Glossary

Below is a collection of real estate terms/words that we have put together to help you in your understanding of buying, selling or maintaining a home. If you have any other terms/words, not listed here, feel free to email us at info@rtrealty.com. We will be happy to explain the terms/words and add them to our Real Estate Glossary.

203k Loan

An FHA 203(k) loan finances the purchase and renovation of a primary residence.

  • 203(k) limited loan: Provides up to $35,000 for renovations, but major structural repairs aren’t eligible.
  • 203(k) standard loan: Renovations must cost at least $5,000, and major structural repairs are eligible. Borrowers using a 203(k) standard loan must hire a HUD consultant to oversee the renovation process.

Agent

An authorized person who manages or transacts business for another. Laws governing real estate – especially relating to agents – vary considerably from state to state. While some standardization has been achieved, it is best to check the particulars in each state.

  • Buyer Agent: An agent who represents the buyer in a real estate transaction. A buyer agent may be paid by the buyer, seller, or listing agent at closing, provided all parties consent.
  • Dual Agent: An agent representing both parties in a transaction. In almost every state, dual agency is illegal and unethical without the written consent of both the buyer and the seller.
  • Listing Agent: The agent who represents the seller.
  • Selling Agent: The agent who obtains a buyer. A selling agent may represent the buyer or may be a subagent of the seller.
  • Subagent: A salesperson who works for an agent.

Amenities

Features that enhance the value or desirability of a property.

Amortize

To pay a debt in periodic amounts until the total amount, including any interest, is paid.

Appraisal

A qualified party’s opinion of the vale of a property. This may include examples of sales of similar properties.

Appraisal contingency

An appraisal contingency is a clause that allows a buyer to dissolve a purchase agreement if a home’s appraised value is less than the sale price.

Appreciation

An increase in value.

Arbitration

A process where disputes are settled by referring them to a fair and neutral third party (arbitrator). The disputing parties agree in advance to agree with the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.

ARM (Adjustable Rate Mortgage)

A financing technique in which the lender can raise or lower the mortgage interest rate according to a set index, such as six-month Treasury bills.

As-Is

A property marketed in “as is” condition usually indicates that the seller is unwilling to perform most if not all repairs. It could also mean that it is priced “as is”, which is typically lower than market pricing in the area.

Assessment / Assessed Value

An official valuation of property for tax purposes. Payments made by condominium or cooperative owners for their share of building maintenance expenses.

Backup Offer

When a buyer is interested in purchasing a property that is already under contract with someone else, that buyer has an opportunity to submit a “backup offer”, in case the first transaction falls apart. A backup offer must still be negotiated and any monies, such as earnest money, submitted, to confirm it is the next offer in line. There can only be one backup offer legally, as you cannot have a backup to the backup.

Balloon Payment/Mortgage

A mortgage with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mortgage may contain an option to “reset” the interest rate to the current market rate and to extend the due date if certain conditions are met.

Bankruptcy

Legally declared unable to pay your debts. Bankruptcy can severely impact your credit and your ability to borrow money.

Broker

A real estate broker works to negotiate and arrange real estate transactions. This licensed individual has daily duties that include writing contracts and overseeing transactions for sales and purchasing activities on homes, land and commercial properties. A broker has attained a higher-level license than a real estate agent and can hire real estate agents to work as a team under their supervision. The Broker also establishes real estate office policies, hires employees, determines their compensation and supervises their activities.

CLO (Computerized Loan Origination)

A computer network of major lenders that allows agents to initiate mortgage applications in their office. HUD has approved the procedure as long as 1) full disclosure is made of the fee; 2) multiple lenders are displayed on the computer screen to give borrowers a basis for comparison; 3) the fee charged is a dollar amount rather than a percentage of the loan.

Closing

The point at which real estate formally changes ownership. Closing costs are fees paid for services associated with a home’s closing such as title insurance, surveying fees, recording fees, deeds and affidavits.

Closing Cost

Closing costs are an assortment of fees, including fees charged by a lender, the title company, attorneys, insurance companies, taxing authorities, homeowner’s associations, real estate agents, and other closing settlement related companies. These closing costs are typically paid at the time of closing a real estate transaction.

CMA (Comparative Market Analysis)

The best method available to home sellers to learn their home's current value so they can select the best sale price is a CMA, or Comparative Market Analysis. CMA is the term real estate agents use when they conduct an in-depth analysis of a home's worth in today's market. A method of determining the value of a property by comparing the prices paid for similar properties.

