Real Estate Dictionary

Real estate terms that you need to know before you buy or sell

Real estate terms that you need to know before you buy or sell We asked our "Ask An Expert" leaders to help decode some of the most common terms and phrases used during the buying and selling process.   Here are their hand picked phrases and terms you need to know!

Special thanks to Jay Villella, Timothy Gyves, Steve Lester, Amy Jacobs, Andrea Morales, Sheyla Wright, Val Lemoine for their assistance in building our real estate dictionary for consumers! 
 

Addendum - a document that is attached to a real estate contract or purchase agreement and made a part of the original contract at the time it is prepared. It can be explanatory, informational, or indicate other requirements that aren't clearly spelled out in the contract.

Admendment - a document that changes any aspect of the previously agreed-to-terms or change to the ratified contract.

Agency Disclosure - a written explanation, to be signed by a prospective buyer or seller of real estate, explaining to the client the role that the broker plays in the transaction. The purpose of disclosure is to explain whether the broker represents the buyer or seller or is a dual agent (representing both) 

Agent - someone who is licensed to help people buy, sell, and rent real estate.  

Amenities - features that are considered to benefit a location, contribute to its enjoyment, and thereby increases its value.  

Appraisal - the estimated value of a home determined by an inspection of the property and its comparison to recently sold homes in the area to estimate the value.

Appraiser - a licensed and/or certified person that provides objective, impartial, and unbiased opinions about the value of a property to federally regulated lenders. They can also be hired by homeowners to determine their homes value.

As Is - the seller is unwilling to make any changes or improvements to the property prior to offloading it.

Breach Of Contract - a real estate contract contains many terms and conditions that are integral to the contract. A breach of contract occurs when a party to the contract, either oral or written, fails to perform any of the contract's terms.

Broker - these are real estate agents with additional license and have the ability to manage their own businesses. That means that real estate brokers can either work independently or hire other real estate agents to work for them.

Brokerage - a state-licensed real estate broker is responsible for all brokerage activities, including acts performed by sales agents sponsored by the broker.  When you sign a contract with your agent, it is actually a contract with the brokerage.

Brokerage Fee - a fee charged by a broker to execute transactions or provide specialized services. Brokers charge brokerage fees for services such as purchases, sales, consultations, negotiations, and delivery.

Buyer's Agreement - a buyer representation (agency) agreement is a contract that delineates the relationship between a prospective home purchaser and a real estate broker or agency.

Buyer's Market - when supply exceeds demand more houses for sale than buyer's ready to put an offer on the market 

Buyers Agent - a real estate professional who guides a buyer through the process of purchasing a home. As a representative of a purchaser in a real estate transaction, a buyer's agent has a legal obligation to protect the interests of the buyer

Closing - the final step in executing a real estate transaction.  The closing date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. On the closing date, the ownership of the property is transferred to the buyer.

Closing Agent - an experienced  real estate professional who helps the buyer, seller, and lender to complete a property sale.

Closing Costs - fees and expenses you pay when you close on your house, beyond the down payment. These costs can run 3% to 5% of the loan amount and may include title insurance, attorney fees, appraisals, taxes and more.

CMA - a Comparable Market Analysis provided by a Realtor (not an Appraiser). A CMA estimates a home’s value based on recent sales of similar real estate in the area. 

Co-Op - a type of housing owned by a corporation made up of the owners within the co-op. The corporation owns the interior, exterior, and all common areas of the building.

Commission - payments made directly to real estate brokers for services rendered in the sale or purchase of a property. A commission can be a percentage of the property's selling price or a flat fee.   Learn how commissions work here.

Comparables - known as “Comps” are a way Realtor’s figure out what a home is worth based on recent sales prices of similarproperties. These comps are then used to help the agents come up with their asking price.  Buyers can also use comps to help them come up with how much they would like to offer for a property.  Comps are always a moving target.  

Consumer Notice - this explains the different duties and responsibilities that an agent has to consumers, and that consumers may enter into an agency relationship with a Licensee.  It gives the Buyer notice that until a business relationship is selected by signing a written agreement, the licensee is not representing him and any confidential personal or financial information should not be disclosed to the agent.  Because of Agency law the licensee represents the Seller.  The consumer notice is not a contract and does not bind the consumer in any way.

Contingency - requirements that must be met before a real estate deal can be closed. The specific contingencies are set and agreed upon by the buyer and seller.

Counter Offer - this serves as a rejection of an offer to enter into a contract, as well as a new offer that materially changes the terms of the original offer. Because a counteroffer serves as a rejection, it completely voids the original offer

Days On The Market - the amount of days from the day the house was listed to the day it went under contract (including both of those days)

Deed - a legal document transfers ownership of real property that is recorded in the county records.

