The following advice for buying is supplied as general information for home buyers, especially first time home buyers. While it gives some good general advice, you should carefully assess your own needs for both the present and future. Along with these buying tips, you will find forms that will help you in assessing what you can afford and the type of house is right for you.

Basic Home Buying Tips

So you are about to buy a new home! Whether you are a first time buyer or looking to upgrade to another home that better fits your lifestyle, there are a few basics you should consider during this process. If you consider the following tips as a guide, they should help you to successfully find the next home of your dreams.

The first truism to remember is that the three most important factors in buying a home are Location! Location! Location! A bad location will remain a bad location. Don’t be inclined to buy anything, anywhere just because it is new and shiny. When the time comes to sell, it will no longer be brand new and the next buyer will not be as enchanted then as you are today. It will not matter how pretty it is if it is poorly located.

Don't buy beside a major road, or backing up to a dump or commercial property unless you get the property for at least 10% less than a better-located property. You will take a minimum 10% hit when you finally sell. Don't buy a lot on a corner, or backing up to a vacant field. It may not bother you, but it will make it very difficult to resell.

Poor construction will not improve with age. Does the builder have any other existing homes that are at least 10 years old in a comparable price range? Take a look at them. How are they holding up?

In any new home purchase, refrain strenuously from over-building and over-improving. What does that mean? Builders have all kind of options that add drastically to the cost of your home that you will not recover when you resell.

Some Basic DON'TS

DON'T over-improve your first house. Keep the upgrades within reason and your budget. If in doubt, don't.

DON'T spend thousands of dollars on the "best" carpeting. By the time you sell, the carpeting, any carpeting, will probably need to be replaced. Get decent, not extravagant quality.

DON'T pay for the upgraded "elevation.', Elevation means the outside design of the house. If this a home that will be outgrown, then don't spend money here, there will be no return at resale. The standard will be just fine! People expect to have a front on the house and floor coverings. They will not pay a premium when it's time for resale. Don't pay for It when you buy.

DON'T pay for fancy ceilings or fancy windows. Everyone who comes after you will love them but no one will pay you for them.

DON'T pay for a "premium" lot in a house that you don't plan to spend twenty years in. Especially for a first time home, you have better places to spend your money. It is not at all unusual for a premium lot to add a minimum of 5% to 15% to the price. When it comes time to sell, the premium lot may help your home sell faster, but you seldom get a better price than the house across the street. This is not true for golf course or waterfront locations. Those really are premium lots.

DON'T pay for "custom" wood cabinets. On the other hand, don't take the vinyl. Is there a standard wood pack? Wood can be sanded and refinished. A nick in vinyl and it's gone. Replacing all of the kitchen cabinets will cost more than paying for the standard wood, even if that's a bit more than the vinyl.

DON'T go overboard with upgrading the baths and kitchen You are encouraged to think that no one uses the standard grades. That depends on the standard grades. Take a sample of the standards for tile, flooring or carpet, or a flyer describing the models of appliances, to a home improvement center and compare it. If the standard is not going to last at least five years, then maybe you do want to upgrade a bit, but keep some perspective on it' and try to keep all upgrades way under 5% of sale price. But then again, you may want to question the purchase of a home from a builder who uses lesser quality material as their "standard".

The basic DO’S

DO buy the "wood" package. Vinyl doors and cabinets can't be repaired or refinished and cost you more in the long run. Wooden doors and wooden trim are usually worth the money as long as you stick with the basics.

DO install neutral colors for all permanent items like sinks, toilets and tile. This is not the time to be "artsy" or "new and daring." Think beige or neutral gray. It may not be exciting, but it will never be offensive.

DO have another bath done now or at least roughed in if you are going to need it later. It will cost twice as much to start from scratch later.

DO spend money on space rather than bells and whistles.

DO buy better padding for the carpet. Its cheaper than better carpet.

DO ask if the builder is willing to give you a better deal on anything. Occasionally the builder is trying to move a particular house or lot, or his financing, and will give concessions to do so. Never hurts to ask.

DO read the contract thoroughly and ask lots of questions before signing. Never accept a verbal agreement that is not backed up in writing.

DO use a reputable agent or attorney for advice on legal matters. And a Realtor can be a valuable asset. The price is the same, with or without them. You may as well get the help they can provide. A good agent will know who has a good reputation and who doesn't. They will also understand which items will bring you dollars at resale.

