Below is a “real estate dictionary” aimed at clearing up any confusion you may have when real estate agents throw big words at you. There’s plenty of industry-speak out there, and it may be used intentionally to confuse you and throw you off track.
Arm yourself with knowledge before you begin your real estate search and you’ll gain the upper-hand in negotiations and the like.
Appraisal – a report used to assess the value of a piece of property, based on the property itself, comparable sales, and market forces.
Appreciation – the increase in value of real property, typically represented as a percentage of the purchase price.
Assessed value – the valuation of real estate assigned by a tax assessor for tax purposes. This is how you figure out your annual real estate taxes.
Automated valuation model – a computer generated appraisal, also known as an AVM.
Chain of title – the sequence of possession of a piece of property, used to track ownership.
Clear title – a title free of encumbrances and claims that would put into doubt its validity. Also known as “marketable title.”
Closing costs – the costs associated with purchasing a piece of real estate and obtaining a mortgage loan.
Commission – the real estate agent’s fee for assisting in the sale or purchase of real estate.
Common area – areas of a piece of property, such as a parking lot, hallway, swimming pool, or tennis court, which are managed by the homeowners’ association.
Comparable sales – otherwise known as “comps,” comparable sales are key to determine how much a property should be bought or sold for.
Condominium – a type of ownership where an individual possesses the interior of the unit itself, but shares the common areas with others in the complex. It is normal for apartments to be referred to as “condos,” though the distinction is really owning vs. renting.
Condotel – a mix between a condominium and a hotel, typically found in vacation areas such as Florida and Hawaii. There is typically a front desk, along with maid services.
Contingency – a condition that must be satisfied before a contract is deemed legal. A common one is a home inspection, or the ability to obtain financing.
Curb appeal – your home’s exterior based on a prospective buyer drive-by. Examples include new grass, flowers, plants, a fresh coat of paint.
Deed – a written legal document that conveys title of a piece of property, from seller to new owner.
Depreciation – this is the opposite of appreciation, and occurs when a property declines in value.
Earnest money deposit – a cash deposit made by a prospective buyer to show the home seller they are serious about the purchase.
Easement – the right to use property owned by another, such as crossing a neighbor’s property to get to your own.
Equity – the amount of ownership you have in a property, which is the present value less any loans/liens.
Escrow – money or something of value held by a third party that is collected and released when certain contractual conditions are met.
Eviction – the removal of occupants from a home, typically after the property falls into foreclosure.
Exclusive listing – a contract where one real estate agent is given exclusive rights to sell a property.
Fair market value – the price a willing and unpressured buyer would pay for a piece of property that a willing seller would accept.
Fee simple – a form of ownership where the property holder has complete control over the use and transfer of the real estate.
Flip house – a recently flipped home that is typically listed for sale shortly after renovation.
Foreclosure – the legal process in which a property is relinquished by the homeowner to the bank who issued financing.
For sale by owner – a property listed for sale by the owner without the help of an agent.
Gated community – an enclosed and secured residential city or planned unit development.
Half bath/ full bath – click on link for a detailed explanation of the distinction.
Home equity line of credit – a credit line used to finance or tap into the equity of a piece of property.
Home flipping – the art of buying a piece of property, quickly refurbishing it, and selling it for a profit.
Home inspection – an analysis that evaluates the condition of a piece of property before a sale. It is typically a contingency in a real estate sales contract.
Home staging – presenting a home in its best light with the use of propped furniture, plants, art, and other fixtures.
Homeowner association – a non-profit group that oversees the common areas of a complex or planned unit development.
HOA Fees – dues that must be paid monthly to cover insurance, maintenance of a development’s common areas, and other incidentals such as trash disposal and water.
Homeowner warranty – a type of insurance policy typically offered by the seller that covers certain household items such as refrigerators, dishwashers, plumbing, HVAC, and so on.
Lease – a written contract between a homeowner and tenant that specifies payment and terms of occupancy.
Lease option – a rental contract that allows the lessee to eventually buy the property if they so choose at the end of the rental period.
Lien – a legal claim held against a property that must be paid when sold. Mortgages are also considered liens.
Listing price – the price a home is listed for on the MLS.
Multiple listing service – a central database of properties listed by real estate agents that details basic information such as square footage, asking price, and so forth.
Notice of default – a formal written notice from a mortgage lender to a borrower who is 90 days behind on their payments. It also marks the beginning of foreclosure proceedings.
Off the market – a property not currently listed for sale.
Obsolescence – occurs when a home or some part of it becomes less useful and subsequently loses value.
Planned unit development – a condominium complex or housing subdivision that has common areas managed by a homeowners association. Also known as a PUD.
Pocket listing – a piece of property that is for sale, but not officially listed.
Prepaid interest – the amount of mortgage interest due at closing to cover the payment gap.
Purchase agreement – a written contract between a buyer and seller regarding the proposed sale of a piece of property.
Real estate agent – an individual licensed to buy and sell real estate. Also known as a “Realtor” if part of the National Association of Realtors (NAR).
RESPA – the Real Estate Settlement Procedures Act is a consumer protection statute that prevents kickbacks between lenders and third-party settlement service providers. It also requires lenders to provide an estimate of closing costs through the issuance of a Good Faith Estimate, and a HUD-1 detailing final costs at closing.
Seller carryback – a situation where the owner of the property agrees to provide some of the financing to the buyer to make the deal work.
Seller paid closing costs – closing costs paid for by the seller, typically offered to cement a sale.
Short sale – a real estate sale in which the purchase price is below the associated mortgage balance.
Standard sale – a non-distressed real estate transaction.
Subdivision – a large tract of land that is typically divided into parcels where new homes and communities are built and created.