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Florida: Glossary – Florida Property Terms

American Terms

Acceptance: Agreeing to accept an offer on a property, which constitutes a contract.

Adjustable Rate Mortgage (ARM): A type of mortgage rate loan whose interest rate changes periodically up or down, usually once or twice a year. There are a large number of ARMs available from lenders nation-wide. Also called a ‘variable rate mortgage’.

Ad Valorem Tax: A tax based on the value of property, i.e. property or real estate taxes.

Amortisation: The gradual process of systematically reducing debt in equal payments (as in a mortgage) comprising both principal and interest, until the debt is paid in full.

Annual Percentage Rate (APR): Everything financed in a mortgage loan package (interest, loan fees, points or other charges), expressed as a percentage of the loan amount.

Appraisal: The professional examination of a property to determine its market value.

Assessed Value: The value placed on a property for tax purposes by the county property appraiser. Unlike in many other countries (and US states), the assessed value in Florida should be equal to the actual market value.

Assumable Mortgage: A loan that the lender is willing to transfer from the current owner of a property to a new owner, possibly with the same interest rate and terms. An Assumable loan may make your home more attractive to buyers when you want to sell.

Balloon Mortgage: A loan with a large final payment.

Broker: See Real Estate Broker.

Buyer’s Agent/Broker: An agent working solely for the buyer and under obligation to obtain the best price and terms for him.

Cap: The maximum rate by which an adjustable-rate mortgage can change, either annually or over the lifetime (term) of the mortgage.

Closing: The final procedure in a property transaction when documents are executed and recorded, funds are disbursed and the title transferred from the seller to the buyer. A buyer can give a lawyer (or another person) power of attorney to attend the closing on his behalf. Also called settlement.

Closing Costs: Costs the buyer must pay at the time of closing in addition to the down payment, including broker’s commission, points, mortgage insurance premium, homeowner’s insurance and prepayments for property taxes. Closing costs average around 5 per cent of the purchase price.

Closing Statement: A statement prepared by a broker detailing the closing costs for both the seller and the buyer.

Common Elements: The parts of a building housing a condominium or co-operative units that aren’t individually owned, in which all owners have an indivisible interest. Common elements usually include foyers and hallways, maintenance areas, parking lots, grounds, recreational facilities and the external structure of a building.

Community Association: An organisation which a buyer must usually join when buying in community developments. Note that even single-family home communities can have community associations.

Condominium (Condo): A building or development comprising two or more units (e.g. apartments or townhouses), the interior of which is individually owned. The common elements of the building (see above) are owned in common by all unit owners.

Co-operative: A building or development comprising two or more units (e.g. apartments or townhouses) which is owned by a corporation usually made up of the owner/occupants. No real property is owned by individuals, who own shares in the corporation (allocated to each unit according to its size) entitling them to use a certain dwelling unit or other units of space.

Contingency: A condition placed on an offer to buy or sell a home, e.g. a prospective buyer may make an offer contingent on the sale of his present home.

Conveyance: The act of transferring the title (ownership) of a property and also the document (such as a deed) used to transfer the ownership.

Deed: A written legal document that conveys title to real property.

Deed Restrictions: A clause in a deed that restricts the use of land.

Discount Points: The amount paid to the lender at the time of the origination of a loan to account for the difference between the market interest rate and the lower face rate of the note (see also Point).

Down Payment: The amount that needs to be paid in cash to obtain a mortgage, e.g. if you have an 80 per cent mortgage, you must make a 20 per cent down payment.

Earnest Money: Funds submitted with an offer to show good faith to follow through with a purchase. Earnest money is placed by a broker in an escrow (trust) account until closing, when it become part of the down payment or closing costs.

Easement: The interest, privilege or right that a party has in the land of another party, e.g. utility lines.

Encumbrance: Any right or interest in a property that affects its value such as outstanding loans, unpaid taxes, easements and deed restrictions.

Equity: The value an owner has in a property after the deductions of any outstanding liens such as a mortgage, e.g. if a property is valued at $100,000 and the amount outstanding on a mortgage is $50,000, the owner has $50,000 equity.

Equity Loan: A second mortgage where the owner borrows against his equity in a property.

Escrow: A procedure in which documents of cash and property are put in the care of a third party, other than the buyer or seller, pending completion of agreed conditions and terms in sales contracts. An escrow company performs escrow services.

