Real Estate Terms 101

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I am absolutely in love with learning and sharing all things real estate. I’m an agent for Jacaranda Real Estate In Harare, Zimbabwe. This blog will be the ultimate resource for all things real estate so subscribe and stay tuned.

Table of Contents

So you’ve entered the world of real estate and have had a rude introduction to real estate jargon. Whether you walked through the doors to buy or sell, rent or rent out or just to have a look around; you’re bound to come across your fair share of  ARMs, CMAs, commissions, agents, and brokers.

Whether you’re a complete fish out of water in the world of real estate or you’re just trying to spruce up your real estate dictionary; this post is intended to help you understand enough jargon to get you through the vast majority of interactions in most real estate situations.

I’ve made up a list of 70 terms that cover the following 3 real estate discussion environments:

  • Part 1 – The Basics.
  • Part 2 – Terms for Real Estate Procedures and  Contingencies.
  • Part 3 – Terms for Real Estate Financing and Investment.

Part 1 – The Basics

The terms within this section make up the foundation of most real-estate conversations. Whether you’re working with a bank, agent or brokerage it’s going to be rare that you get yourself in and out of a conversation without having to come face to face with the following.

1. Real Estate.

Property that is owned or protected by a specific party is known as real estate. Real estate can be categorized as either residential, commercial, industrial, land, special-use or hybrid real estate.

2.Broker.

A company that facilitates real estate transaction services such as for sales or rentals.  They do this through the use of various real estate agents.

3. Sales, Purchase and Listing Agents/Negotiators.

Sales Agent – An individual who assists a property seller in the procedures necessary to sell real estate. Such as legal obligations, advertising and negotiating.

Purchase Agent – An individual who assists a property buyer in the procedures necessary to buy real estate. Such as legal obligations, due diligence, financing and negotiating.

Listing Agent – An individual who assists a property seller in the procedures necessary to present the property to the public on internal and public listing services.

Agents work under real estate brokers.

4. Realtors.

This is a real estate agent who works under the national association of realtors to which they are a member of. Not under a brokerage. This holds them to specific codes of conduct.

5. Dual Agency

Agents who provide both buying and selling services is known as a “dual agent.”

6. Commission.

The fee charged to property buyers, sellers and renters for specific services provided to them by real estate agents and brokers.

7. Listing.

Presentation of a rental or sales property to the public through either a Multiple Listing Service (MLS) or Internal Listing Service (ILS).

8. Attached Homes

Properties being sold as “attached homes” are properties that have been taken as collateral for a party’s inability to pay back its debt. The “attached home” property will be sold to assist in paying back that debt. They are typically sold under auction.

9. Purchase and Sale Agreement (PSA)

A written contract that outlines the terms and conditions that will facilitate the transfer of property from the seller to the buyer. When both parties have formally agreed to the sale; the property is considered “under contract.”

10. Pending

When the buyer and seller have dealt with the majority of all documents necessary to transfer ownership of the property from the seller to the buyer – the sale is considered “pending.” The property can be removed or relabelled as (sold) under MLSs; the property is considered transferred.

11. Closing.

When the sale of the property is considered complete. Signed contracts. updated title deeds, initiation of finance lenders and the payment of agents. When the property is “closed;” the seller loses access to the property while the buyer gains access to it.

12. Offer.

A written statement representing the price to which the property buyer as valued and wishes to purchase a property from the seller. Offers do not finalize any agreement but do show a level of commitment and desire for the property.

13. Counter Offer

A property seller can deny most offers and issue a counter-offer of their preferred valuation of the property. Both offers and counter-offers can have attached documentation that provides reasoning to presented valuations.

14. Renovating.

The act of renewing, replacing or improving a specific aspect of the home such as Cleaning the carpet, adding a new carpet of getting the carpet fixed.

15. Remodeling.

The act of changing the purpose of a specific structure. Adding a swimming pool, breaking down walls to make a room bigger or adding new features to an existing room count as remodels.

16. Title Deeds

Documentation that provides evidence of the current and previous owners of a property. As well as the contracts for sale, wills, mortgages, and leases. Title Deeds assist in valuing a property for sale in the market because they show the price trend for the property overall its sales.

