Real Estate from A to Z: Common Real Estate Terms You Should Know

Like any industry, real estate has its jargon, some of which are more complex than others. Whether you are buying or selling a home, it’s vital that you become acquainted with important terms that will help you better understand the process for your home selling or buying journey.

To help you out, we’ve compiled some of the most essential real estate terms you might encounter along the way. The terms are in alphabetical order for easier reference.

 

A

Adjustable-rate mortgage refers to a home loan with a variable interest rate. The initial interest rate is typically fixed for one year, with the interest rate resetting yearly or monthly.

Amortization is a process that dictates how much of a homeowner’s monthly mortgage payment goes toward the interest and principal of the loan.

Appraisal is the valuation of a property by an estimate of an appraiser. An appraiser provides a fair assessment of the property’s market value.

Assessed value refers to the value of land property which is used to decide how much tax must be paid.

 

B

Broker refers to a licensed professional that assumes legal responsibility for managing real estate transactions through their brokerage.

Buydown is a mortgage-financing strategy to lower the buyer’s interest rate from anywhere between a few years to the loan’s lifetime.

 

C

Clean title is the title of the property without no question of legal ownership.

Chain title is the documentation of all past ownership of a property from the present to the very first owner.

Closing is the final stage of any real estate transaction. Usually consists of the closing date where the property is legally transferred to the buyer from the seller.

Collateral is an item of economic value pledged by a borrower to secure a loan or other credit and subject to seizure in the event of a default.

Commission refers to the percentage real estate agents earn from a specific selling price of a property. Typically, real estate commissions run from 4% to 6% and are further divided among agents and brokers who worked on the sale.

Comparable sales refer to the data used by an appraiser to set how much a home is worth based on similar properties in the area that have been recently sold.

 

D

Days-on-market indicates the days between a property’s listing on the market and the day it is sold.

 

E

Earnest money is an upfront cash deposit paid by the home buyer during the contract period to indicate they are serious about purchasing the property.

Equity is a unit of measurement calculated by taking the market value of a property and deducting the amount still owed on the mortgage if any.

 

F

FHA is an acronym for the Federal Housing Administration, a government agency whose primary purpose is to insure residential mortgage loans.

Foreclosure refers to the process of enforcing a mortgage or other security interest against a property.

 

H

Home Inspection is the examination of the overall condition of a property, usually ordered by a real estate buyer as part of an assessment.

 

I

Interest refers to the profit a mortgage lender makes in exchange for a home loan.

Interim financing is sometimes referred to as a construction loan. It is a short-term loan made during the construction phase of a building project.

 

L

Lease is a contract granting the use of the property during a specified time for a specified payment.

Lessee refers to the person to whom a property is rented or leased. Sometimes referred to as tenant in most residential leases.

Lessor is the person who rents or leases property to another. They are sometimes referred to as landlords or landladies.

 

M

Market value is the highest price a property will bring if exposed for sale in the open market.

Mortgage is a long-term loan given by a lender to finance a real estate property.

Multiple listing service (MLS) is a digital database of current real estate listings operated by a group of agents or brokers. MLS provides accurate and updated information about the local listing status.

 

N

National Association of Realtors (NAR) is an American association for those who work in the real estate industry. NAR was previously called the National Association of Real Estate Boards.

 

O

Open house refers to a viewing event run by a real estate agent that allows potential home buyers to visit a property to gain interest and showcase the property.

 

P

PITI is an acronym for the four components of a mortgage payment—Principal, Interest, Taxes, and Insurance.

Principal is the borrowed or part of the amount that remains unpaid, excluding interest.

Private mortgage insurance (PMI) is an insurance policy that requires payment of additional premiums that protect the lender in case the borrower defaults.

 

R

Realtor is a real estate agent or broker representing sellers or buyers of real estate or real property. Realtors in the USA are members of the National Association of Realtors.

RESPA refers to the Real Estate Settlement Procedures Act, a federal consumer protection law governing loans on one to four-family properties, which requires a lender to provide advance notice of estimated costs.

 

S

Sale deed is a document for the purchase or sale of a property.

Sale-leaseback is a real estate transaction in which the buyer leases back the property to the seller for a specific period.

 

T

Title deed is a legal document constituting evidence of property ownership.

Title insurance is an insurance policy issued to protect a property owner against losses resulting from undisclosed defects that affect an insured person’s ownership rights.

 

U

USDA Loan is a government-backed mortgage loan available to US residents that live in rural areas.

 

Final Thoughts

These are just some of the few terms among the long list of jargon in the real estate industry. And now that you have a glossary of real estate terms, we’re sure you’ll be more prepared to jump into conversations related to home selling or home buying in the U.S.