Glossary
Real estate, translated
The industry hides behind jargon. Here's every term you'll meet — explained in plain English, free for everyone.
73 terms · Plain English · Always free
11 term
- 1031 exchange
- A U.S. tax provision letting investors sell one investment property and buy another while deferring capital gains tax, under strict identification and closing deadlines. Powerful for scaling portfolios — with unforgiving rules.
- Ask Ava about structuring →
A7 terms
- Actual cash value (ACV)
- An insurance payout basis equal to replacement cost minus depreciation. On older roofs and contents, ACV pays far less than it costs to buy new — check which basis your policy uses for each coverage.
- Homeowners insurance guide →
- Adjustable-rate mortgage (ARM)
- A home loan whose interest rate is fixed for an initial period (often 5 or 7 years) and then adjusts up or down on a schedule based on market rates. The starting rate is usually lower than a fixed-rate loan, in exchange for uncertainty later.
- Mortgage calculator →
- Amortization
- The schedule by which a loan is paid down over time. Early payments are mostly interest and only a little principal; that mix gradually flips, which is why equity builds slowly in the first years of a mortgage.
- Appraisal
- A licensed appraiser's independent opinion of a home's market value, ordered by the lender before approving a mortgage. If the appraisal comes in below the agreed price, the buyer may renegotiate, bring extra cash, or walk away if they have an appraisal contingency.
- Appraisal gap
- The difference between the contract price and a lower appraised value. Buyers in competitive markets sometimes offer 'appraisal gap coverage,' promising to pay some or all of that difference in cash so the deal survives a low appraisal.
- As-is sale
- A listing where the seller won't make repairs or offer credits for defects. Buyers can still inspect the home and walk away, but they shouldn't expect the seller to fix anything found.
- Assessed value
- The value a local government assigns to a property for calculating property taxes. It's often different from market value — sometimes far lower — and is updated on the assessor's schedule, not the market's.
B4 terms
- Backup offer
- An accepted offer that sits in second position behind an existing contract. If the first deal falls through, the backup automatically moves into first place without the home returning to the market.
- Buyer's agency agreement
- The written contract between a buyer and their agent — now required before touring homes since the 2024 NAR settlement — spelling out the agent's fee, the term, and how to exit. It's negotiable: fee, length, and cancellation terms are all set before you're attached to a house, which is exactly when you have leverage.
- Guide: How to choose a real estate agent →
- Buyer's agent
- A real estate agent who represents the buyer's interests in a transaction — finding homes, advising on offers, and negotiating. Their commission has traditionally been paid out of the seller's proceeds, though this is increasingly negotiated.
- Ask Kai, our residential expert →
- Buyer's market
- Market conditions where homes for sale outnumber active buyers — inventory is high and days-on-market are long. Buyers gain negotiating power on price, repairs, and terms.
- Ask Kai about your market →
C10 terms
- CAM charges
- Common-area maintenance costs — lobbies, parking, landscaping, snow removal — passed through to commercial tenants pro-rata on top of base rent. Ask for history and negotiate caps on annual increases.
- Cap rate (capitalization rate)
- A property's net operating income divided by its price — the unleveraged annual return, used to compare investment properties. Lower cap rates signal safer, growth-priced assets; higher ones price in more risk.
- Cap rates explained →
- Closing
- The final step of a purchase: documents are signed, funds are transferred, and ownership legally changes hands. Also called settlement. From accepted offer to closing typically takes 30–45 days with financing.
- Ask Ava about closing →
- Closing costs
- The collection of fees due at closing beyond the price of the home: lender fees, title insurance, escrow charges, prepaid taxes and insurance, and recording fees. Buyers typically pay 2–5% of the purchase price; sellers pay commissions plus roughly 1–3%.
- Seller net proceeds calculator →
- Closing disclosure
- The final, itemized statement of loan terms and closing costs a lender must give the buyer at least three business days before closing. Compare it line by line against your loan estimate — the numbers should be close.
- Comparative market analysis (CMA)
- An estimate of a home's value built from recent sales of similar nearby homes ('comps'), adjusted for differences in size, condition, and features. It's the same method agents use to price listings.
- Home value worksheet →
- Comps (comparable sales)
- Recently sold homes similar to a subject property in location, size, and condition, used to estimate its value. The best comps sold within the last six months, within about a mile, and needed few adjustments.
- Home value worksheet →
- Contingency
- A condition written into an offer that must be satisfied before the sale can close — most commonly inspection, financing, and appraisal contingencies. If a contingency fails, the buyer can usually exit the contract with their earnest money.
- Conventional loan
- A mortgage that isn't backed by a government program (unlike FHA or VA loans). Conventional loans typically require stronger credit, and down payments as low as 3% — though under 20% adds private mortgage insurance.
- Counteroffer
- A seller's response that changes the terms of a buyer's offer — price, dates, or contingencies — or vice versa. Each counter voids the previous offer, and negotiation continues until one side accepts or walks.
D6 terms
- Days on market (DOM)
- How long a listing has been active. Low average DOM signals a hot market; a single home sitting well beyond the local average often signals overpricing and invites lower offers.
