common Terms & phrases
Real Estate GLOSSARY
New to real estate? Looking to learn more? We’ve gathered together some commonly used terms.
A
Adjustable-Rate Mortgage (ARM) A mortgage with an interest rate that varies throughout the life of
the loan based on credit market conditions, usually after an initial
fixed rate period – also called a variable-rate mortgage
Amenities The features of a property or neighborhood which increase a property’s value or desirability, such as included appliances or being near good schools
Appraisal A estimate of a property’s market value based on the review of a licensed appraiser
Appraiser A licensed professional who can perform appraisals and give an estimate of a property’s value
After Repair Value (ARV) An estimate of a property’s value after repairs, renovations or rehabs have been done
Assessed Value The value of a property used to determine taxes
B
Broker A licensed real estate agent who has additional education and certifications for owning a real estate business and supervising other agents
Broker Price Opinion An estimate of a property’s value made by a licensed real estate agent
C
Capitalization Rate Usually shorted to “cap rate”, this metric is found by dividing a property’s net operating income (NOI) by its original cost or market value – the cap rate can be used to compare investment propeties or trends in real estate investing
Closing The final step in the buying/selling of a property when ownership is officially transferred to the buyer – also called settlement or escrow
Closing Agent A third party who oversees the transferring of a property from seller to buyer and the closing of a real estate transaction
Closing Costs Fees paid during the closing of a real estate transaction by both the seller and the buyer
Competitive Market Analysis (CMA) An analysis by a real estate agent of the selling prices of recently sold properties to determine the selling price of a similar property – more generally comparables, or “comps”, can be pulled by anyone interested in looking at the real estate market of a neighbor or particular property
D
Demographic A section of the population that shares similar characteristics or traits such as age, sex, income or employment
Depreciation The decrease in a property’s value over time
Down Payment The portion of a property’s purchase price paid at the time of buying and not included in the mortgage
Duplex (Multi-Family) A residential building that has two separate living units
E
Equity The difference between the market value of a property and the amount left of the mortgage
Escrow An account where money and/or documents are held by a third party during closing to ensure that all requirements are met before they are transferred
Exit Strategy A method a real estate investor uses to divest of an investment property
F
Fixed Rate Mortgage A mortgage with an interest rate that remains the same throughout the life of the loan
Fixer-Upper A property that needs repair work or renovations but can otherwise be lived in as usual
Foreclosure The legal process where a property is sold to pay for a loan that has been defaulted on
H
Home Inspection An examination of a property’s structural and mechanical elements by a licensed inspector to assess its condition – a home inspector will submit a home inspection report, which lists areas of the home and provides a grade or information on its condition
Home Staging The decorating of a home so that it will appeal to buyers. This is unique from home decor and makes use of principles both of design principles and buyer psychology
Home Warranty Short-term plan that covers repairs or replacements on home systems and appliances
Homeowners Association (HOA) An organization in a subdivision, development or condo community that defines and enforces rules for properties and shared spaces within its purview
Homeowners Insurance An insurance policy for your property that covers losses and damages to the property, assets within the property and provides liability for accidents
I
Interest A fee paid to a lender for money borrowed
Interest Rate The amount of interest charged on a loan, usually in a percentage
Investment Portfolio A group of investments belonging to a particular investor
Investment Property A property owned for the purpose of real estate investing rather than personal use
L
Listing Agent A real estate agent who works on behalf of the seller to sell and market a property – also called a seller’s agent
Listing Agreement A contract between seller and real estate agent that grants the agent the right to handle the sale of a property during a given period of time and receive a commission or fee for their services
Loan Period The length of time a borrower has to pay off a loan
M
Mortgage A loan agreement in which the property is used as collateral to repayment
Move-In Ready A property that meets all governmental requirements and is ready to be lived in immediately without any repairs – also called turnkey
Multiple Listing Service (MLS) A regional database used by real estate agents which maintains information about properties, both previously sold and currently on the market, and provides listing information to outside real estate websites, such an Zillow or Redfin
N
Net Cash Flow The total amount of money gained or lost during a given period after expenses have been paid – also referred to simply as cash flow
P
Pre-Approval The commitment by a lender to provide a borrower with a loan of a certain amount – often involves a credit check
Pre-Qualification The determination by a lender that a borrower meets requirements for a loan of a certain amount – usually does not require a credit check
Principal The amount owed on a loan, not including interest and fees
Private Mortgage Insurance (PMI) An insurance policy that protects lenders from loan non-payment and is often required by lenders for loans with down payments less than 20% of price
Property Management Service A company or individual that provides the day to day administration and maintenance of a rental property on behalf of the owner
Property Tax A tax based on the assessed value of the property and paid to the local government where the property is located
Property Value An estimate of a property’s worth
R
Real Estate Agent A licensed professional is who can perform real estate transactions under a broker
Real Estate Attorney A lawyer who specializes in the laws of real estate transactions
Realtor A real estate agent who is also a member of the National Association of Realtors and meets their requirements, such as continued education, for membership
Refinancing The process of obtaining a new loan for a previously mortgaged property
Rehab The restoring of a distressed or poor condition property by completing major repairs and updates, usually so that it can be sold for a profit
Remodel The renovation of a property that includes making structural changes such as removing or adding walls
Renovation The updating of a property, or area of a property, with new or improved features, such replacing fixtures or restoring hardwood floors
Return On Investment (ROI) A measurement used to compare the performance of different investments. There are several methods for calculating ROI, but it generally represents the amount gained or lost on an investment compared to the amount invested
S
Selling Agent A real estate agent who works on behalf of the buyer to purchase a property – also called a buyer’s agent
Short Sale A sale of a property for less than is due on the mortgage, usually occurs when a owner is in financial distress
T
Tenant A person or business who rents or leases a property that is owned by someone else
Title The legal documentation of ownership for a property
Title Company A company that checks and ensures the legal owner of a property for real estate transactions