100 Real Estate Terms and Definitions You need to know

Real estate terms

The real estate world is filled with technical terms that can confuse even the most experienced buyers and sellers. Because of that, we’ve put together a real estate glossary with definitions of the most common terms you’ll come across.

A

Abstract of title

A summary of the ownership history of a piece of property.

Accrued Depreciation

The portion of the value of a property that has been used up and is no  longer available.

Acquisition

The purchase of a property.

Ad Valorem Tax 

It is levied on the value of the property, such as real estate or personal property. “Ad Valorem” is Latin for “according to value.” Ad valorem taxes fund public services, such as education and infrastructure.

Adjustable-rate mortgage (ARM)

A mortgage loan whose interest rate is not fixed but instead adjusts periodically according to   market conditions.

Adjusted Gross Income (AGI)

A measure of income that includes wages, interest, dividends,   and other forms of income however it does nor include deductions for taxes or other purposes.

Affidavit 

A written statement that is made under oath.

Alienation 

The transfer of property ownership from one person to another.

Amenities

Features of a property that make it more desirable, such as a swimming pool or gym.

Amilyar

Land or property tax

Appraisal

An appraisal is an expert’s opinion of the worth of a piece of property, such as a house or land. The opinion is based on many factors, including the current market value of similar properties and the condition of the property being appraised.

Appreciation

An increase in the value of a property due to market conditions or improvements made to the property.

Arbitration

A process in which two parties agree to submit their dispute to a neutral third party for resolution.

Assessed value

The property’s value as determined by a local government for tax purposes.

Assignment

The transfer of rights or interests in a property from one person to another.

Attorney-In-Fact

A person authorized to act on behalf of another person.

B

Balloon Payment

A large, final payment made at the end of a loan’s term that pays off the remaining principal balance.

Beneficiary

The person or entity named in a will or trust to receive assets upon the death of the individual who created the document.

Bequest

A gift of personal property given in a will.

Bilateral Contract

An agreement between two parties in which each party is obligated to fulfill its promises.

Bridge Loan

A short-term loan used to finance the purchase of a property until longer-term financing can be arranged.

Buyer’s Agent

A real estate agent representing the buyer’s interests in a transaction.

C

Capital Gains Tax

A tax on an investment or property sale profit.

Cash Flow

The difference between an investment’s cash inflows and outflows.

Certified Mail

Mail sent with a receipt that the recipient must sign, showing that the letter was received.

Closing costs

The miscellaneous fees associated with buying a property, including things like title insurance, loan origination fees, and real estate taxes.

Closing

The final step in the home-buying process is to sign all the necessary paperwork and pay the purchase price.

Commission

A fee paid to a real estate agent for their services with a transaction.

Common Area

Any part of a multi-unit property that is available for use by all residents, such as hallways, lobbies, and playgrounds.

Conjugal Property

Property owned by a married couple.

Contract for deed

A contract in which the buyer agrees to make installment payments directly to the seller rather than to a bank or other lending institution.

Contract to Sell

A contract in which the buyer agrees to purchase a property at a set price, and the seller agrees to sell the property at that price.

Conventional mortgage

A type of mortgage loan that is not insured or guaranteed by the government.

Counteroffer

A rejection of an initial offer, accompanied by a new, usually lower, offer.

D

Deed

A legal document that conveys ownership of a piece of real property.

Default

Failure to make loan payments on time or to meet other conditions of the mortgage agreement.

Due diligence 

Due diligence is the investigation of a potential investment or product to ensure all information is considered before making a decision. It can be applied to multiple areas but is most commonly associated with business transactions, such as mergers and acquisitions.

E

Earnest money deposit 

A good faith deposit made by a prospective buyer to show that they are serious about purchasing a property.

Easement

A right to use someone else’s land for a specific purpose, such as running utility lines across it.

Eminent Domain

The right of the government or a utility company to take private property for public use, with just compensation to the owner.

Equity

The portion of a property’s value that the homeowner owns instead of any amount still owed on the mortgage.

Escrow

An account held by a third party, which funds are deposited during a real estate transaction for later disbursement, as per the contract terms.

Exclusivity Agreement

A contract in which one party agrees not to enter into similar agreements with other parties.

F

Fair Market Value

The price that a willing and informed buyer would pay for a property and that a willing and informed seller would accept for the property.

Fixture

A personal item permanently attached to a real estate property, such as a stove or chandelier.

Fixed-rate mortgage

A type of mortgage loan whose interest rate is fixed for the life of the loan.

Foreclosure

The legal process by which a lender reclaims a property from a borrower who defaults on their mortgage loan.

G

Grantee

The person who receives an interest in the property through a deed transfer.

Grantor

The person who gives an interest in the property, such as through a deed transfer.

H

HOA fees

Monthly or annual fees by homeowners to a homeowners’ association (HOA) for the upkeep and maintenance of common areas in their community.

I

Implied Warranty of Habitability

The implied warranty of habitability is a legal doctrine that requires landlords to maintain their rental properties in livable condition. If a landlord fails to live up to their obligations under the warranty of habitability, tenants may have legal recourse, such as the right to withhold rent or sue for damages. While the implied habitability warranty helps protect tenants from substandard living conditions, it is essential to note that it is not absolute, and there are some situations where landlords may be exempt from its requirements.

Indemnification

When a person or organization agrees to indemnify another party, they agree to provide compensation or reimbursement in the event that the other party suffers damages.

Injunction

A court order that requires a person to refrain from taking certain actions.