- Debt-to-income ratio (DTI)
- Your total monthly debt payments divided by gross monthly income. Lenders use it to size your mortgage: the classic guideline caps housing at 28% of income and all debts at 36%, though many programs allow more.
- Affordability calculator →
- Deed
- The legal document that transfers ownership of real property from seller to buyer. It's signed at closing and recorded with the county, making the transfer part of the public record.
- Discount points
- Upfront fees paid to the lender to lower your interest rate — one point costs 1% of the loan amount and typically trims the rate by about a quarter percent. Points only pay off if you keep the loan past the break-even date, so compare Loan Estimates with and without them.
- Guide: How to choose a mortgage lender →
- Down payment
- The cash a buyer pays upfront toward the purchase price, with the mortgage covering the rest. 20% avoids mortgage insurance on conventional loans, but many buyers put down 3–10% and pay PMI instead.
- Affordability calculator →
- Dual agency
- When one agent (or one brokerage) represents both the buyer and the seller in the same deal. It halves the duty owed to each side — the agent can't fully advocate for either — and it's illegal in several states, requiring written consent in most others. Agree to it only with clear eyes, never under pressure.
- Guide: How to choose a real estate agent →
E4 terms
- Earnest money
- A good-faith deposit (often 1–3% of the price) a buyer puts into escrow when an offer is accepted. It's credited toward the purchase at closing, refundable if a contingency fails, and at risk if the buyer walks without cause.
- Easement
- A legal right for someone else to use part of a property for a specific purpose — a utility line, a shared driveway, beach access. Easements stay with the land, so they carry over to new owners.
- Equity
- The portion of a home's value the owner actually owns: market value minus the mortgage balance. Equity grows through paying down the loan and through appreciation, and can be borrowed against.
- Escrow
- A neutral third party that holds money and documents during a transaction — earnest money before closing, and often taxes and insurance after (an 'escrow account' bundled into the monthly payment). It protects both sides until every condition is met.
F3 terms
- FHA loan
- A mortgage insured by the Federal Housing Administration, designed for buyers with smaller down payments (as low as 3.5%) or thinner credit. The trade-off is a mortgage insurance premium for most of the loan's life.
- Fixed-rate mortgage
- A home loan with the same interest rate — and the same principal-and-interest payment — for its entire term, usually 15 or 30 years. The most predictable and most common U.S. mortgage.
- Mortgage calculator →
- For sale by owner (FSBO)
- A home sold directly by its owner without a listing agent, usually to avoid commission. Sellers take on pricing, marketing, showings, and paperwork themselves — and buyers' agents may still expect compensation.
G1 term
- Gross lease
- A commercial lease with one all-in rent number — the landlord covers taxes, insurance, and maintenance. Simpler for tenants than triple-net, and usually priced accordingly.
H4 terms
- Home inspection
- A professional examination of a home's condition — structure, roof, plumbing, electrical, HVAC — ordered by the buyer after an offer is accepted. The report powers repair negotiations and is the main exit ramp if serious problems surface.
- Home warranty
- A service contract (distinct from homeowners insurance) covering repair or replacement of home systems and appliances for a set period. Sellers sometimes include one to sweeten a deal.
- Homeowners association (HOA)
- An organization that governs a condo, townhome, or planned community — setting rules and collecting dues for shared amenities and maintenance. HOA dues are part of your true monthly cost, and lenders count them in affordability.
- House hacking
- Living in part of a property while renting the rest — a duplex unit, spare rooms, or an ADU — so tenants cover most of your housing cost while you build equity with owner-occupied financing.
- House hacking explained →
I1 term
- Interest rate
- The annual cost of borrowing, expressed as a percentage of the loan. Even a half-point change meaningfully moves the monthly payment and the total interest paid over a 30-year loan.
- Mortgage calculator →
J1 term
- Jumbo loan
- A mortgage larger than the conforming loan limits set for Fannie Mae and Freddie Mac. Jumbos typically require stronger credit, bigger down payments, and more cash reserves.
L5 terms
- Lien
- A legal claim against a property as security for a debt — a mortgage is a lien, and so are unpaid-tax or contractor claims. Liens generally must be paid off or cleared before a home can transfer with clean title.
- Listing agent
- The agent who represents the seller: pricing the home, marketing it, managing showings, and negotiating offers on the seller's behalf.
- Ask Kai about listing →
- Listing agreement
- The seller's contract with their listing agent: commission, listing period, marketing duties, and cancellation terms. Everything in it is negotiable before signing — including the fee and an early-exit clause if the relationship isn't working.
- Guide: How to sell your home →
- Loan estimate
- The standardized three-page form a lender must send within three business days of a mortgage application, laying out the rate, monthly payment, and closing costs. Because the format is standardized, it's the easiest way to compare lenders.
- Loan-to-value ratio (LTV)
- The loan amount divided by the home's value. An 80% LTV (20% down) is the threshold that avoids PMI on conventional loans; higher LTVs mean more lender risk and usually higher costs.
M3 terms
- MLS (Multiple Listing Service)
- The regional databases where agents list homes for sale and share compensation and property details. Most listing portals get their data from MLS feeds.
