Business Method Patents Ruling - What effect on Real Estate Models?

There's a lot of hullabaloo about the recent ruling by the US Court of Appeals about Business Method Patents. On the surface, it would seem that the 1300+ Business Method Patents registered in the US last year are, as of today, INVALID.

I haven't yet seen the research or looked into any specific 'Real Estate Model' method patents, however I do recall hearing that there were quite a few 'new' model companies filing for protection under this process.

I've read that the court ruled there to be a two-pronged test to determine whether a software of business method process patent is valid:

(1) it is tied to a particular machine or apparatus, or

(2) it transforms a particular article into a different state or thing.

We'll see what comes of this in the weeks and months to come, and I'll keep you updated once I've found which, if any company (models) this may affect.

The good news for startups: Perhaps with the protection lifted here, we will see faster and further innovation - making things better and clearing the way for the 'next' iteration of Web 2.0-meets-Real Estate...

Or?...

Who knows.

Tim Mancuso

Consultant, Trusted Advisor

-Tim Mancuso
International Real Estate Advisor
Speak your Mind! Let your Real Estate Voice be Heard!
International-Real-Estate-Advisor.com

What's important in a Title Company and/or Title Sales Professional to YOU?

As I travel and visit with Real Estate professionals I often ask them what they feel is important for them in specific industries.

In the Title business, for example, there seem to be far too many companies in existence that focus on their own beliefs about what the industry and the customer wants and needs regarding transaction and settlement services.

With that in mind, I'd like to pose the question here, to all of you - both RE Professional and Consumer alike:

What's important in a Title Company and/or Title Sales Professional to YOU?

Here are a few key features and benefits others have shared with me - please add your own as well.

* Financial Stability and long-term industry presence
* A history of success in the Title Business
* Professionalism in appearance and behavior
* Expertise and Industry Knowledge
* Guaranteed Service Levels
* Taking the time to understand and learn about my specific needs
* Tools and Services that can enhance my business
* Patience
* Mobile Closings (close-anywhere)
* Independent Sales Reps that are empowered to make decisions for their customers
* Cookies at the closing table, and not just chocolate chip (seriously - this is one I've heard a lot!)
* Great rates / pricing
* A deal with my broker/brand

Thank you all for helping to build this list - your feedback is important!

It's also noteworthy to point out here that in many emerging markets globally, there is an honest 'thirst' for Title Insurance. The security we have in the US with our mature Title Insurance markets does not exist in many overseas markets.

More on the International Title Insurance opportunities to come, stay tuned!

-Tim Mancuso
International Real Estate Advisor
Speak your Mind! Let your Real Estate Voice be Heard!
International-Real-Estate-Advisor.com

Industry Shakeups - Zillow Layoffs

Another sign of the times, Zillow recently announced layoffs of 25% including their Product, Business, and Sales divisions/departments.

I personally commend both Zillow and Rich Barton on the manner in which the layoffs were handled - we can all benefit by taking a play from their book in this regard.

We've seen Simon Baker ousted from RealEstate.com.au, continued cutbacks and closures across the board, and a full-scale pullback from companies from MLS systems providers to large-scale aggregators in both national and international markets.

The $64 (yes, that's still Dollars) question is, what's next, and who will be standing with a viable search and lead generation model to serve the needs of the emerging real estate consumers on a global scale?

Most of the current offerings out of the UK and European markets are simply variations on a theme, providing nothing more than the same old subscription-based models with traditional web-based advertising and little, if any, innovation.

I for one am ready for a FRESH take on this constant theme. It's time for a revolution of sorts - it's been years since we've seen any real innovation here folks, and I'm as guilty as the next (startup) guy.

It's time for a change.

Perhaps the talent on the street, provided by Zillow and others, will spark new opportunities and ideas in our marketplace - IF, and only if, the investors see fit to roll the dice yet again on Real Estate-related enterprises.

The future remains grey. I'm hopeful but not convinced.
Your take? Share it here and let's be real.

-TM

-Tim Mancuso
International Real Estate Advisor
Speak your Mind! Let your Real Estate Voice be Heard!
International-Real-Estate-Advisor.com

Tim Mancuso for President '08

-Tim Mancuso
International Real Estate Advisor
Speak your Mind! Let your Real Estate Voice be Heard!
International-Real-Estate-Advisor.com

Realogy Launches Better Homes and Gardens Real Estate Franchises - What's the (New) Deal?

The New and (much) Improved Better Homes and Gardens Real Estate Brand has emerged.

So the question on the top of our minds is: 'what's the deal'?

In a time where brokerages and brokerage models are under scrutiny by analysts, investors, and the International contingencies, is there room for another traditional brokerage model in the US & Worldwide landscape?

I've seen commentary regarding the limitation for franchisees around 100+ successful agents as a minimum requirement for consideration.

There is also talk that this is the beginning of Zillow's (http://www.zillow.com) foray into the Brokerage arena - an interesting conspiracy theory. . . (check out the 'tight' integration between bhgrealestate.com and Zillow)

Share your thoughts and any additional info here for all of us - we want to know more about this rebirth of Better Homes and Gardens brand in Real Estate. The potential is certainly there for a juggernaut on the Real Estate scene.

-Tim Mancuso
International Real Estate Advisor
Speak your Mind! Let your Real Estate Voice be Heard!
International-Real-Estate-Advisor.com

States suing Lenders - Ramifications, Opinions, and Responsibility

The state of Connecticut (thank you Mrs. McFadden - ed/sp!) sued Countrywide Financial Corp. this week and joined California, Illinois, Florida and US cities including San Diego in allegeing that Countrywide 'misled borrowers' into purchasing home loans they could not afford.

So the question is this: in a highly regulated industry with the levels of oversight and process control(s) present in the mortgage business, is it acceptable - even conceivable - for legal action from a state to come to bear against a (federally controlled) lender?

Obviously, if there are evident, blatant, or criminal actions on the part of the lender and/or it's policies and practices, this would make sense.

- But to sue because the economy in America has run afoul and consumers as a whole are indebted beyond their ability to recover - is this what we've come to?

Share your thoughts, your evidence, your opinions and more here. I have by no means been exhaustive in my research, however I firmly believe that at the least, an equal portion of the responsibility (note I did not say 'blame' here) rests firmly on the consumer.

