100 Real Estate Terms You Should Know

Real Estate

Amortization: The process of paying off a debt over time through regular payments.
Appraisal: An evaluation of a property’s value by a professional appraiser.
Assessed Value: The value of a property according to a public tax assessor for purposes of taxation.
Balloon Mortgage: A mortgage that has a large, lump-sum payment due at the end of the loan term.
Bridge Loan: A short-term loan that is used until a person or company secures permanent financing.
Broker: A person who acts as an intermediary between two parties in a transaction.
Buyer’s Agent: A real estate agent who represents the buyer in a real estate transaction.
Capital Gain: The profit from the sale of a property or an investment.
Closing: The final step in a real estate transaction where the title is transferred from the seller to the buyer.
Closing Costs: Fees paid at the closing of a real estate transaction.
Commercial Property: Real estate property that is used for business activities.
Comparative Market Analysis (CMA): An examination of the prices at which similar properties in the same area recently sold.
Contingency: A condition that must be met for a real estate contract to become binding.
Conventional Mortgage: A type of mortgage loan that is not insured or guaranteed by the government.
Deed: A legal document that proves ownership of a property.
Down Payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Earnest Money: A deposit made to a seller indicating the buyer’s good faith in an arrangement.
Equity: The difference between the market value of a property and the amount the owner still owes on the mortgage.
Escrow: An account held by a third party on behalf of two parties in a transaction.
Fixed-Rate Mortgage: A mortgage that has a fixed interest rate for the entire term of the loan.
Foreclosure: The process by which a bank takes back a property from a borrower who has failed to make mortgage payments.
Home Inspection: A thorough inspection by a professional that evaluates the structural and mechanical condition of a property.
Homeowner’s Association (HOA): An organization in a subdivision, planned community, or condominium that makes and enforces rules for the properties in its jurisdiction.
Lease: A legal document outlining the terms under which one party agrees to rent property from another party.
Lien: A claim or charge on property for payment of some debt, obligation or duty.
Listing: A formal agreement between a property owner and a real estate broker authorizing the broker to represent the seller and find a buyer.
Loan-to-Value Ratio (LTV): The ratio of a loan to the value of an asset as determined by the formula loan amount divided by the appraised value of the property.
Market Value: The highest estimated price that a buyer would pay and a seller would accept for an item in an open and competitive market.
Mortgage: A loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
Multiple Listing Service (MLS): A service used by a group of real estate brokers. They band together to create an MLS that allows each of them to see one another’s listings of properties for sale.
Pre-Approval Letter: A letter from a lender indicating that a potential buyer has the ability to pay back a loan up to a certain amount.
Principal: The amount of money originally borrowed in a loan.
Private Mortgage Insurance (PMI): Insurance that a mortgage lender requires a borrower to purchase if the loan is more than 80% of the home’s value.
Property Tax: A tax assessed on real estate by the local government, usually based on the value of the property.
Real Estate Agent: A professional licensed to negotiate and conduct real estate transactions.
Real Estate Investment Trust (REIT): A company that owns, operates, or finances income-generating real estate.
Realtor: A real estate agent who is a member of the National Association of Realtors.
Refinance: Obtaining a new mortgage to replace an existing one.
Title: A legal document evidencing a person’s right to ownership of a property.
Title Insurance: Insurance that protects the holder from loss sustained by defects in the title.
Underwriting: The process of evaluating a loan application to determine the risk involved for the lender.
Zoning: Government regulations that control how land can be used.
Adjustable-Rate Mortgage (ARM): A mortgage loan with the interest rate on the note periodically adjusted based on an index.
Appreciation: The increase in the value of a property over time.
Bankruptcy: A legal proceeding involving a person or business that is unable to repay outstanding debts.
Cash Flow: The net income generated by a property after mortgage payments and operating expenses.
Chain of Title: The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
Condominium: A building or complex of buildings containing a number of individually owned apartments or houses.
Depreciation: A decrease in the value of a property due to wear and tear or obsolescence.
Easement: A right to cross or otherwise use someone else’s land for a specified purpose.
Fair Market Value: The price that a willing buyer and a willing seller would agree upon, given reasonable exposure of the property to the marketplace, full information as to the potential uses of the property, and no undue compulsion to act.
Gross Rent Multiplier (GRM): A simple method used to assess the approximate value of a rental property.
