Common Real Estate Terms

A house as seen from the back yard

In the world of Real Estate Agents, Home Inspectors, and Loan Officers, numerous Common Real Estate Terms get used that may be unfamiliar to first-time home buyers. Let’s examine the top Common Real Estate Terms.

  1. 1031 Exchange: A tax-deferred exchange allowing an investor to sell a property and reinvest the proceeds in a similar property, deferring capital gains taxes.
  2. AFCI: arc-fault circuit interrupter (AFCI) detects arcing in the electrical system and turns off the power to an outlet or breaker.
  3. Amenity: A feature that enhances the value or desirability of a property, such as a swimming pool or proximity to parks.
  4. Amortization: The gradual repayment of a loan through scheduled payments, which includes both principal and interest.
  5. APR (Annual Percentage Rate): The annual cost of borrowing, expressed as a percentage of the loan amount.
  6. Appraisal: An assessment of the value of a property conducted by a licensed appraiser.
  7. ARM (Adjustable Rate Mortgage): A mortgage with an interest rate that may change periodically.
  8. Asbestos: A fibrous mineral once used in building materials that can pose health risks when disturbed.
  9. Assessment: The valuation of a property for tax purposes.
  10. Assessed Value: The value assigned to a property for tax purposes by a taxing authority.
  11. Assumption: The transfer of a mortgage from one borrower to another.
  12. AVID: Agent Visual Inspection Disclosure. A short visual inspection performed by a Real Estate Agent for the buyer of a home.
  13. Balloon Mortgage: A mortgage with relatively low payments for a set period, followed by a larger final payment.
  14. Biweekly Mortgage: A mortgage with made every two weeks, resulting in quicker loan repayment.
  15. Bridge Loan: A short-term loan used to bridge the gap between purchasing of a new home and the sale of an existing one.
  16. Capitalization Rate (Cap Rate): The rate of return on a real estate investment, calculated as the annual net operating income divided by the property’s purchase price or value.
  17. Certificate of Occupancy: A document issued by a local government indicating that a property meets building and zoning codes and is safe to occupy.
  18. CMA (Comparative Market Analysis): An evaluation of similar properties in the area to determine a home’s value.
  19. Closing Agent: A neutral party responsible for facilitating the transfer of ownership and funds in a real estate transaction.
  20. Closing Costs: Fees and expenses associated with finalizing a real estate transaction.
  21. Closing Disclosure: A document provided to the borrower before closing, detailing the final terms and costs of the mortgage loan.
  22. CO: usually refers to carbon monoxide, a clear orderless gas that can cause injury or death when breathed in. C/O means a certificate of occupancy, a document issued by a city or county that says a building is safe to live in.
  23. Comparative Market Analysis (CMA): An analysis of recently sold properties similar to the subject property, used to estimate its value.
  24. Condo Fees: Monthly fees paid by condominium owners to cover the maintenance and operation of common areas and amenities.
  25. Conventional Loan: A mortgage not insured or guaranteed by a government agency, typically requiring a higher down payment.
  26. Counteroffer: A response to an offer that modifies some terms, often made during negotiation.
  27. Deed: A legal document transferring ownership of a property from one party to another.
  28. Deed Restriction: A limitation on the use or development of a property, typically imposed by a previous owner or governmental authority.
  29. Depreciation: A decrease in the value of a property over time due to wear and tear or other factors.
  30. Down Payment: The initial payment made toward the purchase of a property.
  31. Due Diligence: The investigation and evaluation of a property’s condition, legal status, and financial performance before purchase.
  32. Due-on-Sale Clause: A provision in a mortgage or deed of trust that requires the borrower to repay the loan in full if the property is sold or transferred.
  33. Earnest Money: A deposit made by the buyer to demonstrate serious intent to purchase a property.
  34. Easement: A legal right to use another person’s land for a specific purpose.
  35. EEM (Energy Efficient Mortgage): A mortgage that finances energy-efficient improvements to a home, allowing borrowers to qualify for a larger loan amount.