-Tim Mancuso
International Real Estate Advisor
Speak your Mind! Let your Real Estate Voice be Heard!
International-Real-Estate-Advisor.com

Real Estate Investor Advice? Freddie and Fannie - Maximum Number of Financed Properties CUT

Has anyone got commentary and/or personal experience on the following re: Fannie and Freddy changing the limit on maximum number of financed properties (investors):

* Freddie went from 10 to 4 as MAX 1-4 unit properties

* Fannie is expected to follow suit

* What, if any options or work-arounds are available to today's investor wanting to capitalize on soft-market pricing advantage(s)?

We are starting to field questions and concerns on this and would like to see the feedback here as a resource for all.

Real Estate Terms: Realty, Homes for Sale, Agency, Mortgage and more defined

Real estate defined provided by MyREALTY.com, Home of the GLS. This is an International Real Estate Index of Terms - a Realty Glossary, provided free for your real estate and housing research needs.

Each term comes with not one, BUT TWO definitions. The first definition being the widely accepted and approved ‘real’ definition, called the Realty definition. The second is what the word really means, or as we denote it, the Reality definition.

MyREALTY.com is Real Estate 2.0. You decide the content. If you have a “Realty” and/or a “Reality” definition for the MyREALTY.com Glossary, then please send it to us.

1031 Exchange

Realty = An exchange called Internal Revenue Code 1031, where a property owner
can trade a similar property and defer paying an income tax.

Reality = There are very specific guidelines you have to follow, so
watch out. Likely, it will not be an actual trade, but a third party
exchange agent holds your sales proceeds so that you can purchase a
property. You could sell a home and purchase a commercial property (or
two), or buy land on speculation.

Agency

Realty = Your representation during a real estate transaction. Your agency
might be a buyer’s agent, a listing (seller) agent or dual agency.

Reality = Avoid dual agency, or having one real estate agent
represent both the buyer and seller. This typically happens because the
potential buyer calls the phone number on the “For Sale” sign in front of a
home for sale. Once you do that, you’re speaking to the real estate agent
who is representing (and earning a commission from) the sellers. If
you’re looking to buy, do not call the number on the real estate signs.

Rather find a buyer’s agent to represent you.

Agent

Realty = Usually, an independent sales worker who represents buyers and/or
sellers in the transaction of real property. The client represented is
called a “principle”.

Reality = All Realtors® are agents, but not all agents are
Realtors®. The term Realtor® is often considered generic for ‘real estate
agent’ when in fact Realtor® is a member of an association (National
Association of Realtors®). For an agent not to be part of the Association
is silly (assuming she lives in an area where the association exists) because
once an agent pays the annual dues, they can access the MLS, or Multiple
Listing Service, and have an agreement with other Realtors® to split a
commission. The MLS is currently the North American industry standard for
listing homes for sale. The newer Global Listing Service (GLS) is open to
all agents, Realtors® or not, as well as, property owners who want to get
maximum exposure and list their property for free.

Agreement of Sale

Realty = The contract in which a seller agrees to sell and a buyer agrees to
buy. Other specific terms and conditions are out in writing and signed by
both buyer and seller. Also known as “binder,” “purchase
agreement,” "sales agreement” and “buy-sell contract”.

Reality = Get EVERYTHING in writing. Seller’s tip: Disclose,
Disclose, Disclose! Buyer’s tip: Do your Due Diligence before you
get to this point, or ensure you have contingencies to allow you the time to
perform your due diligence.

Amortization

Realty = Paying off and reducing a debt, commonly a mortgage, with regularly
installed payments of principal and interest. Amortization is often
associated with an amortization schedule that is the timetable in which a
mortgage is paid. For example, your mortgage may come with a 5, 15, 20,
30 or even a 40-year amortization.

Reality = Over the period of a fifteen-year mortgage of $200,000 you
might pay $150,000 dollars less in total interest than you would a thirty-year
mortgage. The drawback of a shorter amortization is that you’re monthly payment
will be considerably higher. Watch out for Balloon and Negative
Amortization mortgages! Balloon Mortgages require total payment of the
loan after the amortization is over. Negative amortization requires very
little up-front costs but your monthly payment only covers part of the interest
while the balance continues to grow.

Annual Percentage Rate (APR)

Realty = Includes the cost of initiating a loan as well as costs incurred during
the life of the loan. Interest, insurance and the points (origination
fee) are expressed in the total APR as a quoted interest rate. The APR
also represents all additional service and finance charges associated with the
loan.

Reality = The APR is a good way to find out how much a loan will
really cost. A lot of lenders will advertise a low, low interest rate,
but sneak in a variety of fees and closing costs. The APR offers a more
complete picture of the expense at hand an apples-apples comparison, if you
will.

Appraisal

Realty = Based on an expert appraiser’s site judgment, measure of dimensions, comparable sale analysis, and re-build cost estimates, a professional appraisal includes calculations of the value of real estate for a given date.

Reality = Professional appraisers are good people with houses, spouses and dreams of one day winning the lottery. However, as of late, the appraisal industry has come under fire for “rubber stamping” the value of a property. This will happen two ways. If you are buying, an appraiser might value a home congruent to the offer price stated on the buy/sell contract. So, it’s a good idea not to make an offer until you get an appraisal. Secondly, lending institutions have, through their own appraisals, overvalued homes in order to loan money to homeowners. In turn, homeowners find themselves owing more money than their house is worth. Foreclosure can result if a home is overvalued for the purpose of loaning money, and the owner can’t keep up on payments.

Appraiser

Realty = A qualified, licensed person who is paid a fee to estimate the value of
an asset, your property.

Reality = You’ll want to find a reputable appraiser who will act
independently, without bias, when evaluating your property. Shop around for
references, although your lender often selects the appraiser in a loan/mortgage
process.

Appreciation

Realty = The increase in the value of your property over time.

Reality = The longer you can hold onto your property, the more likely
the appreciation will grow. Search for properties in a neighborhood with a good appreciation track record.

Assessed Value

Realty = The public tax assessor uses this property valuation for the basis of taxes.

Reality = While some lender appraisals lean to the high side, the county
appraisals are usually lower than market value, so don’t confuse the two.

