Useful Real Estate Terms

Annual Percentage Rate (APR): This is not the interest rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of your loan. It will help you when choosing a lender. In theory, whoever has the lowest APR is providing you with the best overall loan when you consider the interest rate being offered and the fees being paid.

Certified Funds: Certified funds are monies delivered in the form of a bank wire, a cashier’s check, a certified bank check, money orders or cash. Under South Carolina law, all funds for real estate closings must be certified funds. Whether you are the purchaser, seller, or lender, a certified check or wire must be used to deliver the funds required for closing.

Closing: The big day has arrived and it is time to complete the purchase of your new home! Purchaser, Seller and Lender pick a date and time with the closing attorney to meet and sign all the necessary paperwork to complete the sale of the home, including but not limited to the closing statement, all loan documents, the Deed transferring the home, tax documents and title affidavits. The closing attorney collects all monies owed in connection with the closing and disburses the funds to Seller, Lender, Realtors, Contractors and all other parties involved in the Closing.

Closing Attorney: All real estate closings, whether purchase transactions or refinances, constitute the practice of law in South Carolina. As such, South Carolina law requires that a licensed SC attorney perform all real estate closings. The closing attorney’s job includes reviewing the title history of the property; reviewing the loan documents; explaining the loan documents to Purchaser and overseeing the Closing; preparing the deed and all other transfer paperwork; collecting and disbursing all monies involved in the Closing; and recording the deed, mortgage, and other necessary documents in the Office of the Register of Deeds for the appropriate county.

Closing Costs: Closing costs can be “non-recurring” and “recurring or pre-paids.” Non-recurring closing costs are costs which are paid just once as a result of buying the property or obtaining a loan such as the attorney’s fee, title search or recording fees. “Recurring or pre-paids” are costs which recur over time, such as interest on your loan, HOA dues, property taxes and homeowners insurance. Typical Seller closing costs include deed preparation, deed stamps or transfer taxes, repairs, realtor commissions, payment for expenses involved in satisfying Seller’s mortgage(s) and fees for Seller’s attorney, if any. Purchaser is typically responsible for all other closing costs. When seeking a closing cost credit from a seller, Purchaser should always seek a credit to cover recurring and non-recurring closing costs.

Contract: A Contract is created by a Purchaser’s offer to buy the home, a Seller’s acceptance of Purchaser’s offer and an exchange of consideration, which is typically payment of the Earnest Money. All contracts for real estate must be in writing and signed by
all Purchaser and Seller to be valid. The Contract will contain all the terms relevant to the transaction: sales price, amount of earnest money, division of closing costs between buyer and seller, closing date, and any items (such as repairs) to be completed prior to closing. The Contract merges with the title to real estate after Closing and is effective after Closing unless the contract specifically states otherwise.

Deed (Title to Real Estate): The deed or title to real estate is the written document transferring ownership of real estate from Seller to Purchaser. To be valid, the deed must be recorded in the Register of Deeds Office in the county where the property is located.

Deed Stamps (Transfer Taxes or Documentary Stamps): In South Carolina, any time a property is sold, deed stamps are payable on the sale and are collected at Closing. The deed stamps are calculated at $3.70 per thousand dollars of the Purchase Price, with the price being rounded up to the closest $500.00. For example: Purchase price of $100,300.00, the deed stamps would be calculated based on $100,500.00 divided by $1000 X $3.70 = $371.85.

Due-On-Sale Provision: A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells or transfers the home that serves as collateral for the mortgage. Most mortgages contain this provision. This provision is violated by a transfer of any interest in the property including but not limited to entering seller financing, bond for titles, contracts for deeds or any other type of installment purchase agreement for the property.

Earnest Money Deposit: A deposit made by Purchaser to show that he or she is serious about buying the house and which serves as the consideration for the Contract. The Earnest Money Deposit is typically held in escrow by the Realtor or the Closing Attorney and applied against the Purchase Price at Closing.

Escrow Account: The Escrow Account is an account established by Lender as part of the closing of the loan. In addition to sums collected at Closing, a monthly amount is paid into the Escrow Account along with Borrower’s principal and interest payment. Lender uses the Escrow Account to pay Borrower’s property taxes, hazard insurance, and private mortgage insurance (PMI), as applicable.

General Warranty Deed: A general warranty deed is a form of deed that transfers ownership in a piece of property from one party to another. In addition, a general warranty deed not only conveys all of the Seller’s interest in and title to the property but also guarantees that if the title is defective or has a “cloud” on it, such as a mortgage lien, tax lien, title claim, judgment, or mechanic’s lien, Purchaser may hold the Seller liable for the defect. A general warranty deed is a type of deed where Seller guarantees that he holds clear title to a piece of real estate and has the right to sell it. The guarantee is not limited to the time Seller owned the property. The liability extends back to the beginning of the property’s ownership chain. In most purchase transactions, a general warranty deed is provided unless the Contract specifies otherwise.

Home Inspection: A report prepared by a licensed home inspector after an examination of the home, including but not limited to, HVAC systems, plumbing, electrical, roof, visible insulation, walls, ceilings, floors, windows, doors, foundation, basement/crawl space, and basic structure. Your contract should always include the right to perform a Home Inspection even if you are purchasing the home “As-Is” so that you are protected against unexpected surprises. A standard Home Inspection typically does not include a radon test.

Homeowners’ Association Dues (HOA Dues): Many homes are located in a subdivision or PUD (planned unit development). These neighborhoods require all owners to be Members of the neighborhood association with mandatory homeowners’ association dues payable for the use and upkeep of the amenities. Typically at Closing, Seller and Purchaser will be required to pay an HOA transfer fee as well as the annual dues or a pro-rated portion thereof.

