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Real Estate Terms Glossary

Acceleration Clause

A type of clause in a mortgage agreement that allows the lender to immediately demand payment of whatever may be left over in a loan. Typically, this clause comes into play when a borrower defaults.

Adjustable Rate Mortgage

A type of mortgage loan that has a variable interest rate which is lower during early years, best for homes you’re planning on selling before interest increases.

Annual Percentage Rate (APR)

The interest rate of a mortgage loan broken down yearly, varying based on the initial amount of a loan.

Appraisal

An official number set by a licensed appraiser estimating a home’s value in relation to its condition and area.

Appreciation Potential

How much a certain house may be worth in the future. If you purchase a home in an area that’s on the rise, there’s a good chance the market value of the home with appreciate.

Assessed Value

The actual value of a home as determined by a tax assessor. The price the assessor identifies is what you’ll be paying taxes on.

hand-holding-model-home

Source: Flickr User Alan Cleaver

Assessor

A public official tasked with placing a value on a given property for tax reasons.

Asset

Anything worth a dollar amount that you own. Assets will come into play when a bank determines how much they’re going to lend you.

Assumable Mortgage

When a home buyer takes over the existing mortgage of a seller. This allows buyers to take over a lower-rate mortgage if the lender approves.

Balloon Mortgage

A short-term mortgage that has regular payments for a specified period of time, and a set date for when the remaining amount of a mortgage must be paid. Payments might be made predicting a 30 year pay period, with a clause that the entire amount be paid 15 years in. This can keep monthly mortgages lower while keeping the lending period shorter.

Hot air balloons in the sky.

Source: Flickr User freestock.ca (<3) date to share beauty

Bridge Loan

A type of loan given to individual seeking to purchase a new home while they’re still in the process of selling the one they currently own. These loans can help provide the down payment to sign the final paperwork, though they are growing less common.

Broker

In the real estate world, a broker is typically someone that connects a buyer with larger lending companies.

Buyer’s Agent

A real estate agent that represents the party looking to purchase a home. Having one of these will make sure that someone’s got your back during negotiations.

Closing Costs

Fees that must be paid at the closing of a deal, including things like excise tax, loan-processing costs, and title insurance.

Collateral

In the real estate world, the home that is purchased is considered collateral for the loan. In other words, this is a sort of guarantee that the loan will be repaid. If the buyer fails to follow the terms, they’ll be at risk of losing their property.

Common Areas

Certain areas of a neighborhood or housing development that are shared by all residents of a community. This can include things like pools, weights rooms, and parking lots, with costs of operation generally split amongst all owners that are allowed use.

Families swim in a pool.

Source: Flickr User toddwickersty

Common Law Property

If a common law property system is in effect and a home is purchased by a married couple, the home will only belong to the person with their name on the title. If both partners want to have a piece of the house in their name, they’ll have to make an extra effort to do so.

Comparable Sales

When determining the value of a home, similar homes that have sold recently in the area are considered as a means of more accurately determining value. These are also frequently referred to as “comps.”

Contingencies

Conditions posed by one party involved in a sale that must be met prior to the official closing. For example, an inspection contingency is common, protecting buyers from potential problems that may arise in a home inspection prior to purchasing the home. If the inspectors find a problem and you’ve made a contingency regarding the condition of the house, there’s a good chance you’ll be able to walk away late in the sales process.

agent-explaining-real-estate-terms

Source: Flickr User Andypiper

Counteroffer

An offer with an adjusted dollar amount offered by the seller after an original offer. Expect counter offers to be much higher than an initial offer. The offer process is often a series of offers made back and forth until both parties can agree on a price.

Credit History

The record of an individual’s ability to repay debts, including but not limited to bills and credit card balances. These come into play when mortgage lenders determine how risky a potential client may be.

A man balances his finances.

Source: Flickr User Wonderlane

Dual Agency

When a single agent represents both the buying and selling parties. You can save money on commission by taking this route, but it’s hard to get the best deal possible when your agent is also representing the rival party in a sale.

Earnest Money Deposit

An initial deposit into an escrow account made by a potential buyer to show that they’re serious about purchasing a home. This amount can be anything that both parties agree on, but often the “bigger is better” line holds true.

Equity

The portion of a home that a buyer has actually paid for in relation to how much of a loan is still outstanding.

Escrow

When a third party holds onto all money and important paperwork involved in the home buying transaction until both parties have met all of their obligations, often to protect both parties involved.