Assessor

Realty = A government official who determines the value of property.

Reality = The numbers they come up with will calculate future
property taxes.

AVM

Realty = An AVM or Automated Valuation Model, often used by lenders, is a computerized estimation of a property’s value. It is often used by buyers wanting statistical information that will help them make an educated offer on a home for sale, lot or land.

Reality = While AVM’s have become all the rage in real estate, they are computer generated and reflect constantly fluctuating valuations; they are NOT professional appraisals. If you want a professional appraisal (something you might consider BEFORE you make an offer to buy, refinance or borrow money against your property) then contact a professional appraiser.

Balloon Payment

Realty = The final total payment due at the end of a balloon mortgage.

Reality = It’s not paying for your property with a fancy balloon, it’s if you have a balloon mortgage, then this is the lump sum payment at the end of the decided term. You may have a 5 or 10 year balloon with a loan, although the loan may be amortized over 20 or 30 years to ensure that the payments are more palatable.

Bill of Sale

Realty = A "Deed" that transfers real property.

Reality = In many jurisdictions this can be as simple as what’s sold,
for how much, to whom and when. Another example of why you need not get
bowled over by real estate transactions.

Bridge Loan

Realty = People who haven’t sold their previous property, but have to close on a
new purchase property can get this type of loan, which sources their funds for
the down payment

Reality = These aren’t used so much anymore, because more people tend
to use second mortgage lenders that will lend at a high loan to value.

Broker

Realty = Like a real estate agent a broker is an intermediary between buy/sell transactions,
however, a broker who runs a brokerage oversees real estate agents and their
transactions.

Reality = After some years of experience, a real estate agent may
want to become a licensed broker. Commonly, an exam must be passed and the
new broker may want to work for another broker as a broker-associate.

With all of the experience and education, working with a broker is commonly
seen as advantageous to working with an agent, but finding an agent with the
oversight of a good broker can be just as good.

Broker-Associate

Realty = A broker who does not run his or her own brokerage, but rather works
for another broker.

Reality = Get to know them because one day they’ll have their own
brokerage.

Broker-Owner

Realty = A real estate broker who owns a real estate brokerage.

Reality = Someone you may want to know when you’re looking to buy or
sell real estate.

Buyer’s Agent

Realty = A real estate agent who represents the buyer in a real property
transaction.

Reality = The person you want to call when looking for a home -
instead of calling the number on the “For Sale” sign. When a buyer’s
agent finds you a home, you owe them nothing. They get a piece of the
listing agent’s commission (from the sale price) – assuming the home is listed
in an MLS. If they find you a home that is not listed in an MLS, you’ll
have to agree to a commission or fee.

Buyer’s Broker (or Buyer’s Agent)

Realty = Represents the potential homebuyer in a buy/sell transaction.

Reality = When looking for a home, this is who you call… NOT
the agent on the ‘for sale’ sign.

Buy-Sell Agreement or Buy-Sell Contract

Realty = Signed and agreed upon during closing, a real estate sales contract
identifies the property being sold, names the buyer and seller, states the
amount of money the buyer will pay and the date when title to the property will
be exchanged for the money.

Reality = Before you get to this point, you might consider a
professional appraisal, a professional inspection, negotiated near your original
offer and landed the right loan with the best interest rates. If not this
piece of paper could be the beginning of a very painful experience.

CAP Rate

Realty = Used to compare investment properties, CAP rate is the Net Operating
Income (NOI), divided by the sales price.

Reality = There are many ways to value and compare an investment
property, and using a CAP rate is generally a precursor to more due diligence
and financial analysis.

Certificate of Title

Realty = Does the seller have a good and insurable title? A title examiner
or attorney giving a legal opinion should sign a certificate title stating the
status of the property’s title.

Reality = The proper signature on this certificate ensures that the
title is clear.

Closing Costs

Realty = There are two types of closing costs: non-recurring and pre-paid items.
Non-recurring costs are items you only pay once, as a result of buying or
getting a loan. Pre-paids are items that you
pay over time, such as property taxes.

Reality = Perform your due diligence to understand closing costs
between a loan and a real estate closing. The loan costs are typically
paid by a buyer, and property closing costs are typically paid by the seller or
split between the buyer and seller.

Closing Statement (Settlement Sheet)

Realty = The total determination that the buyer must pay to seller to finalize
the purchase of the real estate. Also the “HUD-1”.

Reality = You’ll definitely want to look over it, as it will reveal
all the costs lurking at closing. This is usually distributed at least three
days prior to closing, so both parties have an opportunity for review.

Collateral

Realty = In a home loan, the property is the collateral.

Reality = You can lose your home, if the loan isn’t repaid according
to the guidelines of the mortgage or deed of trust.

Commission

Realty = The percentage of a real estate sale that goes to a broker and/or agent
for their services.

Reality = Typically between three to seven percent, real estate commissions
are negotiable. Setting a price in stone constitutes illegal price
fixing. A seller should understand that a commission is usually split
between the buyer’s brokerage and the seller’s brokerage. The brokerage
gets part for overhead and the agent gets the remainder.

Competitive Market Analysis (CMA)

Realty = A valuation of your home using the prices of “comparable” homes in your
area.

Reality = You may get an agent to provide this for free or for a
fee. You can purchase a complete property report and valuation from
MyREALTY.com.

Condition

Realty = A promise or demand in an agreement or contract

Reality = Read the fine print for any stipulations in the contract
before signing. For example, if you’re buying a new home, but you want a
new roof to be included in the negotiated price, then it should be stated “a
condition” in your contract.

Conditions

Realty = As used in phrases like “the market conditions” to imply a “buyer” or
“sellers” market.

Reality = No matter the “market” real estate is usually one of your
better investment choices.

Condo / Condominium

Realty = Individual ownership (deeded) of a portion of a building, with common
areas shared by all owners. Monthly fees are charged to maintain the common
areas (parking, lawns, pool, etc.).

Reality = Condos are a great alternative to single-family homes for
people who don’t want to maintain the exterior of their home.

Contingency

Realty = A contractual clause that states something be done for the contract to
be binding.

Reality = A buyer often puts a contingency that specifies the
contract isn’t binding until he or she gets a home inspection report from a
qualified home inspector.

