Plain-English definitions
Real estate glossary for owners, buyers & landlords
From amortization to zoning — the terms you'll meet when you sell, rent or buy by owner, explained simply.
- Adjustable-rate mortgage (ARM)
- A loan whose interest rate is fixed for an initial period, then adjusts periodically based on an index plus a margin, within caps set in the note.
- Amortization
- Paying off a loan through regular payments that cover interest and gradually reduce principal. Early payments are mostly interest.
- Appraisal
- An independent estimate of a property's market value by a licensed appraiser, usually ordered by the buyer's lender.
- Appraisal contingency
- A contract clause letting the buyer renegotiate or cancel if the appraisal comes in below the purchase price.
- As-is sale
- A sale where the seller won't make repairs. It does not excuse the seller from disclosing known material defects where the law requires disclosure.
- Assessed value
- The value a local government assigns a property to calculate property taxes. It often differs from market value.
- Balloon payment
- A large lump-sum payment due at the end of a loan, common in short-term seller-financed deals.
- Bill of sale
- A document transferring ownership of personal property, such as a vehicle or furniture included in a home sale.
- Buyer-agent compensation
- The fee paid to a buyer's agent. Since August 2024 it is agreed in writing between buyer and agent before touring; sellers may choose to contribute.
- Capital gain
- The profit on selling an asset: sale price minus adjusted basis and selling costs. Many homeowners can exclude part of the gain on a primary residence.
- Cap rate
- Net operating income divided by property value; a quick way to compare rental properties' returns without financing.
- Cash-on-cash return
- Annual pre-tax cash flow divided by the cash you invested. Shows the return on your actual dollars.
- Closing
- The final step where documents are signed, funds change hands and the deed is recorded. Also called settlement.
- Closing costs
- Fees paid at closing, such as title insurance, escrow or attorney fees, recording fees, transfer taxes and lender charges.
- Closing Disclosure
- A form lenders must give borrowers at least three business days before closing, itemizing final loan terms and costs.
- Comparable sales (comps)
- Recently sold properties similar in size, location and condition, used to estimate value.
- Contingency
- A condition that must be met for a contract to proceed — commonly inspection, appraisal, financing or sale of the buyer's home.
- Counteroffer
- A response to an offer that changes one or more terms. It rejects the original offer and creates a new one.
- Deed
- The legal document that transfers ownership of real estate. Common types include general warranty, special warranty and quitclaim deeds.
- Deed of trust
- In many states, the security instrument for a loan, involving a borrower, lender and trustee who can foreclose if the loan defaults.
- Debt-to-income ratio (DTI)
- Monthly debt payments divided by gross monthly income. Lenders use it to judge how much you can borrow.
- Depreciation (rental)
- A tax deduction that spreads the cost of a rental building (not land) over its useful life — 27.5 years for residential rental property.
- Disclosure
- Information a seller must share about a property's condition and known defects. Requirements vary by state; lead paint disclosure is federal for pre-1978 homes.
- Due diligence
- The investigation a buyer performs before closing: inspections, title review, surveys, zoning and financial review.
- Due-on-sale clause
- A mortgage clause allowing the lender to demand full repayment if the property is sold or transferred.
- Earnest money
- A good-faith deposit from the buyer, held by a neutral party, credited toward the purchase at closing.
- Easement
- A right for someone else to use part of a property for a specific purpose, such as utilities or access.
- Encumbrance
- Any claim or restriction on a property — liens, easements or deed restrictions.
- Equity
- Your home's market value minus what you owe on it.
- Escrow
- A neutral third party holds money and documents until contract conditions are met. Also the account lenders use for taxes and insurance.
- Fair housing
- Federal, state and local laws prohibiting housing discrimination based on protected characteristics such as race, religion, sex, disability and familial status.
- Fixture
- An item permanently attached to the property (like built-in lighting) that normally transfers with the sale unless excluded.
- Flat-fee MLS
- A service where a licensed broker places your listing on the MLS for a set fee while you handle the sale yourself.
- Flood zone
- An area FEMA maps by flood risk. Properties in high-risk zones with federally backed mortgages generally require flood insurance.
- FSBO
- For sale by owner: the owner sells without a listing agent.
- HOA
- Homeowners association: an organization that manages a community, collects dues and enforces rules.
- Home inspection
- A professional evaluation of a home's condition and systems, usually ordered by the buyer.
- Homestead exemption
- A state or local program that reduces property taxes or protects equity for a primary residence.
- Lease-option
- A rental agreement that gives the tenant the right, but not the obligation, to buy the property later at agreed terms.
- Lien
- A legal claim against property to secure a debt, such as a mortgage, tax lien or contractor's lien.
- Loan Estimate
- A standardized form a lender provides within three business days of a mortgage application, showing estimated terms and costs.
- Market value
- The price a willing buyer would pay a willing seller in an open market.
- MLS
- Multiple Listing Service: a private database where member brokers share listings.
- Mortgage
- A loan secured by real estate. The borrower pledges the property as collateral.
- Net operating income (NOI)
- A rental's income minus operating expenses, before mortgage payments and income taxes.
- Net proceeds
- The cash a seller receives after paying off loans and all selling costs.
- Occupancy tax
- A tax on short-term lodging stays, collected from guests and remitted to state or local governments.
- Owner financing
- The seller lends the buyer part of the purchase price, secured by the property. Also called seller financing.
- PMI
- Private mortgage insurance: required on most conventional loans with less than 20% down. It protects the lender, not you.
- Pre-approval
- A lender's conditional commitment to lend up to a certain amount after reviewing credit, income and assets.
- Principal
- The amount borrowed, or the part of a payment that reduces the loan balance.
- Proration
- Dividing ongoing costs (property taxes, HOA dues) between buyer and seller based on the closing date.
- Purchase agreement
- The binding contract between buyer and seller setting price, terms, contingencies and closing date.
- Quitclaim deed
- A deed transferring whatever interest the grantor has, with no warranty of title. Common between family members.
- Recording
- Filing the deed and mortgage with the county so the transfer becomes part of the public record.
- Security deposit
- Money a tenant pays to cover unpaid rent or damage. Many states cap the amount and set return deadlines.
- Settlement statement
- The itemized list of every charge and credit for buyer and seller at closing.
- Survey
- A professional measurement showing boundaries, improvements and easements.
- Title
- Legal ownership of property. A title search confirms who owns it and what liens exist.
- Title insurance
- Insurance protecting the owner or lender against covered defects in title. The owner's policy is a one-time premium paid at closing.
- Transfer tax
- A state or local tax on transferring real estate. Rates, and who pays, vary widely.
- Underwriting
- The lender's process of verifying information and approving the loan.
- Wire fraud
- A scam where criminals send fake wiring instructions to steal closing funds. Always verify instructions by phone using a known number.
- Zoning
- Local rules controlling how land can be used — residential, commercial, agricultural — and what can be built.