Exploring the ABCs of Real Estate A Dictionary of Real Estate Terms

[Dawon Irvin]

This post serves as a detailed reference point—a compendium of real estate knowledge that delves into the fundamental aspects of this dynamic field.

1031 Exchange: A tax-deferred exchange allowing the sale of one property and the acquisition of another with the deferral of capital gains taxes.

1033 Exchange: A tax-deferred exchange for like-kind investment properties after the involuntary conversion of property.

360-Degree Virtual Tour: A comprehensive online tour of a property providing a full view of the surroundings.

401(k) Real Estate Investment: Using retirement funds to invest in real estate.

504 Loan: A Small Business Administration (SBA) loan program for real estate and equipment financing.

ABR (Accredited Buyer's Representative): A designation for real estate agents specializing in buyer representation.

Absorption Rate: The rate at which available homes are sold in a specific real estate market.

Acceleration Clause: A provision allowing a lender to demand immediate repayment of the entire loan under certain conditions.

Accrued Depreciation: The total depreciation incurred on a property.

Ad Valorem Tax: Property tax based on the assessed value of the property.

Adjudication: The legal process of settling ownership disputes.

Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that can change periodically.

Affidavit of Title: A sworn statement verifying a property's legal status.

Affordable Housing: Housing that is deemed affordable to low- and moderate-income households.

Agent: A person authorized to act on behalf of another in real estate transactions.

Air Rights: The legal right to use the space above a property.

Alienation Clause: A clause in a mortgage allowing the lender to declare the full loan amount due if the property is sold.

Amendment: A change or modification to a contract or legal document.

Amortization: The process of gradually paying off a loan through regular payments.

Appraisal: The process of estimating a property's value.

Appreciation: The increase in the value of a property over time.

Assessment: The valuation of a property for tax purposes.

Assignment: The transfer of rights or interests in a property to another party.

Balloon Mortgage: A mortgage with low initial payments that increase over time.

Balloon Payment: A large, final payment due at the end of a balloon mortgage.

Base Year: The initial year used as a reference for calculating operating expense increases in leases.

Bill of Sale: A document transferring ownership of personal property.

Breach of Contract: Failure to fulfill the terms of a contract.

Bridge Loan: A short-term loan used to bridge a financing gap.

Broker: A licensed professional who facilitates real estate transactions.

Brownfield: A property with real or perceived environmental contamination.

Building Code: Regulations specifying construction standards.

Buydown: A payment to reduce the interest rate on a mortgage.

Buyer's Agent: A real estate agent representing the buyer in a transaction.

Buyer's Market: A market favoring buyers due to high inventory and low demand.

Caveat Emptor: "Let the buyer beware," emphasizing the buyer's responsibility for due diligence.

Certificate of Occupancy (CO): A document indicating that a property meets building codes and is safe for occupancy.

Chain of Title: The historical transfer of ownership for a property.

Chain of Title: The history of a property's ownership.

Chattel: Personal property, as opposed to real property.

Closing Agent: A neutral third party responsible for facilitating the closing of a real estate transaction.

Closing Costs: Fees and expenses associated with the purchase or sale of a property.

Closing Disclosure (CD): A document outlining final loan terms and closing costs.

Cloud on Title: A claim or encumbrance affecting title.

Collateral: Property used to secure a loan.

Collateralized Debt Obligation (CDO): A financial product backed by a pool of debt, often including mortgages.

Common Area Maintenance (CAM): Fees paid by tenants for the maintenance of common areas in commercial properties.

Comparative Market Analysis (CMA): An evaluation of comparable properties to determine a property's market value.

Condominium: Ownership of an individual unit within a multi-unit property.

Condominium Association: A governing body that manages common areas in a condominium.

Conforming Loan: A mortgage that meets the criteria set by government-sponsored entities.

Constructive Eviction: Conditions that make a property uninhabitable, leading to the tenant's departure.

Contingency: A condition that must be met for a contract to be binding.

Contingent Offer: An offer to purchase a property with certain conditions that must be met.

