Essential real estate terms and definitions every buyer and seller should know.
A tax-deferred exchange under IRS Section 1031 that allows investors to sell an investment property and reinvest the proceeds into a like-kind property without paying capital gains taxes at the time of sale.
A professional assessment of a property's market value conducted by a licensed appraiser, typically required by lenders before approving a mortgage.
The process of gradually paying off a mortgage through scheduled payments that cover both principal and interest over the loan term.
A contract term indicating the seller will not make any repairs or improvements, and the buyer accepts the property in its current condition.
A mortgage with an interest rate that changes periodically based on a market index, resulting in varying monthly payments over the life of the loan.
A licensed real estate professional who has completed additional education and can operate independently, manage agents, and oversee transactions.
A licensed real estate agent who represents the buyer's interests exclusively in a real estate transaction, providing guidance from search through closing.
A short-term loan that allows homeowners to use the equity in their current home to finance the purchase of a new home before selling the existing one.
Fees and expenses beyond the property price paid at the closing of a real estate transaction, typically 2-5% of the purchase price, including lender fees, title insurance, and taxes.
A report prepared by a real estate agent comparing recently sold properties similar to a subject property, used to determine an appropriate listing price or offer amount.
A condition in a purchase contract that must be met for the transaction to proceed, such as financing approval, satisfactory inspection, or appraisal.
Capitalization rate — a metric used to evaluate investment properties, calculated by dividing net operating income by the property's purchase price or current market value.
A mortgage not insured or guaranteed by a government agency, typically requiring a higher credit score and larger down payment than FHA or VA loans.
A legal document that transfers ownership of real property from one party to another. The deed is recorded with the county to establish the new owner's legal title.
The upfront cash portion of the purchase price paid by the buyer at closing. Down payment requirements vary by loan type, typically ranging from 0-20%.
The investigation period after a contract is executed during which the buyer inspects the property, reviews documents, and verifies information before committing to close.
The number of days a property has been actively listed for sale on the MLS. A key metric for assessing market demand and pricing accuracy.
A good-faith deposit made by the buyer when submitting an offer, held in escrow and applied to closing costs or down payment. May be forfeited if the buyer defaults.
The difference between a property's current market value and the outstanding mortgage balance. Equity increases as the mortgage is paid down and/or the property appreciates.
A neutral third-party account where funds and documents are held during a real estate transaction until all conditions are met and the sale is finalized.
A mortgage insured by the Federal Housing Administration that allows lower down payments (as low as 3.5%) and more flexible credit requirements, popular with first-time buyers.
Foreign Investment in Real Property Tax Act — a federal law requiring withholding of a portion of the sale price when real property is purchased from a foreign seller.
A mortgage with an interest rate that remains constant for the entire loan term, providing predictable monthly payments regardless of market rate changes.
A Florida tax benefit that reduces the taxable value of a primary residence by up to $50,000 and caps annual assessment increases at 3%.
An organization that governs a community, collecting dues and enforcing rules. HOA fees cover common area maintenance, amenities, insurance, and management.
A thorough examination of a property's condition by a licensed inspector, covering structure, roof, electrical, plumbing, HVAC, and other major systems.
The percentage charged by a lender on the outstanding mortgage balance, expressed annually. Rates vary based on market conditions, credit score, and loan type.
Real estate purchased with the intent to generate income through rental revenue, appreciation, or both — rather than for use as a primary residence.
A mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency, requiring stricter qualification criteria and often a larger down payment.
A legal claim against a property that must be satisfied before the property can be sold or transferred. Common liens include mortgages, tax liens, and mechanic's liens.
The real estate agent who represents the seller, responsible for marketing the property, coordinating showings, and negotiating offers on the seller's behalf.
The percentage of a property's appraised value that is financed by the mortgage. A higher LTV typically requires private mortgage insurance (PMI).
A comprehensive database used by real estate agents to share property listings, providing access to the most current inventory of homes for sale in a given market.
A lender's written commitment to provide financing up to a specific amount, based on verified income, assets, and credit history. Stronger than pre-qualification.
Total income generated by an investment property minus operating expenses, used to calculate cap rate and evaluate investment performance.
A formal written proposal from a buyer to purchase a property at a specified price and terms, which the seller can accept, reject, or counter.
An informal estimate of how much a buyer may be able to borrow, based on self-reported financial information. Less rigorous than pre-approval.
The outstanding balance on a mortgage loan, not including interest. Monthly payments reduce the principal over time through amortization.
Insurance required by lenders when the down payment is less than 20%, protecting the lender against loss if the borrower defaults on the loan.
An annual tax assessed by local government based on a property's assessed value, used to fund schools, infrastructure, and public services.
The process of replacing an existing mortgage with a new one, typically to obtain a lower interest rate, reduce monthly payments, or access equity.
A document in which the seller discloses known defects, repairs, and material facts about the property that could affect its value or desirability.
A sale in which the property sells for less than the outstanding mortgage balance, requiring lender approval. Common when homeowners face financial hardship.
The process of preparing and decorating a home to make it more appealing to potential buyers during showings, photography, and virtual tours.
Insurance that protects the buyer and lender against defects in the property's title, including liens, encumbrances, and ownership disputes discovered after closing.
An examination of public records to verify the seller's legal ownership and identify any liens, easements, or encumbrances on the property.
The status of a property after the seller has accepted a buyer's offer but before the transaction has closed. Also referred to as pending.
A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans and active-duty service members, offering 0% down payment and no PMI.
A final inspection of the property conducted by the buyer shortly before closing to verify the condition, confirm agreed-upon repairs, and ensure no new issues have arisen.
Local government regulations that dictate how a property can be used — residential, commercial, industrial, mixed-use — and what structures can be built on it.