Real Estate Terms
Top 100 Real Estate Terms to Know
We have put together this ‘Agent Glossary’ for you who are studying for the state exam, new agents, or seasoned pros who need a quick refresher. This guide will help you define the most important real estate concepts and terms. Gaining a deeper understanding of the language of real estate will truly set you apart from your peers.
Table of Contents
Appraisal — A report highlighting the estimated value of the property completed by a qualified 3rd party. This is typically done for the benefit of the buyer to ensure the property is worth what they are paying.
Association Fee/HOA Fee — In addition to a mortgage, certain housing communities such as townhomes have a monthly fee associated with maintaining the common areas and amenities.
Balloon Mortgage — A long-term mortgage loan that starts small but has a large payment due at maturity.
Closing — This is the final meeting where the buyer and seller sign the necessary paperwork, complete the transaction, and release/take possession of the property. Usually, the representing agents and attorneys attend.
Closing Costs — The buyer and seller have expenses associated with the transaction other than that of the actual cost of the home. For example, the buyer has a variety of fees due for obtaining a new loan and the seller must pay commission to both agents.
Closing Disclosure — A form that provides the final details about the mortgage loan. It includes loan terms, projected monthly payments, and how much the extra fees will be.
Collateral — Something of value (in this case your home) that is held to ensure repayment of a mortgage or loan.
Commission — A percent of the home’s sale price is paid to agents. The seller pays commission to both the buyer and the listing agent.
Contingencies — Conditions that must be met in order to close. Contingencies are typically tied to a date, referred to as a deadline. If the contingency is not satisfied the contract may be canceled.
Comparables — Homes in the area of interest that have recently sold that have similar features.
Counteroffer — The response from the seller in regard to an offer.
Debt to Income Ratio — A lender will look at a borrowers debt versus income to determine the amount of loan they are eligible for and if they can repay their debt plus the home loan.
Down payment — A percent of the cost of the property that is paid up front as a part of the mortgage.
Due diligence — A time frame given to a buyer to fully examine the property, often used by buying agents to inspect the home so that the buyer can make an informed decision on how to proceed. This allows the buyer to fully understand what they are purchasing. If this is written in the purchase agreement the buyer may be able to renegotiate their offer based on the findings or even terminate their contract.
Earnest Money — The deposit made from the buyer to the seller when submitting an offer. This deposit is typically held in trust by a third party. Upon closing the money will generally be applied to the down payment or closing cost.
Escrow — This term has multiple meanings; earnest money is typical held by a third party until closing in “escrow”. It can also be referred to as the time period from when the contract is written and accepted by the seller to when the home sale actually closes.
Equity — The difference in the market value of a home versus what is owed on the home.
FHA — A mortgage that is financed through a private lender and insured by the Federal Housing Administration, often requiring a lower down payment and income to qualify.
Fixed Rate — The interest rate will remain the same for the entire life of the mortgage.
Home Equity Line of Credit — A loan or line of credit that is determined based on the equity or homes value after subtracting the loans owed.
Home Inspection — The process in which a professional inspects the seller’s home for issues that are not openly apparent, then creates a report for the buyer to review.
Home Protection Plan — An annual service that covers the cost of repairs or replacements to items covered in the plan; items like stoves, washer/dryers, etc.
HUD — The United States Department of Housing and Urban Development (HUD) is an entity within the executive branch of the United States government that’s mission is to uplift communities by creating housing more accessible. They fund and manage affordable housing developments and rent assistance programs.
Hybrid — A loan that starts with a fixed rate period, then converts to an adjustable rate.
Mortgage Insurance — Insurance written in connection with a mortgage loan that protects the lender in the event the borrower cannot repay their loan. This is usually not required if the borrower has 20% or more for the down payment.
Mortgage Note — A promise to pay a sum of money at a standard interest rate during a specific term that is secured by a mortgage.
Multiple Listing Service (MLS) — The national list of real estate properties that are available for sale. These are the most reliable sources to receive up-to-date listing information.
Pre-Approval — The process in which a buyer must provide a mortgage professional the appropriate information on income, debts, and assets that will be used to make the initial credit only loan decision.
Pre-Qualification — Once approved for a loan, this is the process in which the maximum sale price, loan amount, and monthly payments are calculated for the borrower. This is not a loan approval however, it is useful to know prior to searching for a home.
Principal — The underlying amount of the loan which is actually borrowed.
Property Taxes — These are the taxes that are enforced by the city, town, county, and state government entities. These taxes are included in the total monthly mortgage payment and are held in escrow by the lender.
REO — Real estate owned properties or foreclosed properties currently owned by a financial institution such as the bank that made the loan to the previous owner
Reverse Mortgage — This is specifically for seniors and it allows them to convert the equity in their home to cash.
Short Sale — A situation when the seller’s lender is willing to accept an offer and allows the sale to be completed for an amount less than the mortgage amount owed by the seller.
