Excellent communication skills and use of terms are essential for real estate agents. A large part of this comes from having a keen understanding of basic real estate concepts and terminology. Real estate is full of jargon, and it can add layers of confusion to an already complex process.
As a real estate agent, you likely spend most of your time addressing real estate-related questions from home buyers and sellers. Whether you’re buying or selling a home, we created this resource to help you learn the vocabulary.
Top 45 Terms Every Real Estate Agent or Home Buyer Should Know
Adjustable-rate mortgage (ARM)
Adjustable-rate mortgages have interest rates that change periodically. A homebuyer with an adjustable-rate mortgage can start with lower monthly payments compared to a fixed-rate mortgage, but the changing interest rates mean that monthly payments can go up later on.
Amortization is the term used for the schedule of mortgage installment payments over a period of time. In real estate, a typical buyer’s amortization schedule is : one payment per month over 15 or 30 years.
A title search is an examination of public records that show a home’s history, including previous purchases, sales, real property tax, and other types of liens. A title examiner conducts the search to determine who is listed as the property’s record owner.
This information, along with any issues or liens recorded against the property, will be included in the preliminary report, which parties will review before the close of escrow.
This is one of the terms a real estate person should know. A real estate appraisal is a process designed to develop an accurate opinion of the value of a real property.
In a real estate transaction, an appraisal performed by a third party is often required by a lender to ensure that the amount being requested for the loan reflects the property’s fair market value.
In situations wherein a home’s appraised value is less than what the buyer offered, the lender can request the buyer to cover the cost’s difference.
As the name implies, a buyer’s agent is a real estate agent who is legally licensed to assist buyers during the home buying process. They represent the buyer’s interests exclusively during a real estate transaction.
Some of their responsibilities include negotiating for the best possible price for a home, providing information on the neighborhood and its surrounding area, making sure the home is inspected, and performing due diligence.
Closing is the final step in the home buying and selling process, and is one of the most important real estate terms to know. The closing date is agreed upon by the buyer and seller during the negotiation phase, and is typically set weeks after the offer is accepted.
At closing, ownership of the property is officially transferred from seller to buyer and all necessary payments are made, after which the buyer can then move in or start renovating the property.
Expenses incurred by home buyers and sellers to finalize a real estate transaction are known as closing costs. These may include appraisal fees, taxes, loan origination fees, credit report fees, title insurance, and so on.
In most situations, the buyer usually pays from 2% to 5% of the home’s purchase price, although closing costs can be paid by either the buyer or the seller.
Foreclosure is a legal process that happens whenever a homeowner is unable to make a mortgage payment, usually for a period exceeding 90 days. In a foreclosure, the owner forfeits all of their rights to the property.
Should the owner fail to pay off any outstanding debts on the property or sell it through a short sale, the home will enter a foreclosure auction. If it’s still not sold during the auction, the lender will then have control over the property.
A home inspection is a non-invasive examination of a home’s condition and is often performed in connection with the sale of that home. They are normally done by a professional home inspector who has proper training and certifications to handle the inspection.
After the inspection, the inspector provides the client with a written report of the findings, which the client can use to make informed decisions regarding their pending purchase of the property.
A listing is one of the real estate terms that means a written agreement, contract, or arrangement for the marketing and selling of real property through a broker or real estate agent for a specific period.
It gives an agent sole authority to handle the sale of the property in exchange for a fee or commission for their services.
Multiple Listing Service (MLS)
The Multiple Listing Service or MLS is a collection of over 700 regional databases populated by listings. Each database contains its own set of listings which agents can get access to by paying dues.
Member agents are allowed to share listings across different regions without needing to pay dues for each one. The MLS is widely considered the most comprehensive service for listings available today.
In the real estate business, homebuyers need to make an offer on a property they want to purchase. An offer can be for the home’s full list price, or what the buyer and their agent consider a fair market value for the home.
The buyer’s agents are in charge of putting the formal offer in writing before submitting it to the seller’s agent. In case the seller opts not to make a counteroffer, he or she can approve the offer immediately, which turns it into a purchase contract.
A property marketed in “as is” condition usually indicates that the seller is unwilling to perform most if not all repairs. It could also mean that it is priced “as is”, which is typically lower than market pricing in the area.
Finally, “as is” is in the condition at the time the offer was written, and should something happen to the property from the time the offer was written to the closing time which alters that condition, then that property is no longer “as is”, as it was, and should be brought back to its original “as is” condition at the time of offer, at the cost of the seller.
