All Essential Real Estate Terms In One Place

The complete glossary of real estate terms and definitions. Updated 3/12/2021

Essential Functions of Real Estate Professionals

Transfer: Real estate ownership transfers based on a purchase, sale, lease, assignment, inheritance, or exchange, often managed by a real estate professional.

Real Estate Property Management: Property managers and management companies lease, rent, and maintain real estate properties on behalf of the owners.

Real Estate Investment: Individuals and companies invest in real estate properties. They buy, hold, and sell real properties for profit.

Real Estate Regulation: Federal and state governments regulate all real estate activities. Real estate professionals must comply with regulations based on a knowledge of zoning, inspection, assessment, and Fair Housing laws.

Essential Roles of Real Estate Professionals

Real Estate Brokers: Real estate brokers may operate independently or manage real estate brokerages. Real estate agents must work under the direction of a licensed broker when representing buyers and sellers. Thus, brokers attract and assemble a team of quality agents who can help buyers and sellers strategize. That plan might involve putting together a substantial offer for a buyer or finding the perfect price point for a seller. Typically, brokers are seasoned professionals who have experienced all types of markets and can guide clients accordingly with buy and sell transactions.

Real Estate Salespeople: Real estate agents are licensed professionals who work under the direction of a licensed broker to represent buyers and sellers in real estate transactions. Real estate agents who are members of the National Association of REALTORS® can use the title REALTOR® and must abide by a strict Code of Ethics. Not only do agents have a solid grasp of what sells an individual home, but they also possess an intimate knowledge of their market and its neighborhoods. They understand the defining characteristics that attract buyers: safety, walkability, the quality of schools, and proximity to amenities, for example.

Mortgage Brokers: A mortgage broker helps individuals who are buying or refinancing real estate to find the right mortgage banker based on individual needs and financial situation.

Mortgage Bankers: Mortgage bankers can be companies, individuals, or institutions that use their funds to finance a mortgage.

Appraisers: Appraisers have the skills to estimate the value of real estate. States often require appraisers to be licensed or certified. Mortgage bankers typically require an appraisal from a professional to establish the value of real estate before processing a mortgage.

Insurers: Insurers provide property and flood insurance, if required, to cover potential damage. In the case of a home purchase, both lenders and buyers will want to protect the asset and prevent financial loss on either side of the mortgage agreement. Along with coverage to the dwelling and personal property, insurance carriers also provide liability insurance that insulates the homeowner from a slip and fall claim on the premises or medical payments for a dog bite off the premises. When you enter into a mortgage agreement, the lender will require proof of property insurance before you close.

Title Companies: Title companies research property records to ensure that the stated owner of a property owns the property free from any outstanding encumbrances. Claims against a title may include additional mortgages, property liens or unpaid property taxes. Before you close on the property, you’ll want assurance that you’re purchasing the property without any hidden surprises that may affect the deed transfer or cost you additional dollars. 

Escrow Holders: Escrow holders collect and hold funds until certain events take place. For example, a real estate agent may hold earnest money deposits in an escrow account until a property closes. Another example is mortgage bankers who collect and hold property tax payments until the tax is due.

Essential Real Estate Transaction Management Terms

Closing Procedures: The steps required to finalize a transfer of ownership of a property. For a personal home purchase, this final step may occur anywhere from a week to 90 days after a buyer’s offer is accepted. The closing marks the day when ownership transfers from the seller to the buyer, and other parties present will likely include a mortgage officer or broker, along with attorneys or other advisers. However, steps leading up to that day include the mortgage application process, an offer and acceptance, a home inspection, the lender’s appraisal, and a final walk-through of the property.

Financial Qualification: The ability of a buyer to purchase or obtain financing to purchase a property. Mortgage applicants will navigate through a detailed analysis of their financial picture and creditworthiness before an application will be approved. You can expect a lender to look at FICO scores, income, the amount of existing debt, and the assets your own. These assets will include deposit accounts, stocks, bonds, and any equity you might own in other homes or investment properties.