17. Natural Hazard Disclosure (NHD).

A report that is; by law required to be provided to property buyers who are purchasing a property in an area that has experienced and could under reasonable prediction be expected to succumb to a natural disaster.

Examples include properties situated near earthquake territories, flood zones, active volcanoes, tsunami territory, etc.

18. Multiple Listing Service (MLS).

This is a database that allows real estate agents, brokers, and normal individuals the ability to add information on properties that are available for purchase or rent. Property websites are considered the most common form of MLSs.

19. Land Lease

Most property transactions result in the transfer of ownership of both the property built on the land and the land itself. Where a land lease is involved, the buyer gains ownership of the property but has to pay rent on the land that the property is built on.

20. IBuyer.

Companies that quickly purchase your home bellow value to sell the property on their terms at a premium.

21. Days On Market (DOM).

The number of days a single real estate brokerage company or individual has had a property listed for purchase or rental under an MLS. The current average DOM represents the strength of the market.

22. Conventional Sale

A property that has no or minimal mortgage obligations is known as a conventional sale. The types of property transactions typically involve less hassle as less documentation and parties are involved in finalizing the close.

23. Open house.

A  public event for listed properties to which individuals are allowed temporary access to a home to qualify it for potential offers and purchase agreements. It is the equivalent of a “test drive.”

24. Private viewing.

An open house that is only open to privately invited or qualified individuals. Private viewing may require no prior actions from the potential buyer or may require specific conditions for a buyer to commit to before being granted a private viewing.

25. Unfinished homes (developing or under-developed).

Real estate to which the construction of the property has begun but due to specific restraints has not been completed.

Developing homes are still under the intention of completion. The buyer may be buying or depositing money to reserve the property or to buy it at a discount.

Under-developed homes have had their construction stifled to the point of uncertainty. The property is being sold as-is without the intention of completion.

26. Mortgage Broker

A mortgage broker is to you as a borrower and a potential money lender what a real estate agent is to you as a property seller and a potential property buyer. A buffer of interaction who works on your behalf to ensure you get the best deals in the market through due diligence.

27. Mortgage Banker

A mortgage banker is a company, individual, or institution that distributes mortgages. They use internal funding to lend out money to qualified borrowers to purchase real estate in return for mortgage payments over a specified period with interest. 

Part 2 – Procedure and Contingency Terms

Terms within this section are all about your security regardless of you being the buyer, seller, tenant or landlord. When you hear these terms you can be aware that someone is trying to make sure that you’re not going to get conned. And if you don’t hear them; you might want to talk to someone else.

28. Subject To Inspection.

A means of qualifying buyers that only allows individuals who have made an offer that has been accepted by the seller of the property to have access to private showings and outside inspections of the property.

29. Probate Sale.

This occurs when the homeowner has passed away without a will or someone to take over the property in their absence. The probate court takes in the property to be sold by an estate attorney or real estate agency.

30. Sales Inspection Period (Due Diligence Period – DDP).

A period of time, typically allowed to individuals who have made an accepted offer on a property for them to inspect the property for any defects that were unknown or not presented that would affect the desire to purchase.

The buyer would be allowed to take back or amend their offer given the severity of any defects located.

31. Rental Inspections.

Periodic inspections made to rental properties to evaluate whether or not the tenant is upholding the contract in maintaining the property and whether or not the landlord has completed the necessary or agreed upon renovations to the property.

32. Home Warranty

A form of insurance that protects the owner form property damages that resulted from specific future problems. Natural disasters, home invasions, property wear, and tear.

33. Escrow – holding account.

A banking facility that is typically used to hold funding from a property buyer against the property seller until all terms and conditions on the sale have been finalized and upheld. For the seller an escrow account shows the ability to commit and for the buyer, it provides safety from dubious activity.

34. Title Insurance

Payment for the research in the title deeds of a property to ensure that the property can be sold by the buyer. Crucial in avoiding illegal multiple sales of a property.

35. Title Search

Researching and reporting the public records for property’s history regarding sales, purchases, and tax. It can be used to justify the value of a property, prove property ownership and provide insight on property zoning restrictions.