Exclusive listing

A contract that gives a specific real estate agent the sole right to sell a property for an agreed upon time.

Executor

A person that gets put in charge of managing an estate after the owner has passed, specified in a will.

Fannie Mae (FNMA)

The Federal National Mortgage Association, known for being the country’s larger supplier of home mortgage funds.

A Fannie Mae business sign.

Source: Flickr User Senator Mark Warner

FHA 203K Loan

A special loan from the federal government designed to help people repair fixer-uppers they plan on purchasing or repair a home they already own, typically reserved for situations traditional investors might find too risky.

excited-couple-meeting-real-estate-agent

Source: Flickr User Mark Moz

Fixed Rate Mortgage

A type of mortgage loan that has a predetermined interest rate throughout the long life of the loan, often around 30 years. This is best for when you’re planning on purchasing a home and staying in it for a long time.

Fixer Upper

A home in disrepair that is purchased at a low price and then “fixed up,” increasing the home’s value for when it’s resold.

A woman paints a wall insider her house.

Source: Flickr User eelke dekker

Fixture

Personal property that is purchased and then permanently installed in a property, typically not removed when the home is sold. New kitchen appliances can be an example of this.

Two men install a dishwasher into a kitchen.

Source: Flickr User colleen_taugher

Foreclosure

Often referred to as a repossession, this is when a lender forces the sale of a property they’ve mortgaged after a borrower fails to pay or meet other terms of their agreement.

Home Inspection

For a few hundred dollars, professional home inspectors will come check out every inch of your potential new home, searching for problems that should be addressed prior to signing anything.

Homeowners Association

Organizations that are put in charge of managing the common areas in a planned housing development. Generally fees are paid to these organizations, which are in turn used for maintenance and improvements of the area.

Homeowner’s Insurance

A policy taken out when you purchase a home to help remove the personal liability from accidents that might occur on your new property, as well as things like hazard insurance and theft protection.

Homeowner Liability Insurance

A type of insurance that protects homeowners from injuries and accidents that others may have on their property.

Kids play on a trampoline.

Source: Flickr User limaoscarjuliet

Homeowners Warranty

A type of insurance that many buyers will work into their final paperwork protecting them from major repairs that might be needed soon after purchase. For example, if the air conditioner breaks the month after a home is purchased, the buyer can have the seller pay for this.

Hot Market

A real estate market in which homes are flying off the shelves and buyers should expect to pay premium prices.

Listing

An easily viewable statement (hardcopy or digital) that a home is for sale, which often details the specifications regarding a certain house.

exploring-newspaper-home-listings

Source: Flickr User Alan Cleaver

Listing Agent

An agent represents the seller, hosting open houses and seeking potential buyers.

Market Value

The lowest price a seller is willing to sell for that the buyer is willing to pay. This is called a market value because it varies greatly depending on how well a certain market is doing.

Mortgage

A contract that ensures a loan will be repaid using a home’s title as leverage.

Offer

A buyer’s proposed price for a piece of property.

mortgage-road-sign

Source: Flickr User 401(K) 2012

Power of Attorney

A legal document that transfers the rights of someone to another for a specified time.

Pre-Approval Letter

An official letter from the bank that states how big of a loan they’ve pre-approved you for. If you’ve got more assets and good credit, you’ll probably get more money.

Promissory Note

A written agreement to pay a certain amount over a certain time.

Refinance

Getting a new loan on your property, typically replacing prior loans. This can help you save money if you find a better deal.

Replacement Cost Coverage

A home insurance term that refers to how much money you’ll get when a claim is made for lost or damaged goods. If this type of coverage is being offered, it means you’ll get enough cash to purchase a new item, as opposed to losing value due to depreciation. For example, if your 5 year old television gets stolen, you’ll get enough money to replace it, not the amount that it should be worth at your next yard sale.

Secondary Market

The buying and selling of existing mortgages between lenders.

Soft Market

When the real estate market is doing poorly and houses aren’t moving quickly. This opens the door for a final sales price much lower than the cost on the listing.

Sweat Equity

Any contribution that is made to the construction or repair of a property that relies on labor instead of cash value. For example, if an owner spends time repainting their house, this labor could be considered sweat equity.

Title

A legal document used to prove who actually has ownership of a property. A home is not purchased until the name on the title is changed.

Title Insurance

A fee paid by the buyers of a home to title insurers, who then investigate to make sure the home was sold legitimately.

Transfer Tax

A tax that is levied when the title for a property switches hands.