Convey

Realty = When one person or entity deeds or transfers a property to another
person or entity.

Reality = Say the title of your property has your name and your
brother’s name on it, but you want your name to be taken off. You can convey,
or transfer the title to someone his name.

Co-op (Cooperative Housing Unit)

Realty = An ownership (shares) in a corporation that owns the building and
carries a leasehold interest in the unit.

Reality = Co-ops are often more exclusive than a condo. Co-ops can
impose strict guidelines for new buyers such as minimum income or required cash
purchases.

Covenants

Realty = Restrictive covenants are standards that define how a property may be
used and the protections the developer makes for the benefit of all owners in a
subdivision. Commonly called “CC&Rs”, the
term usually refers to a written recorded declaration, which sets forth certain
covenants, conditions, restrictions, rules or regulations, established by a
sub-divider or other landowner, to create uniformity of buildings and use
within tracts of land or groups of lots.

Reality = Always read covenants thoroughly before agreeing to
them. The homeowners’ association, not city or county authorities must
uphold covenants. The tighter (more restrictive) the covenants are, the more
likely your home/property will hold its value.

Credit Report

Realty = A credit report includes information on where you reside, the frequency
at which you pay your bills, and if you've been sued, arrested or filed for
bankruptcy. Consumer reporting companies sell your report to creditors,
insurers, employers and other businesses that use it to evaluate your
applications for credit, insurance, employment or renting a home. The three
credit reporting companies in the United States are Equifax, Experian,
and TransUnion. By law, these companies are
required to give you a FREE credit report every year. Your credit score
is based on a three-digit number that, until recently, was not disclosed to the
public.

Reality = That fickle three-digit number can cost you thousands of
dollars in interest. Any missed payment or neglected debt could dock your
score considerably, and with a lower score comes higher interest rates

Deed

Realty = A formal written instrument expressing the conveyance by which title to
real property is transferred from one owner to another.

Reality = Always look through the conditions of a deed, called
covenants, before accepting.

Deed of Trust

Realty = Just like a mortgage, in that a deed of trust isn’t really a loan, but rather
real property held as a security for debt. Instead of two parties, lender
and borrower, a deed of trust also involves a trustee.

Reality = Some states use this document instead of a mortgage. The
title is actually transferred to a trustee, such as a bank, rather than to the
borrower.

Down Payment

Realty = The initial partial payment of the purchase price of a property.

Reality = The buyer pays this in cash instead of financing it through
a mortgage. It’s typical to put 20% down and get a loan for the remaining 80%,
resulting in an 80% loan to value (LTV).

Dual Agency

Realty = When a real estate agent or broker represents both buyer and seller in
a real estate transaction.

Reality = Humans are, well, human and having the same person who’s getting
paid by the seller negotiate for the buyer seems to be a conflict of interest.

Earnest Money

Realty = Literally, money to show that a potential buyer is “earnest,” or
serious, about their intentions to buy a home. The money is given to the
seller and usually held in escrow.

Reality = It wouldn’t be so wrong to call earnest money a “deposit”,
although some agreements vary. When you buy a home, typically, the earnest
money in escrow goes towards the purchase price of the house.

Easement

Realty = Permission granted to use another person’s real estate for any number
of specific purposes. Common easements include the right to travel over
someone else’s property or right-of-way for utilities.

Reality = Easements are referred to as burdens because once
established, the property owner cannot interfere with it. Please note if
you allow a ‘friendly’ use of your land that the easement could become
“prescriptive,” or assumed in the description of your property.

Encroachment

Realty = An improvement that illegally intrudes on another’s property.

Reality = My land is not your land. Make sure you know your
property lines, so that you don’t build that Olympic size pool that takes over
your neighbor’s property and vice versa. Fences are typical offenders in
an encroachment.

Encumbrance

Realty = Anything that affects or limits the title to a property, such as a lien
or mortgage, easement, or a lease or other restriction.

Reality = Encumbrances are a drag… avoid them whenever possible.

Equity

Realty = The interest or value, which the owner has in real estate, over and
above the debts against it.

Reality = Property sale price (or market value) – what you owe
(mortgage, lien, etc.) = Equity

Escrow

Realty = Money, property, or anything of value left in a trust account overseen
by a third party. Upon fulfillment of certain conditions or by agreement of the
parties, the money is released. Often a lender will set up an escrow account
that accumulates a set amount of your monthly mortgage in order to pay
homeowner’s insurance and county property taxes.

Reality = It’s as easy as buying a soda (pop, cola, depending on your
region’s vernacular.) When you put change in the vending machine your
money is held in an escrow “account” until you commit to buy. If you
change your mind and decide to cash out, then the refund button releases the
money. If you decide to buy and make your selection, the money is sent to
the vending machine’s vault. Impress your friends by saying you’re constantly
dealing with money in escrow. In many regions a title company provides
escrow and closing services for a fixed fee.

Estate

Realty = The total amount of all property (real and personal) owned by a person
at time of death.

Reality = Work with a good attorney to ensure that your heirs don’t
end up paying a large amount of taxes for transfer of your estate after your
death.

Federal Housing Administration

Realty = An agency whose main activity is insuring residential mortgage loans
made by private lenders.

Reality = The FHA insures private first mortgage loans for new and
existing homes and repairs, but they don’t permit 2nd mortgages on insured
mortgage loans.

Fixture

Realty = What was formerly personal property, which is now permanently attached
to real property and goes with the property when it is sold.

Reality = If you can’t remove it without damaging the property, it’s
a fixture.

Flipping (Fix and Flip)

Realty = A type of real estate investment where a property is purchased and resold
often within a few weeks or months for a quick profit.

Reality = Profit is generated through price appreciation, renovations
and capital improvements.

Foreclosure

Realty = A legal process where a property is taken back or sold to satisfy a
debt if the owner defaults on payments or terms.

Reality = The increase in foreclosures has flooded the market with
inexpensive houses, but for every foreclosed property is an individual or
family that just lost their home. Adding to the dark side of the growing
foreclosure market is that a foreclosed home in your neighborhood can
potentially decrease the value of your property. The simplest way
to avoid foreclosing on your home is to owe less than your house is
worth. Interest-only loans can be a good option when you have equity
built in other properties or know for certain (if that’s ever possible) that
the property for which you’ve taken the loan will appreciate. But
interest-only loans and some “no money down” options are risky. Any
mortgage or loan, however, requires much due diligence before signing the
dotted line.

