The Learning Center

Glossary

Backup Contract

A contract to buy property that becomes effective if a prior contract fails to be agreed upon. Also known as a Backup offer.

Balance Sheet

A financial statement in a table form that shows assets, liabilities and net worth.

Balloon Mortgage

A short-term,fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.

Balloon Payment

The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.

Bankrupt

A person, company, or corporation that, through formal court proceeding, is relieved from the payment of all debt after the surrender of some or all assets to a court-appointed trustee.

Bankruptcy

A court proceeding in which a debtor who owes more than his assets can relieve the debts by transferring his assets to a trustee.

Basis Point

One one-hundredth of one percentage point. For example, 50 basis points equals .50%

Before Tax Income

Income before deducting taxes.

Beneficiary

The person designated to receive the benefits resulting from certain acts.

Bill of Sale

A written instrument that transfers ownership of personal property.

Binder

An agreement between a buyer and seller to purchase real estate. A binder, also known as an offer to purchase or a sales contract, secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded. See “Insurance Binder” for a definition related of “binder” as related to homeowner’s insurance.

Binder Deposit

A sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The binder deposit is deducted from the purchase price at closing and is not an additional cost. Sometimes referred to as earnest money.

Biweekly Payment Mortgage

A mortgage that requires payment to reduce the debt every two weeks instead of monthly. The 26 (sometimes 27) biweekly payments are each equal to one-half of the monthly payment that would be required with a standard 30 year fixed-rate mortgage. The result is a faster loan balance reduction with substantial savings in interest.

Blanket Insurance Policy

A single policy that covers more than one piece of property (or more than one person).

Blanket Mortgage

A single mortgage that is secured by more than one parcel of real estate.

Bona fide

In good faith without fraud.

Bond

An interest-bearing certificate that serves as evidence of a debt with a maturity date. Typically, bonds represent obligations of a government or business corporation. A real estate bond is a written obligation, usually secured by a mortgage or deed of trust.

Borrower

A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Breach of Contract

A violation of the terms of any legal obligation or agreement.

Bridge Loan

Sometimes called a "swing loan", a bridge loan is generally a loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

Broker

A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.

Budget

A detailed plan of income and expenses estimated over a specified period of time. Budgets provide guidelines for managing costs and profits.

Building Code

Regulations established by local governments that control design, construction and materials used in construction. Building codes are usually based on standardized health and safety guidelines.

Buydown

A process that allows a borrower to obtain a lower interest rate on a mortgage by paying discount points to a lender. A temporary buydown will reduce the interest rate paid during the first few years of the loan. A permanent buydown reduces the interest rate over the entire life of the loan.

Buydown Account

An account in which money is held so that it can be applied to the monthly mortgage payments as each payment comes due during the period that an interest rate buy-down plan is in effect.

Bylaws

The rules and regulations that a homeowners association or corporation adopts to govern activities.