Real Estate Glossary

Absorption Rate

The rate at which available homes are sold in a specific market during a given time period.

Addendum

An addition or change to a contract, typically appended to the original agreement.

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a referenced index.

Amortization

Gradual repayment of a loan over time through regular principal and interest payments.

Appraisal

A professional estimate of a property’s market value.

As-Is

Property sold in its current condition without repairs or warranties from the seller.

Assessment (Assessed Value)

Value assigned by a taxing authority to calculate property taxes.

Balloon Payment

A large, final loan payment due at the end of a term after smaller periodic payments.

Broker

A licensed professional who facilitates real estate transactions.

Buydown

A payment (often by seller or lender) that reduces the borrower’s interest rate.

Cap Rate (Capitalization Rate)

Net Operating Income divided by property value; used to value income properties.

Closing (Settlement)

Final step where ownership transfers and funds are disbursed.

Comparables (“Comps”)

Recently sold similar properties used to estimate value.

Contingency

A contract condition that must be met for the deal to proceed (financing, inspection, etc.).

Contract of Sale / Purchase Agreement

The binding document detailing terms between buyer and seller.

Conveyance

The act of transferring title from one party to another.

Covenant

A promise or restriction recorded against the property (e.g., usage limits).

Deed

Legal document that transfers property ownership.

Default

Failure to meet legal obligations, commonly missing loan payments.

Depreciation

Value decline over time; also a tax deduction method for improvements.

Disclosure

Required statement of material facts about a property.

Due Diligence

Buyer’s investigation period (inspections, title, HOA docs, etc.).

Easement

A non-possessory right to use another’s land for a specific purpose.

Encumbrance

A claim or liability attached to property (lien, mortgage, easement).

Equity

Market value minus debts secured by the property.

Escrow

Neutral third party holds funds/documents until conditions are met.

Exclusive Listing

Only one brokerage has the right to market and sell the property.

Fair Market Value

Price a property would sell for in an open, competitive market.

Fixed-Rate Mortgage

Loan with an interest rate that remains the same for the term.

Fixtures

Items attached to the property considered part of the real estate.

Foreclosure

Legal process where a lender takes and sells property after default.

Good Faith Deposit (Earnest Money)

Buyer’s deposit demonstrating seriousness; applied to closing or refundable per contingencies.

Grantee

Person receiving property interest via a deed.

Grantor

Person transferring property interest via a deed.

Gross Income

Total income from a property before expenses.

Habendum Clause

Deed or lease clause describing the interest granted (“to have and to hold”).

Homeowners Association (HOA)

Organization managing shared rules, amenities, and assessments in a development or condo.

Housing Market Inventory

Number of homes for sale at a given time.

Inspection

Professional evaluation of property condition and systems.

Interest Rate

Cost of borrowing expressed as a percentage of the loan amount.

Investment Property

Real estate purchased primarily to produce income.

Joint Tenancy

Ownership by two or more people with right of survivorship.

Judgment Lien

Court-ordered claim against property to secure payment of a debt.

Key Money

Upfront payment sometimes required to secure a lease; market-specific practice.

Kickback

Improper payment made for referrals; typically illegal/unethical.

Landlord / Lessor

Owner who leases property to a tenant.

Lease / Rental Agreement

Contract granting possession for a set period in exchange for rent.

Leverage

Using borrowed funds to potentially amplify investment returns.

Lien

Legal claim on property as security for a debt or obligation.

Listing Agent

Agent who represents the seller and markets the property.

Loan-to-Value (LTV)

Loan amount divided by appraised value, shown as a percentage.

Multiple Listing Service (MLS)

Agent-run database with detailed listing data and statuses.

Mortgage

Instrument that pledges property as security for a loan.

Mortgagee

The lender in a mortgage transaction.

Mortgagor

The borrower in a mortgage transaction.

Market Value

Estimated price a willing buyer and seller would agree upon in an open market.

Net Operating Income (NOI)

Income after operating expenses, before debt service and taxes.

Nonconforming Use

A once-lawful use that no longer conforms to current zoning but may continue.

Note (Promissory Note)

Written promise to repay a loan under stated terms.

Offer

Buyer’s proposal to purchase under specific terms; becomes a contract if accepted.

Option

Contract granting the right, but not the obligation, to buy or lease within a timeframe.

Owner Financing (Seller Financing)

Seller finances part or all of the purchase directly with the buyer.

Parcel

A defined piece of land, usually shown on a recorded map.

Point (Discount Point)

Prepaid interest; one point equals 1% of the loan amount.

PITI

Principal, Interest, Taxes, and Insurance—typical mortgage payment components.

Plat / Subdivision Map

A mapped layout showing lots, streets, and easements for a subdivision.

Pre-approval

Preliminary lender review of a borrower’s credit and capacity to lend.

Principal

Amount borrowed or outstanding on a loan, excluding interest.

Quitclaim Deed

Deed conveying whatever interest the grantor has, with no title warranties.

Quiet Title Action

Court action to resolve title disputes and establish clear ownership.

Real Property

Land, improvements, and the associated rights and interests.

REALTOR®

A real estate professional who is a member of the National Association of REALTORS®.

Refinance

Replacing an existing mortgage with a new one, often for better terms.

Reversion

Return of property rights to the original owner after a particular interest ends.

Right of First Refusal

Right to match an offer before the owner can sell to another buyer.

Right of Way

Right to pass through or use another’s property for access or utilities.

Seller’s Market

Demand exceeds supply; sellers typically have pricing power.

Short Sale

Lender-approved sale for less than the mortgage balance.

Sublease / Subletting

Tenant leases the premises to another tenant while retaining obligations.

Survey

Professional measurement defining property boundaries and easements.

Subdivision

Division of a tract into smaller legal lots.

Title

Legal evidence of ownership of real property.

Title Insurance

Insurance protecting against losses from defects in title.

Tenant / Lessee

Individual or entity that rents and occupies property under a lease.

Transfer Tax

Tax imposed on the transfer of title to real property.

Trust Deed / Deed of Trust

Security instrument involving a trustee between borrower and lender, used in some states.

Underwriting

Lender’s process of evaluating risk and approving a loan.

Unimproved Land

Land without buildings, utilities, or infrastructure.

Utility Easement

Easement allowing utilities to install and maintain lines or equipment.

Variance

Zoning exception granted to allow a deviation from current rules.

Vacancy Rate

Percentage of rental units that are unoccupied.

Value-Add (Strategy)

Improving operations or condition to increase value and income.

Walk-Through (Final Walkthrough)

Buyer’s final inspection before closing to confirm condition.

Warranty Deed

Deed in which the grantor guarantees clear title and defends against claims.

Wraparound Mortgage

Seller financing that wraps an existing mortgage, with payments made to the seller.

Xeriscaping

Water-efficient landscaping that reduces or eliminates irrigation needs.

Yield

Income return on an investment relative to cost or value.

Yield Maintenance

Prepayment penalty ensuring the lender receives the expected yield.

Zoning

Government regulation dividing land into districts for permitted uses.

Zoning Variance

Permission to deviate from zoning rules due to hardship.

Zoning Ordinance

Local law that establishes zoning classifications and rules.