Resale may be a better deal. It all depends on the market. If there is a lot of product for sale in your price range, you may do better on a resale.

Again, think about location first. If the location is poor and you can get the house for 10% to 20% below comparable properties and you like it, it may be a deal. However, you will very likely need to price at the same discount when you go to sell. Paying for a better location is usually a good investment.

To get the best deal on a resale house remember that houses, like clothes, go in and out of style. If there are a lot of a particular type of house on the market and they are slower to sell, you may get a better price. If you have to buy what is "fashionable," you will pay top dollar because everyone else wants it too!

The best house for your money usually needs some cosmetic work. You can also save a lot of dollars if you can see past what most people can't. Many perfectly fine houses with great floor plans, and good construction are simply dirty, need a new paint job, new carpeting or some minor landscaping. They don't sell. If you can do the painting, re-carpeting, cleaning, or tidy up the landscaping, you may be able to stretch your dollars and buy more house. Those things are usually within the budget of a first time home buyer, so keep your mind and your eyes open for such opportunities. Any more than that and you may be talking about a major investment that you probably can't afford.

You may be thinking, "If they aren't clean and tidy, have they maintained the home?" That's what building inspectors are for, to answer that very question. If you are interested in buying a home, paying for a building inspection is always a good idea.

Next, ask about empty fields, or empty lots. What's going in there? Stop by the planning and zoning office for a map. Strike up a conversation with the help and get the inside information as well as the official line. You don't want to move in and find out a major highway will be next door within the year!

Check out neighborhoods that are starting to revive. Most areas have cycles. They start off wonderfully. The population ages, the neighborhood may get slightly tacky. Young people start to buy as the older folks move to warmer climates. Children start playing in the yards and it's ready to come back. Typically, you see room additions, and improved landscaping. That might be a place of growth. Walk the neighborhood, chat with folks.

When buying, watch for trends. Growth follows major highways and train lines. In most towns, west and northwest is where the better neighborhoods develop. There are some major exceptions, but check it out.

How do you look at a house? Start on the outside. Do you like the neighborhood? Does that matter to you? Many people live inside the houses, spend little time in their yard, and never socialize with their neighbors. In that case, the neighborhood has significantly less importance.

Start with the other houses on the street. Are they well maintained? That will affect resale when the time comes. A lot of people buy primarily on curb appeal, and that includes the neighbors! Next look at the condition of the driveway, and sidewalks. Concrete is expensive. Blacktop is more reasonable.

Up to the roof. Any shingles flapping in the breeze? Are the gutters firmly attached? Does the exterior need paint? How much? Trim alone is not too bad. The whole house? If you're not inclined to paint it yourself get an estimate if everything else is right.

When you go inside, try to disregard the furnishing and all decorations. The seller usually takes those things with them! Don’t be swayed by someone else's possessions.

That's one of the reasons that new homes sell so well. They have been professionally decorated, and you think your home will look just like that when you move in!

Before you get hung up in other details, check the floor plan. That's the main thing after structural soundness. Does the house flow for you? Can you imagine living there? If you spend all your time curled up in the family room (or the living room) and it is tiny or has no sunshine, would you be happy there? If you love to cook for lots of people and the kitchen is small, with little storage space, this may not be the house for you!

New or Resale? Do your homework and research first. Then the decision is up to you.


Buying Your Next Home at a Fair Price

Most of us are concerned about paying "too much" when we buy a house. There are several things that can be done to educate yourself. The trick is knowing how the game is played, what the other side wants and how to establish a fair price.


In most places you will be expected to give a 'deposit or earnest money with your offer to purchase real estate. Usually the more money you can come up with at this point, the better position you will be in to negotiate.

Put yourself in the sellers' shoes: Your offer will be taken more seriously you accompany your offer with a check for a reasonable amount of earnest money. And if you have taken the time to prequalify for a loan, that will give you even more credibility.

A basic rule of thumb is that the more you want to negotiate the price, the higher the earnest money should be. There are only four basic things that one negotiates when purchasing a house: Price, dates, personal property, and earnest money. If you want the best price, you cooperate on the sellers' dates, and don't ask for anything extra in the personal property. If the date of closing is important to you, you may have to flex on the price if the date doesn't suit the seller. If you want extra personal property that the seller didn't plan to leave with the house, you'll probably pay a bit more.