36. Forbearance.

It is essentially a plea for forgiveness for a given period where you as a debtor are unable to make rent or mortgage payments due to a justifiable hardship.

Forbearance does not equal “free,” it is closer to “postponed;” as if accepted, you will be expected to repay the fees you did not pay during the forbearance period – which can be paid with interest on top.

37. Delinquency.

This occurs when a scheduled payment has not been made with a provision of justifiable reasoning for a least 30 days. After the 30 days, the lender or landlord can begin collection, foreclosure and eviction procedures.  

38. Down payment.

A payment made to present dedicated action towards the purchase or rental of a property.

Property sellers and landlords will typically prefer buyers and tenants who provide higher down payments as this offers more security and displays higher commitment in processing a transaction.

Landlords may keep deposits as a means of reimbursement for tenant damage to property. The remaining balance after such payments is returned to the tenant in the event of their natural vacancy.

39. Rent Agreement.

An agreement of tenancy that is upheld on a month by month basis.

40. Lease Agreement

An agreement of tenancy that is upheld over longer periods such as quarterly, bi-annually or annually.

41. Hoarder House sale.

The sale of a property that was used to hoard large amounts of assets. In the event of the sale; the property buyer is given ownership of the hoarded property to do with as they please.

42. Eminent domain

Property to which the government can use or repurpose for their benefit due to specific events. The government is obliged to repay the property owner for inconvenience, use and lost income (within reason). Farms are typically eminent domains that are activated in wartimes.

43. Covenants, Conditions, Restrictions

Restrictions on property holders to what they can and cannot convert a property for the sake of a neighborhood. not being able to turn your residential property into commercial property for example.

44. Blind Offer.

An offer made by a buyer who has not yet or has shown no interest in viewing the property.

45. Backup Offer.

An offer made by another party in the event where the current property owner has already accepted an offer from an initial party. The latest offer is made and viable if the first offer falls through.

46. Contingency.

A contingent property requires that specific events be done before its closing or else the transaction contract of the property is considered null and void.

47. Collateral List.

A list used for rental properties to identify faults within a property that were there before a tenant and need to be sorted out by the landlord without affecting the tenant.

The list is also periodically updated for damages that occurred during the tenancy or that are yet to be fixed by the landlord.

48. Foreclosure.

When a homeowner is unable to make their mortgage payment or acquire a period of forbearance for 90 days the foreclosure procedure begins.

The property will be sold to cover mortgage costs or if it is not sold; ownership of the property goes to the lender.

49. Right Of Ingress and Egress

An individuals’ legal right to enter and exit a property. Typically for rentals to detail who exactly has and does not have the right to enter and live within the property.

Part 3 – Real Estate Financial and Investment Terms

These terms are all about ensuring that whoever wants to purchase the property has the means to do so. If you’re a tenant or buyer; you might hear these terms early on in a conversation and if you’re a seller or landlord; you might not want to invest in too much time in someone who hasn’t answered the following terms.

50. Proof Of Funds

Documentation that can justify a buyers’ offer by supporting the fact that they do have the willingness and ability to pay their proposed offer.

Bank statements, lines of credit and income and cash flow statements are forms of proof of funds.

51. Prequalification.

When a lender makes an estimated evaluation of how much they believe a borrower can borrow and pay back within a specified time frame whilst accounting for interest.

This purely happens from word of mouth at this stage. There is no documented evidence

52. Appraisal.

The determination of the value of a property that a buyer intends to buy by a money lender to ensure that the appropriate amount of money will be provided. This is done through evaluating the property’s sale history as well as the valuations on similar properties within the same area.  

53. Assessed Valuations.

How much a property is worth according to the appraisal of the national public tax association. This is to charge an appropriate level of state tax for the property.

54. Broker Valuations.

How much a property is worth according to a real estate agent and brokerage. This valuation represents the most likely sales value of a property and accounts for previous sales history, neighborhood, property size, the current state of the property, renovations, remodels and negotiating.

55. Closing Costs.

Fees for a property transaction that only take effect once the property has been closed. Lender installations, Deeds office for title deed update, attorneys, insurance companies, taxing authorities, real estate agents and brokers.

