Encyclopedia of Real Estate Terms
General Real Estate Terms
As-Is
The property is being offered in its present condition with no warranties or representations by the seller or real estate agent.
Closing Costs
The expenses, over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction. Costs incurred may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges.
Homeowner’s Association
A private association often formed by a real estate developer for the purpose of marketing, managing, and selling homes and lots in a residential subdivision.
Buyer’s Agent/ Listing Agent
is a real estate professional who guides a buyer through the process of purchasing a home
Days on Market (DOM)
The number of days from the date on which the property is listed for sale on the local brokers’ multiple-listing services (MLS) to the date when the seller has signed a contract for the sale of the property.
Multiple Listing Services (MLS)
An organization with a suite of services that real estate brokers use to establish contractual offers of cooperation and compensation and accumulate and disseminate information to enable appraisals
Closing
The final phase of mortgage loan processing in which the property title passes from the seller to the buyer.
Escrow Holder
The agent and depositary (as an impartial/neutral third party) having and holding possession of money, written instruments, documents, personal property, or other things of value to be held until the happening of specified events or the performance of described conditions.
Listing and Property Information
Conventional Sale
When the property is owned outright (has no mortgage remaining) or the owner owes less on their mortgage than what the market indicates the owner could sell their property for.
Real-Estate Owned (REO)
A term used in the United States to describe a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction.
Trust Sale
A trust sale is the sale of a property that is held in a trust. The 2 types of trusts are Revocable and Irrevocable. A revocable trust is more flexible and can be altered. An irrevocable trust is more rigid and cannot be changed. A revocable trust may let you “change your mind”, but an irrevocable trust is a more “forever” set up.
Land Lease
A type of agreement that allows a tenant to build or use a piece of land, and in return pay rent on the land, also known as ground leases,
Rent Back
When the buyer agrees to rent the home back to the seller for some amount of time after the closing date.
Tenancy in Common
A shared tenancy in which each holder has a distinct, separately transferable interest.
Probate Sale
The process executed at a county court where the executor for the estate of a deceased person sells property from the estate in order to divide the property among the beneficiaries.
Short Sale
A 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. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.
Financial and Documentation
Adjustable Rate Mortgage
A mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
Equity
The difference between the market value of your home and the amount you owe the lender who holds the mortgage. The amount of money you'd receive after paying off the mortgage if you were to sell the home.
Hard Money Loan
A specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies.
Pre-Approval
A preliminary evaluation of a potential borrower by a lender to determine whether they can be given a pre-qualification offer. Pre-approvals are generated through relationships with credit bureaus which facilitate pre-approval analysis through soft inquiries.
Principal
Any person involved in a contract, such as a seller, buyer, principal broker, or an owner who has hired an agent as a property manager.
Seller Disclosure
A form disclosing the seller's knowledge of the condition of the property. The seller disclosure notice or statement is anecdotal and does not serve as a substitute for any inspections of warranties the purchaser may wish to obtain.
Debt-to-Income Ratio
The percentage of a consumer's monthly gross income that goes toward paying debts.
FHA Loan
A US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by an FHA-approved lender. FHA insured loans are a type of federal assistance.
Mortgage Pre-Approval Letter
A prequalification or preapproval letter is a document from a lender stating that the lender is tentatively willing to lend to you, up to a certain loan amount.
Preliminary Report
A report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land, together with the liens and encumbrances thereon which will not be covered under a subsequent title insurance policy.
Proof of Funds
A document that stipulates that a buyer is financially capable of securing a mortgage or has the funds necessary to make an all-cash purchase in a real estate transaction.
Termite Report
A document provided by a licensed home inspector or pest control company that details their findings after an inspection.
Earnest Money Deposit
A specific form of security deposit made in some major transactions such as real estate dealings or required by some official procurement processes to demonstrate that the applicant is serious and willing to demonstrate an earnest of good faith about wanting to complete the transaction.
Fixed Rate Mortgage
A fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust
Pre-Qualification
A process whereby a loan officer takes information from a borrower and makes a tentative assessment of how much the lending institution is willing to lend them.
Purchase and Sale Agreement
A binding legal contract between two parties that obligates a transaction between a buyer and a seller.
VA Loan
A mortgage loan in the United States guaranteed by the United States Department of Veterans Affairs.
Offers and Contingencies
Appraisal
A valuation of property, such as real estate, a business, collectible, or an antique, by the estimate of an authorized person.
Blind Offer
An offer on a piece of real estate where the buyer hasn't actually been to the property
Loan Contingency
A contingency clause in a home sales contract ensures that the buyer will be freed from any obligation to purchase the home if something goes wrong in the loan approval process.
Appraisal Contingency
A contingency is a condition that needs to be met before an offer can proceed. If your home doesn’t appraise for the amount you’ve agreed to pay, you can walk away from the deal with your deposit.
Home Sale Contingency
One type of clause frequently included in a real estate sales contract or an offer to purchase real estate. With a home sale contingency in place, the transaction is contingent on the sale of the buyer's home.
Offer/ Counter Offer
After an offer is put in on a home, the seller can make a counteroffer. The counteroffer makes changes to the original offer. A counteroffer is a negotiating tactic in response to the initial offer. When a counteroffer is made, the original offer is then void.
Backup Offer
An offer made in acknowledgment of an existing offer and ensures a contract with the seller if that first offer falls through. It's a legally binding contract that, if accepted by the seller, will put you next in line to purchase the home should the first buyer back out.
Inspection Contingency
This gives the buyer the right to have the home inspected within a specified time period, such as five to seven days. It protects the buyer, who can cancel the contract or negotiate repairs based on the findings of a professional home inspector.