The logistics of the negotiating process. If you are buying through a Realtor, the agent who has shown you the house usually writes up the contract (or agreement) for you to sign. Keep in mind that typically the agent is being paid by the seller and first allegiance is to the seller: That does not mean that he or she won't treat you fairly. It does mean that the Realtor is legally obligated to tell the seller anything you say that has to do with the negotiations. In some states you may be able to work through a "buyers" agent or an attorney. These agents are not obligated in the same way to the seller, however they are obligated to conduct all negotiations in an upfront and ethical manner. Check with the local or state real estate board where the home is located for regarding your options.

Prior to making an offer to purchase, you need to find out the sale price of comparable homes in the immediate area. In many areas a Realtor will be able to share that information with you. If not, go to the county court house or contact an appraiser. Real estate transactions are public information.

You must expect to pay the seller a fair price, but you don't have to overpay. When comparing the prices of other similar houses that have sold, you want to compare similar properties. This process will assure you that you are not paying too much. If the house you want has a garage and the other house sold didn't have one, you'll usually pay more for the added feature.

Rough estimates for the comparison process:

A fireplace equals central air in a similar home.

A garage equals a basement.

An extra bedroom equals an extra bathroom.

Adding or subtracting for condition seldom changes the price by much more than 5%. If you're going to pay much more than a 5% premium, (for super good condition) go to a better neighborhood with your money! After you've seen the other recent sales, decide what you want to offer the owner. When the list price is within 10% of the previous sales prices of comparable homes, usually offers that are within 5% of listing price have the best chance of being successfully negotiated.

Different areas handle the actual presentation to the seller in various ways. When Realtors or other agents are involved, either one or both of the agents present the offer to the seller. Ask your agent for a time frame. At what time will the offer be presented to the seller? When can you expect to have a response? This is usually within an hour or so. Try also to schedule when and where can you get together again if there are changes to the contract. There is not a contract until there is agreement to all parts and all changes have been initialed by all parties. It is tempting to let the details go until "tomorrow", and that may not be a problem. Then again, another offer can come in, or the seller can change his mind. Until that contract is fully executed, that is, signed and all changes initialed, you don't have bought the house.

During the negotiation process, keep in mind that all four areas can flex. You might choose to put a few things on the contract that you are willing to let go. For example you may ask for the refrigerator that you don't really have to have, so that you can give it back later as a point of concession. You also don't want to give your absolute best offer right off the bat. When the offer is immediately accepted, the buyer thinks he's paid too much and the seller feels he received too little. So play the game just a little bit to make sure every one is happy.


First, you need to make mortgage application. If you have not already chosen mortgage lender to deal with, your agent may suggest several companies and loan officers that they have worked with previously with success. This process will obviously be easier if you have already obtained a commitment from a reputable lender.

After the application, your lender will not have much to report for about two weeks. Make a date to talk in two weeks about the status of your loan. The house will be appraised within a few weeks, a survey will be done. The single thing that most often keeps loans from being approved on time is the buyer not furnishing the documentation requested in a timely manner. You will most likely be asked for paystubs or proof of income, W2’s and income tax filings for the last two years, bank account records, and any other sources of money to be used for a downpayment. The lending institution will also run a credit report on all members of the buyer’s party that will be responsible for making the payments and be listed on the title. If there is a questionable entry on a credit report, you will be asked to give a written explanation.

Please note that a prequalification with a credit check by a lender will usually point out any credit problems ahead of time, giving you the opportunity to either clean up the problem, prepare a reasonable explanation ahead of time, or shop for another lender that has a more lenient lending policy or program.

7 Basic steps for buying a house or property

Buying property should be a methodical process. It involves certain steps in order to make sure the purchase a success. When approached with a clear understanding , and a plan in mind, it can even be enjoyable. The following are typical steps the buyer must take to achieve their goals:


1. Its a good idea to check with a mortgage company, bank or real estate agent to pre-qualify. This helps to determine the amount of property you can afford before you start looking for one. Some banks and mortgage companies can also offer you a pre-approved loan. It is a good idea to get pre-approved because you usually only have to pay for the credit check and it will oftentimes give you an edge in later negotiations. You can also get a rough idea of how much you can afford by using the FSBO Central's loan calculators.

2. If you can not find the property you are looking for on the FSBO Central service, you may want to select a real estate professional to help with the property search process. Your agent should be able to narrow your search to the property that fit your purchase price, your wants and needs, and the locations you desire. You can also advertise on FSBO Central listing the location, price and amenities for which you are looking.

