Real Estate Glossary

Glossary of Real Estate Terms:

Adjustable-rate mortgage (ARM)
A loan with an interest rate that is periodically adjusted to reflect changes in a specified financial index.

Annual Percentage Rate (APR)
The cost of the loan expressed as a yearly rate on the balance of the loan.

Appraisal
An opinion of the value of a property at a given point in time.

Arbitration
A method of resolving a dispute in which a third party renders a decision.

As-is condition
The purchase or sale of a property in its existing condition.

Backup offer
A secondary bid for a property that the seller will accept if the first offer fails.

Balloon loan
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.

Bridge loan
A short-term loan for borrowers who need more time to find permanent financing.

Buyer's remorse
An emotion felt by first-time homebuyers after signing a sales contract or closing the purchase of a house.

Capital gains tax
A tax placed on the profits from the sale of real estate or investments.

Closing costs
Expenses incidental to the sale of real estate, including loan, title and appraisal fees.

Closing statement
A document which details the final financial settlement between a buyer and seller and the costs paid by each party.

Comparative market analysis
An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.

Easement
A right given to a third party to use a portion of the property for certain purposes, such as power lines or water mains.

Eminent domain
The government's right to condemn private land for public use, such as the routing of a public highway.

Escrow
A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

Fair Housing Act
Landmark federal law passed in 1965 and amended in 1988 that makes it illegal to deny rent or refuse to sell to anyone based on race, color, religion, sex or national origin. The 1988 amendment expanded the protections to include family status and disability.

Home equity loan
A loan that allows owners to borrow against the equity in their homes.

Home inspection
An examination of a home's construction, condition and internal systems by an inspector or contractor prior to purchase.

Homeowners' association
A group that governs a modern subdivision or planned community. An association collects monthly fees from all owners to pay for maintenance of common areas, handle legal and safety issues, and enforce the covenants, conditions and restrictions set by the developer.

Homeowners' insurance
This insurance includes hazard coverage for any damages that may affect the value of a house, in addition to personal liability and theft coverage.

HUD-1 Uniform Settlement Statement
A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing.

Interest-only loan
The borrower pays only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment.

Maintenance fee
The monthly assessment members of a homeowners' association pay for the repair and maintenance of common areas.

PITI (Principal, Interest, Taxes, Insurance)
When a buyer applies for a loan, the lender will calculate the principal (loan amount), interest, taxes and insurance. The figure is designed to represent the borrower's actual monthly mortgage-related expenses.

Pre-approval letter
A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.

Prequalification
Many lenders will prequalify a borrower who is shopping for a loan by completing a preliminary assessment of the buyer's ability to pay for a home.

Real Estate Settlement Procedures Act (RESPA)
A federal law designed to make sellers and buyers aware of settlement fees and other transaction-related costs. RESPA also outlaws kickbacks in the real estate business.

Title insurance
A policy issued to lenders and buyers to protect any losses because of a dispute over the ownership of a piece of property.

Walk-through
A buyer's final inspection of the home to determine if conditions in the purchase agreement have been satisfied.

Zero-lot lines
Houses built without space between them and with little or no yard, such as a townhouse or condo.

Zoning
Regulations that control the use of land within a jurisdiction.