Real Estate Glossary – B

Backup Contract – a real estate contract that takes effect in the event that a previous agreement is not fulfilled.

Balance – See Principal Balance.

Balance Sheet – A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Loan – A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Balloon Payment -Â The final lump sum payment that is made at the maturity date of a balloon mortgage.

Bankrupt – A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

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

Bankruptcy Discharge – After a bankruptcy proceeding is completed, the debtor is released from an obligation to repay his or her debts.

Basis Point – one hundredth of one percent.

Before-Tax Income – Income before taxes are deducted.

Beneficiary -Â The person designated to receive the income from a trust, estate, or a deed of trust.

Bequeath -Â To transfer personal property through a will.

Betterment – An improvement that increases property value as distinguished from repairs or replacements that simply maintain value.

Bilateral Contract – a contract under which both parties are obligated to conduct certain deeds or tasks.

Bill of Sale – A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.

Binder – A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.

Bird Dog – a person who identifies a beneficial real estate investment opportunity and passes information about the deal on to another investor for a fee.

Biweekly Mortgage – A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

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 covers multiple properties.

Board Of Equalization – A committee of persons at the state level who ensure that local property taxes are assessed in a uniform manner.

Board of Realtors – A group of real estate professionals who hold membership in the state and national Associations of Realtors.

Bona Fide – In good faith, without fraud.

Bond – An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Bond Market - Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.

Breach of Contract – a violation of a legal agreement or contract. Also, a default on a loan or other payment.

Bridge Loan – Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property . The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.

Broker – Broker has several meanings in different situations. Most Realtors are “agents” who work under a “broker.” Some agents are brokers as well, either working for themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

Budget – A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.

Budget Category – A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. “Rent” is an example of an expense category. “Salary” is a typical income category.

Building Code – Local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

Building Permit – A statement of permission, in writing, from a local government or agency allowing the recipient to build a particular structure at a particular site.

Bundle of Rights – A group of implied rights in the ownership of any real estate property. These include the owner’s right of occupancy, use and enjoyment, the right to sell in whole or in part, the right to lease any or all of the rights, the right to the benefits derived by occupancy and use of the property, and so on.

Buy Down – Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A “lender funded buydown” is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to “qualify” at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.

Buydown Account - An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.

Buydown Mortgage – A temporary buydown is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower’s monthly payments during the first few years of a mortgage. A permanent buydown reduces the interest rate over the entire life of a mortgage.