Code of Ethics

A written standard of ethical conduct embraced by the NATIONAL ASSOCIATION OF REALTORS, a trade organization of more than 700,000 members representing all branches of the real estate industry.

Commission

Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange or lease of property.

Condominium (Condo)

Individual ownership of a portion of a building, with common areas shared by all owners. Maintenance fees called “assessments” are paid to the condominium association to maintain, repair, or improve the property.

Contingency

A home sale contingency is for a buyer to indicate to a seller that part of their condition to purchase the seller’s property relies on the buyer’s ability to finalize a close on their current property. This is often negotiated with a clause in a contract or with an addendum to a contract. An example of how such a contingency can be used would be if a buyer needs to sell their property in order to have the down payment required on the purchase of the new property or would rather use their sale proceeds instead of their savings to make the down payment.

Conventional Loan

A fixed-rate, fixed term loan that is not insured by the government.

Co-operative (Co-op)

An arrangement in which a corporation made up of residents owns a building. The buyer owns a proprietary lease, rather than real property, and a corresponding number of shares in the corporation.

Counter-Offer

A new offer as to price, terms and conditions made in response to a prior, unacceptable offer. A counter- offer terminates an original offer.

Covenants, conditions & restrictions (CC&Rs)

Usually, these are the rules and regulations placed on real property by a homeowner’s association (HOA), a neighborhood association, a developer, or a builder that sets forth any requirements and limitations of what a homeowner is allowed to do with the property. It may also include monthly and/or annual fees or special assessments.

CRS (Certified Residential Specialist)

A professional designation awarded to experienced agents who complete an advanced course of study in residential real estate and demonstrate proficiency in sales and production. CRS Designees are members of the Residential Sales Council, a not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS.

Days on market (DOM)

DOM is defined as the number of days from the date on which the property is listed for sale on the local real estate brokers’ multiple listing service (MLS) to the date when the seller has signed a contract for the sale of the property with the buyer. A related metric is the average DOM for homes sold in a market during a specified period. A low average DOM indicates a strong market that favors sellers. A high average DOM signals a weak market that favors buyers. Seasonality can also be a factor. Homes generally appear to sell faster in Spring than Winter, since you often have more people looking to purchase and sell during the more pleasant weather months rather than the colder more uncomfortable weather months.

Debt-to-income ratio

Debt-to-income, or DTI, ratio is a number used by mortgage lenders which is determined by the total of your debt expenses, plus your monthly housing payment, divided by your gross monthly income, and multiplied by 100. This helps lenders determine affordability based off of their available loan programs and allows them to estimate how much you can afford to pay monthly for a mortgage. Lenders typically look for borrowers who pay 28 percent, or less, of their total monthly income on housing, and less than 36 percent of their income on debt payments. If either percentage is on the higher side, and you want to buy a home, you might need to adjust your budget.

Deed

A legal document transferring ownership of a property from one party to another.

Deed in Lieu of Foreclosure

The voluntary surrender of property by an owner or borrower to a lien holder (such as a bank) that eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non-Acceptance with the County Recorder.

Disclosure

Revealing what previously was private knowledge. Any statement of fact that is required by law.

Down Payment

A percentage of the purchase price the buyer pays in cash.

Due Diligence

A due diligence period of time might be available in the purchase agreement, which is a time frame provided to a buyer to fully examine a property, often by hiring experts to inspect the property, perform tests, etc., so that a buyer may decide on how to proceed.

A buyer might also be afforded an opportunity to renegotiate the contract based off of their findings or possibly even to terminate within a specified time period, in order to not be considered in default of the contract. Due diligence allows a buyer to fully understand what they are buying.

Earnest Money / Earnest Deposit

A buyer’s partial payment to the seller as a show of good faith in completing the transaction.

Equity

The difference between the current market value of a property and the claims – such as the unpaid portion of a mortgage – that exist against it.

Escrow

The closing of a real estate transaction through a neutral third party who holds funds and/or documents for delivery after specific conditions have been met.

Exclusive Listing

A written agreement in which the seller appoints only one agent to market the property for a specific period of time. If the owner sells the property himself, he is not required to pay a commission.