3. Once you find a property you are interested in purchasing, you will need to make a written offer to purchase. The offer to purchase can be written by either your lawyer, or a helpful real estate agent. You need to have someone who is helping you look after your interest in the transaction! Negotiations over the price, terms and conditions of the offer to purchase are done in this phase. It is important to make sure that you have adequately written contingencies to protect your interest and cover all important areas such as your ability to obtain financing, results of an inspection, closing date, clear title, etc.

In some areas, sellers are able to offer a home warranty package. This an insurance policy that usually covers replacement or repair in case of major appliance failure and most structural failures for a stated period of time. If not already offered by the seller, you could include it in your offer to purchase.

4. If the offer is accepted by the seller, a contract of sale is created. The next step is to take the offer to a loan officer. If you have been pre-approved, they will help you to move to the next stage in completing the financing for the purchase. If you have been prequalified, go to your chosen bank or lending institution to get the formal process started.

5. If you are buying a home or other building, you should have the building inspected by a professional building inspector. The inspection cost usually runs about $200 and should be one of the contingencies in your offer. Most contracts give you a set amount of time in which you must give a written response to the seller listing items which you want corrected.

6. As you satisfy the contingencies in your offer to purchase, you may have to remove them through an amendment to the contract of sale. Consult your contract for specifics. If you have questions, consult your agent or attorney.

7. Once all of the contingencies have been resolved and your loan has been approved, you are ready to close on your loan and purchase the property. The date is usually specified in the offer to purchase and the contract of sale.


Take some time to really think about what is required and what is wonderful but less than essential. Consider how long you plan to keep the home, the size of your family today and during that time, the style of living you wish to enjoy.


A: The House

2 3 4 More
number of bedrooms ____________ ____________ ____________ ____________
number of baths ____________ ____________ ____________ ____________
Eat-in kitchen __________ __________ __________ __________
Dining room __________ __________ __________ __________
Family room __________ __________ __________ __________
Laundry Room __________ __________ __________ __________
Office __________ __________ __________ __________
Basement __________ __________ __________ __________
Patio __________ __________ __________ __________
Garage __________ __________ __________ __________
Carport __________ __________ __________ __________
Barn/Stables __________ __________ __________ __________

B: The Features

Dishwasher ____________ ____________ ____________ ____________
Refrigerator ____________ ____________ ____________ ____________
Central Air ____________ ____________ ____________ ____________
Fireplace ____________ ____________ ____________ ____________
Whirlpool ____________ ____________ ____________ ____________
Tub ____________ ____________ ____________ ____________
Swimming Pool ____________ ____________ ____________ ____________

C: The Style - Single Family

One level ranch ____________ ____________ ____________ ____________
Two story ____________ ____________ ____________ ____________
Two level ranch ____________ ____________ ____________ ____________
raised ranch  or bi-level ____________ ____________ ____________ ____________
Split or tri level ____________ ____________ ____________ ____________

The Style - Attached housing

Duplex   (Attached to one other home) __________ __________ __________ __________
Townhouse (houses in a row) __________ __________ __________ __________
Condo             (like apartments) __________ __________ __________ __________
Quads       (houses grouped together) __________ __________ __________ __________
Co-op Apartment __________ __________ __________ __________

D: Other

_________________ ____________ ____________ ___________

_________________ ____________ ____________ ___________

_________________ ____________ ____________ ___________


Please answer these questions: (use two sheets if more than person is buying)

We suggest that you do this exercise separately, then discuss your answers to find consensus. ,

I regard my home primarily as a place

____to relax and be myself,

____ to entertain,

____ to raise a family.

True or false:

1. The inside of the house is more important than tile neighborhood.

2. The neighborhood is more important than the house itself.

3. I would live in a smaller, less perfect house, if it was in a more desirable neighborhood.

4. I would live on a busy street, or a slightly less desirable neighborhood if I could find just the right house.

5. I am handy and would be willing to make some repairs if I could save some money on the purchase.

6. I would be willing to make some sacrifices to buy a house.

7. I grew up in a family - owned home.

8. I have never bought a home before.

9. I would be willing to buy whatever 1 can afford now, and move up in a few years.

10. If I can't get what I want in a house, I'll stay in my apartment.

11. I'll probably need to get some advice from a friend or a family member before I make this decision.

12. I'm buying a home primarily as a place to live.

13. I'm buying a home primarily as an investment.


A. I am currently living in a: ___single family home attached housing (duplex, townhouse) condo


B. I currently ____own my home, am renting.

C. I would like to be in my new home within ____ 60 days, ____ 90 days, ____ 3 to 6 months, ____ 6 months to one year, _____over 1 year.

