Common real estate terms you should know
Real estate terms can feel like their own language: Check the DOM. That listing is BOM. Counter before signing the PSA.
Jargon heavy talk can add confusion to what is already an intimidating process. Whether you’re buying, selling, or both, there are some words you should know.
Below is a non-exhaustive list of real estate terms and their definitions to help you navigate the housing market.
An active listing, or on-market listing, is a property that is currently available for sale and accepting offers.
The active with contract status means that the seller has accepted an offer on the listing but is still taking backup offers in case the accepted offer falls through. You can make an offer on an “active with contract listing,” but the seller cannot accept the bid unless their first offer falls through.
An adjustable-rate mortgage, or ARM, is a type of home loan with a fluctuating interest rate, instead of a fixed rate. The initial interest of an adjustable-rate mortgage is typically lower than a fixed-rate mortgage, but the interest rate is adjusted at specific intervals during the loan period. The ARM interest rates often change depending on the interest rate index they are tied to, such as the London Interbank Offered Rate (LIBOR) or the Federal Cost of Funds Index (COFI).
An appraisal is an unbiased, impartial analysis to determine a property’s market value. An appraisal can take anywhere from a couple of hours to a week, depending on the condition of your home. Seeking an appraisal helps a lender determine if a buyer is requesting to borrow an appropriate amount of money for the property.
An appraisal contingency is a clause that allows a buyer to terminate their purchase agreement if the property’s appraised value is less than the sale price. An appraisal contingency protects the buyer and in many cases, allows the buyer to get their earnest money back.
A property listed in “as-is condition” means the seller is listing the house in its current condition and is unwilling to perform any repairs on the property. A buyer must be willing to accept the property in the condition that it is in when the offer is written and are responsible for any repairs.
A listing that’s back on the market (BOM) means the property is available for sale again after a previous offer or contract fell through. If you’re interested in buying a listing that’s back on the market, ask why the original contract fell through to make sure there aren’t glaring problems with the property.
A blind offer is when a buyer sends a purchase agreement on a property they have not seen. Blind offers often occur in competitive markets and are used in an attempt to be the first to submit an offer and purchase a property.
A buyer’s agent is a licensed real estate agent who represents the buyer through purchasing a new home. The buyer’s agent is legally obligated to protect the buyer’s interest and make sure they’re getting the best price and terms on their purchase.
A closed listing is a property that has been sold and is no longer available. However, the listing is not technically considered off-market until the title of the property is transferred to the buyer.
The closing process is the final step of a home sale when the seller relinquishes ownership to the buyer. But this step has many moving parts and takes a good deal of time to complete. The process can take almost two months or even longer if unexpected issues arise and derail it.
Closing costs are the associated expenses and fees that come with purchasing a home. These fees may include charges from homeowner’s associations, real estate agents, lenders, insurance companies, appraisal services, and other services used during the purchasing process. You pay for closing costs at the end of your real estate transaction.
A comparable, or comp, is a recently sold home that is similar to your house in location, size, features, and condition. Agents review comparable homes to determine your home’s value. When you're buying a home, your agent can also pull a home's comps to help you determine if it is priced fairly.
A comparative market analysis (CMA) estimates a property’s value by evaluating similar recently sold homes in the neighborhood, called comparables. A CMA can help a seller set an appropriate listing price for their property. Typically, your real estate agent performs a CMA to help you set a listing price.
When you work with Orchard, we start you off with an online home valuation, then send out an Orchard Home Advisor to do a walkthrough and run a comparative market analysis. This is a complimentary, no-strings attached service.
A contingent listing means that a seller has accepted an offer, but the property remains active in case the buyer or seller are unable to meet certain criteria before closing the sale. These contingencies can include clauses related to finances, inspections, and appraised home value, among others.
Home sellers make counter offers when they are unhappy with the buyer’s initial bid. A counter offer signals that the buyer is interested in selling to you but wants to make changes to your original offer. Changes could include modifications to the sales price, the closing date, contingencies, or adding or removing personal property from the sale, among other changes. Buyers can also make counter offers if they are dissatisfied with the seller's counter offer.
“Days on market” refers to the number of days that a property has been listed for sale, from the time it’s listed on the MLS to the date the seller accepts a purchase agreement. A low average DOM indicates a strong seller’s market.
A debt-to-income ratio, or DTI, is the percentage of someone’s gross monthly income that’s put towards paying off debts. Mortgage lenders utilize this number to determine how much someone will be able to afford each month towards a mortgage.
To calculate your debt-to-income ratio, add up all your monthly expenses, and divide them by your gross monthly income.
