Real Estate Terms Glossary



Consumers pay debt through amortization-an agreed upon fixed payment schedule. A mortgage is the quintessential example of paying off debt over time. Most financial institutions offer an amortization calculator, which estimates the repayment schedule and accruing interest.
Annual Percentage Rate (APR)

An annual percentage rate (APR) is expressed as a percentage and describes borrowing and interest rates over the course of a year.

An appraisal is a certified and professional evaluation of a home's value. Appraisers use current market conditions, valuation models, neighboring properties, and the quality of the individual home to calculate the appraisal.

Assets can be cashed out, and are free from outstanding debt or liens. Examples include: properties, homes, or investments owned and controlled by an individual or business.
Bill of Sale

The bill of sale transfers the rights of a property to the new owner.
Bridge Loan

A bridge loan borrows against a current property's equity, in order to finance a new purchase. This short-term financial instrument typically expires after a six-month period, but can often be extended to a year.

A broker has successfully passed the broker's licensing exam, and has met all state certifications and obligations. This real estate professional has reached the highest level of accreditation and can supervise rising agents. Brokers strive to match sellers and buyers in the real estate market, and charge a fee for executing the sale.
Cash-out Refinance

A cash-out refinancing of an existing mortgage is exactly like it sounds. This process replaces the existing mortgage with a larger loan, and puts the cash difference in the pocket of the borrower.
Closing costs

Closing costs are incurred in the final days of escrow and exceed the price of the home or property. Examples include: loan origination fees, broker's commission, appraisal fees, title company fees, insurance, taxes, and credit report charges.

Collateral is an asset that borrowers pledge to secure a loan. If the borrower defaults, the lender can seize the collateral to recover financial loss. Vehicles, properties, investments, and other tangible assets are all examples.

Real estate brokers are paid in commission for handling the course of a sale. Most brokerage and realty shops earn most of their profits through this service charge.
Condominium (Condo)

Condominium properties are typically divided into units, and each is owned by an individual. Some complexes provide residents with communal amenities. A pool, club house, tennis court, and local shuttle might be accessible to residents.

A contingency provides protection for lenders, buyers, and sellers in the real estate process-through setting binding conditions. For example, lenders can bow out if a buyer is unable to get approved for homeowner's insurance. And sometimes the completion of the deal is contingent upon the selling price matching the appraisal.

This payment is due at the end of a "balloon loan," and is a larger payment than the typical payment during amortization of the loan. Typically, balloon loans are associated with relatively short terms during which only part of the loan's principal balance is repaid. The remaining balance, usually at least double the amount of other payments, is left as a final repayment.

A deed legally transfers property ownership in the real estate process. This binding document contains the names of the previous and prospective owners, a legal description of the property, and the signature of the title company's representative.
Down Payment

A down payment is made at the onset of a home purchase and represents a percentage of the purchase price. Homebuyers typically finance the remaining balance through a mortgage.

When easement is granted, a secondary party is awarded access to a property, but the title remains in the name of the owner. Utility companies that string power lines along lawns and cable companies that "plug" into backyards are both common examples.
Eminent Domain

Eminent domain is the power of state, county, local, or national governments to seize private property for public or civic use. In some instances, officials must pose a financial offer, before resorting to this option. The most common purposes for takeover include: roads, government buildings, state supported facilities, and municipal utilities.

Encroachment is a common scenario in real estate, and describes the violation of property lines. Fences that defy the land surveyor's report and political signs teetering onto to the next lawn are both examples.
Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) applies to all creditors and legally protects all credit applicants from discrimination. It is unlawful to decline a loan because of religion, race, national origin, marital status, sex, creed, or age (as long as the applicant is legally of age, and legally able to consent to the contract).

Equity is the difference between an asset's value and what is owed. Accountants and economists calculate {Assets - Liabilities = Equity} to determine the degree of ownership in an asset. A shareholder can hold partial equity in a business, and a paid off house provides a homeowner with full equity.

Escrow trusts are run by title companies, which objectively protect both parties in the final days of the closing. For example, a buyer can ensure the house hasn't downgraded in condition-before transferring funds to the seller. And sellers have the confidence of knowing the incoming owner is a capable and vetted buyer. Once every condition has been fulfilled, the title company transfers payment from the escrow account to the seller.

