out than coming in. This is usually caused at the time of purchase, by pretending that the only thing the rent needs to cover is the loan payment.
Net worth: the total value of things owned by a person or company after subtracting liabilities.
No-doc loan: a loan that doesn't require the borrower to provide evidence of a job or income (no documentation). These loans are based on property value, credit score of the borrower, or both. For example, a lender may make a no-doc loan on a house, but only loan 70% of the value, so the loan is safe. With a high credit score, they may loan 95% of the value. Interest rates are always higher on no-doc loans. A no-doc mortgage loan may commonly be 2.5% to 5% higher than a traditional loan.
Non-conforming loan: a loan which doesn't meet the qualifications to be purchased by Fannie Mae or Freddie Mac.
Nonrecurring closing costs: costs payable just once (appraisal, credit report, loan points, title insurance, home inspection, etc).
Note: a loan agreement, such as those for a mortgage loan or a land contract or other financing. Notes can be sold, although usually at a discount. A note that the borrower owes $100,000 on, for example, might be bought for anywhere from $65,000 up to face value, depending on the credit score of the borrower, the interest rate, and other factors. The borrower then makes payments to the new owner of the note.
Note broker: A person or company that arranges the sale of notes to a note buyer for a commission.
Note buyer: a person or company that specializes in buying real estate notes.
Note rate: the specified interest rate of a mortgage note or other loan.
Nothing down: see Zero down.
Occupancy rate: the rented units in a building or property or area, expressed as a percentage. For example, if 34 of 38 units are rented, the occupancy rate would be 34 divided by 38: 89%.
Offer: indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing. Also called a "purchase offer," or "offer to purchase." See also; Counter offer.
One party listing: a contract with a broker to sell a property to a particular person or company. This typically happens when the seller is selling on his own, but a broker has a potential buyer they want to show the property to. Of course, they will only do so if they get a commission on the sale, hence the agreement. The buyer only pays the commission if that particular party buys the property.
Open house: a prospecting tool for real estate agents, whereby they let the public walk through a seller's home with their muddy feet, under the pretense that this is an effective way to sell a home, while actually gathering names of people who want to buy other homes.
Open listing: a property which is marketed by multiple real estate agents simultaneously .
OPM: acronym for "other peoples money." It is a major concept in real estate investing, because it is using other peoples money that gives the leverage necessary to make big returns.
Option: a agreement that gives the option holder the right, but not the obligation, to buy a specific property. In other words, if you pay $1,000 for a one-year option to buy a piece of property for $100,000, you can choose to do so within that year, but you don't have to (of course the $1,000 is not refundable). Commonly used when you are not sure about getting the financing or zoning changes or other things in place for a project, but you don't want to lose the property (or when you think you have a buyer for $150,000 in the above example).
Option ARM: an adjustable rate loan some lenders are offering that allows you make various payment options each month, from paying only the interest to paying the full interest-and-principal payment.
Origination: the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.
Origination fee: the charge for originating a loan; is usually calculated in the form of points and paid at closing.
Paper: a general term for loan documents or promissory notes. See Notes.
Partial Claim: a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.
Partial release: a clause in a mortgage that allows some of the collateral to be released from the lien if certain conditions are met. If the mortgage covers two rental homes, for example, one might be released once the balance on the loan is below a certain amount.
Partnership: a business organization of two or more people. In real estate, a limited partnership is perhaps the common form. In this legal structure, there is one or more general partners, who make all the decisions and are financially liable for the effects of those decisions, and limited partners, who basically just invest their money, and have limited liability (as long as they don't take part in managing and decision making).
Per-diem interest: interest that is charged or accrued daily.
Periodic rate cap: a limit on the interest rate increase (or decrease) during any adjustment period. This keeps those ARM payments (or at least the interest) from going up too fast.
PITI: Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
PMI: Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price. See also; Mortgage insurance.
Points : see Discount point.
Pre-approval: a lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. Getting pre-approved makes sellers take your offers more seriously.
Pre-foreclosure sale: allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.
Prepaid expenses: items such as taxes, insurance, and assessments that are paid before the due date.
Prepaid interest: interest that is paid before it is due. This is commonly collected on loans at closing, for the remaining days of the month, so that payments can begin on the first of the following month. That way you don't have a payment due 11 days after you close.
Pre-qualification: a lender informally determines the maximum amount an individual is eligible to borrow. This is not a pre-approval, but knowing how much you can borrow is the least you should do before looking for property to buy.
Premium: an amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Prepayment: payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty. Ask about prepayment penalties before you sign for a loan, especially if you think you'll be paying off the loan early.
Principal: the amount borrowed from a lender, or remaining balance owed, but not including interest or additional fees. In regards to payments, it is the part of the payment that goes to reduce the principal owed on the loan (the other, often larger part, is the interest).
