The legal world is full of terminology that can confuse anyone outside it. Through our Legal Lingo blog series, we’ll introduce you to and define some legal lingo you might encounter to help you be more informed.
Real estate transactions, in particular, include many terms specific to the real estate world, and if it’s your first time buying or selling property, all of this new jargon can get confusing.
Common Real Estate Terms
Here are some common terms you might encounter while on your real estate journey in North Carolina.
As-is
When a real estate listing says a property is being sold “as-is,” it typically means that the property must be accepted by the buyer in its current condition; the seller is not willing to make any improvements or repairs to the property as a condition of the sale.
Closing
Also referred to as escrow, it is the last step in financing and purchasing real estate before you can officially call a home or property yours. During this time, you will sign any necessary documents, pay closing costs and fees, and the property will officially be signed over to you by the seller. You will also need to have certain documents and items with you to show to your mortgage lender. Check out our North Carolina Real Estate Closing Checklist for an idea of what the process entails.
Deed
The physical, legal document used to legally transfer title or ownership from one party in a real estate transaction to another. The deed states who owns the property, where it is, and its boundaries. Multiple types of property deeds exist, including General Warranty, Limited Warranty, Quitclaim, and Deed In Lieu of Foreclosure.
Equity
The difference in the amount a property is worth and how much is owed on the mortgage, calculated by subtracting the amount of the outstanding mortgage loan and any liens against the property from the property’s fair market value. If you purchase a property for any amount lower than its fair market value, you are said to gain instant equity on the home. Equity allows a homeowner to build wealth over time as they pay off their mortgage.
Foreclosure
When a borrower defaults or fails to make payments on a mortgage, the lender who holds the title of the property can foreclose – or take ownership – of it. This grants the lender legal ownership of the property so that they can sell it to recoup their investment.
Lien
A legal claim to a piece of property by someone other than the owner, often in cases where a best is owed to the lien holder. A lien allows the lien holder to hold possession or ownership of the property until the debt is repaid. If a property for sale has a lien against it, the buyer can be prevented from taking the title, or ownership, of it until the lien is removed.
Mortgage
A loan secured by using real estate as collateral, giving the lender the right to take ownership of the property if the borrower defaults (fails to repay) on the loan. When you take out a mortgage, your lender holds the title to the property until the loan is paid in full. Mortgage loans are typically used to purchase or refinance the property as collateral, but they can also be taken out against a property to provide money for something else.
- Fixed-rate mortgage: a mortgage loan where the interest rate stays the same for the duration of the loan.
- Adjustable rate mortgage (ARM): a mortgage loan where the interest rate can change after an initial fixed-rate period as it is adjusted based on the current interest rate index. This type of mortgage is less favored than the fixed-rate mortgage due to its lack of predictability but has the potential to yield lower interest rates during certain periods
Title
The ownership of a piece of property. In real estate, when you own a piece of property, you are said to “hold the title” to that property. This gives you the legal rights, control, and responsibility over the property. Real estate titles can be held by individuals, groups of people (i.e., couples), or even corporations, organizations, and trusts. Unlike vehicles, a real estate title is not a physical document; instead, the term is used to describe the concept of the ownership of a piece of property.
Contact Starling, Rodriguez & Associates
Knowing the lingo is just the start of being able to navigate through a real estate transaction in North Carolina. You’ll need an experienced real estate attorney to share their legal expertise and know-how to ensure the transaction works best for all parties involved. The real estate team at Starling, Rodriguez & Associates can guide you through the process. Contact our office to speak with an attorney today.