  36. Encroachment: Unauthorized intrusion onto another person’s property.
  37. Encumbrance: Any claim or liability that affects the title to real property, such as a lien or easement.
  38. Equity: The difference between the fair market value of a property and the outstanding balance of any loans secured by the property.
  39. Equity Loan: A loan secured by the equity in a property, typically used for home improvements or debt consolidation.
  40. Escrow: Funds held by a third party until all conditions of a real estate transaction are met.
  41. Escrow Account: An account held by the lender to collect and disburse funds for property taxes, homeowners insurance, and mortgage insurance.
  42. FHA (Federal Housing Administration): A government agency that insures mortgages with low down payments.
  43. Fixture: A permanent part of a property that is legally considered part of the real estate.
  44. FMV (Fair Market Value): The price a willing buyer would pay and a willing seller would accept in an open market.
  45. Foreclosure: The legal process by which a lender repossesses a property due to non-payment.
  46. FSBO (For Sale By Owner): A property listed for sale by the owner without the representation of a real estate agent.
  47. GFCI (Ground Fault Circuit Interrupter): A device designed to protect against electrical shock by shutting off power when a ground fault is detected. Required in wet areas, such as kitchens, bathrooms, garages, laundry rooms, and at the exterior.
  48. Grantee: The party to whom property is transferred by deed.
  49. Heat Pump. A system that uses refrigerant, a blower, and a condenser to heat a home. Instead of burning gas or oil.
  50. Home Equity: The value of a homeowner’s interest in their property after deducting outstanding mortgage debt.
  51. Home Warranty: A service contract covering the repair or replacement of home systems and appliances.
  52. HOA (Homeowners Association): An organization that manages a community’s common areas and enforces rules.
  53. HUD (Department of Housing and Urban Development): A government agency responsible for housing policy and programs.
  54. HUD-1 Settlement Statement: A standard form used to itemize services and fees charged to the borrower by the lender or broker in a real estate transaction.
  55. HVAC: stands for Heating and Air Conditioning. This refers to the entire system for heating and cooling a home.
  56. Inspection Contingency: A clause in a real estate contract allowing the buyer to have the property inspected before finalizing the purchase.
  57. Interest Rate: The percentage of a loan amount charged as interest over a specified period.
  58. InterNACHI: International Association of Certified Home Inspectors. The largest certifying organization of home inspectors.
  59. Investment Property: Real estate purchased with the intention of generating income or appreciation, rather than for personal use.
  60. Lender: A financial institution or individual that provides funds to borrowers for the purpose of purchasing real estate.
  61. Level I Fireplace inspection: a basic inspection that is a visual-only inspection of the fireplace,  the chimney, and the flue, usually performed by a home inspector
  62. Level 2 Fireplace Inspection: A visual inspection of the chimney and flue with a special camera, performed by a specialist.
  63. Level 3 Fireplace Inspection: An invasive inspection that includes disassembling portions of the fireplace, chimney, or flue for damage that can not be seen visually or with a camera.
  64. Lien: A legal claim against a property as security for a debt or obligation.
  65. Listing Agreement: A contract between a property owner and a real estate agent, authorizing the agent to market the property for sale.
  66. Loan Origination Fee: A fee charged by a lender for processing a new loan application.
  67. Loan-to-Value Ratio (LTV): The ratio of the loan amount to the appraised value or purchase price of a property, expressed as a percentage.
  68. MLS (Multiple Listing Service): A database used by real estate agents to share information about properties for sale.
  69. Mortgage: A loan used to finance the purchase of real estate, typically secured by the property itself.
  70. Mortgage Broker: A licensed professional who connects borrowers with lenders and helps them obtain mortgage loans.
  71. Mortgage Insurance: Insurance that protects the lender against losses if the borrower defaults on the loan.
  72. Mortgage Insurance: Insurance is required for conventional loans with a down payment less than 20% to protect the lender against default.
  73. Open House: A scheduled period during which a property is available for viewing by potential buyers without an appointment.
  74. Phase 1 Inspection: An environmental inspection of commercial property to identify any potential environmental contamination liabilities.
