Real Estate Definitions: A Glossary Of Common Terms

Real estate in general — and buying or selling a home in particular — is rife with jargon and slang that’s probably unfamiliar to many. Here’s a glossary of some of the most common terms, with their real estate definitions.

General real estate definitions

Closing costs: Homebuyers and sellers both incur various types of closing costs, which are the fees and expenses associated with finalizing a real estate transaction. For buyers, these typically include a variety of mortgage-related fees.

Commercial real estate: Commercial real estate is property on which a business is operated, designed to generate income. Types of commercial real estate include retail shopping spaces, warehouses, factories and office buildings.

Comps: This common term, an abbreviation for comparable properties, refers to similar homes in the area that have recently sold. Real estate agents will check comps when determining an appropriate asking price or offer price.

Easement: An easement refers to a legal right that a property owner grants someone to access or use their property in a particular way. For example, an easement may allow a utility company the right to access and repair their electrical lines. Or, an owner can grant an easement to a neighbor, giving them the right to use a driveway or walking trail that crosses the property.

FSBO: This abbreviation stands for “for sale by owner” and is often pronounced “fizz-bow.” The term refers to a home or listing that is being sold directly by its owner without the help of a real estate agent. A FSBO sale can save the seller money, because without an agent you don’t have to pay an agent’s commission — but you also miss out on an agent’s professional expertise and guidance.

HOA: A homeowners association, or HOA, is a neighborhood organization that manages common areas and facilities, like parking garages, landscaping and snow removal, and deals with issues that affect the neighborhood. It maintains a series of rules that must be followed by all residents and charges fees to cover the costs of maintaining the area. HOA fees are usually dependent on the amenities offered — for example, a development with a swimming pool and tennis courts will likely charge more than one without.

Mortgage: A mortgage is the home loan most buyers take out in order to pay for a home purchase. A long-term debt that’s repaid in monthly installments, with interest, it uses the property you’re purchasing as collateral. Mortgages can charge fixed or variable interest rates.

Property taxes: Property taxes are set by your state, city or town. The amount you pay is based on your home’s value and local tax rates for your county or municipality. Property taxes are often used to fund schools, fire and police departments, parks, sidewalks and road maintenance, and other local amenities and services.

Purchase agreement: A purchase agreement is a legally binding contract that spells out the details of a real estate transaction. You may also hear the similar terms “purchase and sale agreement” and “real estate purchase contract” (or REPC, sometimes pronounced “rep-C”).

Real estate agent: A real estate agent is someone who is licensed by their state to represent buyers and sellers of property there. For buyers, they help you find and tour properties that meet your needs, submit offers and negotiate with the seller’s agent. For sellers, they help get your house ready for sale, list and market it, manage showings and negotiate with buyers.

Realtor: A Realtor is a real estate agent or other professional who belongs to the National Association of Realtors. Belonging to NAR isn’t required to be an agent, but membership is required to use the Realtor designation.

Real estate commissions: While some agents work for a flat fee, most real estate agents are paid by commission, usually a percentage of the property’s sale price. Figures vary, but each agent involved in a transaction typically earns somewhere between 2.5 and 3 percent.

Real estate broker: A real estate broker is typically a real estate agent who has gone through additional licensing and training that legally authorizes them to own and manage a brokerage. Real estate agents must work under a broker if they are not one themselves.

Residential real estate: Unlike commercial real estate, residential real estate is property specifically developed as a place for people to live. It ranges from freestanding single-family homes to multi-unit apartment buildings.

Title: A house’s title is the formal way that its ownership is indicated — basically, it’s a bundle of rights that dictates who has legal interest or equity in a property. It’s often recorded on a property deed.

Homebuying terms

Buyer’s agent: A buyer’s agent represents a person or party seeking to purchase real estate.

Contingencies: Contingencies are clauses in a purchase and sale agreement specifying an action or requirement that must be met, usually within a certain timeframe, for the transaction to close. Common ones include a satisfactory appraisal, financing and sale of a prior home or purchase of a new home. If an agreed-upon contingency is not fulfilled, it allows you to back out of the contract with minimal consequences.

Counter-offer: A counter-offer is the seller’s response to your home offer. It’s a part of the negotiating process between buyers and sellers.

Earnest money: Sometimes called a good-faith deposit, earnest money is a deposit a buyer makes when signing a contract with the seller to show that you’re serious about buying the property. Earnest money amounts vary but are typically around 1 percent of the home’s purchase price — so, if you go into contract on a house for $400,000, your earnest money deposit may be $4,000. The funds are held in escrow until closing and eventually applied to the purchase price.

