Real Estate Glossary: Key Terms and Definitions

A

Appraisal: A professional evaluation of a property’s value, typically conducted by a licensed appraiser.

Assessed Value: The dollar value assigned to a property for tax purposes by the local government.

Asset: Any item of value owned by an individual or corporation, often used to determine wealth.

B

Broker: A licensed individual or firm that arranges transactions between a buyer and a seller for a commission when the deal is executed.

Buyer’s Agent: A real estate agent who represents the buyer in a transaction, assisting with finding properties and negotiating offers.

C

Closing: The final step in a real estate transaction where the title is transferred from the seller to the buyer, and all financial obligations are settled.

Commission: The fee paid to a real estate agent or broker for their services, usually a percentage of the property’s sale price.

Comparative Market Analysis (CMA): An evaluation of similar, recently sold homes (comps) in the area to determine a property’s value.

D

Deed: A legal document that transfers ownership of a property from one person to another.

Down Payment: The initial payment made by a buyer towards the purchase price of a property, typically a percentage of the total price.

E

Equity: The difference between the market value of a property and the outstanding balance of any liens against it.

Escrow: A neutral third party that holds funds and documents until all conditions of a real estate transaction are met.

F

Fixed-Rate Mortgage: A mortgage with an interest rate that remains the same for the entire term of the loan.

Foreclosure: The legal process by which a lender takes possession of a property due to the borrower’s failure to make mortgage payments.

H

Home Inspection: An examination of the property’s condition by a professional inspector before the sale is completed.

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

I

Interest Rate: The percentage of a loan amount charged by a lender to a borrower for the use of assets.

Investment Property: Real estate purchased for the purpose of generating income, either through rental or resale.

L

Listing: A property that is for sale and represented by a real estate agent.

Loan-to-Value Ratio (LTV): A financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

M

Market Value: The estimated amount for which a property should sell under normal conditions.

Mortgage: A loan used to purchase real estate, with the property itself serving as collateral.

O

Offer: A formal bid from a buyer to purchase a property at a specified price.

Open House: A scheduled period when a property for sale is available for public viewing.

P

Pre-Approval: A lender’s conditional approval for a mortgage loan based on a preliminary review of the buyer’s financial status.

Principal: The amount of money borrowed in a loan, excluding interest and other charges.

R

Real Estate Agent: A licensed professional who represents buyers or sellers in real estate transactions.

Refinance: The process of replacing an existing mortgage with a new one, typically to obtain better terms or rates.

S

Seller’s Agent: A real estate agent who represents the seller in a transaction, assisting with pricing, marketing, and negotiating offers.

Short Sale: The sale of a property for less than the amount owed on its mortgage.

T

Title: A legal document proving ownership of a property.

Title Insurance: Insurance that protects against financial loss from defects in the title to a property.

U

Underwriting: The process by which a lender evaluates the risk of a mortgage loan to determine if the borrower qualifies for the loan.

Upgrade: Improvements made to a property to increase its value.

V

Variable Rate Mortgage: A mortgage with an interest rate that can change periodically based on the terms of the loan.

Vacancy Rate: The percentage of all available rental units in a property or area that are vacant or unoccupied at a particular time.

W

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

Z

Zoning: Local government regulations that dictate how property can be used in different geographic areas, such as residential, commercial, or industrial zones.

This glossary covers many of the key terms in real estate and can serve as a helpful resource for buyers, sellers, and industry professionals.