Or in the alternative, the seller should release the buyer from their obligation to purchase and refund the monies spent by the buyer, such as earnest money.
When a buyer is interested in purchasing a property that is already under contract with someone else, that buyer has an opportunity to submit a “backup offer”, in case the first transaction falls apart.
A backup offer must still be negotiated and any monies, such as earnest money, submitted, to confirm it is the next offer in line. There can only be one backup offer legally, as you cannot have a backup to the backup.
When a buyer makes an offer on a property they haven’t seen, even when it was possible to see it, that offer is considered a “blind offer”. It is most commonly used in a highly competitive area and/or circumstance and used as an attempt to be first and win quickly.
This is one of the real estate terms you should know if you are into the business. A homebuyer who is pre-approved means a lender has verified their information checked their credit and has approved them for a specific loan amount for up to 90 days.
The process requires buyers to fill out an application in order to allow a lender to examine their current financial situation, including their creditworthiness, debt-to-income ratio, and ability to repay.
Pre-qualification is the first step to getting pre-approved for a loan. It is meant to give a homebuyer an idea of how much of a loan they’ll be able to qualify for.
The pre-qualification process is based on data submitted by a consumer, whereas the pre-approval process uses only verified consumer data such as credit checks, for example.
Probate sales occur whenever a homeowner passes away without writing a will or leaving the property to someone else. The probate court will authorize an estate attorney to get the services of a real estate agent, who will then be tasked with selling the property.
Compared to a conventional sale, probate sales are usually more complicated and can take more time to complete.
A short sale happens whenever a property is sold for less than what is owed on its mortgage. In a short sale, the seller pays for the difference in what is owed to sell the home. These are often used as an alternate option by homeowners and banks to avoid foreclosure.
This is one of the terms a real estate person should know. Homes sold by a trustee and not a private party are known as a trust sale. This often occurs because the original homeowner has passed away and has assigned their assets into a living trust.
Trustees who have never occupied the property for sale are not required to offer the same disclosures as sellers in a conventional sale.
The down payment is the amount paid by the homebuyer during the closing period. Most home loans require a 20% down payment, while several conforming loans only require a down payment of 5%.
There are also loans offered by the Federal Housing Administration (FHA) that accept a 3.5% down payment.
The part of the property officially owned by an individual is known as home equity. While a person does have ownership of a property he or she has purchased, the mortgage lender has interest in the property up until it’s completely paid off.
Escrow is a step in the home buying or selling process which happens when a neutral third party holds something of value (often the buyer’s earnest money check) during a real estate transaction.
Once the transaction is completed during the closing period, the third party will then release the funds held during escrow.
Fair market value (FMV)
One of the key real estate terms and definitions all agents should be familiar with is fair market value, which is an accurate representation of a property’s value or worth.
Simply put, it is the price a property would be able to sell for on the open market, under the condition that the buyer and seller are both well-informed regarding the property, are acting in their best interests, and are not pressured for whatever reason to complete the transaction.
A conventional sale is when the property is owned outright (has no mortgage remaining) or the owner owes less on their mortgage than what the market indicates the owner could sell their property for.
Such conventional sales are often smoother transactions than non-conventional sales, such as foreclosures, probate-related sales, and short sales.
This is one of the terms a real estate professional should know. A Federal Housing Administration or FHA loan is a mortgage issued by a lender approved by the FHA and insured by the agency itself.
An FHA loan is designed for low to moderate-income homebuyers and requires a lower minimum down payments and credit scores compared to other conventional loans.
A fixed-rate mortgage comes with an interest rate that remains the same throughout the loan’s lifetime, giving the borrower more predictability and stability over their loan’s duration. It is one of the most common types of loans available and is preferred by many consumers due to its long-term reliability.
Property deed and title
Deed and title are two terms that are often used interchangeably. But while they’re closely related, there’s a difference between the two. The title is a concept and not a physical document. It represents legal ownership of the home and all of the rights that are transferred from seller to buyer.
On the other hand, the deed is a physical, legal document that conveys the title to the new owner after a home is sold. It includes a description of the property and identifies the grantee (buyer) and grantor (seller) of a specific transaction.
Real-estate owned (REO)
Real-estate owned is a designation given to properties that are owned by a lender due to an unsuccessful foreclosure sale at auction.