Designated Agency - a designated agency is one that represents both buyers' and sellers' interests. One agent, working for the broker or agency, represents the seller and another stands in for the buyer. It's a requirement that certain procedures are put in place to ensure that client information is kept separate.

Disclosure - a statement is a legally binding document in which the seller comes clean about any potential flaws and issues the buyer needs to know about.

Discount Agent - a brokerage that offers a commission that usually lower than a traditional agent.  There is no standard commission, so the word "discount" is not correct.  Most of these brokerages offer similar services to traditional agents but charge a flat fee or 1% seller commission.  Most still recommend that you offer 2% to 3% to buyers agents,  so make sure to add that to the total commission (example: 1% to the selling agent and 2.5% to buyers agent = 3.5% commission).    Make sure to ask what is included, and what responsibility falls on you, when selecting this type of representation.

Dual Agency - one agent or brokerage represents both the seller and the buyer in the same real estate transaction. A dual agent must walk a narrow path to be neutral toward both parties, and they may not disclose confidential information to either party.  Dual agency is not legal in some states.

Earnest Money Deposit - also known as "good faith money" and is a sum put up by the buyer and generally held in escrow or trust to show the buyer is serious about purchasing the home.

Equity - the difference between the market value of your home and the amount you owe the lender who holds the mortgage.

Escrow - a neutral third party that holds closing funds and processes the closing documents in connection with the contract.  

Exclusive Agency Listing - a contractual agreement under which the listing broker acts as the agent or as the legally recognized non-agency representative of the seller(s), and the seller(s) agrees to pay a commission to the listing broker if the property is sold through the efforts of any real estate broker.

Exclusive Buyers Agent - a real estate agent who only helps clients buy homes. They never represent seller clients, commonly known as "listing homes for sale." Some believe exclusive buyer agents offer a higher level of service and ethics because they have full loyalty to their buyer clients instead of potentially divided loyalty between seller and buyer clients.

Fair Housing Act - a federal law passed in 1968 and amended in 1988 with NAR support. The original law strove to ensure equal housing opportunity for all, making it illegal to discriminate on the basis of race, color, religion, sex, or national origin. The amendments extended protection to families with children and persons with disabilities.

First Right Of Refusal - a provision in a lease or other agreement. It gives a potentially interested party the right to buy a property before the seller negotiates any other offers.

Fixtures - if an object is physically and permanently attached or fastened to the property, it's considered a fixture. This includes items that have been bolted, screwed, nailed, glued or cemented onto the walls, floors, ceilings or any other part of the home.  A fixture is a permanent part of a house or apartment. A fixture is real property and conveys with the transfer of real estate; it is not personal property. This means it will be sold with the house, and the seller will not remove it before the house is transferred to the buyer.

Flat Fee MLS - A service provided by a brokerage that unbundles the services a traditional real estate brokerage offers and lists the property for sale in the local multiple listing service (MLS) à la carte without requiring the seller to use all services.

Foreclosure - the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property.

Home Inspection - an inspection that observes and reports on the condition of a real estate property, usually when it is on the market to be sold.  A qualified home inspector assesses the condition of the property, including its heating and cooling systems, plumbing, electrical work, water, and sewage, as well as some fire and safety issues. Learn how to find a good inspector here.

Homeowners Association - an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and its residents. Those who purchase property within an HOA's jurisdiction automatically become members and are required to pay dues, known as HOA fees.

Homeowners Warranty - a contract that agrees to provide a homeowner with discounted repair and replacement services. Always read the fine print in the warranty to understand what is covered and when.

HUD - "Home Urban Development" The government guarantees mortgages on FHA loans. When people default sometimes HUD has to take the properties back and try to recoup their losses. Those are referred to as HUD homes; HUD homes are currently very rare mostly due to forbearance

Inventory - the amount of months it will take (currently 1.6 months in Atlanta) with the current buyer demand for the current inventory of houses actively for sale to completely deplete should no new listings hit the market. A balanced market is considered to be 6 months of inventory.

List Price - this is the asking price for a property that has been determined with the current market conditions and the CMA & comps provided by your Realtor.  Simply put, this is a the expectation of what your can sell your home for based on current market conditions. 

Listing Agreement - a legally-binding contract that creates an agency relationship authorizing a broker to serve as the agent for a principal in a real estate transaction.” In other words, a listing agreement is an employment contract between a client and a broker that spells out what the broker is responsible for in the real estate transaction and how the client will compensate them. Breaking this agreement can have legal consequences for either the broker or the client, depending on who breaks what part of the agreement. However, listing agreements must be in writing in order to be enforceable also signed by the seller and the broker.

MLS - multiple listing service (MLS) is a database established by cooperating real estate brokers to provide data about properties for sale. An MLS allows brokers to see one another's listings of properties for sale with the goal of connecting homebuyers to sellers.   There are currently almost 600 MLS's throughout the United States.   If choosing a Flat Fee MLS selling service, make sure you understand which MLS's they will be utilizing.