FSBO

Realty = For Sale
by Owner versus using a real estate agent.

Reality = FSBO, or For Sale By Owner, properties have taken a small chunk
of business from listing agents because seller’s want to avoid paying the
listing agent a commission on the ultimate selling price of their
property. Selling your own home is not a difficult thing to do and it can
save you money. One note: Recent research shows that the
professional sales skills of a listing agent will get you more money for your
home and that comparatively FSBO’s sometimes lose
money. For example, a FSBO might sell their home for $200,000. A
listing agent might sell the same property for $220, 000 therefore completely
negating any savings attained by selling without commissioned
representation.

FSBA

Realty = For Sale
by Agent.

Reality = Until recently this term did not yet exist in the universal
sphere of real estate definitions, however, it just makes sense to have
it. MyREALTY.com’s web wizard, Mark Husson, invented it. “FSBO”
came up in a conversation about real estate acronyms and Mark innocently
proclaimed, “So a FSBO is different than a FSBA.” No one in the
room had ever heard of a “FSBA” but it just made so much sense that we’re
kicking off the FSBA revolution right here and now.

Gazunder

Realty = When a buyer reduces his or her bid for a property before the
transaction has been signed and finalized.

Reality = If the real estate market is crashing, a buyer might offer
less because he or she knows that the seller desperately wants to sell the
property.

GLS

Realty = The Global Listing Service emulates the many Multiple Listing Services (MLS)
in its function as a catalog of properties for sale. However, the GLS
differs in that the MLS requires an agent to join the National Association of
Realtors® to submit listing to or access its data. The GLS is free and
open to all, agents and consumers alike.

Reality = The GLS is the brainchild of the founder of MyREALTY.com,
the company that hosts this glossary, so even though the facts completely
warrant it, there’s potential for a favorable bias in the definition.

Grantee

Realty = The person who receives a transfer of real property by a grant deed.

Reality = Grantee obtains property from the grantor.

Grantor

Realty = A person who transfers his or her interest in real property to another
by a grant deed.

Reality = Grantor transfers ownership in a property to the grantee.

Hazard Insurance

Realty = Protects against damages caused to property by fire, windstorms, and
other common hazards.

Reality = If you live in a high-risk area, (some fire or
hurricane-prone areas; just Google “State
Farm Rita Court” for more) then you may need this
in addition to your Homeowner’s Policy.

Home Equity

Realty = The value of ownership built up in a property (not including any
outstanding mortgage Payments).

Reality = One of the largest sources of net worth for many investors
and homeowners.

Home Equity Line of Credit (HELOC)

Realty = A loan providing you with the ability to borrow funds at the time and
in the amount you choose, up to a maximum credit limit for which you have
qualified. Repayment is secured by the equity in your home – often times
in lieu of a second mortgage. Simple interest (interest-only payments on
the outstanding balance) is usually tax-deductible. Often used for home
improvements, major purchases or expenses, and debt consolidation.

Reality = A loan where you can get cash, which is drawn against the
equity in your property. Consider this alternative to a second mortgage.

Homeowner’s Association (HOA)

Realty = A nonprofit association which manages the common areas of a planned
unit development or condominium.

Reality = Homeowners pay monthly fees in exchange for using common
areas. Beware: know your HOA rules before you alter your
property. Some HOA members have been known to be rabid.

Homeowner’s Insurance

Realty = An insurance policy that covers a residential real estate owner against
personal liability, common risks, theft, fire, etc.

Reality = If you live in a natural disaster prone area, you may need
to get additional insurance, such as flood or hurricane insurance.
Homeowner’s policy prices vary widely depending upon prior claims, personal
credit, location, building construction, building age, and the amount of your
deductible.

Homeowner’s Warranty

Realty = An insurance policy that covers certain physical systems within a home.
Typically, the warranty will cover the electrical and plumbing systems, the
furnace and range, roof, and other items, for one year from the date of
closing. If a repair is needed, the homeowner calls the warranty company, who
dispatches a technician to repair or replace the item in question. The
homeowner pays a small deductible, and the warranty company covers the rest.

Reality = A warranty can be a homeowner’s best friend.

HUD (Housing and Urban Development)

Realty = A department of the federal government created in 1965 which is
responsible for the implementation and administration of the U.S. government
Housing and Urban Development programs which include FNMA, FHA, Public Housing
Urban Renewal and Community Facilities.

Reality = HUD oversees many programs designed to promote home
ownership.

HUD-1 Form

Realty = A form used by a closing agent which itemizes charges imposed on a
borrower and seller in a real estate transaction.

Reality ="Buyers" are referred to as "borrowers"
on this form even if no loan involved. It’s also known as a “closing
sheet” or “settlement form”. The HUD-1 is usually issued three days
before a closing.

Inspection (home)

Realty = A written statement illustrating the inspection results of a given
property by a professional home inspector. It will show problems and potential
problems with the property not always visible to an average purchaser (i.e. a
deteriorating roof, an ancient furnace, termites, wood rot, and basement
seepage). Many purchasers make their offer to purchase conditional upon
obtaining a satisfactory Home Inspection report.

Reality = Do your homework for a good home inspector. They will
write it up and sign a report that states every little flaw of the property to
any major disasters waiting to happen. Oftentimes an inspector will
oversee tests for radon, termites, etc...

Interest only

Realty = A mortgage where the borrower is only required to pay the interest due
on the principle mortgage amount during the specified term. The principle loan
must be repaid at the end of the term.

Reality = Seems like a boon, but keep in mind that you’re not
building any equity and if your property depreciates you still owe the entire
original principal of the mortgage.

Joint Tenancy

Realty = An equal ownership interest of property of two or more persons.

Reality = Each party of the property ownership is on the form and in
the event of death, the survivor owns the property in its entirety.

Jumbo Loan

Realty = a loan which is larger than the limits set by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation. Because
jumbo loans cannot be funded by these two agencies, they usually carry a higher
interest rate.

