Real Estate Lingo You Need to Know


Real Estate Lingo You Need to Know 

 

Whether you're a buyer or a seller, familiarizing yourself with the acronyms, terms and definitions frequently used in the real estate market is a helpful tool when preparing to make wise decisions and be informed when the time comes to do so. Instead of allowing yourself to get bombarded with real estate terms that are foreign to you, be proactive and brush up on the commonly used real estate lingo so you are prepared for what to expect. Of course, any knowledgable and professional real estate agent can help you navigate this uncharted territory and answer any questions you may have along the way, but it's always good to do a little homework for yourself.

 
Here's some of the commonly used real estate lingo that you're likely to encounter in the midst of your real estate transactions. Don't let the jargon intimidate you!
 

Acronyms 

Popular Real Estate Acronyms

APR

 

Annual Percentage Rate: A yearly interest rate that includes upfront fees and costs paid to acquire the loan, calculated by taking the average compound interest rate over the term of the loan. Mortgage lenders are required to disclose the APR so that borrowers can more accurately compare the actual cost of different loans with different fees.


ARM

Adjustable Rate Mortgage: A mortgage loan with an interest rate that fluctuates in accordance with a designated market indicator, such as the weekly average of one-year U.S. Treasury Bills, over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.


CCRs

 

Covenants, Conditions & Restrictions: A homeowners' association typically manages the common areas and oversees the covenants, conditions, and restrictions that apply to the property.


CMA

 

Comparative (or Competitive) Market Analysis: A CMA is a report that shows prices of homes that are comparable to a subject home and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.


EMD

 

Earned Money Deposit: A partial payment (deposit) demonstrating commitment in a contractual relationship, and commonly made in real estate transactions at the time of making the purchase offer. The remainder of the payment is due on the closing date. The seller keeps the earnest money if the buyer fails to make timely payment in full (or if there is a similar breach of the agreement).


FHA

 

Federal Housing Administration: The Federal Housing Administration provides mortgage insurance on FHA approved loans – typically the home has to meet certain standards as well as requires a minimum down payment from the borrower.

Property

HOA

 

Homeowners Association: An organization made up of neighbors concerned with managing the common areas of a subdivision or condominium complex. These associations collect monthly dues and take on issues such as garden, pool, and fence maintenance, noise abatement, snow removal, parking area upkeep, repairs, and dues. The homeowners' association is also responsible for enforcing any covenants, conditions, and restrictions (CCRs) that apply to the property.


HUD

 

Department of Housing & Urban Development: HUD homes are owned and sold by U.S. Department of Housing and Urban Development, a government agency. 


IDX

Internet Data Exchange: An acronym for Internet Data Exchange and is refers to the data feed that is downloaded from an MLS. IDX’s also make it possible for the public to search homes using a real estate broker’s website.


MLS

Multiple Listing Service: A computer-based service, commonly referred to as MLS, that provides real estate professionals with detailed listings of most homes currently on the market. The public can now access much of this kind of information through websites.


PITI

Principal, Interest, Taxes & Insurance: Abbreviation for the major expenses that make up a mortgage payment: principal (the amount borrowed), interest, (property) taxes, and (homeowners') insurance.


 

PMI

Private Mortgage Insurance: Insurance that reimburses a mortgage lender if the buyer defaults on the loan and the foreclosure sale price is less than the amount owed the lender (the mortgage plus the costs of the sale). A home buyer who makes less than a 20% down payment will most likely have to purchase private mortgage insurance, commonly referred to as PMI.


REO

 

Real Estate Owned: An acronym for the term Real Estate Owned in which bank (or other financial institutions) give to the properties they own.


VA

 

(Department of) Veterans Affairs: The Department of Veteran Affairs is typically associated with military service members using their eligibility to purchase a home using VA financing. A mortgage loan issued by qualified lenders guaranteed by the U.S. Department of Veterans Affairs.

 

Terminology 

Commonly Used Real Estate Terminology

 

Acceptance

Agreeing to the terms of an offer, thereby creating a contract. Both buyer and seller are in contract for the sale of the house, and neither can back out without facing consequences. In the buyer's case that translates to losing earnest money deposit and in the seller's case, a potential lawsuit.


Appraisal

A determination of the value of something, such as jewelry, stock, or, in this case, the house you plan to buy. A professional appraiser (who should be a qualified, disinterested specialist in real estate appraisals, with expertise in the local geographic area) makes an estimate by examining the property, looking at the initial purchase price, and comparing it with recent sales of similar property. Your bank or other lender will require the appraisal in order to ascertain the worth of the house for lending purposes. And, unfortunately, the lender may refuse to fund the loan if the appraisal comes in lower than the loan amount. In such situations, if you can't come up with additional down payment money or a better appraisal, deals have been known to fall through.


Appreciation

An increase in the value or worth of an asset or piece of property that's caused by external economic factors occurring over time, rather than by the owner having made improvements or additions. For example, increased market demand or inflation can cause property to appreciate. The term is commonly used in the context of real estate. The seller is probably hoping to cash in on any appreciation in the home's value since buying it, but the opposite (called depreciation, defined below) is also possible.


  

Buyer's Market

A market with more sellers than buyers; too many homes on the market without enough buyers causes lower prices because homes are harder to sell.

  

Common Area

 
Facilities and space, such as recreation facilities, parking, laundry rooms, or a courtyard in condominiums, apartment buildings, and some cooperative housing projects. Common areas in condominiums are not individually owned by the residents, but shared by percentage interest or owned by the management organization.