Mutlifamily - a classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex.  Units can be next to each other (side-by-side units), or stacked on top of each other (top and bottom units).

Net Sheet - a document that calculates how much money one can expect to have when the sale of their home is final.

Office Exclusive - this means that the listing is “Exclusive” to the company which has it listed. The only agents that are able to advertise, conduct showings/open houses, and ultimately sell this property are the agents employed by the listing company.   Some office exclusives are off the MLS and only benefit the brokerage as they have a better opportunity to collect commissions from the buyer and seller side.

Open House - a public event hosted at a home that is for sale in which potential buyers can walkthrough.   This is also a marketing tool for agents to recruit new clients.

Paper Brokerage - a company that has a brokerage license, but does not represent sellers or buyers.  Instead, they refer consumers to agents willing to give them (the paper brokerage) a % of the agents earned commission when their clients close on a property.  Learn more about the negative impact of these companies here.

Realtor - a licensed real estate salesperson who belongs to the National Association of Realtors.

Rebate - when the buyer agent shares some of their commission income with the buyer client. Rebates are legal in 40 states, as long as they are disclosed to the lender and recorded on the Loan Estimate and Closing Disclosure. Rebates must not exceed the limits set by the policies of the lender, Fannie Mae, Freddie Mac, or Ginnie Mae, depending on the loan product and program. Rebates can be applied directly to the buyer's closing costs or come in the form of a check. It is not completely clear whether this rebate is taxable or not, but as far as we are able to tell based on previous IRS decisions, a commission rebate is not considered taxable income and is rather considered a reduction in the cost of purchasing a home.  Learn about rebates, and how to ask for one here.

Referral Fee - a percentage or set amount of earned commission that is given to one agent when they send a client to another.  While there are times when this might be necessary, there are many companies whose business model is based solely on referring and profiting by collecting fees.  Typically these companies are easy to spot (see definition of paper brokerage) as they don't sell homes or represent buyers, but offer to find you the "best agent for free."   Learn more about the negative impact of these platforms here.

Rent Back - a rent-backallows sellers to stay in their home until a specified date past closing. After settlement, the sellers pay rent to the buyer who now owns the home.

Rescission - the cancellation of a real estate contract between the buyer and seller.

RESPA - Real Estate Settlement Procedures Act," a consumer protection federal law overseen by HUD and now the CFPB. It governs the actions of all service providers involved in a residential real estate transaction with a mortgage loan. It's a complicated law but the most important things for home buyers to know: 1) the buyer has the sole right to choose their title company 2) it is illegal for your realtor or lender to give or receive any thing of value in exchange for referrals from related service providers like home inspectors, lenders, appraisers, or surveyors. There are many other consumer protections within RESPA and it has been amended and expanded several times since original implementation in 1974.

Seller's Market - the buyer demand outweighs the amount of houses currently for sale. The sellers start in a position of strength when negotiating.

Short Sale - a short sale is the sale of a real estate property for which the lender is willing to accept less than the amount still owed on the mortgage.

Term - typically found in your contract with your agent, this refers to a length of time for an agreement.  Remember, when signing a listing or buyer's agreement with your agent, terms are negotiable.

Title - a legal document saying you are the rightful owner of a property.Whether partially or fully, you have access to the property and making modifications as you see fit. You can also transfer that ownership to others.

Title Insurance -  covers you in case someone who thinks they have a claim to your land sues to quiet title.

Under Contract - as with a contingent property, a home that is active under contract is one where the buyer and the seller have agreed to terms, but the deal is still in its early stages and may not come to fruition.

Waiving Appraisal Contingency - opting for this as a buyer means that you cannot back out of the sale or renegotiate the price and/or terms just because the appraisal came back lower than the agreed-upon sale price.  Lenders will only allow the appraised amount to be mortgaged, leaving the buyer to pay the difference out of pocket. For example, the contracted price is 325,000, but the appraisal came back at 320,000. If the buyer enacted this option, they would have to come up with 5,000 cash to make the difference.

Waiving Inspection - means you cannot back out of the sale or renegotiate the price and/or terms due to any previously undiscovered material defect. In our PA contract it also means you as the buyer cannot conduct any inspections.  Some states allow you to do an informational only inspection, but this can not be used for negotiations or a reason to walk without penalty.

Walk Thru - usually the day before closing; walk thru the house to ensure that the agreed upon fixtures and appliances (and repairs if applicable) have remained and that the house is clean and in acceptable condition prior to transfer of wonership.

Withdrawn Listing - when a home sellers decide they no longer want to sell their home, they ask their real estate agent to "withdraw" the listing so it's no longer active on the multiple listing service.