Exclusive Right of Sale Listing

A written agreement between an agent and a property owner stating that the owner will pay a commission to the agent if the property is sold during a specific time period – whether or not the agent is responsible for the sale.

Fannie Mae (Federal National Mortgage Association)

Fannie Mac purchases home mortgages, thus serving as a source of funds for mortgage lenders. It is a privately-owned corporation whose shares are traded on the New York Stock Exchange, but it is subject to the strict supervision of the secretary of the U.S. Department of Housing and Urban Development (HUD).

Federal Fair Housing Law

Refers to Title VIII of the Civil Rights Act and stipulates that discrimination based on race, color, sex, familial status, handicap, religion, or national origin is illegal in connection with the sale or rental of most dwellings.

FHA (Federal Housing Administration)

A federal agency established to improve housing standards and conditions. The FHA provides mortgage insurance to approved lending institutions.

Forbearance Agreement

An agreement between a mortgage holder and a borrower that specified a loan payment plan and halts the foreclosure action if borrower meets requirements and terms of the agreement. The payment plan generally includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond its original term.

Foreclosure

The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower’s loan.

Freddie Mac (Federal Home Loan Mortgage Corporation)

A federally chartered corporation established to purchase mortgages in the secondary, or resale, market. Freddie Mac’s policies are designed to serve the needs of savings and loan associations. It is subject to oversight by the U.S. Department of Housing and Urban Development (HUD).

Guaranty

A pledge made by one person (the guarantor) to ensure that another person (the obligor) will fulfill an obligation to a third party (the obligee).

HUD (U.S. Department of Housing and Urban Development)

A federal department active in a variety of national housing programs including urban renewal and public housing.

Improvements

Additions intended to increase the value of a property.

Inspection

An examination of a property by the buyer, agent, title insurance company, or other interested party.

Inspection Contingency

Also known as a “due diligence contingency,” the inspection contingency is a clause sometimes offered in a purchase agreement that grants buyers a predetermined amount of time during escrow to perform any necessary inspections. It protects the buyer, who can cancel the contract or negotiate repairs based on the findings of a professional home inspector.

Land Lease

Traditionally, when you purchase a home, you own the home and the land the property is built on. There are some circumstances that involve a land lease, which means you would own the home while paying rent to the landowner for the land.

Lien

A charge or claim by one party on the property of another as security for the payment of a debt.

Listing

A written agreement between a property owner and a real estate broker authorizing the broker to find a buyer.

Loan Contingency

A loan contingency is a clause or addendum (also known as a mortgage contingency) in an offer contract that allows a buyer to back out of a deal and keep their deposit if they are unable to secure a mortgage with specified terms during a fixed period of time.

Loss Mitigation

Banks and lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a Loss Mitigation Department, generally operated by the bank or lender to deal specifically with delinquent accounts.

Market Value

The price a property will command on the open market.

MLS (Multiple Listing Service)

A means by which agents are informed of the properties offered for sale by other agents.

Mortgage

A legal document pledging property as security for the payment of a loan.

Mortgage Insurance

An insurance plan that protects the lender if the borrower does not repay a loan. Mortgage insurance is required when a home buyer makes less than a 20% down payment at the time of purchase. Private mortgage insurance (PMI) covers conventional (fixed-year, fixed-rate) loans. The Federal Housing Administration charges a mortgage insurance premium (MIP) on FHA loans.

NATIONAL ASSOCIATION OF REALTORS

A trade organization serving over 700,000 members from all branches of the real estate industry. Members subscribe to a strict Code of Ethics which governs their conduct.

NOD

Abbreviation for Notice Of Default.

Notice of Default

An official notice filed and recorded by a designated trustee at the request of a lender indication lender has commenced foreclosure action.

Offer

A proposal to purchase property at a specified price and terms.

Open House

The common real estate practice of showing “For Sale” homes to the public during established hours.

Origination Fee

A lender’s charge for establishing and processing a new mortgage loan. It is generally computed as a percentage of the loan and may be tax deductible.

Owner of Record

The person named in the public record as the owner of a property or mortgage.

Pre-Approval Letter

Getting a mortgage pre-approval letter is important because it gives home buyers an idea of what they can afford. A mortgage pre-approval letter is issued by the lender and identifies the terms, loan type and loan amount the buyer qualifies for after checking the buyer’s debt-to-income ratios along with cash on hand and credit history.

