Terms to Understand
- Closing
- The execution of legal documents of conveyance and loan paperwork to transfer and/or mortgage a property.
- Commission
- The fees paid to the real estate agents who represent the buyer and the seller. These should be outlined in the Listing Agreement or the sales contract. Commissions are generally calculated based on the sales price and are reflected on the HUD-1 Settlement Statement
- Contract
- Contains all the material terms relevant to the transaction: sales price, property description, amount of earnest money, who is paying closing costs and how much, closing date, and items to be completed prior to or at the closing.
- Earnest Money
- A buyer will generally deposit a sum of money to the seller upon making an offer, as a demonstration of the buyer’s good faith intention to purchase the property. This deposit is usually refunded to the buyer at closing on the settlement statement. The contract should outline who shall hold the earnest money and how it should be handled in the event of a default.
- Escrows
- An account which is maintained by the lender on behalf of their borrower for the payment of annual taxes and insurance. Borrowers pay a monthly amount added on to their principal and interest which equals 1/12 of their taxes and homeowner’s insurance. The lender will disburse the full annual payments to the taxing authority and insurance company when each becomes due.
- Hazard Insurance
- Also known as “homeowner’s insurance”. It ensures a home against liability and loss associated with fire, wind, vandalism and other damage. Most lenders require this as a condition of the loan.
- Homeowner’s Association Dues
- Fees assessed against a property owner which is used to maintain the common areas in the subdivision.
- Promissory Note
- Sometimes just called “Note”. An instrument signed by a borrower whereby they promise to prepay, on demand or at some fixed time in the future, a sum of money to a lender. This document outlines the terms of the loan including the principal amount, the interest rate, term of the loan, penalties for late payments, and prepayment penalties, if applicable.
- Property Taxes
- Taxes paid to the city and/or county based upon the assessed value of the property.
- Security Deed
- In Georgia, the mortgage is called a Security Deed. It is the instrument which is recorded at the county courthouse to secure the property as collateral for the loan.
- Settlement Statement
- A document created by the United State Department of Housing & Urban Development which itemizes all fees and services associated with closing the loan. Also called the “HUD”.
- Survey
- A survey is a drawing prepared by a registered land surveyor, after a physical inspection, that depicts the property boundary lines, size and improvements, as well as setback lines, easements and encroachments concerned with the property.
- Specialty surveys also exist which provide more information such as topography, water flow, elevation and the location of any septic and drain lines.
- Tax Stamps
- The taxes paid to the State of Georgia on transfers documented by the deed of conveyance and the mortgage deed. Tax stamps are calculated by sales price and/or loan amount.
- Termite Letter
- An inspection report which shows the existence of active or previous infestation of subterranean termite and other wood destroying organisms. It is a standard state form which reveals whether there is any earth-to-wood contact on the property, if there were any areas of the structure that were not inspected, and if it appears that any previous termite treatment has been performed.
- Title Exam
- An examination of public records in the county where the property is located. The title examiner reviews the history of the title to ensure the seller owns the property and to determine if there are any mortgages or liens on the property that will have to be paid before or at the closing.
- Title Insurance
- Protects the insured from claims regarding ownership of the property, liens against the property & marketability of title to the property.
- Mortgage policy—Protects the lender’s interest in the property, required.
- Owner’s policy—Protects the buyer’s equity in the property, optional.
- Warranty Deed
- The instrument which transfers ownership interest in the property from the seller to the buyer and which contains assurances as to the marketability of the title of the property