A desktop appraisal is an assessment of a property’s value by a professionally trained and licensed or certified appraiser that takes place remotely. Instead of an in-person inspection of the property, the appraiser uses digital data sources to complete their valuation. They are generally more affordable, take less time, and potentially reduce bias. In March 2022, major lenders made desktop appraisals an acceptable option for home sale appraisals.
Due diligence refers to the time period when a buyer can inspect a property and review important information before they finalize the purchase. In layman’s terms, a home buyer is “doing their homework” to make sure the home is a wise purchase. During this time, buyers often hire experts to perform tests and inspect the property to ensure there are no faults with the property that would cause a buyer to cancel the purchase.
The due diligence period starts after both parties sign a purchase contract and typically lasts 10 to 14 days. In Texas, this period, called an option period, lasts 10 days.
An earnest money deposit, or EMD, is the initial funds that a potential buyer is willing to put down after a seller accepts the buyer’s offer. The amount of an EMD usually paid is between 1% and 5% of the property's sale price. An earnest money deposit is sometimes referred to as a “good faith deposit”.
An expired listing is a property that does not sell before the stipulated expiration date found in the listing contract between the listing agent and the seller.
A Federal Housing Administration (FHA) loan is a mortgage insured by the federal government for low-to-moderate-income borrowers. The FHA ensures that if a borrower cannot pay the loan, the federal government will cover any losses the lender would have incurred. Popular among first-time buyers, FHA loans have a lower down payment requirements and higher credit score minimums.
The FHA 203k rehab loan is often known as the “fixer-upper” or renovation loan. An FHA 203k loan allows homeowners to borrow money to use for both a property purchase and home renovation costs. Like an FHA loan, the FHA 203k rehab loan is insured by the federal government. This renovation loan is not intended to be used towards luxury improvements; it is to be used towards renovations such as energy upgrades or plumbing upgrades.
A fixed-rate mortgage is a mortgage loan with a set interest rate throughout the loan period, regardless of whether interest rates go up or down. A 30-year fixed loan is common and indicates that an individual will pay a loan over a 30-year period with the interest rate fixed at the time of purchase.
Fixtures in real estate are any physical property that’s affixed to the home. If the item isn’t moveable without tools to detach it, probably a fixture. Some common examples are built-in shelving, garden features, and curtain rods. Note that appliances are generally not considered fixtures.
Properties that are for sale by the owner, or FSBO, indicate that the owner is not using a listing agent to sell the property. Sellers do this when they want to save money on an agent’s commission, but the downside is that the seller is solely responsible for photographing, listing, marketing, and negotiating.
A foreclosure is a home that has been seized by the bank after the owner fails to make their mortgage payments. The foreclosure process varies by state and by the terms of the loan. The bank or lender often attempts to recover financial losses by auctioning foreclosed properties.
The Georgia Real Estate Commission (GREC) regulates the brokerage industry and is in charge of licensing real estate practitioners in Georgia. The GREC regulates initial licensing, license renewal, maintains licensee records, and investigates and imposes necessary penalties for license violations.
The gross sales price, or gross purchase price, is the total amount a buyer pays for the home, excluding seller concessions, broker’s commission fee rebates, and service fees.
A hold period refers to the duration of time that a person owns or “holds” a home. Generally, the hold period begins the day after the property is bought and ends when the property is sold. It’s a commonly used term for real estate investors who buy properties for resale.
A home sale contingency is a clause that says that a buyer’s offer on a house is only valid if the buyer’s house sells. Home sale contingencies can be risky for sellers because there is no guarantee that a buyer’s property will sell by the specified date in the contract.
When you work with Orchard, you can make a non-contingent, competitive offer without having to wait on their existing home to sell.
A homeowner’s association (HOA) is an organization that manages a shared housing community or condominium. All property owners within the community pay monthly or annual HOA fees. The HOA fee provides funding for property care, such as necessary repairs, grounds maintenance, and facility upkeep.
An iBuyer, or “instant buyer,” is an online real estate service that makes a cash offer on your property and buys the property directly from you. iBuyers offer a more streamlined process though the cash offer is often lower than market value.
A home inspection is an in-depth investigation of a house by a licensed inspector. An inspection allows buyers to assess the house’s condition and discover any defects or necessary repairs before purchasing the home.
An inspection contingency, otherwise known as a “due diligence contingency,” is a clause that gives buyers a predetermined amount of time to conduct an inspection and back out of the purchase if the inspection uncovers serious issues.
A leaseback allows an individual to rent property from a company that has purchased that property. The previous owner becomes the lessee, and the purchaser becomes the lessor. It’s popular for people who are waiting on their new home to close but want to finalize the sale of their existing home.
An MLS, or a multiple listing service, is a local or regional database that compiles available properties and accompanying detailed information submitted by real estate agents and broker members.
