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The C’s Of Real Estate

REAL ESTATE TERMS YOU MAY WANT TO KNOW WHEN BUYING OR SELLING A HOME IN THE ORLANDO AREA

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(Click A Letter Or Scroll Down To Find A Term Starting With That Letter)


Get to know the language of real estate to get better results when buying or selling a home in the Orlando area
 

Get To Know The “C’s” Of Real Estate

+/- Click A Term To Read Its Definition – Expands Answer In This Same Window – Click Again To Collapse

+/- “C” Loan or “C” Paper

FICO scores typically from 580 to 619. Factors include three to four 30 day late mortgage payments and four to six 30 day late installment loan payments or two to four 60 day late payments. Should be one to two years since bankruptcy. Also referred to as Sub – Prime.

+/- Callable Debt

a debt security whose issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity.

+/- Cap

a limit, such as one placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease, either at each adjustment period or during the life of the mortgage. Payment caps do not limit the amount of interest the lender is earning, so they may cause negative amortization.

+/- Cap Rate

AKA Capitalization Rate. CAP Rate is the better known name. CAP Rates are used to determine a value, normally for income producing property. To determine a CAP Rate we need to understand certain elements of the property, as well as other “like kind or similar” properties. The CAP Rate for an industrial property and one for an office building may use the same mathematics to derive the valuation number via formula, but the comparable properties must be similar to arrive at a correct value. Just as you would not value a condominium to a single family detached home, they just do not compare. The formula for determining the CAP Rate is: I/V=R Income divided by Value equal Rate – I/V=R or $100,000/$1,000,000 = .10 or 10 percent. The $100,000 represents the NET OPERATING INCOME while the $1,000,000 represents the sellers asking price and we find it produces that Capitalization Rate (CAP Rate) of ten percent. The higher the CAP the better position you are to pay the Debt Service

An agent knowing real estate math is the difference between you getting or giving.

+/- Capacity

The ability to make mortgage payments on time, dependant on assets and the amount of income each month after paying housing costs, debts and other obligations.

+/- Capital Gain

the profit received based on the difference of the original purchase price and the total sale price.

+/- Capital Improvements

property improvements that either will enhance the property value or will increase the useful life of the property.

+/- Capital or Cash Reserves

an individual’s savings, investments, or assets.

+/- Cash-Out Refinance

when a borrower refinances a mortgage at a higher principal amount to get additional money. Usually this occurs when the property has appreciated in value. For example, if a home has a current value of $100,000 and an outstanding mortgage of $60,000, the owner could refinance $80,000 and have additional $20,000 in cash.

+/- Cash Reserves

a cash amount sometimes required of the buyer to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

+/- Casualty Protection

property insurance that covers any damage to the home and personal property either inside or outside the home.

+/- Certificate of Title

a document provided by a qualified source, such as a title company, that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

+/- Chapter 7 Bankruptcy

a bankruptcy that requires assets be liquidated in exchange for the cancellation of debt.

+/- Chapter 13 Bankruptcy

this type of bankruptcy sets a payment plan between the borrower and the creditor monitored by the court. The homeowner can keep the property, but must make payments according to the court’s terms within a 3 to 5 year period.

+/- Charge-Off

the portion of principal and interest due on a loan that is written off when deemed to be uncollectible.

+/- Clear Title

a property title that has no defects. Properties with clear titles are marketable for sale.

+/- Closing

the final step in property purchase where the title is transferred from the seller to the buyer. Closing occurs at a meeting between the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property. Also known as settlement.

+/- Closing Costs

fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes. A common estimate of a Buyer’s closing costs is 2 to 4 percent of the purchase price of the home. A common estimate for Seller’s closing costs is 3 to 9 percent.

+/- Cloud On The Title

any condition which affects the clear title to real property.

+/- Co-Borrower

an additional person that is responsible for loan repayment and is listed on the title.

+/- Co-Signed Account

an account signed by someone in addition to the primary borrower, making both people responsible for the amount borrowed.

+/- Co-Signer

a person that signs a credit application with another person, agreeing to be equally responsible for the repayment of the loan.

+/- Collateral

security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral and can be taken away from the borrower if mortgage payments are not made.

+/- Collection Account

an unpaid debt referred to a collection agency to collect on the bad debt. This type of account is reported to the credit bureau and will show on the borrower’s credit report.

