REAL ESTATE GLOSSARY
We, as REALTORS®, sometimes forget that not everyone is familiar with the ins and outs of the real estate industry, causing unfamiliar lingo to roll off our tongues. Have you ever wondered what all of that real estate jargon means? We’ve compiled a list of some of the most-common unfamiliar terms.
Adjustable-Rate Mortgage (ARM)
A type of mortgage on which interest rates are periodically adjusted up or down monthly, semi-annually, or annually. Some ARMs can remain fixed for a period of time before adjusting.
Amortization
A method of maintaining equalized monthly mortgage payments over the life of a loan, even though the proportion of principal to interest changes over time. In the early part of the loan period, the principal repayment is low, while the interest payment is high. At the end of the loan period, the relationship is reversed.
Annual Percentage Rate (APR)
An APR is the finance charge for a loan, including points and fees, in addition to the stated interest rate.
Appraisal
An appraisal serves to establish a property’s market value—the likely sales price it would bring if offered in an open and competitive real estate market.
Assessed Value
The value placed on a property by a municipality with the objective of levying taxes. The assessed value may differ widely from The appraised or market value.
Balloon Payment
A large principal payment due all at once at the end of specified loan terms.
Cap
A limit on how much the interest rate can be modified in an adjustable-rate mortgage.
Certificate of Title
A document, signed by a title examiner, stating that a seller has an insurable title to the designated property.
Closing
The actual procedure by which the deed to a property is legally transferred from seller to buyer, and documents are recorded.
Closing Costs
Fees associated with the closing of a home sale transaction, above and beyond the agreed-upon price of the property itself.
Commission
A fee (usually a percentage of the total transaction) paid to a real estate agent or broker for services performed.
Comparative Market Analysis (CMA)
A survey of the attributes and selling process of comparable homes currently on the market or recently sold; used to help determine an accurate pricing strategy for a seller’s property.
Contingency
A condition in a real estate transaction contract that must be met for the contract to be binding.
Contract
A binding legal agreement between two or more parties that details the conditions for the exchange of value (for example: money exchanged for title to property).
Deed
A legal document formally conveying ownership of a property from seller to buyer.
Down Payment
The percentage of the purchase price of a property that the buyer must pay in cash and may not borrow from a lender.
Earnest Payment
A a good-faith deposit toward the purchase of real estate. Also called earnest money or simply earnest.
Equity
The value of a property actually owned by the homeowner: the purchase price, plus appreciation, plus improvements, less mortgages and liens.
Escrow
A fund or account held by a third-party custodian until the conditions of a contract are met.
Fixed-Rate Mortgage
The type of mortgage in which interest rates remain the same over the life of the loan.
Fixture
A recognizable entity (such as kitchen cabinets, backyard decking, or light fixtures) that is permanently attached to a property and belongs to the property when it is sold.
Hazard Insurance
Contracted coverage that will compensate for property damage from specified hazards, such as fire and wind.
Interest
The assessed fee for borrowing money, usually expressed as a percentage rate.
Lien
A security claim on a property until a debt is satisfied.
Listing Contract
The agreement through which a homeowner engages a real estate company for a specified period of time to sell a property, for which, upon the property’s sale, the agent receives a commission.
Market Price
The actual price at which a property is sold.
Market Value
The price of a property that is established by location, current economic conditions, and general market trends.
Mortgage
The temporary, conditional pledge of real estate property to a creditor as security for performance of an obligation or repayment of a debt.
Multiple Listing Service (MLS)
A nationwide system that provides detailed information about properties for sale to its agent members and prospective buyers.
Origination Fee
The application cost(s) for processing a proposed mortgage loan.
PITI
The acronym—referring to the sum of principal, interest, taxes, and insurance—forming the basis for monthly mortgage payments.
Point
One percent of a mortgage loan principal, charged in addition to interest and fees.
Prepayment Penalty
The practice by which a clause is included in a loan contract allowing a lender to collect extra money from the homeowner if the loan is prepaid above a certain percentage.
Principal
One of the parties to a contract; also, the amount of money borrowed in a transaction, for which interest is charged.
Prorate
To allocate, distribute, or assess proportionately.
Purchase and Sale Agreement
The contract between a buyer and seller detailing a property purchase and transfer.
Settlement
All of the financial transactions required to make a contract final and binding.
Title
A formal document that serves as proof of ownership of property.
Title Search
Detailed examination of the entire document history of a property title to determine it is without legal encumbrances.