- Mortgage broker
- A licensed intermediary who shops your loan application across many wholesale lenders instead of lending directly — strongest for non-standard files (self-employed, complex income, credit dings) and thin-margin pricing. Paid a disclosed fee by the lender or by you, never both.
- Blog: Mortgage broker vs. bank →
- Multiple offer situation
- When several buyers bid on the same home. Sellers may ask for 'highest and best' final offers; buyers compete on price but also on terms — financing strength, timelines, and fewer contingencies.
N1 term
- Net operating income (NOI)
- All rental income minus all operating expenses — taxes, insurance, maintenance, management, vacancy — but before the mortgage. The core number behind cap rates and commercial valuations.
- Ask Theo about a deal →
O1 term
- Origination fee
- What a lender charges to process and underwrite a mortgage, typically 0.5–1% of the loan amount. It appears on the loan estimate and is negotiable, especially with strong credit.
P5 terms
- Pre-approval
- A lender's document-verified commitment for a specific loan amount, based on your actual income, assets, and credit. Sellers take pre-approved buyers seriously; it's one of the highest-leverage first steps in buying.
- Get mortgage-ready guide →
- Pre-qualification
- A quick, informal estimate of what you might borrow, based on numbers you self-report. Useful for early budgeting, but it carries far less weight with sellers than a verified pre-approval.
- Principal
- The amount you actually borrowed and still owe, separate from interest. Each payment splits between principal (building equity) and interest (the cost of borrowing).
- Private mortgage insurance (PMI)
- Insurance that protects the lender when a conventional loan exceeds 80% of the home's value. It's added to the monthly payment and can be removed once you reach about 20% equity.
- Mortgage calculator →
- Property tax
- The annual tax local governments levy on real estate, based on assessed value. Nationally it averages around 1% of home value per year but varies widely by state and county — always check the actual bill for a specific home.
R4 terms
- Rate lock
- A lender's commitment to honor a quoted interest rate for a set window (often 30–60 days) while the loan closes. Locking protects you if rates rise; some locks include a 'float down' if rates fall.
- Realtor
- A real estate agent or broker who belongs to the National Association of Realtors and follows its ethics code. It's a trade membership, not a higher license or a skill guarantee — evaluate any agent on recent production, not the title.
- Guide: How to choose a real estate agent →
- Refinancing
- Replacing an existing mortgage with a new one — to lower the rate, change the term, or pull out equity in cash. Refinancing has its own closing costs, so the math depends on how long you'll keep the home.
- Rider (endorsement)
- An add-on that modifies an insurance policy — scheduling a specific piece of jewelry, adding sewer-backup coverage, or extending limits a standard policy caps. Cheap riders often close expensive gaps.
- Ask Zara about coverage →
S3 terms
- Security deposit
- Money a tenant pays up front that the landlord holds against unpaid rent or damage beyond normal wear and tear. Most states cap the amount, set return deadlines, and require itemized deduction statements.
- Security deposit rules →
- Seller concessions
- Costs the seller agrees to cover for the buyer — closing costs, rate buydowns, or repair credits. Common in slower markets, and capped by loan program rules.
- Seller's market
- Conditions where buyers outnumber homes for sale — low inventory, fast sales, multiple offers. Sellers gain pricing power and can hold firm on terms.
- Ask Kai about your market →
T4 terms
- Title
- The legal right of ownership in a property. A title search before closing checks the public record for liens, easements, and ownership disputes so the buyer receives 'clean' title.
- Title insurance
- A one-time-premium policy protecting against ownership problems that the title search missed — forged deeds, unknown heirs, recording errors. Lenders require their own policy; an owner's policy protects the buyer.
- Triple-net lease (NNN)
- A commercial lease where the tenant pays base rent plus their share of property taxes, insurance, and common-area maintenance. The advertised rent is only part of the real cost.
- Commercial lease guide →
- Turnkey property
- A rental sold move-in ready — renovated, sometimes already tenanted and managed. Convenient for hands-off investors, but the convenience is priced in: underwrite the numbers as skeptically as any other deal.
U2 terms
- Umbrella policy
- Extra liability insurance ($1M+) that sits on top of home and auto policies, protecting your assets from large judgments. Typically inexpensive, and a staple for landlords and higher-net-worth owners.
- Underwriting
- The lender's deep verification of a loan application — income, assets, credit, and the property itself — before final approval. Avoid new debt or job changes during underwriting; both can derail a closing.
V2 terms
- VA loan
- A mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and surviving spouses. VA loans allow zero down payment and have no monthly mortgage insurance.
- Vacancy rate
- The share of time (or of units) a rental sits empty and unearning. Investors underwrite 5–8% vacancy even in strong markets — and every vacancy also triggers turnover costs (make-ready, re-leasing) beyond the lost rent, so the two assumptions should move together. A deal that only works at zero vacancy doesn't work.
Z1 term
- Zoning
- Local rules that control how land can be used — residential, commercial, multifamily — and what can be built on it. Zoning matters for renovations, additions, rentals, and accessory dwelling units (ADUs).
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