Chicago Real Estate Terms
Acceptance Date – The date that the employee accepts the Home Purchase Agreement from Kraft. On an amended sale (see below) the acceptance date is the date that the employee accepts after Kraft has received the original and final sales contract from the employee’s listing agent.
Adjustable Mortgage loans – Mortgage loans under which the interest rate is periodically adjusted.
Adjustments – Money credited to either / both buyer and seller at closing, including real estate taxes, price adjustments based on disclosures in the inspection, etc.
Agency – Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter.
Agent – One who is authorized to act for or represent another (principal), usually in business matters.
Amended Sale – A Kraft approved sale generated by the employee, through their listing agent prior to, or during the employee’s sixty-day marketing period.
Amortization – A method by which monthly mortgage payments are equalized over the life of the loan despite the fact that the proportion of principal to interest changes.
Anticipated Sales Price – The price at which a property is anticipated to sell in a competitive and open market, assuming an arms-length transaction whereby: the analysis reflects the subject in as-is condition, both buyer and seller are typically motivated, a reasonable marketing period, not to exceed 120 days is allowed for exposure in the open market, forecasting is applied to reflect the anticipated trend of market conditions and prices during the subject property’s prospective marketing period.
APR – Annual Percentage Rate: The total finance charge (including interest, loan fees, points, etc. ) expressed as a percentage of the loan amount.
Arms Length Transaction – Legal slang meaning that there existed no special relationship between the parties involved in any matter which would taint the result of the transaction. A willing and informed buyer and a willing and informed seller.
Arrears – (1) Payment made after it is due is in arrears. (2) Interest is paid in arrears since it is paid to the date of payment rather than in advance, as is in rent. Example: A mortgage payment is due and made for July 1, the interest portion pays from June 1 – June 30, it is paid in arrears. The majority of mortgage payments run one month in arrears and tax payments generally run one year in arrears.
Assessed Value – Value placed upon property for property tax purposes by the tax assessor. Most often the assessed value is higher than the appraised value.
Balloon Mortgage – A mortgage calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.
Bona Fide Offer – An offer in good faith, for valuable consideration without notice or knowledge of adverse claims of others.
Broom Clean – Floors are swept and the home is free of debris.
Buy Down – A payment to the lender from another causing the lender to reduce the interest rate for a fixed period of time.
Buyer Agency – A buyer’s agent (and the brokerage that employs same agent) owe the buyer loyalty, obedience, confidentiality, accounting, and reasonable skill and care in performing their duties and any other duties contained in a buyer’s agency agreement. It is common that the compensation owed to a buyer’s agent be the responsibility of the buyer. It is also possible that as a buyer’s agent, a seller may not allow their home to be shown by such an agency relationship.
Cess Pool – A pit or pool which holds raw sewage.
Closing – The final settlement at which time the title is transferred from seller to buyer, accounts are settled, new mortgages signed and all fees and expenses dispersed or satisfied.
Closing Costs – Expenses incidental to a sale or purchase of real estate, such as loan fees, title fees, appraisal fees, etc.
Comparable Sales – A similar and recently closed property (generally within the last six to 12 months) that an appraiser compares to the subject property during the appraisal process in order to ascertain the anticipated sales price.
Competing Listings – Properties that are currently on the market that appraisers consider when developing their final opinion of anticipated sales price during the appraisal process.
Down Payment – The buyer’s payment to the seller at the time the sales contract has been mutually agreed to, or at closing, for the percentage of the total purchase price required by the buyer’s mortgage loan.
back to top
Earnest Money – Money given by the buyer with an offer to purchase. Shows good faith on behalf of the buyer towards completing the purchase of a home. There is no fixed amount required as earnest money. It is negotiable between the seller and the buyer.
Easement – A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another. It is either for the benefit of land (appurtenant), such as right to cross A to get to B, or “in gross”, such as a public utility easement.
Equity Loan (advance) – The difference between the market value and the amount of the owner’s indebtedness on a property. Generally calculated the following way: Kraft offer amount less the principal balance of any outstanding mortgages, less one months mortgage interest that runs in arrears (see arrears), less any property taxes owed, less any other liens or potential repair issues, times 95%.