Exclusive Agency Listing: A contract giving one broker the sole right to sell a property for a specified time, while allowing the owner to sell the property without payment of a commission.

Exclusive Right to Sell Listing: A contract giving a broker the exclusive right to sell a property and to collect a commission if the property is sold by anyone, including the owner, within the term of the agreement.

Fee Simple or Fee Absolute: A freehold title or absolute ownership of real property.

FHA Financing/Loan: A loan which is insured against loss by the Federal Housing Administration (FHA), part of the US Department of Housing and Urban Development (HUD). Such financing requires only a 3 to 5 per cent down payment.
Fixed-Rate Mortgage: A mortgage with a fixed interest rate, usually over a period of 15 to 30 years.

Foreclosure: Legal proceedings instigated by a lender to deprive a person of ownership rights when mortgage payments haven’t been maintained (called repossession in some countries).

FSBO: An abbreviation for ‘For Sale By Owner’, when a home is being sold without the assistance of a real estate agent.

Graduated-Payment Mortgage (GPM): A loan requiring lower payments in the early years, with payments increasing in steps until they are sufficient to amortise the loan. Also called a ‘flexible payment mortgage (FPM)’.

Growing Equity Mortgage (GEM): A loan in which the payment is increased by a specific amount each year, with the additional payment amount applied to principal retirement. This results in the maturity of the loan being significantly shorter than a comparable level-payment mortgage.

Hazard Insurance: Homeowner’s insurance that covers a property against certain risks (hazards) such as fires and storms.

Home Inspection: A home inspection is a thorough examination of the condition of a home before purchase, also called a survey and carried out by a surveyor in many countries. It should be completed by a professional home inspection company which provides a detailed written report. You can make a purchase contingent on a satisfactory home inspection.

Homeowners’ Association: An organisation of owners in a community property such as a condominium or co-operative development, usually for the purpose of managing the common elements of the development and enforcing deed restrictions.

Homeowner’s Insurance: An insurance policy that protects a homeowner from ‘casualty’ (losses or damage to the home or personal property) and from ‘liability’ (injury to other people or damage to a third party’s property). Required by lenders (premiums are usually included in monthly mortgage payments).

HUD: The US Department of Housing and Urban Development (HUD), which sells homes deeded to HUD/FHA by mortgage companies who have foreclosed on FHA-insured mortgage loans. HUD is also responsible for government housing programs.

Impound Account: An account held by a lender for payment of taxes, insurance and other periodic debts against a property. The borrower pays an apportioned amount with each monthly loan payment and the lender pays the bills with the accumulated funds.

Interest Rate: A percentage that when multiplied by the principal determines the amount of money that the principal earns over a period of time (usually one year).

Joint Tenancy: Property ownership by two (e.g. a married couple) or more persons with an undivided interest and the right of survivorship, where if one owner dies the property automatically passes to the joint owner(s).

Jumbo Mortgage: A high value mortgage, usually in excess of $250,000, with a lower than average interest rate.

Lien: A charge against property making it security for a debt such as a mortgage or community fees.

Listing: A property listed for sale, a record of property for sale by a broker, or a written contract between a property owner and an agent authorising the agent to perform certain services for the owner.

Loan Origination Fee: A fee charged by the lender for evaluating, preparing and submitting a proposed mortgage loan.

Lock-In Period (LIP): The period of a mortgage during which the interest rate is fixed.

Lot: The plot or parcel of land on which a home is built or the land on which a mobile home is located.

Market Value: The current value of a property compared with similar properties, generally accepted to be the highest price a buyer will pay and the lowest price a vendor will accept.

Mortgage: A written instrument that creates a lien against real estate as security for the payment of a loan.

Mortgage Insurance Premium (MIP): A charge paid by the borrower (usually as part of the closing costs) to obtain financing particularly when making a down payment of less than 20 per cent of the purchase price.

Mortgage Pre-Approval: A service offered by lenders whereby they provide pre-approval of a loan (for a maximum sum) thus establishing a buyer’s price range, strengthening his buying position and shortening the loan approval period.

Mortgagee: One who holds a lien on property or title to property as security for a debt, i.e. the lender.

Mortgagor: One who pledges property as security for a loan, i.e. the borrower.