Conventional Loan: A mortgage not insured or guaranteed by a government agency.

Conveyance: The transfer of a property from one party to another.

Cooperative (Co-op): A type of multi-unit housing where residents own shares in the corporation that owns the property.

Cost Approach: A real estate valuation method that estimates the cost to replace a property.

Covenants, Conditions, and Restrictions (CC&R): Rules and regulations governing the use of properties within a development.

Credit Report: A record of an individual's credit history.

Debt Service: The total amount of principal and interest paid on a loan.

Debt-to-Income Ratio (DTI): The ratio of debt payments to income.

Deed: Legal document transferring ownership of a property.

Deed in Lieu of Foreclosure: A voluntary transfer of title to a lender to avoid foreclosure.

Deed of Trust: A legal document used in some states instead of a mortgage, providing security for a loan.

Depreciation: A reduction in the value of a property over time.

Depository Trust and Clearing Corporation (DTCC): A financial services company that provides clearing and settlement services.

Development Agreement: A contract between a developer and a local government outlining conditions for a development project.

Down Payment: The initial payment made when purchasing a property.

Dual Agency: When a real estate agent represents both the buyer and the seller in a transaction.

Due Diligence: The process of thoroughly researching and analyzing a property before making an investment decision.

Due-On-Sale Clause: A provision allowing a lender to demand full repayment if a property is sold.

Earnest Money: A deposit demonstrating a buyer's serious intent to purchase.

Earnest Money Deposit: A deposit made by a buyer to show serious intent to purchase.

Easement: The right to use another person's land for a specific purpose.

Easement Appurtenant: An easement that benefits a specific property.

Easement by Necessity: An easement created by necessity, often due to a lack of alternative access.

Easement in Gross: An easement that benefits an individual or entity rather than a specific property.

Egress: The right to exit a property.

Eminent Domain: The government's power to take private property for public use with compensation.

Encroachment: The intrusion of one property onto another.

Encumbrance: A claim or lien on a property.

Equitable Title: The right to use and possess a property.

Equity: The difference between the property's market value and the outstanding mortgage balance.

Equity Financing: Raising funds by selling ownership interests in a property.

Escrow: A neutral third party holding funds and documents during a real estate transaction.

Escrow Account: A third-party account holding funds for a specific purpose.

Escrow Agent: A neutral third party responsible for handling funds and documents in a real estate transaction.

Escheat: The reversion of property to the state when an owner dies without a will and no heirs can be found.

Exclusive Agency Listing: A listing agreement where the seller agrees to pay a commission to the listing broker, but reserves the right to sell the property themselves without paying a commission.

Exclusive Right-to-Sell Listing: A listing agreement where the seller agrees to pay a commission to the listing broker regardless of who sells the property.

Fair Housing Act: Legislation prohibiting discrimination in housing.

Fair Market Value: The price a willing buyer and seller agree upon in an open market.

Fannie Mae (Federal National Mortgage Association): A government-sponsored enterprise that buys and guarantees mortgages.

Federal Housing Administration (FHA): A government agency that insures mortgages with low down payments for qualified borrowers.

Fee Simple Absolute: The highest form of property ownership.

FHA Loan: A mortgage insured by the Federal Housing Administration, often requiring a lower down payment.

Fiduciary Duty: A legal obligation to act in the best interest of another party.

Fixture: An item permanently attached to a property.

Flipping: Buying a property with the intention of selling it quickly for a profit, often after making improvements.

For Sale By Owner (FSBO): A property listed for sale by the owner without a real estate agent.

Foreclosure: The legal process of repossessing a property due to non-payment.

Freddie Mac (Federal Home Loan Mortgage Corporation): A government-sponsored enterprise that buys and securitizes mortgages.

Free and Clear: Ownership without any liens or encumbrances.

Full-Service Broker: A real estate broker providing a comprehensive range of services.

General Contractor: A professional overseeing construction projects.

General Warranty Deed: A deed providing the highest level of protection for the buyer against title defects.

Ginnie Mae (Government National Mortgage Association): A government agency that guarantees mortgage-backed securities.

