Common Real Estate Terms

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.

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