Private financing: financing provided by a person or company other than a bank or other institutional lender. Usually, but not always, this means the seller.
Private mortgage insurance (PMI): see Mortgage insurance.
Pro-forma income: the income the seller of a rental property wants you to think the property is making. Actually it is just his rosy projections. It is usually best to ignore this and ask for the actual income figures from the past year.
Profit: the amount you make after all expenses, usually ranging from 0% to 150% of the amount you thought you would make, depending on your math skills and common sense.
Property management company: a company that manages income properties, including renting out units, collecting rents and arranging for minor repairs. They are usually paid a percentage of gross rents collected, ranging between 5% and 15% for different types of property in different areas.
Property tax: the tax paid on real estate. It is most commonly paid semiannually (twice per year), or monthly if the lender requires it to be escrowed. The tax amount is determined by applying the local tax rates to the assessed property value.
Proration: the dividing up of expenses paid and due, at closing, according to the time of ownership of each party. For example, if the seller already paid property taxes of $2,000 for the year ahead, and the closing is 113 days into that year, the buyer owes him $1380 for the other 252 days (since he will be the owner during that time - $2,000 divided by 365 days times 252). If the taxes are paid "in arrears," meaning after the year is past, then the seller owes for his 113 days, since the buyer will be paying the whole bill at the end of the year. Other things prorated include rents, sometimes insurance (if it transfers), and anything that is paid ahead or in arrears.
Purchase money mortgage: basic seller financing; a mortgage given to the seller, so he can take back his property if the buyer doesn't pay according to the agreed-upon terms.
Quitclaim deed: a deed that releases a person's interest in a property. These are often used when it isn't clear if they have an interest, just to be sure they don't. It isn't the same as a warrantee deed, which positively warrantees that the property belongs to the one conveying it.
Radon: a radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.
Real estate agent: an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.
Real estate investment trust (REIT): a security which is sold like a stock. REITs invest in real estate directly, or through mortgages. They are not treated the same as stocks for tax purposes, so ask your accountant about these before investing.
Real estate note: see Note.
REALTOR: a real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.
Reassessment: a redetermining of the value of a property for tax purposes. There are usually procedures for requesting this if one thinks their property is over-assessed.
Record: to record something (like a deed or lien) is to have it copied into the public records of the governing body (the city, county, state, etc.) where the transaction takes place.
Recording fee: the fee a government charges for putting documents into the public record.
Redemption period: the amount of time a person has to legally redeem their property lost due to a tax lien. This can be as much as a year in some states.
Refinancing: paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).
REO: "real estate owned," the term used for real estate that banks and other lending institutions own. These are the properties they have foreclosed on and are usually anxious to sell.
Rehabilitation mortgage: a mortgage that covers the costs of rehabilitating (repairing or improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.
Rent roll: a listing of all the units in a property, who the tenants are, how much they pay, and (hopefully) whether they have been paying on time.
Rental history: the record of the units in an income property, showing how long the tenants have been staying, how much the units have been renting for, and other information.
Rental property: any property that is owned primarily to be rented out for a profit.
Replacement reserve: money set aside to replace roofing, fencing, painting and other such inevitable expenses. If you don't allocate some money to this in your figuring of expenses for an income property, you may find that your projected cash flow disappears.
RESPA: Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships.
Return: the profit you make on your invested money. See also; Cash on cash return.
Reverse mortgage: a home loan for your final years, paid out either in one lump sum, as a regular monthly check, or at times and in amounts you choose. The balance and interest are repaid once you sell, permanently move, or die. A way to live in your equity and eat it too.
Right of first refusal: generally, the right to purchase something before it is available to others. For example, if you have the right of first refusal on a property (perhaps one that you are leasing), and an offer comes in for $300,000, you have the opportunity to buy it for that price, with the same terms. Only when you refuse to do so can the seller accept and complete the offer.
Second position: see First position.
Secondary market: the market for mortgage loans, most of which is Fannie May and Freddie Mac. Few banks keep their own loans now, preferring to sell them to the secondary market.
Section 8: a government program that guarantees a portion of the rent for eligible renters renting in eligible buildings.
Security: collateral for a loan; the home in the case of a mortgage loan.
Seller financing: financing help from the seller. This can be a mortgage loan, a land contract, a personal loan, or anything that involves paying the seller over time.
Settlement: another name for closing.
Settlement or closing fees: see Closing fee.
Settlement statement: see Closing statement.
Shared-appreciation mortgage: a mortgage loan that gives the lender a share of the borrower's profits when the home is sold.
Slumlord: slang for a landlord who rents less-than-perfect apartments.
Special forbearance: a loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.
Speculation: buying just because you think the value will quickly go up. Also called gambling.