Homeowner’s Insurance (Hazard Insurance): Homeowner’s insurance is designed to protect against damages to the home and its contents and also provides liability coverage against accidents in the home or on the property. Lenders require evidence of your homeowner’s insurance listing the Lender as an additional insured on the policy prior to Closing and require that the insurance premium for the first year be paid in full at Closing.

Homeowner’s Warranty: A type of insurance often purchased at or prior to Closing that will cover repairs to certain items, such as HVAC, should they break down within the coverage period. Typically, Purchaser will request that Seller pay for this coverage as a condition of the sale, but either party can purchase the coverage.

HUD-1 Settlement Statement: A closing statement that provides a step by step accounting of the funds that were collected and paid at Closing. All Closing Costs appear on the statement and include realtor commissions; loan fees, points, and initial escrow amounts; attorney’s fees; and title charges. The totals at the bottom of Page 1 of the HUD-1 statement show Seller’s net proceeds and Purchaser’s net payment at Closing.

Joint Tenants with Rights of Survivorship: When there are two or more owners of a piece of property, they can hold title to the property as “joint tenants with rights of survivorship,” which means that ownership of the property automatically transfers to the surviving owner(s) upon death of one owner and the property does not have to go through probate. Typically, spouses and parents and children who own property together request that it be held as joint tenants with rights of survivorship to avoid the property being tied up in the probate process upon the death of an owner. If the owners do not want the property to automatically transfer to the surviving owner, they need to request that the property be titled as “tenants in common” and the owner’s interest will pass through the owner’s probate estate.

Limited Warranty Deed (Special Warranty Deed): A limited warranty deed is a deed in which Seller warrants or guarantees the title only against defects arising during the period of Seller’s ownership of the property. Seller makes no warranty against defects existing before the time of Seller’s ownership of the property.

Mortgage: The mortgage is a legal document recorded in the Office of the Register of Deeds that pledges the real estate as collateral to the Lender as security for payment of the loan. All owners of the real estate, i.e. your name appears on the deed, must sign the mortgage at Closing for the security interest to be enforceable. If an owner’s name only appears on the mortgage, his or her credit should be unaffected by any failure to pay on the loan.

Note (Promissory Note): The note is a legal document in which the Borrower promises to repay a loan at a stated interest rate by the maturity date. The note contains the basic terms of the loan including the loan amount, annual interest rate, term of the loan, payment amount, loan payment due dates and any applicable grace period, late fees and pre-payment penalties, if any.

Power of Attorney: A power of attorney is a legal document that authorizes another person to act on one’s behalf. Lenders typically require that a power of attorney used for a real estate closing or a loan transaction be specific to the real estate closing or loan transaction. If any purchaser or seller thinks they may not be available at Closing, they should contact the Closing Attorney as early as possible so that the Closing Attorney can prepare the necessary documents and have them approved by the Lender prior to the Closing.

Property Taxes: Property taxes in South Carolina are paid in arrears. Annual tax notices are issued in October or November and are due on or before December 31st, late after January 15th. If the current tax bill has not been issued by Closing, Purchaser will receive a credit from Seller for the portion of the year that Seller owned the property and will then pay the tax bill when issued. If the current tax bill is available at Closing, the Closing Attorney will collect the amount due, prorated accordingly between Purchaser and Seller, and pay the current year’s property taxes. In South Carolina, Purchaser is entitled to a discounted tax rate on a primary residence and should make sure to complete all necessary paperwork with the applicable county after Closing to insure the property is assessed at the 4% owner occupied rate. Additionally, residents over the age of 65 or legally disabled may apply for an additional discount known as a homestead exemption after residing in South Carolina for one year. For more information:
https://www.greenvillecounty.org/County_Auditor/Homestead_Exemption.asp

Quitclaim Deed: A deed that transfers whatever interest or title Seller may have in the property at the time of the conveyance without any warranty as to Seller’s ownership of the property. A quitclaim deed is typically used when the Seller does not have clear title to the property or there is some uncertainty about the ownership of the property and Seller cannot or will not guarantee what he is transferring. Purchaser only receives whatever title Seller held in the property whether it was 100% ownership or 0% ownership.

Survey (Plat): A survey is a drawing by a licensed surveyor or engineer showing the exact boundaries of a piece of property and the location of any easements, improvements or encroachments located thereon. The survey is used to provide a valid legal description for the property. A Purchaser has the option to have a new survey completed prior to closing, but a new survey is typically not required by lenders.

Termite Letter (CL-100): A termite inspection is performed by a licensed pest control expert who inspects the home for the presence of wood destroying insects, prior treatments, fungi, mold and moisture issues. The termite letter is the report prepared by the inspector prior to Closing. It is required for FHA loans and USDA loans. If the termite letter indicates a problem, further action may be required by the lender. For new construction, Soil Treatment Letter and Guaranty is required instead of the CL-100.

Title Exam (Title Abstract): The title exam is a review of the county public records related to the property. The title abstractor reviews the history of the ownership of the property to insure that Seller actually owns the property and to see what items affect the title such as mortgages, tax liens, judgments, easements or restrictive covenants. The title exam lets us know what liens need to be paid and satisfied at Closing and whether there are any problems with the title to the property that need to be corrected prior to Closing.

Title Insurance: Title Insurance is insurance that protects the lender or the owner against loss arising from disputes over ownership of the property up to the value of the title policy. Title insurance provides assurance of coverage for a loss caused by defects in the title to property. Purchaser must buy an Owner’s Policy of title insurance at Closing as the Purchaser is not covered by the Lender’s Policy of title insurance obtained for the Lender.

What is Title Insurance?
http://www.cltic.com/whatistitle.aspx

Why do I need Title Insurance?
http://www.cltic.com/whyneedtitle.aspx