Good Faith Estimate (GFE): An estimate of closing costs provided by a lender.

Good Faith Deposit: An amount paid by a buyer to secure a property purchase.

Gross Lease: A lease where the landlord covers operating expenses.

Gross Rent Multiplier (GRM): A ratio used to evaluate the potential value of an income-generating property by comparing its price to its gross rental income.

Ground Lease: A lease where the tenant leases only the land and constructs their own improvements.

Hard Costs: Construction costs related to physical improvements.

Hard Money Loan: A short-term, high-interest loan used by real estate investors to finance a property purchase.

Highest and Best Use: The most profitable use of a property that is legally and physically possible.

Home Equity Loan: A loan using a property's equity as collateral.

Home Inspection: A thorough examination of a property's condition.

Homeowners Association (HOA): An organization managing common areas in a community.

Housing Bubble: A rapid increase in property prices followed by a sharp decline.

HUD (Department of Housing and Urban Development): Government agency overseeing federal housing programs.

HUD-1 Settlement Statement: A document detailing closing costs in real estate transactions.

Implied Warranty: Unwritten promises regarding a property's condition.

Ingress and Egress: The right to enter and exit a property.

Inspection Contingency: A clause in a purchase agreement giving the buyer the right to inspect the property before finalizing the purchase.

Installment Contract: A contract for the sale of real estate where the buyer makes payments over time.

Institutional Lender: A large financial institution providing mortgage loans.

Interest-Only Mortgage: A mortgage where the borrower pays only the interest for a certain period, with principal payments starting later.

Investment Property: Property purchased with the intent of generating rental income or achieving capital appreciation.

Joint Tenancy: Ownership of property by two or more individuals with equal rights.

Joint Venture: A business arrangement involving shared ownership and profits.

Judicial Foreclosure: Foreclosure conducted through the court system.

Lease Option: A lease agreement that includes an option for the tenant to purchase the property.

Leverage: The use of borrowed funds (e.g., a mortgage) to increase the potential return on an investment.

Lien: A legal right or interest in a property held by a creditor as security for a debt.

Like-Kind Exchange: A tax-deferred exchange of one investment property for another, as defined in Section 1031 of the Internal Revenue Code.

Listing Agreement: A contract between a property owner and a real estate agent or broker, authorizing the agent to represent and market the property.

Loan-to-Value (LTV) Ratio: The ratio of the mortgage loan amount to the appraised value of the property, expressed as a percentage.

Lock-In Period: A specified period during which a borrower cannot refinance or repay a mortgage without incurring penalties.

Lot Line: The boundary separating one property from another.

Low-E Glass: Low-emissivity glass designed to minimize heat transfer and improve energy efficiency in windows.

Market Analysis: Evaluation of local real estate market conditions to make informed investment decisions.

Market Value: The estimated value of a property in the current market conditions.

Master Plan: A comprehensive long-term plan for land use and development within a community.

MLS (Multiple Listing Service): A database of real estate listings shared among real estate professionals.

Mortgage: A loan used to finance the purchase of real estate, with the property serving as collateral.

Mortgage Broker: A professional who connects borrowers with lenders and helps facilitate mortgage transactions.

Mortgage Insurance: Insurance that protects the lender in case the borrower defaults on the mortgage.

Mortgage Note: A legal document outlining the terms and conditions of a mortgage loan.

Multiple Dwelling Unit (MDU): A building containing multiple separate living spaces, such as apartments or condominiums.

Negative Amortization: A situation where loan payments are insufficient to cover the interest, resulting in the unpaid interest being added to the loan balance.

Net Operating Income (NOI): The total income generated by a property minus operating expenses, excluding debt service and income taxes.

Non-Recourse Loan: A loan where the borrower is not personally liable for repayment and the lender's only recourse is the collateral.

Notary Public: An official authorized to witness and certify signatures on legal documents.

Notice of Default (NOD): A formal notice filed by a lender indicating that a borrower is in default on their mortgage.

Offer: A proposal made by a buyer to purchase a property, including the proposed purchase price and terms.