Split: to legally divide a piece of land into more than one parcel. When you see "can be split," it means that the zoning allows for legally dividing the property.
Stated income loan: similar to a no-doc loan, except the borrower must provide evidence of a business or other source of income. The amount of income is not verified, and the lender considers the borrowers credit score. These loans are common for small business owners and others with variable or hard-to-document income.
Step-rate mortgage: a mortgage loan that has a gradual increase in interest rate during the first few years of the term. The increases are scheduled, and not dependent on an index, as in ARMs.
Stick-built home: a wood framed house that is built on the homesite, as opposed to a manufactured home.
Sub-contractor: see Contractor.
Subdivision: the process of legally dividing a larger tract of land into smaller lots. This is done with the help of a surveyor, and the resulting property lines of the new lots are recorded with the local authorities. The conditions and covenants (no farm animals allowed, no junk cars, etc) that the developer or subdivider creates and attaches to the titles are recorded as well.
Subordinate: to place in a rank of lesser importance or to make one claim secondary to another. A second mortgage or home equity loan, for example would be subordinate to the primary mortgage loan. In other words, if you stop paying any of your loans, the primary lender gets to foreclose and sell your house, and get their money back. Any subordinate lenders can only collect from what is left over, if there is any money left.
Substitution of collateral: when a borrower substitutes another property as collateral for a loan. This may be done so the borrower can split the land and sell it, or so he can sell a house on terms, or for a variety of reasons. The lender has to agree, and the collateral substituted must normally be of equal or greater value.
Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc. Surveys are not normally required when buying properties on city lots, unless there is a question about a garage that is close to the line, etc. They are commonly needed when buying large parcels of land.
Sweat equity: value added to a property by the owner's
labor, such as home improvements.
Tax lien: a lien against property for nonpayment of taxes. Tax liens are placed by the taxing authority (the local government) and often sold to raise money.
Teaser rate: a low (and only temporary) interest rate offered on an adjustable rate mortgage to make the borrower think it's a better deal than it is
Tenancy by the entirety: a form of ownership in which owners (usually husband and wife) both hold title to the whole property with rights of survivorship (if one dies, the other is the owner automatically).
Tenancy in common: ownership in which owners hold an undivided, but not necessarily equal, interest in a property, without right of survivorship. If one owner dies, her share is part of her estate, to be inherited by whoever she designated.
Tenant: a renter in a property.
Terms: the specific conditions and details of an offer. These are often as important or more so than the price. For example, you could have greater cash flow from a property even if you pay more for it, if you get a better interest rate, or have the loan amortized over a longer time.
Timeshare: a form of ownership that gives the owner the right to use the property for a specific period of time. Common with vacation homes or resorts.
Title: the legal document proving ownership of a property. Paper titles are used for mobile homes and other property, but with real estate, legal title resides in the whole of the recorded documents, and is transferred by way of a deed.
Title company: a company that examines property titles and provides title insurance.
Title exam: a search of public records to determine if the seller is the legal owner and if there are any encumbrances affecting the property.
Title 1: an FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title 1 loans less than $7,500 don't require a property lien.
Title insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for home buyers. It is common in many areas to for the seller to provide a title insurance policy to the buyer.
Title search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.
TransUnion: one of the three major credit bureaus in the country.
Triple net lease: a lease in which the tenant is responsible for all of the costs. Specifically, this usually includes lease payments, property taxes, insurance, any upgrades, utilities, repairs, etc.
Trust deed: similar to a mortgage; it allows the lender to take the property if the loan is in default.
Truth-in-Lending: a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.
Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.
VA: Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.
Vacancy rate: the inverse of the occupancy rate. In other words, the number of empty units divided by the total number of units. For example, 4 vacant units divided by 38 total means a vacancy rate of about 11%.
Variable rate mortgage: See Adjustable rate mortgage (ARM).
Voluntary lien: a lien that the owner of a property agrees to. A mortgage, for example, is voluntary, as opposed to an IRS or mechanics lien on the property.
Weasel clause: a clause in an offer that lets you back out of a deal (weasel out). "Subject to my wife's approval within seven days," for example, means that you can bring your wife and use her disapproval to cancel the deal for any reason. Another common one is "Subject to inspection of the property and buyer's approval of the inspection results within ten days." In other words, whatever the inspector finds, you have to say it's okay, or you can back out of the deal.
Zoning: the division of a municipality or area into zones, each with it's own permitted uses. Areas are commonly zoned "residential," "commercial," and "industrial," but with many sub-classifications. It is especially important to know the zoning of a property (and what it means) if you plan to change its use.
Note: This glossary of real estate terms is included as a printable PDF bonus with the ebook "69 Ways To Make Money In Real Estate." For more on that, visit http://www.99reports.com/make-money-in-real-estate.html.