  75. PITI (Principal, Interest, Taxes, Insurance): The components of a mortgage payment, including principal, interest, property taxes, and homeowners insurance.
  76. PMI (Private Mortgage Insurance): Insurance required for conventional loans with a down payment less than 20% to protect the lender against default.
  77. Points: Fees paid to the lender at closing in exchange for a lower interest rate on the mortgage loan.
  78. Pre-Approval: A lender’s conditional commitment to provide financing up to a certain amount.
  79. Pre-Qualification: An initial assessment by a lender to determine a borrower’s eligibility for a loan.
  80. Principal: The original amount of money borrowed in a mortgage loan.
  81. Private Sale: A real estate transaction conducted directly between the buyer and seller, without involving real estate agents.
  82. PUD: Planned Urban Develment. A community of single-family homes where all homeowners belong to a homeowners association (HOA).
  83. Purchase Agreement: A contract outlining the terms and conditions of a real estate transaction between a buyer and seller.
  84. Radon: A naturally occurring radioactive gas that can seep into homes and pose health risks. Common in other states, but not very common in most of Southern California.
  85. Real Estate Agent: A licensed professional representing buyers or sellers in real estate transactions.
  86. Real Estate Broker: A licensed professional who oversees real estate agents and may also represent clients in transactions.
  87. REO (Real Estate Owned): Property owned by a lender after foreclosure proceedings have failed to sell it at auction.
  88. Retro Fit. Retrofit is a term with numerous meanings, but it general refers to upgrades to the original structure after it was built.
  89. RPA: Residential Purchase Contract. A standard contract used by all Real Estate agents in California for residential properties.
  90. Second Mortgage: A subordinate mortgage taken out on a property that already has a first mortgage.
  91. Seller’s Disclosure: A document in which the seller discloses known defects or issues with the property.
  92. Short Sale: A sale of real estate in which the proceeds fall short of the balance owed on the property’s mortgage.
  93. Soft Story: A multi-story structure built with a first floor that is much less rigid than the floors above. A building with a weak first floor often has large openings like a garage that may not withstand side-to-side motion in an earthquake.
  94. Survey: A measurement of a property’s boundaries and physical features.
  95. Tax Lien: A claim by the government against a property for unpaid taxes.
  96. Tenancy in Common: A form of property ownership where each owner holds an undivided interest in the property.
  97. Title: Legal ownership of a property, evidenced by a deed or other document.
  98. Title Insurance: Insurance that protects the buyer and lender against other people having claims to a property title.
  99. Title Search: An examination of public records to determine the legal ownership of a property and uncover any liens or encumbrances.
  100. Townhome: A type of condominium that looks more like a house usually only sharing one or two walls with neighboring units.
  101. TRP also called a TPRV: A Temperature Release Pressure Value. Designed to release water from a water heater if the water heater should overheat. The release of water prevents the water heater from potentially exploding.
  102. Under Contract: A home where a buyer and a seller have agreed to terms, but the sale has not yet been completed.
  103. Underwater Mortgage: A situation in which the outstanding balance of a mortgage loan exceeds the appraised value of the property.
  104. Underwriting: The process by which a lender evaluates the risk of lending to a borrower.
  105. USDA Loan: A mortgage loan guaranteed by the U.S. Department of Agriculture for eligible rural and suburban homebuyers.
  106. VA Loan: A mortgage loan guaranteed by the U.S. Department of Veterans Affairs for eligible veterans and service members. Allows qualified military personnel and veterans to purchase a home with no money down.
  107. Walk-Through: A last walk-through of the property by a buyer before closing to make sure the property is in the condition as expected.
  108. Walkability: A measure of how pedestrian-friendly a neighborhood or property is, often based on proximity to amenities and public transportation.
  109. Warranty Deed: A deed in which the seller guarantees that they have clear title to the property and have the right to sell it.
  110. Zoning: Government regulations controlling the use of land within a particular area.



Book your home inspection by calling 818-298-3405 or book online here!