Reality = Watch out for those jumbo loans. That higher interest rate
might get you if you aren’t careful.

Lease Option

Realty = A lease where the tenant has the right to purchase real property under
certain conditions either during or at the end of the lease term.

Reality = A rent to own type of property. The monthly rent may
have an additional amount added which can be applied to the down payment of the
property. It often starts with a sizeable down payment as well. Many
investors use lease options to control and sell properties without ever owning
them.

Lessee

Realty = The person who rents property from a Lessor.

Reality = The tenant. Always read your lease and understand
what you’re bound to.

Lessor

Realty = An owner, or landlord who has granted tenant possession and use of a
property for a period of time.

Reality = Typically, a landlord.

Lien

Realty = A piece of property is used to secure payment of some sort. Your mortgage
is considered a lien.

Reality = It’s like someone is holding your car for ransom. You don’t
pay your parking tickets, so the county takes your car as a lien (impounds it)
until you pay up. In addition to a mortgage, tradesmen may file a “mechanics”
lien on your property, in the event they are not paid for their work.

Listing Agent

Realty = The real estate agent assisting the sellers of real property.
They work for a commission, anywhere form 3-7% of the sale price of the
home.

Reality = You pay them to do the dirty work.

Listing Broker

Realty = Also known as the seller’s agent, representing the party selling real
estate in a buy/sell transaction.

Reality = This is the person listed on the ‘for sale’ sign.

Listing Contract

Realty = A contract between a homeowner (as principal) and a licensed real
estate broker (as agent) by which the broker is employed to market the real
estate within a given time, and in return, the owner agrees to pay a
commission.

Reality = A signed agreement between the homeowner and agent that
says you will pay the agent a commission for listing your house. These
contracts are usually exclusive and the standard listing term is 180 days.

Loan (vs. Mortgage)

Realty = Borrowing of money.

Reality = Use loans with caution, as the interest that can accumulate
can be substantial. A mortgage is different from a loan in that you
basically sign away your house if the money isn’t paid back.

Loan to Value (LTV)

Realty = The percentage relationship between the amount of the loan and the
appraised value or sales price (whichever is lower).

Reality = Most lenders require a minimum 20% down payment (80% loan
to value).

Loan to Value Ratio

Realty = The amount of mortgage debt a lender can loan you compared to the
appraisal value of a property used as collateral (expressed as a percentage).

Reality = The higher the LTV, the higher the risk…which means the
loan will cost you more to borrow or you’ll need to purchase mortgage
insurance. Bankers usually require a ratio at a maximum of 80% for a mortgage
to be approved.

Market Price

Realty = The actual amount for which a piece of property is sold.

Reality = The sales price or purchase price.

Market Value

Realty = The highest price, which a ready, willing and able buyer, (but is not
compelled to buy), would pay, and the lowest price a ready, willing and able
seller, (but not compelled to sell), would accept.

Reality = Research the market value in your area. It is pretty
much the basis for a "listing price" or "asking price".

MLS (Multiple Listing Service)

Realty = MLS is a current and comprehensive listing system for relaying a
specific area’s “for sale property” information, (except those being sold by
the owner) between Realtors®.

Reality = A marketing service in which many brokers pool all of their
listings and establish procedures for sharing commissions. Generally, multiple
listing services (MLS) require that property owners sign an exclusive agency or
exclusive right to sell their listing with participating brokers in order to
have access to the marketing pool.

Mortgage

Realty = A lien or claim against real property, given by the buyer to the
lender, as security for money borrowed.

Reality = The amount of money you owe your lender until your property
is completely paid off. Once you pay off your note, ensure that your
lender removes the mortgage from county records.

Mortgage Note

Realty = A written agreement to repay a loan. The agreement is secured by a
mortgage, serves as proof of indebtedness, and states the manner in which it
shall be paid. Also, “deed of trust note".

Reality = A loan that puts your mortgage up as proof of debt and
lists the terms under which the mortgage is to be paid.

Option

Realty = A right to purchase or lease a property upon certain specified terms
within a particular time period.

Reality = The receiving party is not obligated to purchase the
property. It’s only an option.

Origination Fee

Realty = A fee charged for the work involved in the evaluation, preparation and
submission of a proposed mortgage loan.

Reality = Beware of all origination fees and “closing costs”
associated with obtaining a loan. Shop to obtain an
apples-apples comparison.

Origination Points

Realty = A type of fee borrowers pay to lenders or loan officers in order to
compensate them for the role they play in evaluating, processing and approving
mortgage loans. Some borrowers pay points (one point is equal to 1% of the loan
amount) up front, in order to obtain a lower interest rate.

Reality = Credit history is one factor that plays a role in the
amount of origination points a borrower needs to pay. They are not tax
deductible.

Owner Financing

Realty = A property purchase where the seller provides all or part of the
financing.

Reality = A buyer’s dream. An owner may be willing to offer financing
if they own the property outright and want to have income from the sale of the
property. The interest rate and amortization term is oftentimes
negotiable.

P.I.T.I.

Realty = The four components of a mortgage payment: Principal, Interest, Taxes,
and Insurance. Also, “carrying charges".

Reality = Principal, Interest, Taxes, and Insurance add up to your
total monthly payment. Lenders usually pay your taxes and insurance to
reduce their risk from tax liens and expired insurance policies.

Point

Realty = Sometimes called "discount points.” A point is 1% of the
amount of the mortgage loan.

A one-time charge, by the lender, to increase or decrease the stated interest rate on a loan. To decrease the interest rate, the borrower "pays" points, to increase the interest rate; the borrower receives points which can be used to reduce the closing cost. Each point is equal to one percent (1%) of the loan amount.

Reality = A point is 1% of the loan amount. Paying points up
front may be beneficial, if you intend to hold your property for a long period
of time.

Power of Attorney

Realty = A legal document that authorizes another person to act on one’s behalf.

Reality = A POA can have total authority or can be limited to certain
acts or certain periods of time. A POA for real estate is often used if one is
out of country or does not have all of his/her faculties.

Pre-approval

Realty = A guarantee that a lender will loan a potential buyer a fixed amount,
as long as, he or she buys a home within a certain time frame and the house
appraises for the amount of money for which he or she qualifies.