D. Do you anticipate any income changes within 3 years?

____ Increase ____ Decrease

E. Do you anticipate any changes in family size within 3 years? _____ Yes _____ No

F. If Yes, it will be an ____ Increase ____ Decrease




Note: There are no right or wrong answers here! Answering these questions should help you focus

ill on what you want, need arid require. Once you know that, the process becomes easier.


Please note that this is an abbreviated list of common terms used in Real Estate transactions.

The terms are very generally defined and their usage may vary according to

state and local custom.

Abstract of Title: A summary of the public records relating to the title to a particular piece of land. An attorney or a title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable title.

Acceleration Clause: Condition in a mortgage that may require the balance of the loan to become due immediately if regular mortgage payments are not made or for breach of other conditions of mortgage.

Agency: In real estate, an agency is created by the contract between a Real Estate Broker and an owner of real property whereby the broker agrees to act as the owner’s agent in representing and negotiating for sale of the property under contract. The contract is known as a listing agreement.

Agency Listing: In some states, this describes a listing whereby a broker’s commission is protected against a sale by other agents, but not by a sale by the property owner or the principal in the agreement. This allows the property owner to sell on their own as well and not have to pay commission. Called a "non-exclusive listing" in some states. For other types of listing agreements, see Exclusive Listing and Open Listing.

Agreement of Sale: Known by various names such as contract to purchase, purchase agreement, or sales agreement, according to location. A contract in which a seller agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

Amortization: A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.

Appraisal: An expert judgment or estimate of the quality or value of real estate as of a given date.

Assumption of Mortgage: An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an asurnption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is released from further liability under the mortgage. Since the mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments.

Binder or Offer to Purchase: A preliminary agreement, secured by the payment of earnest money, between a buyer and a seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. if the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder or offer expressly provides that it is to be refunded.

Broker: See Real Estate Broker

Building Line or Setback: Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, or by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Certificate of Title: A certificate issued by the title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of tide offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Closing Costs: The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of property and are items prepaid at dosing. This is a typical list:


Documentary Stamps on Notes
Recording Deed and Mortgage
Escrow & Attorney Fees
Title Insurance & Survey Charge
Appraisal & Inspection


Cost of Abstract                                      Documentary Stamps on Deed
Escrow & Attorney Fees
Recording Mortgage & Survey Charge
Real Estate Commission

The agreement of sale negotiated previously between the buyer and the seller

may state in writing who will pay each of the above costs.

Closing Day: The day on which the formalities of the real estate sale are concluded The certificate of title abstract & deed are generally prepared for the dosing by an attorney and this cost is charged to the buyer. The buyer signs the mortgage, and dosing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Cloud (on the title): An outstanding claim or encumbrance which adversely affects the marketability of the title.

Commission: Money paid to the real estate broker by the seller as compensation for finding a buyer and completing the sale. Usually a percentage of sales price.

Condominium: Individual ownership of a dwelling unity and an individual interest in the common areas and facilities which serve the multi-unit project.

Contract of Purchase: See Agreement of Sale

Conventional Mortgage: A mortgage loan not insured by HUD or guaranteed by the Veteran's Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different lender and between different States. (States have various interest limits.)

Cooperative Housing: An apartment bulling or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or the association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit as long as he owns the stock A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be delivered to the purchaser at dosing day. There are two parties to the deed: the grantor and the grantee.

Deed of Trust: A security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender. In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender.

Default: Generally, thirty days after the due date if payment is not received, the mortgage is in default. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.

Depreciation: Decline in the value of a house due to wear and teat; adverse changes in the neighborhood, or any other reason.

Documentary Stamps: A State tax, in the form of stamps, required on deeds and mortgages when real estate title passes form one owner to another. The amount of stamps varies with each State.

Downpayment: Downpayment is the difference between the sales price and the mortgage amount. The agreement of sale will refer to the downpayment amount and will acknowledge receipt of the downpayment. The downpayment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the downpayment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such a clause. If the seller cannot deliver good title; the agreement of sale usually requires the seller to return the downpayment and to pay interest and expenses incurred by the purchaser.

Earnest Money: The deposit given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the downpayment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.

Easement Rights: A right of way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example. These usually "run with the land", meaning the easement is permanently granted no matter who owns it or how often it is sold.