Local Market Conditions: The conditions that affect the housing market, including supply and demand, mortgage rates, and more. To limit the days a home will spend on the market, sellers must understand market dynamics such as the sales value of comparable properties, the desirability of the location, and the existence of lucrative employment opportunities. 

Real Estate Financing: Obtaining a mortgage or using another method for funding a real estate purchase. Buyers who finance a purchase could choose a fixed-rate option, in which interest rates remain the same over the life of the loan, or a variable-rate option that pegs the rate to an index. One of the more commonly used benchmarks is the London InterBank Offered Rate or LIBOR, for short.

Real Estate Transaction Management Software: Software designed specifically for real estate transaction management allows brokers, real estate teams, and real estate transaction coordinators to manage their transactions digitally. These systems often provide features like task management, document management, compliance management, and more.

Value Estimation: An estimate of what buyers in the market would be willing to pay for a property based on comparable properties or comparisons that recently sold in the same market. Market value differs from loan value in that a lender will only be willing to loan a certain percentage of what that institution feels the property is worth. Hot markets where a property’s market value exceeds its loan value would require a buyer to provide a more significant down payment if the offer price exceeds the amount of the lender’s appraisal.

Essential Real Estate Listing and Property Terms

Agency Law: The law that defines the legal relationship between the property owner and a real estate agent. For example, the agent may represent the property owner exclusively, or the agent may represent buyers and sellers in the same transaction.

Buyer Agency Agreements: A contract between a buyer or seller and their real estate agent that defines their legal relationship.

Commercial Property: Property zoned for business activities. Commercial property includes industrial, retail, and office property used for business purposes.

Commission Rate: A percentage of the sale price paid to the real estate agents involved in a transaction. Typically the commission split between the agents who represent the buyer and seller is 5%-6% of the purchase price. 

Designated Agency: A brokerage that provides one agent to work with the seller and one to work with the buyer on the same transaction.

Dual Agency: A situation where a real estate agent can represent both the buyer and seller in a real estate transaction.

Exclusive Agency Listing: A contract between the property owner and real estate agent, giving the agent exclusive authority to act on behalf of the seller. The seller also reserves the right to find a buyer and sell without paying a commission.

Exclusive Right to Sell Listing: A contract between the property owner and real estate agent, giving the agent sole authority to act on behalf of the seller.

Industrial Property: A subset of commercial property zoned for manufacturing, processing, or warehousing.

Investment Property: Any real estate acquired by an investor with the intent to realize revenue from rental income or net profits from selling the property. 

Limited Service Listing Agreement: A contract between the property owner and real estate agent that defines a limited set of services the agent will provide to sell the property.

Listing Agreement: A contract between the property owner and real estate agent, giving the agent authority to act on behalf of the seller.

Listing Period: The amount of time a listing agreement is in effect. Sellers sign contracts that cover a specific time period for the sale of a house. For instance, you might list a home with a local real estate agent for three months. If the property remains listed within the initial contract period, you can renew the existing contract or seek another agent to market the home. In general, nothing more than a signature is required to move forward with the agreement.

Listing Termination: Typically, listing agreements terminate after a stated time frame.

Multiple Listing Service (MLS): A local or regional service that publishes listing information provided by its members. Local licensed brokers oversee the MLS.

Open Listing: A property listing that uses multiple non-exclusive listing agreements, or a property that is for sale by owner.

Property Type: Property type generally refers to the unique features and potential buyers that characterize real property.

Ranch and Land: The Ranch and Land property type is a variety of real estate, which includes ranches, farms, single lots suitable for building or large tracts of land ideal for farm, ranch, residential, and commercial real estate development.

Residential Property: Property zoned for living. Examples include single-family homes, condominiums, and duplexes.

Revocation: When an offer is withdrawn.

Transaction Brokerage: A brokerage that serves both the buyer and seller on the same transaction.

