Glossary of Real Estate Terms & Definitions

Helping first time home buyers, and everyone, understand real estate terms.

Accrued Items On a closing statement, items of expense that are not yet payable, such as interest on a mortgage loan or taxes on real property.

Adjustable-Rate Mortgage (ARM) A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.

Agent One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.

Amortized Loan A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.

Annual Percentage Rate (APR) The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth-in-Lending Act.

Appraisal An estimate of quantity, quality or value of something. The process through which conclusions of property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.

Appreciation An increase in the worth or value of a property due to economic or related causes, which may prove to be either temporary or permanent; opposite of depreciation.

Closing Statement A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in transaction.

Commission Payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.

Comparables Properties used in an appraisal report that are substantially equivalent to the subject property.

Competitive Market Analysis (CMA) A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style and amenities.

Contingency A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.

Contract A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.

Conventional Loan A loan that requires no insurance or guarantee.

Counteroffer A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

Deed A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

Depreciation (1) In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence and external obsolescence. (2) In Real Estate investment, an expense deduction for tax purposes taken over the period of ownership of income property.

Earnest Money Money deposited by a buyer under the terms of a contract, to be fortified if the buyer defaults but applied to the purchase price if the sale is closed.

Escrow Account The trust account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction.

Exclusive Right-to-Sell Listing A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner or another broker.

Listing Agreement A contract between an owner (as principal) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission.

Loan Origination Fee A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.

Market Value The most probable price property would bring in an arm's-length transaction under normal conditions on the open market.

Mortgage A conditional transfer or pledge of real estate security for the payment of debt. Also, the document creating a mortgage lien.

Mortgage Lien A lien or charge on the property of a mortgagor that secures the underlying debt obligations.

Multiple-Listing Clause A provision in an exclusive listing for the obligation on the part of the listing broker to distribute the listing to other brokers in the multiple-listing organization.

Offer and Acceptance Two essential components of a valid contract; a "meeting of the minds."

Prepayment Penalty A charge imposed in a borrower who pays off the loan principal early. This penalty compensates the lender for interest and other charges that would otherwise be lost.

Principal (1) A sum loaned or employed as a fund or an investment, as distinguished from its income or profits. (2) The original amount (as in a loan) of the total due and payable at a certain date. (3) A main party to a transaction - the person for whom the agent works.

Private Mortgage Insurance (PMI) Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.

Realtor® A registered trademark term reserved for the sole use of active members of local Realtor ® boards affiliated with the National Association of Realtors ®.

Recording The act of entering of recording documents affecting or conveying interests in real estate in the recorder's office established in each county. Until it is recorded, a deed or mortgage ordinarily is not effective against subsequent purchasers or mortgagees.

Survey A pictorial depiction of land and the improvements on it and shows boundary lines with measurements and bearings, buildings, easements, etc.

Time is of the Essence A standard statement in a contract which ensures that all dates and times of day noted in the contract are important and cannot be ignored by any of the parties without the consent of the others except in breach of the contract.

Title Insurance A form of insurance contract which guarantees to indemnify an owner or mortgagee of property for damages suffered as a result of undiscovered title defects which arise later.