Inspection

A professional usually conducts a property examination to check for any defects or problems.

Interim Financing

Short-term financing is used to cover the gap between when a property is purchased and when longer-term financing becomes available.

L

Leasehold Estate

An interest in real property held under a lease.

Lessee

The tenant in a lease agreement.

Lessor

The landlord in a lease agreement.

Listing Agreement

A contract between a homeowner and real estate agent gives the agent the right to market and sell the property.

Loan Origination Fee

A fee charged by a lender for processing a loan.

M

Maceda Law

A Philippine law provides protections for tenants, including the right to a lease and the right to make repairs to the property.

Maceda Law

Mainstreet Organization of Realtors (MOR)

A professional trade organization for real estate agents and brokers in the United States.

Mortgage Banker

A company that originates mortgages and sells them to investors.

Mortgage Broker

A person or company arranges loans for borrowers in exchange for a commission.

Mortgage insurance

A type of insurance protects lenders from borrowers who default on their mortgage loans.

Mortgage

A mortgage is a loan people get to purchase a piece of property. The property acts as collateral for the loan, and the borrower makes payments on the loan over time. Mortgages are typically paid off over 15 to 30 years, although shorter and longer terms are available.

Multiple Listing Service (MLS)

A database of properties listed by member real estate agents and brokers.

N

Net Operating Income

The income from a property after operating expenses are deducted.

Note

A document evidencing a debt and outlining repayment terms.

O

Offer

A proposal to purchase a property at a specific price.

Open House

An open house is an excellent opportunity to check out a potential new home without the pressure of making an offer. It also allows you to meet the neighbors and get a feel for the community. However, there are a few things you should keep in mind when attending an open house:

  1. Be respectful of the homeowner’s belongings and don’t go into any marked private rooms.
  2. Take your time and explore the property. Pay attention to things like the condition of the floors and walls and how well the house is insulated.
  3. Don’t be afraid to ask questions.

The open house is a great chance to get more information about the property from the real estate agent or homeowners. You can make the most of your open house experience by following these tips.

Option

The right, but not the obligation, to purchase a property at a specific price within a certain period.

Outbuilding

A structure on a property that is not the main residence, such as a garage or shed

Owner’s Title Insurance Policy

An insurance policy protects the buyer from losses due to title defects.

P

Patent defect

A physical condition on a property that cannot be seen or known without an inspection, take the case of  a cracked foundation.

Personal Property

Property not permanently attached to real estate, such as furniture or cars.

Plat Map

A map showing the boundaries and dimensions of a piece of property.

Pre-approval

A process in which a lender evaluates a prospective borrower’s creditworthiness and ability to repay a loan to determine how much money they are willing to lend.

Pre-Qualification

A determination by a lender of how much money a borrower may be eligible to borrow.

Principal

The amount of money borrowed from a lender, not including interest or other fees.

Private mortgage insurance (PMI)

A type of mortgage insurance from private insurance companies, not the government.

Purchase agreement

A contract between a buyer and seller that outlines the terms of a real estate transaction.

R

Real Estate Agent

A professional who represents buyers or sellers in purchasing or selling a property.

Real Estate Broker

A professional who represents buyers or sellers in purchasing or selling a property and is licensed to list and market properties.

Real Estate Investment Trust (REIT)

A Real Estate Investment Trust, or REIT, is a particular corporation that owns and operates income-producing real estate. By law, REITs must distribute at least 90 percent of their taxable income to shareholders in the form of dividends. As a result, REITs offer investors high yields and the potential for capital appreciation.

Recording

Filing documents, such as deeds, with the local government

Renovation

The process of repairing or updating a property.

Refinance

Taking out a new loan to pay off an existing loan.

Rent to own

An arrangement in which a tenant rents a property with the option to purchase it at a set price.

Right of First Refusal

The right to be allowed to purchase a property before it is offered to anyone else.

S

Sale-Leaseback

A transaction in which a property is sold and then leased back to the seller.

Secured Loan

A loan backed by collateral, such as a mortgage or deed of trust.

Security Deposit

A deposit of money by a tenant to a landlord as security against damage to the rental property.

Short sale

A real estate transaction in which the proceeds from the sale are not enough to pay off the loan balance, and the lender agrees to accept less than what is owed.

Special Assessment

An additional tax levied on a property for improvements, such as a new sidewalk or streetlights.

Subdivision

Land division into smaller parcels, typically for development.

T

Tax Lien

A tax lien is a legal claim that the government can place on your property if you owe back taxes. The lien gives the government a right to your property, which means they can collect the money you owe by selling your property.

Tenancy in Common

Joint ownership of a piece of property without the right of survivorship.

Tenant

A person who occupies a piece of property, such as a rental unit, under the terms of a lease.

V

Value added tax

A tax levied on the sale of goods and services

Why is it necessary for Real Estate Agents to learn these terms?

Real estate terms 2

As a real estate agent, it is essential to be familiar with all of the technical terms used in the industry to serve your clients better, for instance, encumbrance.

An encumbrance is a legal claim or lien on a property that may limit its sale or transfer. An encumbrance can be placed on a property by the owner or someone to whom the owner owes money. The most common type of encumbrance is a mortgage, which is a loan used.

By understanding the definition of each term, you will be able to communicate more effectively with your clients. Additionally, having a solid grasp of industry terminology will make you more credible and knowledgeable.

Now that you know the meaning of these essential real estate terms, you are ready to handle any situation during the home-buying or selling process.

Jane

Jane

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