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!
Popular Real Estate Acronyms
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.
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.
Covenants, Conditions & Restrictions: A homeowners' association typically manages the common areas and oversees the covenants, conditions, and restrictions that apply to the property.
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.
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).
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.
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.
Department of Housing & Urban Development: HUD homes are owned and sold by U.S. Department of Housing and Urban Development, a government agency.
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.
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.
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.
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.
Real Estate Owned: An acronym for the term Real Estate Owned in which bank (or other financial institutions) give to the properties they own.
(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.
Commonly Used Real Estate Terminology
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.
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.
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.
Common Interest Development
Fixed Rate Mortgage
Nonrecurring Closing Costs
Real Estate Agent
Real Estate Broker
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.