Multiple Listing Service (MLS): A broker information network whereby an association of real estate brokers agrees to share listings publicising homes for sale, where the selling agent splits the commission with the agent who finds a buyer. Most homes are multiple listings and therefore different agents offer the same properties.

National Association of Real Estate Brokers (NAREB): An organisation of minority real estate salespersons and brokers who are called ‘realtists’.

National Association of Realtors (NAR): An Organisation of ‘realtors’ devoted to encouraging professionalism in real estate transactions. NAR has over 600,000 members, associations in all 50 US states and a number of affiliates.

Offer: A bid to buy a property at a specified price.

Open Listing: A listing of properties for sale given to any number of brokers without liability to compensate any except the broker who first secures a buyer.

Plat: A plan or map of a specific land area.

Point: An amount equal to 1 per cent of the principal amount being borrowed. A lender may charge a borrower several points as a fee for providing a loan. See also Discount Points.

Prepayment Penalty: A penalty sometimes imposed on a borrower when a loan is paid off before the end of the mortgage term (maturity).

Principal: The amount of money borrowed to buy a property and the amount still owed. Also one who owns or will use a property.

Principal and Interest Payment (P&I): A periodic (usually monthly) mortgage payment that includes interest charges plus an amount applied to the amortisation of the principal balance.

Principal, Interest, Taxes and Insurance (PITI): Monthly mortgage payment (P&I) plus an amount deposited in escrow against future property tax and insurance payments.

Private Mortgage Insurance (PMI): See Mortgage Insurance Premium (MIP) above.

Property Taxes: Taxes based on the assessed value of a home paid by the homeowner for community services such as schools, public works and other costs of local government.

Purchase-Money Mortgage: A mortgage given by a buyer to a seller in part payment of the purchase price of a property.

Real Estate: In law, real estate is land and everything built on or attached to it.

Real Estate Broker: A person who has passed a state broker’s examination and is licensed by the state to represent buyers and sellers in real estate transactions. A brokerage is the business of being a broker.

Real Estate Salesperson: A person who has passed a state examination and who works under the supervision of a broker.

Real Estate Taxes: Property taxes levied on land and buildings charged to owners by local government (e.g. county) agencies.

Realtist: A member of the National Association of Real Estate Brokers (NAREB).

Realtor: A real estate broker who’s a member of the National Association of Realtors (NAR), a professional association. Not all brokers are realtors.

Refinance: To replace an old loan with a new one, either to reduce the interest rate, secure better terms or increase the amount borrowed.

Seller’s Agent/Broker: A real estate agent employed solely by the seller and under obligation to obtain the best price and terms for the seller.

Remodelling: Remodelling is the name used in America for modernisation, renovation and restoration of a property. Also called rehabilitation.

Settlement: See Closing.

Single-Family Home: A detached property built on its own lot (plot or parcel).

Subdivision: A tract of land divided into lots for homebuilding purposes.

Survey: A process under which a parcel of land is measured and a blueprint produced showing its measurements, boundaries and area. Note to be confused with a British home survey, which is called a home inspection in America.

Tenancy in Common: A form of ownership in which two or more persons buy a property jointly, but with no right of survivorship. Owners are free to will their share to anyone they choose, which is the main difference between this and joint tenancy. Often used by friends or relatives buying together.

Term: The life-span of a mortgage, e.g. 15 or 30 years.

Title: The right of possession and evidence of ownership.

Title Company: A company that issues title insurance and which may also perform escrow functions.

Title Insurance: Protects lenders and homeowners against loss of their interest in property due to legal defects in the title (e.g. liens or encumbrances) discovered after the change of ownership.

Title Search: A professional investigation of public records to establish the chain of ownership of a property and note any outstanding liens, mortgage, encumbrances or other factors that may affect clear title.

Variable Rate Mortgage (VRM): See Adjustable Rate Mortgage (ARM).

Zoning: The procedure that classifies land and property for a number of different uses such as residential, commercial or industrial, in accordance with a land-use plan. In some counties, an area must be specifically zoned for short-term rentals.

© Survival Books Limited 2004

“Buying a Home in Florida” 2nd Edition, David Hampshire.

Reproduced with the permission of Survival Books Limited.

Further information on this topic can be found in “Buying a Home in Florida” 2nd edition, by David Hampshire.

For extensive information about buying a property in Florida, you can purchase this book at www.survivalbooks.net

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