Home inspection: A home inspection is not mandatory but is smart for a buyer to get. Conducted by a professional inspector, it evaluates the home’s condition, noting any dangers or need for repairs. Many real estate contracts contain an inspection contingency allowing the buyer to walk away if major problems are found. Problems found may also be used as bargaining chips — for example, asking the seller to pay for needed repairs.

Walk-through: The walk-through refers to the final tour of the property a buyer takes right before the closing. The goal is to ensure the home is empty and in the agreed-upon condition, with all contractual repairs made and problems addressed.

Home-selling terms

Comparative market analysis: A seller’s real estate agent will usually complete a comparative market analysis to help determine an appropriate asking price for the home before they list it. They will look at the pricing of comparable homes in the area, as well as local market conditions and other criteria, to come up with the right dollar value.

Fair market value: A home’s fair market value is, essentially, the price a buyer would be willing to pay for it on the open market. It is not necessarily the amount the home should be listed at, but more an objective assessment of how much the home might fetch under neutral conditions, disregarding current supply-and-demand dynamics.

Listing agent: The real estate agent who represents the seller is the one who lists the home on the market, and is typically referred to as the listing agent.

Open house: When a home hits the market, the agent will typically schedule an open house to make it available for public viewing. Potential buyers don’t need to set up an appointment, they can just show up and look around.

Seller concessions: Seller concessions are items that the seller agrees to pay for on behalf of the buyer. These can include covering certain closing costs, needed repairs or any other expenses. Concessions are often made to sweeten the deal, and often include paying to address an issue uncovered during the home inspection.

Seller disclosures: Most states require home sellers to complete a mandatory disclosure form making the buyer aware of the home’s condition and any issues they know of. The level of required disclosure varies from state to state, but if you purposely fail to disclose a problem in order to conceal it from the buyer, you could run into legal trouble.

Mortgage terms

Appraisal: Mortgage lenders typically require a home appraisal to make sure the home is worth at least the amount they’re lending, less the down payment. Appraisers are licensed professionals who do not work for either the lender or the seller, and they provide an objective assessment of the home’s worth.

Down payment: The down payment is the amount of cash a homebuyer is paying upfront, with the remainder being financed by a mortgage. Different loan types have different down payment requirements.

Escrow: During the homebuying process, funds such as the earnest money deposit will often be held in escrow until the sale closes. Usually, a title company or closing agent will manage the escrow account and handle disbursing funds as needed. Many lenders require mortgage-holders to keep a certain amount of property taxes and homeowners insurance premiums in escrow accounts as well.

Homeowners insurance: Mortgage lenders require mortgage applicants to secure a homeowners insurance policy before the sale can close, to protect its investment. A standard policy will cover you for most (but not all) types of loss and damage to your home, property and belongings, as well as offering liability protection.

Lender: The mortgage lender is the financial institution that loans you money to finance your home purchase. Lenders can be banks, credit unions or independent companies.

Mortgage broker: A mortgage broker acts as a middleman between buyers and lenders. They match buyers with a variety of lenders to help them shop around for the best possible rates and loan terms.

Preapproval: Mortgage preapproval is confirmation from a lender of the maximum amount of money they are likely to be willing to lend you. It is not the same as an approval — you’ll still need to formally apply for the loan even if you’re preapproved — but a preapproval letter is typically necessary to make offers on homes.

Title insurance: Title insurance helps protect mortgage lenders and homebuyers against potential problems with a property’s ownership — for example, if a previously unknown heir comes forward and claims ownership rights.

Housing-type terms

Condominium: Condominiums, commonly called condos, are individual units within a larger community, often in a multi-story building. They are usually less expensive than single-family homes and can be a good first step for homeowners.

Manufactured home: A manufactured home is a type of prefabricated residence. Its various parts are built and assembled in a factory and then transported to a site — a piece of property that is either rented or owned.

Multi-family home: A multi-family home contains two or more distinct units, each designed to accommodate a separate household and each with its own private entrance and kitchen/bath facilities.

Single-family: Single-family homes are typically detached homes built for and occupied by one household.

Stick-built home: Stick-built homes are built from scratch on site with walls and roofs framed with wooden beams (or “sticks”). This method is the standard for detached American houses.

Townhome: Townhouses or townhomes are narrow, multi-floor residences that share walls with adjacent homes, though they have their own entrances and often their own yards as well.