50 Real Estate Terms Everyone Should Know

Real estate is the biggest industry in the world, providing opportunities for both buyers and sellers to invest in property. As a part of this industry, it is important to understand certain real estate terms to make informed decisions. Here, we present a list of 25 real estate terms with their definitions and explanations that will help you navigate the industry with ease.

1. Appraisal: An appraisal is a professional assessment of a property’s value, conducted by an independent appraiser to determine the market value of a home.
2. Building code: The building code is a set of standards and protocols that must be followed by builders and contractors during the construction of a property.
3. Closing: Closing is the final stage of a property purchase, in which a buyer and seller sign legal documents and transfer ownership and payment.
4. Commission: A commission is a percentage of the total sale price of a property that a real estate agent receives as compensation.
5. Comparative Market Analysis (CMA): A comparative market analysis is an evaluation of similar properties in the same geographic area. A CMA helps sellers determine a competitive price range for their property.
6. Contingency: A contingency refers to a clause in a contract that outlines certain conditions that must be met for a sale to proceed. For instance, a contingency may state that the sale of a buyer’s current home must occur before they can purchase a new one.
7. Credit report: A credit report is a report detailing a person’s credit history, which is used by lenders to determine the borrower’s creditworthiness.
8. Down payment: The down payment is the amount of money a buyer pays upfront toward the purchase of a property.
9. Equity: Equity is the difference between the fair market value of a property and any outstanding liabilities or mortgages.
10. Home inspection: A home inspection is a thorough assessment of a property’s condition and systems, conducted by a professional inspector.
11. Homeowners Association (HOA): A homeowners association is an organization responsible for managing and regulating a residential community, often including shared amenities like pools and parks.
12. Interest rate: The interest rate refers to the percentage of the loan principal charged by the lender for the privilege of borrowing money.
13. Listing: A listing is a property that is being offered for sale or rent through a real estate agent or broker.
14. Mortgage: A mortgage is a loan that is used to finance the purchase of property, typically paid back over a set period of time with interest.
15. Multiple Listing Service (MLS): An MLS is a database of properties that are for sale or rent, used by real estate agents and brokers to share information about properties.
16. Pre-approval: A pre-approval is a preliminary evaluation of a borrower’s credit, income, and other financial factors that helps determine their eligibility for a mortgage.
17. Principal: The principal refers to the original amount of a loan borrowed to purchase property.
18. Property tax: Property tax is a tax on real estate that property owners must pay annually, used to fund local governments and services.
19. Real estate agent: A real estate agent is a licensed professional who helps buyers and sellers navigate the process of buying and selling properties.
20. Real Estate Broker: A real estate broker is a licensed professional who oversees a team of real estate agents and brokers, and is responsible for transactions involving significant sums of money.
21. Seller’s market: A seller’s market is a situation in which the demand for properties is greater than the supply, resulting in higher prices and more favorable terms for sellers.
22. Title: The title refers to the legal documentation that shows ownership of a property.
23. Underwriting: Underwriting is the process by which lenders evaluate a borrower’s eligibility for a mortgage, including their creditworthiness, income, and other financial factors.
24. Zoning: Zoning refers to the regulations and restrictions placed on the use and development of land within a particular area or jurisdiction.
25. 1031 Exchange: A 1031 Exchange is a tax-deferred exchange that allows a real estate investor to defer paying taxes on a sale by using the proceeds to purchase another property.
26. Absorption Rate: The rate at which available homes are sold over the market period. It refers to the ability of the real estate market to absorb new homes.
27. Amortization: A process of repaying a loan over a period of time through regular payments, which include both principal and interest.
28. Annual Percentage Rate (APR): A yearly interest rate that includes all fees and charges paid to obtain the loan.
29. Balloon Payment: A large payment, typically after a few years of a mortgage, that is required to pay off the entire loan.
30. Bridge Financing: A short-term loan provided to bridge the gap between the sale of a property and the purchase of a new property.
31. Cash Flow: The amount of money remaining after all expenses are deducted from rental revenue.
32. Capitalization Rate: The ratio between the net operating income and the property value used to determine the return on investment.
33. Condominium: A privately owned unit within a larger building or community that shares common areas and amenities.
34. Deed: A legal document that transfers ownership of property from one party to another.
35. Easement: The right of a property owner to use a portion of the property of another party for specific purposes, such as access to a neighboring property.
36. Fixed Rate Mortgage: A mortgage with a fixed interest rate over the entire loan term, typically 15 or 30 years.
37. Home Equity Line of Credit (HELOC): A line of credit secured by a property’s equity that can be used for home improvements or other expenses.
38. Home Warranty: A policy that provides coverage on certain appliances and systems in a home for a specific period of time.
39. Listing Price: The price at which a property is listed for sale by the seller.
40. Multiple Offers: When there are multiple offers for a property, often leading to a bidding war and the seller choosing the highest offer.
41. Net Operating Income (NOI): The revenue generated by a property minus the expenses, excluding debt payments.
42. Offer: A buyer’s proposal to purchase a property at a certain price and with certain terms.
43. Plat: A map showing the boundaries and locations of a property and its structures.
44. Private Mortgage Insurance (PMI): Insurance paid by the borrower to protect the lender in case of default.
45. Refinance: The process of obtaining a new mortgage with different terms to replace an existing mortgage.
46. Short Sale: A sale of a property for less than the outstanding mortgage with the lender accepting the sale as repayment in full.
47. Title Insurance: Insurance that protects the buyer and lender against any defects in the title of the property.
48. Underwater Mortgage: A mortgage in which the outstanding balance is greater than the value of the property.
49. Walk-Through: A final inspection of a property by the buyer before closing.
50. Yield: The return on investment generated by a property, often expressed as a percentage of the property’s value.

As a real estate agent, I believe everyone should understand these real estate terms so as buyers and sellers you can understand while you navigate the process of buying and selling property with greater ease. Whether you are a seasoned investor or a first-time buyer, understanding these terms can provide you with valuable insights into the real estate market, and help you make informed decisions.