Open House: A scheduled period during which a property is available for viewing by potential buyers.

Option Fee: A fee paid by a buyer to secure the option to purchase a property within a specified time frame.

Origination Fee: A fee charged by a lender for processing a mortgage loan application.

Owner Financing: A purchase arrangement where the seller provides financing to the buyer.

Parcel Number: A unique identifier assigned to a specific piece of land for legal and administrative purposes.

Planned Unit Development (PUD): A type of residential development with a combination of housing, commercial, and recreational spaces.

Points: Fees paid to a lender at closing in exchange for a lower interest rate on a mortgage.

Pre-Approval: A preliminary approval from a lender indicating the borrower's creditworthiness and the maximum loan amount.

Prepayment Penalty: A fee charged by a lender if a borrower pays off a mortgage loan before the scheduled maturity date.

Principal: The original amount of money borrowed in a mortgage loan, excluding interest.

Private Mortgage Insurance (PMI): Insurance that protects the lender in case of default, typically required for conventional loans with a down payment below 20%.

Promissory Note: A legal document containing a borrower's promise to repay a specified amount to a lender under certain terms.

Property Management: The oversight and operation of real estate properties on behalf of the owner.

Purchase Agreement: A legally binding contract outlining the terms and conditions of a property sale.

Quiet Title: Legal action taken to establish or confirm ownership of a property.

Real Estate Agent: A licensed professional who represents buyers or sellers in real estate transactions.

Real Estate Investment Trust (REIT): A company that owns, operates, or finances income-generating real estate.

Real Property: Land and anything permanently attached to it, including buildings.

Refinance: The process of replacing an existing mortgage with a new one, often to obtain better terms or rates.

Rent Control: Government regulations limiting the amount by which landlords can increase rents on residential properties.

Rent-to-Own: An arrangement where a tenant has the option to purchase the rented property after a specified period.

Resale Value: The estimated value of a property upon resale in the future.

Residential Mortgage-Backed Securities (RMBS): Securities backed by residential mortgages.

Reverse Mortgage: A financial product that allows homeowners aged 62 or older to convert home equity into cash.

Right of First Refusal: The right to match an offer before a property is sold to someone else.

Second Mortgage: A subordinate mortgage taken out on a property that already has a primary mortgage.

Seller's Agent: A real estate agent representing the seller in a transaction.

Seller's Disclosure: A document where the seller discloses known defects or issues with the property.

Short Sale: A sale of real estate where the proceeds fall short of the balance owed on the property's loan.

Survey: A measurement of a property's boundaries and features.

Tax Lien: A claim against a property for unpaid taxes.

Title: A legal term referring to ownership of a property.

Title Company: A company that examines and insures title to a property.

Title Insurance: Insurance that protects against financial loss due to defects in title.

Title Search: An examination of public records to verify a property's ownership history.

Transfer Tax: A tax imposed on the transfer of real property.

Underwriting: The process of evaluating a borrower's creditworthiness and risk in mortgage lending.

VA Loan: A mortgage loan guaranteed by the Department of Veterans Affairs for eligible veterans and service members.

Vacancy Rate: The percentage of time a rental property is unoccupied, affecting overall rental income.

Vendor Take-Back Mortgage: A financing arrangement where the seller provides part or all of the mortgage financing to the buyer.

Walk-Through: A final inspection of a property before the closing to ensure it's in the agreed-upon condition.

Wholesaling: A real estate investment strategy where an investor contracts to buy a property and then sells the contract to another buyer for a profit without taking ownership.

Wraparound Mortgage: A financing arrangement where a new mortgage "wraps around" an existing mortgage on the property.

Yield: The return on an investment, often expressed as a percentage.

Zoning: Government regulations that control the use of land and the types of structures that can be built.

Zoning Ordinance: Local laws or regulations that specify the permitted uses of land and the requirements for development.

This dictionary includes a wide range of real estate terms, covering various aspects of the industry. It's advisable to consult additional resources and seek professional advice for a deeper understanding of specific terms and their implications in different contexts.