Real estate glossary
Real estate terms, defined
A plain-English real estate glossary — 76 terms defined for agents, buyers and sellers, from CMA and escrow to cap rate and 1031 exchange.
Pricing & valuation
Absorption RateThe rate at which available homes sell in a market during a given peri→AppraisalA licensed appraiser's independent, professional opinion of a property→Appraisal GapThe difference when a property appraises for less than the agreed purc→Assessed ValueThe value a local tax authority assigns to a property to calculate pro→Comparative Market Analysis (CMA)An agent's estimate of a home's value based on recent sales of similar→Days on Market (DOM)The number of days a property has been actively listed for sale before→Fair Market ValueThe price a willing buyer and willing seller would agree on, both info→List PriceThe price at which a property is publicly advertised for sale by the s→Price Per Square FootA property's price divided by its living area, used to compare relativ→
The transaction
Closing / SettlementThe final step where ownership legally transfers from seller to buyer →Closing CostsThe fees and expenses, beyond the purchase price, that buyers and sell→ContingencyA condition in a purchase contract that must be met for the sale to pr→Earnest MoneyA deposit a buyer makes to show serious intent when their offer is acc→EscrowA neutral third party holds funds and documents until the conditions o→Final WalkthroughThe buyer's last inspection of a property shortly before closing to co→Pending vs. ContingentTwo listing statuses that describe how far along an accepted offer is →PossessionThe point at which the buyer gains the legal right to occupy the prope→ProrationThe fair division of ongoing property expenses between buyer and selle→Under ContractA property with an accepted offer whose sale has not yet closed.→
Agency & representation
Buyer Representation AgreementA contract in which a buyer hires an agent to represent them in findin→Designated AgencyA brokerage assigns separate agents to represent the buyer and seller →DisclosureThe seller's legal obligation to reveal known material defects and fac→Dual AgencyWhen a single agent or brokerage represents both the buyer and the sel→Exclusive Right to SellA listing agreement guaranteeing the brokerage a commission if the hom→Fiduciary DutyThe legal obligation of an agent to act in their client's best interes→Listing AgreementA contract between a seller and a brokerage authorizing the agent to m→Procuring CauseThe agent whose efforts primarily led to a buyer's purchase, used to d→
Financing & mortgages
Adjustable-Rate Mortgage (ARM)A mortgage whose interest rate can change periodically based on a mark→Conventional LoanA mortgage not insured or guaranteed by the government, often followin→Debt-to-Income Ratio (DTI)The share of a borrower's gross monthly income that goes toward debt p→Discount PointsUpfront fees a borrower pays the lender to lower the loan's interest r→Escrow AccountA lender-managed account that collects and pays a borrower's property →FHA LoanA government-insured mortgage with lower down payment and credit requi→Financing ContingencyA contract clause letting a buyer cancel if they cannot secure a mortg→Fixed-Rate MortgageA mortgage with an interest rate that stays the same for the entire lo→Jumbo LoanA mortgage that exceeds the conforming loan limits set for Fannie Mae →PITIThe four components of a typical monthly mortgage payment: principal, →Pre-Approval vs. Pre-QualificationTwo levels of lender assessment of how much a buyer can borrow, differ→Private Mortgage Insurance (PMI)Insurance that protects the lender when a borrower puts down less than→UnderwritingThe lender's process of verifying a borrower's finances and the proper→VA LoanA mortgage guaranteed by the Department of Veterans Affairs for eligib→
Listings & the MLS
Active, Pending, and Sold StatusThe core MLS statuses that describe where a listing stands in the sale→Coming SoonA pre-marketing status announcing a property that will soon be listed →Internet Data Exchange (IDX)Rules and technology that let brokers display MLS listings on their ow→Multiple Listing Service (MLS)A private database where brokers share property listings and offers of→Off-Market ListingA property available for sale but not publicly listed in the MLS.→Pocket ListingA property marketed privately by an agent without being entered into t→Virtual Office Website (VOW)A brokerage website that shows expanded MLS data to registered consume→
Legal & title
Chain of TitleThe historical record of successive ownership transfers of a property →Covenants, Conditions & Restrictions (CC&Rs)Recorded rules that govern what owners can and cannot do with property→DeedThe legal document that transfers ownership of real property from one →EasementA right for someone to use part of another person's property for a spe→EncumbranceAny claim, lien, or restriction on a property that may affect its use →Homeowners Association (HOA)An organization that governs a community, enforces rules, and collects→LienA legal claim against a property that must usually be paid before it c→SurveyA professional measurement of a property's boundaries, structures, and→TitleThe legal ownership rights to a property, including the right to use a→Title InsuranceA policy that protects an owner or lender against losses from defects →
Property types
CondominiumA privately owned unit within a larger building or community, with sha→Cooperative (Co-op)A housing arrangement where residents own shares in a corporation that→Multifamily PropertyA building with multiple separate housing units, such as a duplex, tri→Planned Unit Development (PUD)A community where owners hold their individual lots and share ownershi→Single-Family HomeA standalone residence on its own lot, designed for one household and →TownhouseA multi-story home that shares one or more walls with adjacent units b→
Investment
1031 ExchangeA tax strategy that lets an investor defer capital gains taxes by rein→Capitalization Rate (Cap Rate)A property's net operating income divided by its value, used to gauge →Cash FlowThe money left over from a rental property after all expenses, includi→Cash-on-Cash ReturnThe annual pre-tax cash flow of an investment divided by the actual ca→Gross Rent Multiplier (GRM)A property's price divided by its gross annual rental income, used as →Net Operating Income (NOI)A property's income after operating expenses but before mortgage payme→Return on Investment (ROI)A measure of an investment's profitability, expressed as gain relative→
Commissions & fees
Commission SplitHow commission income is divided, both between brokerages and between →Dual or Variable Rate CommissionA listing arrangement where the commission changes depending on who br→Real Estate CommissionThe fee paid to brokerages for their services in a transaction, typica→Referral FeeA portion of commission paid to another agent or broker for referring →Transaction FeeAn administrative charge some brokerages add to cover the paperwork an→