Encroachment: An obstruction, building, or part of a building that intrudes beyond a legal boundary onto a neighboring private or public land, or a building extending beyond the building line.

Encumbrance: A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action ,unpaid taxes, or restrictive covenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.

Equity: The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property &e paid in full the homeowner has 100% equity in his property.

Escrow: Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.

Exclusive Listing: A listing contract whereby a property owner agrees to pay a fee or commission to the listing broker if the property under contract is sold during the stated period, regardless of whether the broker or their sales agents were or were not the cause of the sale. Also known as Exclusive Right to Sell. For other types of listing agreements, see Agency Listing and Open Listing.

Foreclosure: A legal term applied to various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgage property, and depriving the mortgagor of possession.

General Warranty Deed: A deed which conveys all the grantor's interests in and title to the property of the grantee. It also warrants that if the title is defective or has a "cloud" on it; such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it; the grantee may hold the grantor liable.

Grantee: The party in the deed who is the buyer or the recipient.

Grantor: The party in the deed who is the seller or the giver.

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

HUD: U.S. department of Housing and Urban Development. Office of Housing / Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.

Interest: A charge paid for borrowing money. Len: A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor.

Listing Agreement: Contract between a Real Estate Broker and an owner of real property whereby it is agreed that the broker will perform as the seller’s agent for the express purpose of selling the property under contract. This agreement sets the listing price and terms in return for a fee or commission. It usually is made for a set length of time after which it expires. There are three basic types of listing agreements; Agency Listing, Exclusive Listing and Open Listing.

Marketable Title: A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Mortgage: A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government-insured or loan-guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.

Mortgage Commitment: A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance Premium: The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.

Mortgage Note: A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures, the interest rate, and renders the mortgagor personally responsible for repayment.

Mortgagee: The lender in a mortgage agreement.

Mortgagor: The borrower in a mortgage agreement.

Open Listing: A listing contract whereby a property owner agrees to pay a fee or commission to the listing broker if the broker or their sales agent presents the seller with a bone fide offer that meets the specified price and terms. There is no Exclusive Right to Sell and the offer must be brought before any other offer is presented or accepted. It is not required that the offer be accepted by the owner for the commission to have been earned. For other types of listing agreements, see Agency Listing and Exclusive Listing.

Plat: A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land and easements.

Points: Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $100,000, one point is $1000. Points are charged by a lender to raise the yield on his loan. On a conventional mortgage, points may be paid by either the buyer or the seller. Sellers must pay points on a VA loan.

Prepayment: Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. FHA loans may be prepaid.

Principal: The basic element of the loan as distinguished from the interest, mortgage insurance premium, hazard insurance or real estate taxes. Principal is the amount upon which interest is paid.

Quitclaim Deed: Such a deed makes no warranties as to the title. but simply transfers to the buyer whatever interest the grantor has. A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks.

Real Estate Agent: A licensed sales agent working under the authority of a Real Estate Broker. In some states, agent is required to have a brokers license, in others, only a sales agent license is required. Check with a state’s Board of Realtors for their requirements.

Real Estate Broker: A middleman or agent who buys and sells real estate for a company, firm or individual on a commission basis. The broker does not have title to the property, but generally represents the owner. Required to have a license and be registered in the state where practicing. Is legally responsible for complete disclosure and ultimately works for the seller, not the buyer. In many states, broker is manager over sales agents and has more training in state and federal law.

Refinancing: The process of the same mortgagor paying off one loan with the proceeds from another loan.

Restrictive Covenants: Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether the covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title.

Sales Agreement: See agreement of sale.

Special Assessments: A tax imposed on property, individual lots or all property in the immediate area for road construction, sidewalks, sewers, street lights, etc.

Special Liens: A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, materials, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien")

Special Warranty Deed: A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has or which might in the future, impair the grantee's title.

State Stamps: See documentary stamps.

Survey: A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and it's relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

Tax: As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State.

Title: As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents) or may refer to the ownership interest one has in the real estate.

Title Insurance: Protects lenders or homeowners against loss of their interest in property due to legal defects in the title. Title insurance may be issued to either the mortgagor or as an "owner's title policy". Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an owner's title policy, if he desires the protection of title insurance.

Title Search or Examination: A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.

Trustee: A party who is given legal responsibility to hold property in the best interest of or "for

the benefit of" another. The trustee is one placed in a position of responsibility for another, enforce-able in a court of law. (See deed of trust.)

Zoning Ordinances: The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.