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Avenue 3 Real Estate, MA Realtors | 125 Cambridge Park Drive Suite 301 | Cambridge, MA 02140 | 857.209.5037 |


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MA Real Estate Glossary

Learning the language of real estate is an important first step in the home buying and selling process. The following glossary will provide you with helpful explanations of common Massachusetts real estate terms.


Adjustable Mortgage Loans:  Mortgage loans under which the interest rate is periodically adjusted. The amounts and times of adjustment are set at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARMs), Flexible Rate Loans and Variable Rate Loans.

Amenity: A feature of a home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural ( such as location, woods, water) or man-made ( such as a garden or patio).

Amortization:  Payment of a debt in equal installments of principal and interest, rather than interest-only payments.

Annual Percentage Rate (A.P.R.): The yearly interest percentage of a loan, as expressed by the total finance charge actually paid (interest, loan fees, and points). The A.P.R. is disclosed as a requirement of federal truth in lending statutes.

Appraisal: A document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Assessed Value: The valuation placed on a property by a public tax assessor for purposes of taxation.

Buydown: A payment to the lender from the seller, buyer, or third party, or some combination of these, which causes the lender to reduce the interest rate during the early years of the loan.

Buyer's Agent: An agent who represents the buyer and owes fiduciary duties to the buyer

Cap: In adjustable rate mortgages, the limit on how much the interest rate or monthly payment can change.

Client: The party for which professional services are rendered. In real estate, a buyer or seller to whom an agent owes all the fiduciary responsibilities of obedience, loyalty, disclosure, confidentiality, accountability and reasonable care.

Closing: The final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. Closing Statement: The statement which lists the financial settlement between buyer and seller, and the costs each must pay to close the transaction.

CMA: CMA, or Comparative Market Analysis, is a comparison of homes similar to a seller's home in terms of size, style, features, and location that has sold recently or are on the market.

Condominium: A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title.

Contingency: Commonly, a stated event which must occur before a contract is binding. For example, a home sale may be contingent upon the buyer obtaining financing.

Deposit: A portion of the down payment given by the buyer to the seller or escrow agent with a written offer to purchase to show good faith.

Designated Agency: A brokerage practice whereby the Designating Broker assigns or designates a single agent to be the sole representative for a buyer or a seller. As such, no other agents of the firm will represent the buyer's or seller's best interests.

Designated Agent: A real estate licensee who as been appointed by a Designating Broker to be the sole and exclusive representative for a buyer or seller.

Down Payment: Cash portion of the purchase price paid by a buyer from his own funds as opposed to that portion which is financed.

Dual Agent: An agent representing both the buyer and the seller in the same transaction.

Dual Agency: The occurrence of an agent representing both the buyer and the seller in the same transaction. In this arrangement, the dual agent will not be able to satisfy all of his fiduciary responsibilities to either party

Escrow: A procedure in which a third (neutral) party holds all funds, documents, etc. necessary to the sale, with instructions from both buyer and seller as to their use and disposition.

Equity: A home owner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owned on the mortgage and other liens.

Exclusive Listing: A written contract that gives a licensed real estate agent the exclusive right to market a property for a specified period of time.

FHA Loan: A loan insured by the Federal Housing Administration, a part of the Department of Housing and Urban Development. FHA insurance enables lenders to loan a very high percentage of the sale price.

Fiduciary Relationship: A relationship of trust and confidence, as between trustee and beneficiary, attorney and client or principal (client) and agent.

Graduated Payment Mortgage: Referred to as GPM, is a mortgage with initial low monthly payments which gradually increase over a specified period of time.

Green Glossary: A glossary of real estate related environmental terms.

Hazard Insurance: Otherwise known as homeowners insurance. This is a usual requirement of a mortgage lender and an advisable safeguard for any homeowner to protect against loss.

Home Inspection: A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included in a contingency by the purchaser.

Home owner's Insurance: An insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence or inappropriate action that results in bodily injury or property damage

Index or Rate Index: A measure of interest rate changes used to adjust the interest rate of an Adjustable Mortgage Loan. Example: the change in U.S. Treasury securities (T-bills) with a 1-year maturity, based upon their weekly average yield.

Lien: A legal claim or charge on property as security for payment of a debt or for the discharge of an obligation.

Loan-to-Value Ratio: The ratio - expressed as a percentage - of the amount of a mortgage loan to the appraised value or selling price of the property.

Lockbox: A key storage system placed on a home entrance that is accessible only by active, licensed real estate agents who must abide by a strict set of guidelines when showing a seller's home.

Margin: In Adjustable Rate Mortgage Loans, the number of percentage points the lender adds to the index rate to determine the new interest rate at each adjustment.

MLS: MLS stands for multiple listing service, a data sharing service of cooperating members that facilitates the sale of each others listings.

Offer: Indication by a potential buyer of willingness to purchase a home at a specific price, terms, and conditions, generally put forth in writing.

PITI: Principal, Interest, Taxes, and Insurance. Used to indicate the four major items included in a monthly mortgage payment.

Points: A fee charged by a lender as a service charge or as an amount needed to make the yield on a mortgage competitive with other types of investments. Each point represents 1% of the loan amount.

Principal: Amount of debt, not including interest; the face value of a loan.

Private Mortgage Insurance: Insurance issued by a private company against a loss by the lender in the event of default. Private mortgage insurance is generally required for conventional financing whenever less then 20% is put down.

Purchase and Sale Agreement: A detailed written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Real Property: Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Second Mortgage: A mortgage which ranks after the first mortgage lien in priority.

Seller's Agent: An agent who represents the seller and owes a fiduciary duty to the seller.

Settlement: Same definition as closing.

Survey: A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Title Insurance: Insurance against loss resulting from defects of title of public records.

Underwriting: The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and judgment of the property value.

VA Loans: Loans partially guaranteed by the Veteran's Administration, enabling veterans to buy a home with little or no down payment.