Reality = A process whereby a potential homebuyer secures a
guaranteed mortgage approval before making an offer on a house. A lending
institution guarantees, in writing, to grant a loan for a specified amount. Not
to be confused with prequalification. (See the full definition of
pre-approval.)

Prepayment Penalty

Realty = Penalty for the payment of a mortgage note or deed of trust note before
it actually becomes due.

Reality = Think you’re in the clear for paying your loan off
early? Think again, you may have to pay a fee for paying your debt
earlier than they want you to. Always make sure your loan does not
include a pre-payment penalty.

Prequalification

Realty = Some lenders "pre-qualify" mortgage applicants in less than an
hour by performing cursory checks. Seldom can a lender fully check an
applicant's credit, asset and debt status this quickly, so final approval
typically takes at least a few more days.

Reality = Though such preliminary pre-qualifications may soon lead to
a full pre-approval, there is no guarantee until the applicant receives a
letter, certificate or wallet-size card bearing the mortgage-holder's name and
maximum loan amount.

Prime Rate

Realty = The lowest commercial interest rate charged by banks on short-term
loans to their most creditworthy customers.

Reality = Changes in the prime rate do not directly affect mortgage
rates, but the same factors that influence the prime rate also affect the
interest rates of mortgage loans.

Principal

Realty = The amount borrowed or remaining unpaid. The
part of the monthly payment that reduces the remaining balance of a mortgage.

Reality = Usually, it’s the remaining balance of your mortgage.

Private Mortgage Insurance (PMI)

Realty = A policy provided by private mortgage insurers to protect lenders
against loss if a borrower defaults. Most lenders require PMI for loans with
loan-to-value (LTV) percentages in excess of 80%. This allows the borrower to
make a smaller down payment of as low as 3%, instead of about 20%, and usually
requires an initial premium payment and possibly an additional monthly fee
depending on the loan's structure.

Reality = To make it easier, lenders are now required to tell the
buyer at closing how many years and months it will take for them to pay 20% of
the principal to cancel PMI. If you must have PMI, make sure you aren’t
paying it after achieving 20% equity.

Promissory Note

Realty = A written promise to repay a specified amount over a specified period
of time.

Reality = A loan… with a promise by the borrower to repay the lender.

Property Management

Realty = The operation of real property, including the leasing of space,
collection of rents, selection of tenants, and the repair and renovation of the
buildings and grounds.

Reality = A property owner often pays a brokerage or property
management firm a few to maintain a property, collect rents, and keep it
occupied.

Prorate

Realty = To allocate between seller and buyer, their proportionate share of an
obligation paid or due.

Reality = For example, a prorate of real
property taxes, fire insurance, or condominium fee.

Purchase Agreement

Realty = A written contract signed by the buyer and seller stating the terms and
conditions under which a property will be sold.

Reality = Synonymous with buy-sell agreement.

Purchase Money Transaction

Realty = The acquisition of property through the payment of money or its
equivalent.

Reality = That’s right, money “or its equivalent.” Do you have
other property or something else of value to barter for the property you
want? It never hurts to ask a seller to what options they’re open.

Qualifying vs. non-qualifying

Realty = Qualifying Ratios: Calculations that are used in determining whether a
borrower can qualify for a mortgage. There are two ratios. The "top"
or "front" ratio is a calculation of the borrower’s monthly housing
costs (principle, taxes, insurance, mortgage insurance, and homeowner’s
association fees) as a percentage of monthly income. The "back" or
"bottom" ratio includes housing costs as well as all other monthly
debt.

Reality = Perform your own calculations to ensure you have more than
enough income to pay off all of your monthly obligations and still have money
for fun and emergencies.

Quitclaim Deed

Realty = Quitclaim deeds transfer or "quit" any interest in real
property. The grantor may not be in title at all, so the grantee cannot assume
that the grantor has any real interest to convey. A common example
is a divorce settlement where one spouse “quits” his or her interest in the
property to the other party (now ex-spouse) in the proceedings.

Reality = Now you can correct those who call it a “Quick” Claim.

Radon gas

Realty = A ground-generated radioactive gas that seeps into some homes through
sump pumps, cracks in the foundation and other inlets. Radon exists naturally
in many locations, and may present a serious health risk when it accumulates in
basements or crawl spaces beneath homes.

To reduce the risk of lung cancer, EPA has set a recommended “action level” of 0.4 pCi/L for homes. The Canadian limit before remediation is required is 800 Bq/m3 (vs. 150 Bq/m3) in the United States.

Reality = You don’t want an excessive amount radon in your home.

Real Estate Investment Trust (REIT)

Realty = A portfolio of properties managed for investors. Similar in nature to a mutual fund.

Reality = REIT’s are an alternative to those who want to invest in
real estate, yet don’t have the time, knowledge, or large amount of investment
capital required.

Realtor®

Realty = Any real estate agent who belongs to the National Association of
Realtors®.

Reality = It’s Real-Tor not Real-uh-tor. Much like Real-tee (realty)
is the correct pronunciation over Ree-al-i-ty.

Recording Fee

Realty = The fee a government charges for reporting a real estate purchase or
sale into the public record.

Reality = The fee to file a deed or lien is usually $5-$20. The
escrow/closing company or an attorney usually files deeds and mortgages,
although any individual can file a document at the county Clerk
and Recorder’s office.

Refinance

Realty = The process of paying off one loan with the proceeds from a new loan
(usually for a lower interest rate) using the same property as security.

Reality = Refinancing is a popular practice when interest rates drop.

REO (Real Estate Owned)

Realty = An REO is a “Real Estate Owned” property that, after an unsuccessful
foreclosure auction, goes back to the lender/bank.

Reality = For many who rocked with the great hair bands of the 80’s,
REO stands for Ransom Eli Olds who invented the REO Speedwagon.
Now it’s time for me to fly.

Reverse Amortization

Reality = The annual payment is less than the interest obligation
during the early years of the debt obligation, so that the outstanding balance
on the debt actually increases rather than decreases.

Realty = When you have a mortgage, the annual interest adds up, so even when you
pay off your mortgage, you will still owe more than the value of your house.

Reverse Mortgage

Realty = A special type of loan used to convert the equity in a home into
cash. Therefore, the borrower/homeowner gets monthly payments based upon
the equity in their home.