An estate describes the net worth of an individual, whether they are living or deceased. Economists and accountants utilize {legal rights + property - liabilities} to calculate the balance of an estate.

An executor of a will is responsible for ensuring all debts have been absolved. Once every creditor has been paid off, the executor is tasked with distributing remaining assets, cash, and property to heirs.
Fannie Mae

Fannie Mae is rich in history and mortgages. In 1938, the Federal National Mortgage Association (Fannie Mae), was created to make mortgages more accessible for lower and middle income borrowers. Fannie Mae does not provide mortgages. Instead, this government sponsored entity (GSE) purchases and then guarantees them through the secondary mortgage market.
Homeowner Association (HOA)

Condominium complexes, townhouse developments, and gated communities typically obligate buyers to join a homeowner association (HOA). Residents are contractually required to pay monthly dues, are subject to annual fees, and must abide by the rules and regulations of the HOA. The bylines might restrict renovations, landscaping, holiday decor, pets, and more.
Joint Tenancy

Joint Tenancy allows two or more people, typically spouses or family members, to own the same property at the same time. In most cases, a right of survivorship is included in the deed, allowing property shares to be distributed in the event of a death.

Leases are the legal and binding contracts that set the terms of rental agreements.

If a client is privy to unscrupulous actions, negligent activity, or unlawful behavior at the hands of their real estate broker-they can be charged with vicarious liability. Liability can also apply to the risks of owning real estate. A storm damaging a property or a tenant vandalizing a rented apartment can also evoke liability.

If you sign up for a mortgage, you sign up for a lien. Simply put: a creditor has the right to use the property as collateral. In the case of a mortgage, a lender can foreclose on a house, if the owner defaults. Liens are utilized in almost every real estate purchase.
Line of Credit

A Line of Credit (LOC) allows real estate investors to purchase multiple properties within the same loan. Caveat: this financial instrument is capped at a specific credit limit.
Liquid Asset

A liquid asset can be cashed out at any time, and doesn't penalize the investor with fees, consequences, or a reduction in value. For example, if you have $1,000,000 in ingots, you can liquefy them for $1,000,000 in cash.

A listing authorizes the marketing, management, and sale of a property through a real estate agent or broker.

Adjustable rate mortgages (ARMs) offer a fixed and often competitive introductory interest rate, which is never permanent. To calculate the new rate, the bank adds a margin to an established index: {Margin + index = the new rate}. Margins always stay constant throughout the loan, but the index rate fluctuates.

A mortgage is used by homebuyers and investors to raise cash for real estate, and pay off property over time. Borrowers agree to a fixed payment schedule, and the payments continue until the property is owned, free and clear.
Owner Financing

A seller can finance a home sale through owner financing, a loan from the seller to the buyer, which provides capital, payment schedule terms, the interest rate, and default conditions. The most common instances occur when the buyer is unable to obtain funding through a traditional lender or during an interest rate spike.
Promissory Note

In real estate, a promissory note is a binding agreement, where the borrower promises to follow the terms of the mortgage.
Real Estate Agent

A real estate agent is licensed to represent the buyer and seller in the home buying process, and is compensated through commission.

Refinancing occurs when a homeowner revises the terms of a mortgage. In a nutshell: the previous loan is paid off with the new loan, and the old terms are struck and replaced by the new terms.
Secured Loan

Borrowers may need to pledge an asset through a secured loan to guarantee financing. If the agreement is not upheld, the lender can place a lien on the collateral to recoup the balance.

The title refers to who has legal rights to a home or property. In the final steps of the closing, the title company transfers the title from the seller to the buyer.
Title Insurance (TI)

Title Insurance financially safeguards homebuyers from lawsuits, disputes, and claims related to the title or property.

A trustee is tasked with managing property, owned and operated by a trust, while protecting the interest of the beneficiaries. For example, in the case of a rental property, this third party would manage tenant rent, supervise building repairs, comply with inspection regulations, and secure insurance.

When fully vested, a homeowner has absolute title and ownership rights. During the escrow process, these rights are legally transferred to the buyer.