REO properties can sometimes present an opportunity for a buyer to be purchased for below market value as most banks would prefer to reinvest the proceeds, rather than waste time marketing the property for an extended period.
Additionally, the bank will often market the property “as-is” meaning they are unwilling to make any repairs to the property, which can make financing tricky.
A homeowner’s association or HOA is a private organization within a planned community, subdivision, or condominium tasked to create and enforce rules for the homes in the community and its residents.
Those who buy properties within an HOA’s jurisdiction are automatically included as members and are required to pay dues or HOA fees.
Internet Data Exchange (IDX)
Internet Data Exchange (IDX) is a set of licenses, regulations, and technologies that allow realtors to access MLS listings, use the listings on their websites, and display the information publicly.
“Broker Reciprocity,” a term used interchangeably with IDX, is a rule that gives collective permission to display listings from the MLS.
Brokers who opt into IDX grant other participants the right to display their listings, while also receiving the right to display listings from other participants. IDX is designed to help agents promote and market listings, attract more leads, and close more sales.
A REALTOR® is a licensed real estate professional who’s a member of the National Association of Realtors. The term (in all caps and followed by the registered trademark symbol) is designed to let people know that the practitioner abides by a strict Code of Ethics that protects customers, other real estate agents, and the public.
Protected by federal law and owned by the NAR, the REALTOR® trademark is one of the key benefits for members, distinguishing them from other real estate licensees.
This is one of the terms a real estate professional should know. A seller’s real estate agent is a professional who exclusively represents a seller of a property during a real estate transaction.
They assist the seller by performing certain duties such as collecting data and selling prices of comparable homes, marketing the property, and advising clients on choosing the best offer received for the property.
A seller disclosure is a document issued by a home seller to a buyer. It outlines any existing issues with the property and other important details buyers need to know about regarding the home.
It typically includes repairs performed on the home, details on defective systems or appliances, and history of leaks and other environment-related issues.
A Veteran’s Affairs or VA loan is a type of home loan that is only available to US military veterans and their surviving spouses. This type of loan is designed to assist veterans who are looking to purchase a property without needing a down payment or mortgage insurance.
VA loans are available through banks and mortgage companies. A percentage of VA loans are guaranteed by the federal government, allowing banks to offer more advantageous loan terms.
Covenants, conditions & restrictions (CC&Rs)
Usually, these are the rules and regulations placed on real property by a homeowner’s association (HOA), a neighborhood association, a developer, or a builder that sets forth any requirements and limitations of what a homeowner is allowed to do with the property.
It may also include monthly and/or annual fees or special assessments.
Read Also: How to become an house flipper
More Terms you must Know
is a type of building, normally detached, that may contain a small loft. Bungalows only have one floor. It is either single-story or has a second story built into a sloping roof, usually with dormer windows (one-and-a-half stories).
is a rental property consisting of two to four units—from duplexes to quadruplexes—that buyers can live in themselves if they wish.
A detached home is it a flat, duplex or bungalow that is a stand-alone one-family residence and is not joined to any other house. Detached houses give you the advantage of not sharing party walls with neighbors, which means you should be able to make more noise in your property without attracting complaints.
are multi-family homes composed of two distinct living areas separated either by floors or walls, that is, either side by side or stacked on top of each other. It could serve as a single or different family dwelling.
This is one of the terms a real estate everyone should know. A single house that is joined to another house with a common wall. A semi-detached house has one wall shared with the neighbor. Semi-detached properties are often mirrored images of each other.
A residential tenancy agreement, a contract between tenants and the landlord or owner either verbal or written. This is where the amount of the rent, lease term, rules, regulations and you and your landlord’s responsibilities for the apartment are outlined in exchange for letting you live in the unit.
Notice to Vacate:
This is one of the terms a real estate everyone should know. A formal notice given to the landlord by a tenant stating he or she intends to end occupancy of the premises and not renew the lease.
This is one of the terms a real estate everyone should know. This is a formal notice given to a tenant by the landlord stating that he or she intends to end the lease and begin eviction.
It will often state some cause that can be corrected, such as paying back owed rent or removing an illegal border, by a certain date to resolve the violation.
This is one of the terms of real estate everyone should know. An amount of money you and your landlord have agreed on in your lease for you to pay on a regular and constant recurring basis (usually monthly or yearly) in exchange for living in the apartment.