Reality = Instead of the borrower making monthly payments to a
lender, as with a regular mortgage, a lender makes payments to the borrower.
While a reverse mortgage loan is an option for older homeowners who have
considerable equity, the borrower owns the home and holds title to it, without
having to make any monthly mortgage payments.

Right of First Refusal

Realty = A provision in an agreement that requires the owner of a property to
give another party the first opportunity to purchase or lease the property
before he or she offers it for sale or lease to others.

Reality = In general, the right of a person or company to purchase
something before the offering is made available to others.

Right of Survivorship

Realty = The right, which is the distinguishing feature of joint tenancy, of a
surviving tenant or tenants to become owner of the entire interest of a deceased tenant.

Reality = A good thing for the surviving member when a spouse or
partner dies.

Sale –Leaseback

Realty = An arrangement where the seller of an asset leases back the same asset
from the purchaser.

Reality = Used to free up operating capital for expansion, operating
capital, or other investments.

Sales Associate

Realty = A person with a real estate license and associated with a specific real
estate broker.

Reality = A salesperson is a licensed real estate agent who works
under the supervision of a broker.

Second Mortgage (and subordination)

Realty = A second financing arrangement, in addition to the first mortgage, also
secured by the property. Second mortgages are usually issued at a higher
interest rate and for a shorter term than the first mortgage.

Reality = A second loan placed upon a piece of property, and the
interest is still tax deductible. Oftentimes this money is used to reduce
credit card debt, for home improvements, or to start a business or purchase an
asset. Synonymous with home equity loan.
One might also consider a home equity line of credit (HELOC).

Survey

Realty = A map or drawing made by a licensed surveyor showing the precise legal
boundaries of a property, measuring the land with its elevations, improvements,
boundaries, and its relationship to surrounding tracts of land. A survey is
often required by the lender to assure a building is actually sited on the land
according to its legal description.

Reality = My land is your land… It just may be if you don’t get a
boundary line survey to determine what is actually yours.

Tenants in Common (TIC)

Realty = When a property is owned by two or more tenants.

Reality = If one owner dies, the other does not automatically take
the entire estate. When the person dies, the property portion is transferred to
the descendant's beneficiary

Title

Realty = A legal term for an owner's interest in a piece of property. It
may also refer to a formal document that serves as evidence of ownership.
Conveyance of the document may be required in order to transfer ownership in
the property to another person. Title is distinct from possession, a right that
often accompanies ownership but is not necessarily sufficient to prove it. In
many cases, both possession and title may be transferred independently of each
other.

Reality = A document that indicates rights of ownership and
possession of a particular property.

Title Abstract

Realty = A summary of the public records relating to the title of particular
piece of land. An attorney or title company reviews an abstract or title to
determine whether there are any title defects. This can include a brief history
of the transfers of a piece of land, including all claims that could be made
against it

Reality = An abstract is a condensed version of a longer piece of
writing (Summary highlighting major points in the Title)

Title commitment / Preliminary Title Report

Realty = A report made by a title company stating whether there are any other
claims to ownership of a property. A necessary step before a mortgage loan can
be approved.

Reality = Review this report closely prior to purchase, to see what
you’re getting yourself into.

Important information in the Title Commitment

Before issuing the Title Commitment, the title company
(issuing the title insurance policy) will perform a title search on the
property. The results of the title search that may be an issue in the transaction
will be included in the Title Commitment. Thus, the Title Commitment may
contain important disclosure issues, such as:

• Easements

• CC&R’s and other deed restrictions

• Access problems

• Whether the property is the vicinity of a military airport

• Prior leases

The Title Commitment may also reveal problems that could
delay the close of escrow, such as:

• Court orders/divorce decrees

• Probate issues

• Foreclosures

• Bankruptcies

• Judgment liens

• State and federal tax liens

• Environmental liens

• Other matters of record affecting title.

Title Insurance

Realty = A policy, usually issued by a title insurance company, which insures a
homebuyer against errors in the title search. It protects lenders and
homeowners against loss of their interest in property due to legal defects in
title. The cost of the policy is usually a function of the value of the
property, and is often borne by the purchaser and/or seller. A lender’s
policy is usually purchased in conjunction with a loan/mortgage to protect the
lender.

Reality = If you want to be protected against potential flaws in your
title, but title insurance.

Title Search or Examination

Realty = 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.

Reality = Double checking to make sure there are no problems “clouds”
with the title. Clouds or encumbrances include leans and easements.

Transaction Management System (TMS)

Realty = An automated system built to electronically organize and track
documents in a real estate transaction.

Reality = TMS’s saves time, money, and trees. In the future,
there will be no stacks of documents to sign at a closing. Buyers and
sellers will have the ability to sign electronically and get a CD at closing.

Transfer Tax

Realty = State tax, local tax (where applicable), and tax stamps (in some areas)
required by law when title passes from one owner to another.

Reality = In a narrow legal sense, a transfer tax is essentially a
transaction fee (often relatively small in relation to the value of property)
imposed on the transfer of title to property.

Trust Deed (Deed of Trust)

Realty = A written instrument that legally conveys property to a trustee; often
used to secure an obligation such as a mortgage or promissory note.

Reality = Used in place of a mortgage.

VA Mortgage

Realty = A mortgage that is guaranteed by the Department of Veterans Affairs
(VA).

Reality = The guarantee by the VA protects the lender against loss and
thus encourages lenders to make mortgages to veterans.

Warranty Deed

Realty = A warranty deed assures the buyer that the Seller will defend his title
to the property from all other persons.

Reality = A general warranty deed is a type of deed where the grantor
(seller) guarantees that he or she holds clear title to a piece of real estate
and has a right to sell it to you. The guarantee is not limited to the time the
grantor owned the property—it extends back to the property's origins.

When purchasing a home or property, make sure you get a “warranty” deed.

Zoning

Realty = The division of a city or a county by legislative regulations into
areas (zones), specifying the uses allowable for the real property in these
areas.

Reality = The public regulation of land and building used to control
the character of a place. It’s probably a good idea to check out the
zoning laws in your area if you want to tear down or build. Zoning is
often categorized as residential, multi-family, business, industrial, etc.