Preliminary Report

A preliminary report reveals any issues with the title that needs to be dealt with by the seller in order to deliver a clear title. It gives details such as ownership history, liens, and easements. The title company gathers this report by searching existing property records at the county recorder’s office.

Pre-qualification

A pre-qualification is a lender estimate of the amount a home buyer can expect to be approved for during the loan process. Getting pre-qualified is a quick assessment by a lender of the buyer’s financial situation based solely off of what a buyer tells a lender, and not based with any proof or verifications.

Points

A one-time charge paid to the lender for issuing a loan. Each point equals one percent of the loan amount and is used to obtain revenue in addition to the interest rate.

Principal

The amount of money upon which interest is paid.

Purchase and sales agreement (PSA)

A purchase and sale agreement are commonly referred to a written contract between the buyer and seller, which outlines the terms of the parties to sell and purchase real property. When a home is “under contract” it usually signifies that the Buyer and Seller have formalized their commitment to sell and purchase the real property.

Qualified Buyer

A buyer who has demonstrated the financial ability to afford the asking price of a home. Prequalifying with a lender can expedite the home buying transaction.

Real Estate Owned (REO)

Real estate owned is a designation given to properties which are owned by a lender due to an unsuccessful foreclosure sale at action.

Realtor

A registered trade name that may only be used by members of the NATIONAL ASSOCIATION OF REALTORS, an organization with over 700,000 members who represent all branches of the real estate industry. REALTORS subscribe to a strict Code of Ethics which governs their conduct.

Refinance

Obtaining a new loan to pay off an existing loan. Refinancing is a popular practice when interest rates drop.

Rent-back / Lease-back

Rent-back, or leaseback, refers to an arrangement whereby the buyer, who is now the new homeowner, agrees to allow the seller, the now tenant, to stay in the house beyond the close of escrow. The terms are negotiated prior to the situation occurring and will often involve a lease deposit, a daily rental rate, and a length of time allowable.

Residential Sales Council

A not-for-profit affiliate of the NATIONAL ASSOCIATION OF REALTORS. The Council awards the Certified Residential Specialist (CRS) Designation, to experienced members who have completed an advanced course of study in residential real estate.

Seller Concession

Seller may offer concessions to incentivize buyers to purchase the home or sweeten the deal. An example would be to contributions towards the buyer’s closing costs, up to certain limitations and approvals by a buyer’s lender.

Seller Disclosure

A seller’s disclosure is a disclosure by the seller of information about the property, or which could affect a buyer’s decision to purchase the property, all of which to the best of the seller’s knowledge.

Serious Delinquency

A single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months or more past due.

Short Refinance

Short refinance is the replacement of a mortgage, usually with a reduced mortgage, when the borrower is already in default. This is done to transition the borrower to a more affordable payment structure. The lender has to write off the difference between the old mortgage and the new mortgage, but in some cases, this may be preferable to foreclosure.

Short Sale

To sell a home through negotiation with the bank or lender, who agrees to accept less than the full amount owned to satisfy the debt allowing the debt to be “paid off”, short. Short sales are subject to bank approval and are often used as options in lieu of foreclosure.

Tenancy in common (TIC)

Tenancy in common describes a type of joint ownership of a property, whether a single-family property or a commercial building. The tenants in common all own the property, but in different ratios. Tenants in common have no right of survivorship, meaning that if one tenant in common dies, that tenant's interest in the property will be part of his or her estate and pass by inheritance to that owner's devisees or heirs, either by will, or by intestate succession.

Title

Lawful ownership of property.

Title Insurance

An insurance policy that protects against losses arising from title defects such as forged or misfiled documents.

Title Search

An examination of the public records to determine whether the current title is clear or defective.

Town House

Also known as a row house, generally refers to a type of dwelling having two floors, with the living area and kitchen on the first floor, and the bedrooms on the second. Town houses share a common wall between units.

Trust Sale

A trust sale means that the home is being sold by a trustee of a living trust and not a private party. More often than not this is because the original homeowner has passed away or has placed their assets in a living trust.

VA (Veterans Administration)

A federal agency designed to help veterans enter the housing market.

VA Loan

A loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans are made to honorably discharged veterans or their unremarried widows or widowers. Such loans require a minimal or no down payment and offer lower interest rates.

Walk-Through

A final inspection of a property before it changes ownership.