An open listing agreement is a legally binding contract between a seller and a listing agent or broker that is non-exclusive. The agent or broker agrees to list the house, but any agent or broker (or even the seller) may win the commission by finding a buyer for the property. They are a common choice for people who are selling on their own(FSBO sellers).
Specific to Texas, an option period gives the buyer 1 to 10 days to perform due diligence on a house. The timeframe in which termination can be done and the cost for this ability are negotiable between buyer and seller. If a home buyer chooses to terminate the contract within the option period, they will receive a refund on their earnest money deposit.
A pending listing indicates that a buyer has submitted an offer and the seller has accepted it, but legal work is being processed to complete the sale. You may be able to make an offer on a home that’s pending, but you may not be able to tour the property.
A pending listing is one step closer to being sold than a listing that is “active with contract.”
In real estate, power buyers are property tech companies focused on empowering homebuyers. Their services differ from company to company, but many guarantee your home sale and help you become a cash buyer. The term was coined by Mike DelPrete, a real estate-tech strategist at University of Colorado Boulder.
A pre-approval letter is a letter from a lender that shows the loan amount you can access to buy a home. Pre-approval is determined by having buyers submit an application to a lender that allows the lender to determine buyers’ financial situation, their debt-to-income ratio, and ability to repay their debt.
Principal refers to the amount of money you borrow when you take out a home mortgage loan.
A proof of funds letter shows sellers that buyers have the necessary cash available for a down payment and closing costs. Proof of funds must come from a verified authority or entity.
A purchase and sale agreement, or PSA, is a written contract between a buyer and seller that outlines all the agreed-upon terms for the sale and purchase of a home.
Real property is defined as a parcel of land and everything that is permanently attached to it — your house, your basement, the trees in your yard, and the like are all considered real property. As the owner of real property, you have the exclusive right to own, sell, and/or lease the land.
Real property and real estate are generally considered to be synonymous, and it is the opposite of personal property
Redlining is the discriminatory practice of denying a qualified applicant a home loan. The term refers to the practice of 1930s lenders drawing redlines around predominantly Black neighborhoods to falsely identify them as high risk and therefore deny mortgage applications.
The practice began to be outlawed in the 1960s; however, the remnants of the practice remain. If you suspect that you have been the victim of redlining, you can report it to the U.S. Department of Justice’s Civil Rights Division.
A Realtor is a real estate agent who is a member of the National Association of Realtors (NAR). Realtors promise to uphold the NAR standard of ethics and to conduct their practice in a manner that is consistent with the organization’s standards.
Seller concessions are incentives offered to potential buyers that work to create an attractive deal. Seller concessions often include a credit towards a buyer’s closing costs or funds to make specific repairs.
A seller disclosure is a set of documents provided by the seller that outlines any known issues with a house that may affect a buyer’s decision to purchase.
A short sale occurs when a property sells for less than what the homeowner owes on their mortgage. Because all lenders must approve the sale, short sales typically take more time to be approved than a traditional sale. Short sale homes differ from foreclosures, as the property still belongs to the owner and not the bank. If a short sale fails, the property becomes foreclosed.
This is the practice of influencing, or steering, a buyer based on one of the protected characteristics of the Fair Housing Act. Those characteristics are race, color, religion, gender, disability, familial, status, or national origin, though the most pervasive form of steering is racial.
Real estate agents who are steering may counsel buyers to buy only in certain neighborhoods, or limit the choices they present their clients based on presumptions about one or more of these protected characteristics.
A title company makes sure that the seller has the legal right to transfer ownership of their home to a buyer. This is an essential step of closing on a home and protects the owner from any lawsuits or illegal claims to the property.
Title insurance protects lenders and homebuyers from financial loss if the title to the property is contested. Though a title search is meant to turn up any issues with home titles, issues sometimes slip through. Title insurance covers claims that are made after closing on a home.
The Texas Real Estate Commission (TREC) regulates Texas' real estate industry and seeks to protect consumers in all matters related to real estate transactions and valuations. The TREC interprets and enforces statutes found in The Texas Real Estate Law (TRELA) and regulates educational and licensing programs for industry practitioners.
Turnkey properties are homes — apartments, duplexes, houses, etc. — that are fully functioning and ready to be moved into or rented out. They are typically recently renovated and require little to no immediate maintenance.
A listing that is under contract means that a potential buyer and the seller have an agreed-upon contract but the sale has not closed yet. This is a later stage than a “pending sale” status.
A Veteran Affairs (VA) loan is a special loan that is guaranteed by the US Department of Veteran Affairs that requires little-to-no down payment and has a competitive interest rate. The VA loan is available only to eligible veterans (active and retired,) select spouses, and potentially other beneficiaries.
A withdrawn listing indicates that a property has been pulled off the market and is not available for sale anymore.
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