Common Interest Development

 
A type of housing, composed of individually owned units, such as condominiums, townhouses, or single-family homes, that share ownership of common areas, such as swimming pools, landscaping, and parking. Common interest developments (also known as community interest developments or CIDs) are managed by homeowners' associations. Members typically pay monthly association dues.

Condominium

 
A type of real property ownership in which each owner holds title to his or her individual unit and shares ownership jointly of common areas such as driveways, parking, elevators, outside hallways, and recreation and landscaped areas. A homeowners' association typically manages the common areas and oversees the covenants, conditions, and restrictions (CC&Rs) that apply to the property. Condominiums are often referred to as a common interest development.
 

Contingency

 
A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event, usually by specific dates leading up to the closing. For example, a contingency in your home purchase contract might state that, if the buyer does not approve the inspection report of the physical condition of the property, the buyer does not have to complete the purchase. Or the seller might include a contingency asking for proof that the buyer is financially able to close the deal or for closing to be held off until the seller successfully finds another house to buy.
 

Conventional Loan

 
A loan not insured or guaranteed by the government.

Counteroffer

 
The rejection of an offer to enter into a contract, where the rejecting party includes a different offer that changes the terms of the original offer in some way. For example, if you offer $350,000 for a house, and the seller replies that he wants $375,000, the seller has rejected your offer and has made a counteroffer. The legal significance of a counteroffer is that it completely voids the original offer.

 

Deed

 
A written document for a title to real estate to be conveyed from one party to another.

 

Depreciation

 
The gradual loss of value of property that occurs through external economic conditions, the property's age, natural wear and tear, or deterioration.
 

Disclosure

 
The making known of a fact that had previously been hidden; a revelation. In many states, a home seller must disclose major physical defects in the house within his or her knowledge, such as a leaky roof or potential flooding problem; and, in all states, sellers must disclose the presence of lead-based paint hazards in buildings constructed before 1978.

 

Due Diligence 

Due Diligence

 
Taking care before signing a contract to research, analyze, and gather information about a property.

 

Escrow

 
The holding of funds or documents by a neutral third party prior to closing your home sale.

Escrow Agent

 
A person (often an attorney) or a company that handles escrow arrangements for a fee usually paid as part of the closing costs. Also sometimes called a title agent.
 

Escrow instructions

 
Written instructions, signed by a buyer and seller, telling an escrow agent what needs to happen before the deal closes.
 

Fixed Rate Mortgage

 
A mortgage loan that has an interest rate that remains constant throughout the life of the loan, usually 15 or 30 years.
 

Hazard Insurance

 
A type of insurance found in homeowners' policies, which protects against physical damage to the property caused by unexpected and sudden events such as fires, storms, and vandalism. Your mortgage lender will no doubt require you to purchase hazard insurance, in order to protect its collateral from decreases in value.

 

House Closing

 
The final transfer of the ownership of a house from the seller to the buyer, which occurs after both have met all the terms of their contract and the deed has been recorded.

 

Nonrecurring Closing Costs

 
Those costs of closing a home purchase that need to be paid only once such as the appraisal fee, title insurance, and transfer taxes.

 

Pre-Approved

 
Where the buyer has funding secured by a lender to purchase a home.

 

Pre-Qualified

A process that allows the prospective buyer to submit a loan application to a lender before the home buying process.

 

Prepayment Penalty

 
A fee imposed on a borrower who pays off a loan (usually a mortgage) before its due date. Lenders impose this kind of fee to encourage borrowers to hold a debt, and keep paying interest on it, for the whole term of the loan. Such penalties have become rare, however.

 

Points

 
A fee paid up front to the lender at closing to lower the interest rate over the life of the loan. Also known as discount points or purchase points.

 Real Estate

Real Estate

 
Land and things permanently attached to it, such as buildings, houses, stationary mobile homes, fences, and trees. Real estate is also called real property. Anything that isn't real estate is personal property.
 

Real Estate Agent

 
A foot soldier of the real estate business who shows houses and does most of the other nitty-gritty tasks associated with selling real estate. An agent must have a state license and be supervised, in most U.S. states by someone called a real estate "broker" (or, if the agent is already referred to as a broker in his or her state, by a "managing broker"). Most agents are completely dependent upon commissions from sellers for their income.
 

Real Estate Broker

 
A real estate professional licensed to negotiate the purchase and sale of real estate for a commission or fee. In most states, a broker is one step up from a real estate agent, having more training and the power to supervise agents. However, in some states, the term "broker" is used for all agents. In Washington State, for example, regular real estate agents are referred to as "designated brokers," and those who can supervise others are called "managing brokers."

 

Short Sale

 
When a home owner is attempting to sell his/her home for less than is owed against it. Short sales have to be approved by the lien holder in order to be executed.

 

Staging

Preparing a home for sale by improving the property's appeal for potential buyers.

Under Contract

A home for sale wherein the home seller has accepted an offer from a buyer.

 

Zero Down

 
Used in terms of a financing method meaning there is no out of pocket expense for the borrower (buyer). Common zero down programs are USDA and House Key.


Sources:

Real Estate Terminology for Home Buyers & Sellers

Real Estate Jargon 101


 

RELATED READING:

10 Things You Should Look for in a Real Estate Agent

10 Real Estate Resources You Should Know About


Did we miss any real estate terms you need to know? Contact one of our knowledgable Century 21 Action Topsail real estate agents or contact our real estate sales department and we'll help answer any questions you may have. 

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