Equity Statement – A document prepared and disbursed to the relocating employee by Kraft showing the itemized breakdown of the employee’s equity. This statement should be saved for tax purposes.
ERC Summary Appraisal Report – Six page appraisal report for relocation purposes.
Escrow Account – A third party account used to retain funds including the property owner’s real estate taxes, buyer’s earnest money or hazard insurance premiums.
Fixed Rate Mortgage – A mortgage having a rate of interest which remains the same for the life of the mortgage.
Forecasting – May be applied during the appraisal process. Forecasting is used to reflect the anticipated trend of market conditions and prices during the subject property’s prospective marketing period.
Hazard Insurance – Often confused with “Home Owner’s” insurance, it’s designed to compensate for specific hazards including fire and wind. An “all-risk home owner’s policy” provides more complete coverage.
Home Purchase Agreement – Documents prepared by Kraft between Kraft and the employee outlining the details of the offer as compiled through the appraisal process.
back to top
Listing Agreement – An agreement between an owner of real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee or commission.
Marketing Period – Reasonable time to allow a property for exposure on the open market, typically not to exceed 120 days.
Miscellaneous Expense Allowance – For current employee renters, experienced new hires, and college recruits. A one-time $5,000 allowance to cover movement of household goods, lease cancellation, duplicate mortgage, etc.
Mortgage Broker – One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security.
Mortgagee – The party lending the money.
Mortgage Insurance – Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by mortgage default. Generally applicable when a borrower puts less than 20% of the purchase price as a down payment. There is an initial up front premium that is paid by the borrower and continues in future mortgage payments.
Mortgagor – The party who borrows the money.
Multiple Listing Service (MLS) – A system through which participating brokers agree to share commissions, on a pre-determined percentage split, on the sale of properties listed by any broker in the system.
Negative Amortization – Most likely to occur with ARMs when monthly payments are not sufficient to cover interest costs. Additional interest is added to principal balance and the borrower may end up owing more than at the initiation of the loan.
PITI – Principle, Interest, Taxes, Insurance payment.
Prepayment – Borrower pays off an entire mortgage before the scheduled date.
Prepayment Penalty – A fee included in the mortgage agreement requiring borrower to pay in the event the loan is paid before the due date.
Principal – The amount of money borrowed against which interest and possibly fees will be charged. (A second meaning: one of the parties to a contract).
Pro Ration – To divide property taxes, insurance premiums, rental income, etc. between buyer and seller proportionately to time of use, or the date of closing.
Radon – A natural decay of uranium that occurs underground that may enter into a home. This has been listed as the second leading cause of lung cancer.
Relocation Expense Allowance – One month salary capped at $10,000 for current employee homeowners and $3,500 for current employee renters, experienced new hires, and college MBA recruits.
Septic Tank – An underground tank into which a sanitary sewer drains from a building. The sewage is held until bacterial action changes the solids into liquids or gases, which are then released into the ground.
TARA – Targeted Area Relocation Assistance – Kraft program to offer a subsidy for a set period of time to offset the high cost of living in certain defined geographical locations.
Title – A document showing evidence of ownership.
Title Insurance – Protection for lenders and homeowners against financial loss resulting from legal defects in the title.
Travel Lump Sum Allowance – For current employee homeowners, current employee renters, experienced new hires, college MBA recruits. This is for expenses associated with home finding and temporary living. This eliminates the need for TRIP expense reports (with the exception of final move).
back to top
URAR – Uniform Residential Appraisal Report – Two page appraisal report generally used for mortgage purposes.
Vacate Date – The date that the home becomes vacant including person or persons and household goods.
Walk-Through Inspection – The final inspection by the buyer, usually in the company of the buyer’s real estate agent, to ensure that all conditions noted in the offer-to-purchase, and all seller-related contingencies have been met. This inspection is most often completed immediately prior to the official act of closing, after the seller has vacated the premises.
Well – A hole or shaft which is sunk (usually by drilling) into the ground to obtain water.