56. Comparative market analysis (CMA).

A valuation assistance report that notes down the value of similar homes within the same or similar neighborhoods for use in effectively valuing a property.

57. Deposit.

A form of payment made in advance that is used to display dedication to securing the property and or used as security for future property damages and payments. So long as the payment is in advance and is not necessary for the moment it is known as a deposit.

Rental Landlords are encouraged to take offers from individuals offering more deposits (3 months’ rent deposit instead of 1); this ensures the security of payment for 3 months.

58. Credit Score.

A  numerical range of 300-850 based on analyzing a person’s credit files to evaluate their current creditworthiness. The higher your credit score the better.

Moneylenders will use your credit score to evaluate the potential risk of lending money to an individual.

Lower scores are charged higher interest rates or will not be allowed to qualify for loans while higher credit scores enjoy lower interest rates and more opportunities to gain credit.

59. For Sale By Owner

When the current owner of the property intends to sell their property on their own without the use of 3rd party agents and brokers.

60. Flip ROI.

The estimated evaluation of the potential return on investment from buying a property to renovate and remodel to sell on the market.

The value of renovations and remodels differs depending on whether the property is intended for a flip or rent.

61. Rental ROI.

The estimated evaluation of the potential return on investment from buying a property to rent. Evaluations can be made pre-renovation or post-renovation.

The value of renovations and remodels differs depending on whether the property is intended for a flip or rent.

62. Mortgages.

A  cash loan in which the property for purchase is used as collateral against the buyer/borrower. The borrower agrees with the lender; receiving the cash upfront whilst making payments over a set period until he pays back the lender in full.  It can range from 10 – 30 years.

Mortgages come in 2 forms for differing types of interest. Adjustable and Fixed Rate Mortgages.

63. Interest.

The cost of borrowing money is regarded as interest. It a monthly fee added on top of the initial amount of money borrowed. Typically charged as a monthly percentage of the initial amount.

64. Adjustable-Rate Mortgage (ARM).

The rate of interest for the mortgage can be adjusted at specific periodic intervals to account for the market. The interest rate can go either up or down for the favor of the borrower or lender.

65. Fixed-Rate Mortgage (FRM).

The interest rate stays the same throughout the lending period with no opportunities for adjustment.

66. Debt-To-Income Ratio

This ratio is used to assist a money lender in evaluating whether or not a borrower is capable of repaying the desired loan. It accounts for the current recurring debt payments a borrower is obliged to make and weighs the amount against the current monthly income (cash flow) of the borrower.

The lower the ratio the safer the loan.

67. Equity.

Concerning real estate, equity represents how much of the property a specific individual or group owns. This is concerning how much off your mortgage you have currently paid. The more off your mortgage you’ve paid; the more equity you have.

68. Cash Offer.

An offer made to purchase real estate submitted by a buyer who does not require any financing to make the purchase. There is no mortgage involved in the payment. This type of transaction is faster to clear as fewer middlemen are involved.

69. Mortgage Insurance.

An insurance policy that only protects a mortgage lender or property seller, not the borrower.

If the borrower/buyer defaults on payments, dies or is otherwise unable to meet the contractual obligations of the mortgage the insurance kicks in to reimburse the protected parties the full amount or a portion of the outstanding payments.

70. Ernest Money Deposit (EMD).

A payment made by a prospective property buyer in good faith to the property seller. This is to prove the dedication of intent to purchase the property whilst wanting a period to go through due diligence procedures such as for Deed checks, inspections, and appraisals.

This amount is non-redeemable and is not considered a deposit.

Conclusion. 

There we have it, you can now talk about real estate just like the best of them.

Just remember the worst-case scenario doesn’t happen if you don’t know the above terms, the worst-case scenario happens when you sign a contract without knowing the terms in it.

When in doubt, ask!

If they tell you not to worry about it – leave.

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I am absolutely in love with learning and sharing all things real estate. I’m an agent for Jacaranda Real Estate In Harare, Zimbabwe. This blog will be the ultimate resource for all things real estate so subscribe and stay tuned.