Seller Concessions — A way that sellers incentivize buyers to purchase their home. A contribution to closing costs is a common way sellers ‘sweeten the deal’.
Seller’s Disclosure — All information about the property that may affect a buyer’s decision to purchase must be reported to the best of the seller’s knowledge. This must include items related to a person’s enjoyment of the property, such as property line disputes, unusual smells from a nearby factory, or noise from a military base/airport.
Title — A legal document proving current and proper ownership of the property. Also referred to as a Title Deed, this document highlights the history of property ownership and transfers.
Underwriting — The process in which the potential home buyer is evaluated for their financial ability to obtain and repay a loan. This normally consist of a credit check and appraisal of the property.
VA Loan — Loans that are given to Americans who have served in the armed forces. They are administered by the Department of Veteran Affairs.
20 Terms to Remember for the Exam
Types of Estates
*Tenancy in Common (TIC) — An estate that has joint ownership, where each owner shares a part of the property. Tenants In Common do not have the right to survivorship. Instead, the deceased tenant’s ownership rights pass to their estate, as stated by their will or the governing law. Two types of TIC are joint tenancy and tenancy by the entirety.
- Joint Tenancy — Defines the ownership interests and rights between two or more co-owners of real property. The co-owners each have equal rights and responsibilities. Married couples, non-married couples, friends, relatives, and business partners can all create joint tenancies. — However, there is a right of survivorship, so if one owner passes away, their part of the property goes directly to the surviving party(s) without going to court or through probate.
- Tenancy by the Entirety — Is created when property is conveyed to a married couple at the same time. This is a way for married couples to have equal interest in a property and survivorship rights. Keep in mind this is not 50/50 ownership, but rather each spouse owns 100% of the property.
Types of Property
Real Property — All things attached to the surface of the land, the ground below, air above, and all the legal rights to them. This includes landscaping, walkways, and other immovable things.
Personal Property — Any tangible and moveable objects such as furniture, appliances, etc. It does not qualify as real property and must be written in the Bill of Sale (aka a contract between buyer and seller) if the seller wishes to sell any personal property with the home.
A Fixture — Kitchen cabinets, ceiling fans, and chandeliers are all examples of a fixture, or any item that was once personal property but has become real property by way of permanent attachment to real property.
Bundle of Rights & How They Work
Bundle of Rights — A set of legal rights that is generally assigned to an owner of real property upon the purchase of a deed. These five rights may be held by the titleholder alone or shared among parties.
The Right of Use — Allows the titleholder to use their property in any way they wish as long as it’s not illegal and adheres with HOA regulations. This may include hosting guests, renting out a room, or even making changes to the property.
The Right of Possession — Gives the titleholder the freedom and power to choose who may or may not enter their property. Limitations arise in instances of search warrants, easements, or rental properties.
The Right of Transfer — The right of transfer guarantees the right of a titleholder to sell, will, or gift a property. This is a transfer of ownership, but exclusions may exist in cases of mortgages and liens.
The Right of Encumberment — The titleholder has the right to finance the home by taking out a loan to build the home’s equity. They can also finance projects to raise the value of the home.
The Right of Enjoyment — Permits the titleholder to engage in any activities of their choice on their property and enjoy the property as they see fit, so long as all activities are legal.
- STUDY TIP — Remember the acronym ‘UPTEE’ when thinking of the Bundle of Rights. This stands for Use, Possession, Transfer, Encumber, and Enjoyment.
Easements & How They Work
Easement — The legal right a person has to access and use another person’s real property for a specific purpose. An example of this is utility companies holding easements that allow them access to power lines on a property.
Dominant Tenement — This is the property that benefits from the easement on another property.
Service Tenement — An easement arrangement refers to the property that bears the burden of an easement.
Ingress and Egress — Ingress, in easements, refers to the right of a person to enter a property while egress is the right to leave the property. These rights come into action when a property is enclosed by land so that a person can access their property even if it means going across another person’s property.
More Terms to Know for the Real Estate Exam
Encumbrance — Anything that limits the homeowner’s ability to do whatever they want with their property; including zoning regulations, tax liens, or other homeowner association restrictions. You are legally obligated to disclose any encumbrances to potential buyers.
Probate Sale — This happens when a homeowner passes away without a will or leaving the property to someone. In this situation, the probate court would authorize an estate lawyer or representative to hire a real estate agent to sell the home.
Eminent Domain — The power that all levels of government have to acquire private property from a person for public use. This is typically done in exchange for compensation from local, state, and federal governments.
Steering — In real estate, steering happens when a real estate agent influences the choice of a buyer discriminatorily by only showing them homes in certain neighborhoods or communities. This discrimination is often based on things such as gender, race, sexual orientation, religion, etc.
Now you should have a good idea of what these real estate terms and concepts mean! Consider creating flashcards and creating your own acronyms to help you remember for the real estate state exam. We hope this set of Real Estate vocabulary words will help you, and good luck on your exam!