Have you ever heard people discussing real estate and didn’t really understand what they were talking about? Sometimes terms and phrases related to real estate transactions can be confusing, especially if it’s the first time you’ve needed to know any of these terms! For this reason, the National Association of REALTORS put together a helpful real estate glossary. We went through and picked out 65 terms that we feel will help you go through your entire transaction a little more confident! Of course, if you hear something and are not sure what it means, do not hesitate to ask your real estate agent, mortgage broker or attorney for clarification!
1. Addendum: An addition to; a document.
2. Adjustable rate mortgage (ARM): A type of mortgage loan whose interest rate is tied to an economic index, which fluctuates with the market. Typical ARM periods are one, three, five, and seven years.
3. Agent: The licensed real estate salesperson or broker who represents buyers or sellers.
4. Application fees: Fees that mortgage companies charge buyers at the time of written application for a loan; for example, fees for running credit reports of borrowers, property appraisal fees, and lender-specific fees.
5. Appraisal: A document of opinion of property value at a specific point in time.
6. “As-is”: A contract or offer clause stating that the seller will not repair or correct any problems with the property. Also used in listings and marketing materials.
7. Broker of record: The person registered with his or her state licensing authority as the managing broker of a specific real estate sales office.
8. Broker’s price opinion (BPO): The real estate broker’s opinion of the expected final net sale price, determined prior to the acquisition of the property.
9. Buyer agent: The agent who shows the buyer’s property, negotiates the contract or offer for the buyer, and works with the buyer to close the transaction.
10. Closing: The end of a transaction process where the deed is delivered, documents are signed, and funds are dispersed.
11. Commission: The compensation paid to the listing brokerage by the seller for selling the property. A buyer agency agreement may require the buyer to pay a commission to his or her agent.
12. Comparative market analysis: A study done by real estate sales agents and brokers using active, pending, and sold comparable properties to estimate a listing price for a property.
13. Condominium right of first refusal: A person or an association that has the first opportunity to purchase condominium real estate when it becomes available or the right to meet any other offer.
14. Contingency: A provision in a contract requiring certain acts to be completed before the contract is binding.
15. Continue to show: When a property is under contract with contingencies, but the seller requests that the property continue to be shown to prospective buyers until contingencies are released.
16. Conventional mortgage: A type of mortgage that has certain limitations placed on it to meet secondary market guidelines. Mortgage companies, banks, and savings and loans underwrite conventional mortgages.
17. Counteroffer: The response to an offer or a bid by the seller or buyer after the original offer or bid.
18. Disclosures: Federal, state, county, and local requirements of disclosure that the seller provides and the buyer acknowledges.
19. DOM: Days on market.
20. Drive-by: When a buyer or seller agent or broker drives by a property listing or potential listing.
21. Dual agent: A state-licensed individual who represents the seller and the buyer in a single transaction.
22. Earnest money deposit: The money given to the seller at the time the offer is made as a sign of the buyer’s good faith.
23. Escrow account for real estate taxes and insurance: An account into which borrowers pay monthly prorations for real estate taxes and property insurance.
24. Exclusions: Fixtures or personal property that are excluded from the contract or offer to purchase.
25. FHA: Federal Housing Administration.
26. FHA (Federal Housing Administration) Loan Guarantee: A guarantee by the FHA that a percentage of a loan will be underwritten by a mortgage company or banker.
27. Gift letter: A letter to a lender stating that a gift of cash has been made to the buyer(s) and that the person gifting the cash to the buyer is not expecting the gift to be repaid. The exact wording of the gift letter should be requested of the lender.
28. Good faith estimate: Under the Real Estate Settlement Procedures Act, within three days of an application submission, lenders are required to provide in writing to potential borrowers a good faith estimate of closing costs.
29. Hazard insurance: Insurance that covers losses to real estate from damages that might affect its value.
30. Homeowner’s insurance: Coverage that includes personal liability and theft insurance in addition to hazard insurance.
31. HUD: U.S. Department of Housing and Urban Development.
32. HUD/RESPA (Housing and Urban Development/Real Estate Settlement Procedures Act):A document and statement that details all of the monies paid out and received at a real estate property closing.
33. Inclusions: Fixtures or personal property that are included in a contract or offer to purchase.
34. Interest rate lock: When the borrower and lender agree to lock a rate on loan. Can have terms and conditions attached to the lock.
35. List date: Actual date the property was listed with the current broker.
36. List price: The price of a property through a listing agreement.
37. Listing: Brokers written agreement to represent a seller and their property. Agents refer to their inventory of agreements with sellers as listings.
38. Listing agent: The real estate sales agent that is representing the sellers and their property, through a listing agreement.
39. Listing agreement: A document that establishes the real estate agent’s agreement with the sellers to represent their property in the market.
40. Loan closing costs: The costs a lender charges to close a borrower’s loan. These costs vary from lender to lender and from market to market.
41. Loan commitment: A written document telling the borrowers that the mortgage company has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time. The loan commitment may also contain conditions upon which the loan commitment is based.
42. Mortgage loan servicing company:A company that collects monthly mortgage payments from borrowers.
43. Multiple listing service (MLS): A service that compiles available properties for sale by member brokers.
44. Multiple Offers: More than one buyers broker present an offer on one property where the offers are negotiated at the same time.
45. NATIONAL ASSOCIATION OF REALTORS® (NAR): A national association comprised of real estate professionals.
46. Net sales price: Gross sales price, less concessions, to the buyers.
47. Offer to purchase: When a buyer proposes certain terms and presents these terms to the seller.
48. Open house (public): When a listing that is on market is available to the public for viewings and showings.
49. Pending: A real estate contract that has been accepted on a property but the transaction has not closed.
50. Preapproval: A higher level of buyer/borrower prequalification required by a mortgage lender. Some preapprovals have conditions the borrower must meet.
51. Prepayment penalty: A fine imposed on the borrower by the lender when the loan is paid off before it comes due.
52. Prequalification: The mortgage company tells a buyer in advance of the formal mortgage application, how much money the borrower can afford to borrow. Some pre-qualifications have conditions that the borrower must meet.
53. Principal, interest, taxes, and insurance (PITI): The four parts that make up a borrower’s monthly mortgage payment.
54. Private mortgage insurance (PMI):A special insurance paid by a borrower in monthly installments, typically of loans of more than 80 percent of the value of the property.
55. Real estate agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller. The real estate agent who does not have a broker’s license must work for a licensed broker.
56. Real estate contract: A binding agreement between buyer and seller. It consists of an offer and an acceptance as well as consideration (i.e., money).
57. REALTOR®: A registered trademark of the NATIONAL ASSOCIATION OF REALTORS that can be used only by its members.
58. Sale price: The price paid for a listing or property.
59. Showing: When a listing is shown to prospective buyers or the buyer’s agent (preview).
60. Special assessment: A special and additional charge to a unit in a condominium or cooperative. Also a special real estate tax for improvements that benefit a property.
61. Transaction: The real estate process from offer to closing or escrow.
62. Under contract: A property that has an accepted real estate contract between seller and buyer.
63. VA: U.S. Department of Veterans Affairs.
64. VA Loan Guarantee: A guarantee on a mortgage amount backed by the U.S. Department of Veterans Affairs.
65. Walk-through: A showing before closing or escrow that permits the buyers one final tour of the property they are purchasing.