+/- Commission

an amount, usually a percentage of the property sales price that is collected by a real estate professional as a fee for negotiating the transaction. Traditionally the home seller pays the commission. The amount of commission is determined by the real estate professional and the seller and can be as much as 6% of the sales price.

+/- Common Stock

a security that provides voting rights in a corporation and pays a dividend after preferred stock holders have been paid. This is the most common stock held within a company.

+/- Comparative Market Analysis (COMPS)

a property evaluation that determines property value by comparing similar properties sold within the last year.

+/- Compensating Factors

factors that show the ability to repay a loan based on less traditional criteria, such as employment, rent, and utility payment history.

+/- Condominium

a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner also shares financial responsibility for common areas.

+/- Conforming loan

is a loan that does not exceed Fannie Mae’s and Freddie Mac’s loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

+/- Consideration

an item of value given in exchange for a promise or act.

+/- Construction Loan

a short-term, to finance the cost of building a new home. The lender pays the builder based on milestones accomplished during the building process. For example, once a sub-contractor pours the foundation and it is approved by inspectors the lender will pay for their service.

+/- Contingency

a clause in a purchase contract outlining conditions that must be fulfilled before the contract is executed. Both, buyer or seller may include contingencies in a contract, but both parties must accept the contingency.

+/- Conventional Loan

a private sector loan, one that is not guaranteed or insured by the U.S. government.

+/- Conversion Clause

a provision in some ARMs allowing it to change to a fixed-rate loan at some point during the term. Usually conversions are allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rates then prevailing for fixed rate mortgages. There may be additional cost for this clause.

+/- Convertible ARM

an adjustable-rate mortgage that provides the borrower the ability to convert to a fixed-rate within a specified time.

+/- Cooperative (Co-op)

residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

+/- Cost of Funds Index (COFI)

an index used to determine interest rate changes for some adjustable-rate mortgages.

+/- Counter Offer

a rejection to all or part of a purchase offer that negotiates different terms to reach an acceptable sales contract.

+/- Covenants

legally enforceable terms that govern the use of property. These terms are transferred with the property deed. Discriminatory covenants are illegal and unenforceable. Also known as a condition, restriction, deed restriction or restrictive covenant.

+/- Credit

an agreement that a person will borrow money and repay it to the lender over time.

+/- Credit Bureau

an agency that provides financial information and payment history to lenders about potential borrowers. Also known as a National Credit Repository.

+/- Credit Counseling

education on how to improve bad credit and how to avoid having more debt than can be repaid.

+/- Credit Enhancement

a method used by a lender to reduce default of a loan by requiring collateral, mortgage insurance, or other agreements.

+/- Credit Grantor

the lender that provides a loan or credit.

+/- Credit History

a record of an individual that lists all debts and the payment history for each. The report that is generated from the history is called a credit report. Lenders use this information to gauge a potential borrower’s ability to repay a loan.

+/- Credit Loss Ratio

the ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation.

+/- Credit Related Expenses

foreclosed property expenses plus the provision for losses.

+/- Credit Related Losses

foreclosed property expenses combined with charge-offs.

+/- Credit Repair Companies

Private, for-profit businesses that claim to offer consumers credit and debt repayment difficulties assistance with their credit problems and a bad credit report.

+/- Credit Report

a report generated by the credit bureau that contains the borrower’s credit history for the past seven years. Lenders use this information to determine if a loan will be granted.

+/- Credit Risk

a term used to describe the possibility of default on a loan by a borrower.

+/- Credit Score

a score calculated by using a person’s credit report to determine the likelihood of a loan being repaid on time. Scores range from about 360 – 840: a lower score meaning a person is a higher risk, while a higher score means that there is less risk.

+/- Credit Union

a non-profit financial institution federally regulated and owned by the members or people who use their services. Credit unions serve groups that hold a common interest and you have to become a member to use the available services.

+/- Creditor

the lending institution providing a loan or credit.

+/- Creditworthiness

the way a lender measures the ability of a person to qualify and repay a loan.

Keep in mind that this is by no means a complete list of terms, but it does highlight most of the more common terms used in the industry and is a constant work in progress as time passes.

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If you have any questions whatsoever regarding the sale or purchase of a property in the Central Florida area please feel free to call or write me direct. My business hours are Monday thru Friday 9am – 6pm.

Thank you for choosing MORE Realty Services LLC as an information source for your Central Florida real estate needs.

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