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Real Estate Terminologies

You have been working abroad for a time now.  You have already paid up for loans you incurred to be able to go abroad and have sent most of your younger brothers and sisters through school.  It is now the perfect time to buy a property for you and your family. This will be the lasting legacy you can leave them, something you and your family can be proud of and will be the ultimate symbol of your success.

So, you come home to Cebu for a vacation for the purpose of buying that dream property and talk to an agent about it.  But wait! This agent mouth seems to be moving and sounds come out from her mouth, but nothing of what she says registers in your brain. Of course, you don’t want to appear like a newbie or a greenhorn, lest you be pounced upon by this salivating wolf-of-an-agent catching its slow, lowly prey for dinner.

You nod and feign a smile hoping she won’t notice.   Still trying to maintain composure, you try to look for intelligent questions to ask hoping this ordeal would be finished soon and that you will leave the impression that you are not someone a sly agent like her can push around. But, you go home feeling unsure what impression you made. More importantly, you are not sure if you were given a good deal. Too much jargon left you lost somewhere.

Maybe if you had done some preparation beforehand, such an embarrassing situation would have been avoided. Maybe if you understood most of the jargon she used, you would feel that you were present in your conversation with the agent. 

Well, below are some of the more common terminologies used in real estate transactions with some comments or added information.  Taken from www.realestateabc.com, this should help ease some of the tension and misunderstandings you would have with your agents as a first time buyer, or even a still uninformed second time buyer.

Terminologies and their definitions

Amortization - The loan payment consists of a portion which will be applied to pay the interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases [until the loan amount paid off completely].

Amortization schedule - A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero. [Ask for this, if you want to know how much you are paying for the interest and the principal each time you give out a payment. To many, the amortization schedule might come out as a shock. Well, there isn’t much one can do about it until the interest rates in our country goes down significantly.]

Appraisal - A justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

Appraised value - An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

Appraiser - An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent. [Appraisers also carry licenses after passing exams and other requirements currently regulated by DTI.]

Appreciation - The increase in the value of a property due to changes in market conditions, inflation, or other causes.

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

Assessment - The placing of a value on property for the purpose of taxation.

Assessor - A public official who establishes the value of a property for taxation purposes.

Asset - Items of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Collateral - In a home loan, the property is the collateral. The borrower risks losing the property, if the loan is not repaid according to the terms of the mortgage.

Depreciation - A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

Earnest Money Deposit - A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Easement - A right of way giving persons other than the owner access to or over a property.

Effective Age - An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Encumbrance - Anything that affects or a title to a property, such as mortgages, leases, easements, or restrictions.

Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

Fair Market Value - The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

More real estate terminologies and concepts will be explained in upcoming issues.

 

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