Home Equity Line of Credit (HELOC): A line of credit extended to a homeowner that uses the borrower’s home as collateral.
Interest Rate: The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.
Joint Tenancy: A legal arrangement in which two or more people own a property together, each with equal rights and obligations.
Landlord: The owner of property that is rented or leased to an individual or business, who is called a tenant.
Lease Option: A lease with an option for the tenant to purchase the property.
Mortgage Broker: An intermediary who brings mortgage borrowers and mortgage lenders together, but does not use its own funds to originate mortgages.
Negative Amortization: An increase in the principal balance of a loan caused by making payments that fail to cover the interest due.
Offer: A formal proposal to buy a property.
Open House: A period of time during which a house or apartment for sale or rent is held open forpublic viewing.
Pre-Qualification: An evaluation of a potential borrower’s ability to receive a loan, pre-qualification is an indication of approximate borrowing capacity.
Real Estate Owned (REO): Property owned by a lender—usually a bank—after an unsuccessful sale at a foreclosure auction.
Rent-to-Own: A type of agreement that allows a renter to become the owner of the property after a certain period of time.
Seller’s Agent: A real estate agent who represents the seller in a real estate transaction.
Short Sale: A sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property.
Tenancy in Common: A type of joint tenancy of property without right of survivorship; each co-tenant’s portion is distributable under a will.
Vacancy Rate: The percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time.
Walkthrough: A final inspection of a home before it changes ownership.
Warranty Deed: A type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer).
Abstract of Title: A summary of the public records relating to the title to a particular piece of land.
Acquisition Cost: The cost to purchase a property, including the contract price and additional costs such as closing and renovation costs.
Basis Point: One hundredth of one percent, used chiefly in expressing differences of interest rates.
Building Code: A set of rules that specify the standards for constructed objects such as buildings and nonbuilding structures.
Capitalization Rate: The rate of return on a real estate investment property based on the income that the property is expected to generate.
Due Diligence: The process of examining all of the material facts of a deal or a contract before a legal contract is signed.
Eminent Domain: The power of a government to take private property for public use.
Fixture: An item of property so attached to a building or land that it becomes part of the real estate.
Gentrification: The process of improving a house or district so that it conforms to middle-class taste.
Housing Discrimination: The act of discriminating against an individual or group in the housing market, usually based on race, religion, national origin, sex, disability, and family status.
Ingress and Egress: The right to enter and leave designated premises.
Joint Venture: A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.
Leverage: The use of borrowed money to finance an investment.
Nonconforming Use: A use of property that is permitted to continue after a zoning ordinance prohibiting it has been established.
Owner Financing: A property purchase transaction in which the property seller provides all or part of the financing.
Property Management: The operation, control, and oversight of real estate as used in its most broad terms.
Quitclaim Deed: A deed that transfers a seller’s interest in a property but does not guarantee that the seller holds the property free and clear of all liens.
Real Property: Land and anything permanently affixed to it, including buildings, fences, and other items attached to the structure.
Survey: The processof measuring land to determine its size, location, and physical description and the resulting drawing or map.
Tax Lien: A legal claim by a government entity against a noncompliant taxpayer’s assets.
Triple Net Lease (NNN): A lease agreement on a property where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance on the property.
Usury: The illegal action or practice of lending money at unreasonably high rates of interest.
Variable Rate Mortgage: A type of home loan in which the interest rate is not fixed.
Yield: The income return on an investment, such as the interest or dividends received.
Zoning Ordinance: A rule that specifies how land in certain geographic zones can be used.
1031 Exchange: A swap of one investment property for another that allows capital gains taxes to be deferred.
Absorption Rate: The rate at which available homes are sold in a specific real estate market during a given time period.
Blanket Mortgage: A mortgage which covers more than one piece of real estate.
Cost of Funds Index (COFI): An index that is used to determine interest rates or changes in interest rates for certain types of mortgages.
Dual Agency: A situation in which a real estate agent represents both the buyer and the seller in the same transaction.

100 Real Estate Terms You Should Know

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