Real Estate Glossary

A

AppraisalAn expert assessment of a property's value, typically conducted by a licensed appraiser.

Assessed ValueThe value assigned to a property by a public tax assessor for the purposes of taxation.

B

Balloon MortgageA mortgage that requires a larger-than-usual one-time payment at the end of the term.

BrokerA licensed professional who can operate their own real estate business and employ other agents.

C

Closing CostsExpenses over and above the price of the property in a real estate transaction. These can include taxes, insurance, and various fees associated with the purchase.

Comparative Market Analysis (CMA)An evaluation of similar, recently sold homes (called comparables) that is used to determine a fair market value for a property.

D

DeedA legal document that transfers ownership of real estate from one party to another.

Down PaymentThe portion of the property purchase price that the buyer pays in cash and does not finance with a mortgage.

E

EquityThe difference between the market value of a property and the amount of money owed on the mortgage.

EscrowA financial arrangement where a third party holds and regulates payment of funds required for two parties involved in a transaction. This helps ensure that the transaction is secure.

F

Fixed-Rate MortgageA mortgage with a constant interest rate and monthly payments that never change over the life of the loan.

ForeclosureThe legal process by which a lender takes control of a property, evicts the homeowner, and sells the home after a borrower fails to meet the repayment terms of the mortgage.

G

Graduated Payment MortgageA type of fixed-rate mortgage where the payments increase gradually from an initial low base level to a higher final level.

Grant DeedA type of deed in which the grantor warrants that they have not previously conveyed the estate being granted and that the estate is free from encumbrances made by the grantor.

H

Homeowners Association (HOA)An organization in a subdivision, planned community, or condominium that makes and enforces rules for the properties and residents.

Home InspectionA thorough examination of a property's condition by a licensed home inspector, typically performed before the sale is completed.

I

Interest RateThe proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Inspection ContingencyA clause in a purchase agreement that allows the buyer to have the home inspected and negotiate further if problems are found.

J

Joint TenancyA form of ownership by two or more individuals together that includes the right of survivorship, meaning if one owner dies, their share passes to the remaining owners.

Judicial ForeclosureA type of foreclosure proceeding that is handled as a civil lawsuit and conducted entirely under the auspices of a court.

K

Key RateAn interest rate that affects the pricing of mortgage loans, often set by central banks.

Kick-Out ClauseA provision in a real estate contract that allows the seller to continue marketing the home until certain conditions are met.

L

Listing AgentA real estate agent who represents the seller in a real estate transaction.

Loan-to-Value (LTV) RatioA financial term used by lenders to express the ratio of a loan to the value of an asset purchased. It is calculated by dividing the amount of the mortgage by the appraised value of the property.

M

MortgageA loan used to purchase real estate, where the property itself serves as collateral for the loan.

Multiple Listing Service (MLS)A database established by cooperating real estate brokers to provide data about properties for sale.

N

Net Operating Income (NOI)A calculation used to analyze real estate investments that generate income. NOI equals all revenue from the property minus all reasonably necessary operating expenses.

Notary PublicA public official authorized to authenticate and witness the signing of documents, including real estate transactions.

O

OfferA formal bid from the buyer to the seller to purchase a home, often including terms and conditions.

Open HouseA scheduled period of time when a house for sale is open to the public for viewing.

P

Pre-ApprovalA preliminary evaluation by a lender of a potential borrower's ability to obtain a loan, which provides an estimate of the loan amount for which the borrower might qualify.

PrincipalThe original sum of money borrowed in a loan, or the remaining balance of that sum.

Q

Quitclaim DeedA legal instrument that is used to transfer interest in real property. The seller (grantor) transfers any interest they have in the property to the buyer (grantee) without making any guarantees about the quality of the title.

Qualifying RatioThe ratio of a borrower’s expenses to their gross income, used by lenders to determine loan eligibility.

R

Real Estate AgentA licensed professional who assists buyers and sellers in real estate transactions.

RefinancingThe process of obtaining a new mortgage to replace the original one, often to benefit from a lower interest rate.

S

Seller's MarketA market condition characterized by high demand for homes and low inventory, leading to higher prices and more competition among buyers.

Short SaleA 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, and the property owner cannot afford to repay the full amounts.

T

TitleA legal term for the rights of ownership and possession of a property.

Title InsuranceInsurance that protects against loss due to defects in the title, such as liens or encumbrances.

U

UnderwritingThe process by which a lender evaluates the risk of providing a loan to a borrower, including a detailed assessment of the borrower's creditworthiness and the value of the property.

UsuryCharging an illegally high interest rate on a loan.

V

Variable-Rate MortgageA mortgage with an interest rate that can change periodically, usually in relation to an index, resulting in fluctuating monthly payments.

VA LoanA mortgage loan in the United States guaranteed by the Department of Veterans Affairs (VA). These loans are available to U.S. veterans, service members, and not remarried spouses.

W

Walk-ThroughA final inspection of the property by the buyer before closing to ensure that the property is in the agreed-upon condition.

Warranty DeedA deed in which the seller guarantees that they hold clear title to a piece of real estate and has a right to sell it.

X

Exclusive Right to SellA listing agreement in which the listing agent is given the exclusive right to sell the property and is entitled to a commission if the property is sold by anyone during the term of the agreement.

Y

YieldThe income return on an investment, such as the interest or dividends received from holding a particular security.

Z

ZoningMunicipal or local government laws that dictate how properties can be used in certain areas, such as residential, commercial, or industrial purposes.

Zero Lot LineA term used to describe a type of development where the structure comes up to or very near the edge of the property line.

This glossary covers a wide range of fundamental terms used in the real estate industry, spanning all letters of the alphabet.

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