Common real estate legal terms

When you are looking at buying or selling property, or you just want to gain some general knowledge in real estate, there are many terms that are widely used in the industry, which has a language of its own. The terms are not difficult to grasp, yet there is a greater possibility of error if words are misheard and misused. Here are a few basic terms and their definitions that are often misunderstood by the consumer and/or seller:

MLS- Multiple Listing Service:
A type of association that assembles, collects, and issues data in relation to various properties that are recorded for sale by its associates, who are real estate brokers. This type of membership is not attainable to the community. However, MLS information may be sold as listings to real estate websites. There is not a sole MLS covering the whole US.

PITI- Principle, interest, taxes and insurance:
These are the four main components to a monthly mortgage payment. The remaining balance is known as the principal, which reduces the amount owed. The fees that are charged by mortgage companies for obtaining a loan are called the interest. You pay taxes and insurance into an escrow account every month for property taxes and mortgage and hazard insurance.

Appreciation:
This is an increase of property value due to changes in market conditions, inflation and several other factors.

CMA- Comparative Market Analysis:
This is report that provides prices of different properties in comparison to a particular property and those that are recently sold, properties on the market or that were previously on the market, but were not sold within the listing period.

Closing costs:
These are the various costs that are settled between the buyer and seller when the agreement is finished. These expenses include mortgage-related fees, escrow or attorney fees, recording fees, title insurance, brokerage commission and others charges. Closing costs are commonly collected via escrow.

Contingency:
Contingency is considered a stipulation of an agreement that prevents it from being legally binding until certain criteria is met. A common stipulation is a buyer’s right to demand a professional home inspection before acquiring the property.

Title insurance:
Title insurance is a special policy that safeguards the interest of a lender or owner, involving real property from various forms of false or unforeseen claims. It’s considered customary for a consumer to pay for the loaner’s title insurance policy.

Concessions:
These are advantages or allowances that are given by the seller or landlord of a home to aid in the closing of a sale or a lease. Common concessions include absorption or moving expenditures, space remodeling or improvements and a reduced payment for the initial duration of the lease.

Sale-leaseback:
A sale-leaseback is a type of agreement where an owner offers a property to an investor, who afterward leases the property back to the initial owner under arranged terms. Sale-leaseback contracts offer the initial owner freed up capital and tax breaks while the investor receives a guaranteed profit and appreciation.

File photo