Termination by the Parties: When parties involved in a sales contract agree to terminate.

Termination by Performance: When a contract is terminated due to the performance of the parties’ obligations.

Time Expiration: When a contract terminates at a stated time.

Essential Real Estate Purchase and Offer Terms

Acceptance: An offer that is approved by both the buyer and seller is called acceptance.

Approval of Title: A title search is conducted by a title company to confirm that the property owner named in the transaction holds a clear, or approved title.

Assignment: When a homebuyer assigns their rights in a real estate contract to another.

Buyer / Seller Credits: A purchase contract may contain agreements giving the buyer or seller credits for closing costs.

Closing Costs: The fees associated with transferring real property are called the closing costs. The costs vary, but most often include fees charged by the lender, title company, insurers, notaries, and other closing related companies.

Closing Date: A purchase contract will identify the date on which the final paperwork is to transfer ownership of the property to the buyer will be processed. The closing is the date in which the transfer is considered final. Typically this date is when all required signatures from each party are executed and all money has been disbursed. 

Contingencies: A purchase contract may contain an identification of action(s) required of the buyer or seller before the contract is binding. Contingencies are negotiated and added into the contract with an addendum that specifies what needs to take place. 

Contract Validity: A real estate contract must follow the requirements of a legally valid contract.

Counteroffer: A homeowner’s response to a buyer’s offer proposing changes in the terms.

Deed Type: A deed is a written document that transfers ownership of a property to another; deed types include general warranty, limited warranty, and quitclaim.

Earnest Money: When a buyer signs an offer to purchase a home, they provide a deposit called earnest money that reinforces their intention to purchase.

Executed Contract: A complete real estate arrangement after both parties have fulfilled their obligations and signed the contract.

Evidence of Title: A legal document that establishes the title, or ownership, of a property.

Executory Contract: A contract made by a buyer and seller requiring obligations that haven’t yet been performed; for example, obtaining a mortgage.

Financing: Obtaining a mortgage or another form of funding to purchase a property.

Inspection: After an offer has been accepted, there is typically an inspection period, or a time in which the buyer can fully assess the property. During this time the buyer may ask the seller to complete repairs or negotiate concessions for repairs or improvements that will be completed after closing.

Negotiation: When a buyer, seller, and their representatives reach an agreement on the terms of the sales contract.

Offer: A proposal by a homebuyer to a homeowner describing the terms for purchasing a home. Offers may be for fair market value or full asking price. In the event that a seller offers a counter offer, the homebuyer may accept or reject the proposed terms. 

Property Condition: Home inspectors evaluate the structure and systems in a property to verify the status or condition of a property.

Prorations: The allocation of monetary items at the closing of a real estate transaction; for example, the buyer must pay the seller for property taxes the seller has already paid for the months the seller will no longer own the home.

Possession Date: A purchase contract will identify the date at which the seller will give the buyer the right to start occupying the property.

Essential Real Estate Commission Terms

Cap: Also known as the capitalization rate, which helps to evaluate a real estate investment.

Client Rebate: A portion of the commission that is paid to a buyer after closing. Not legal in all states, this offer by an agency may require more effort on the part of the buyer. To help increase business volume, these cut-rate agencies may skip showings, inspections, and even closing.

Commission Advance: A real estate agent may receive a portion of the commission they are owed from a broker or an advance based on pending real estate transactions.

Commission Disbursement Authorization: A CDA, or Commission Disbursement Authorization form executed at closing that authorizes payment of commissions.

Commission Instructions: Terms of the commission agreed to by parties in a real estate transaction.

Concessions: A benefit or discount offered by the real estate agent to help sell a property. An agent may agree to provide a commission discount from 3 percent to 2 percent, for instance, the proceeds of which go toward closing costs.

Coop Brokerage: A brokerage where real estate agents pool their funds to pay for the running of the office.

Deduction: Any fee subtracted from a commission amount.

Earnest money deposit: When a buyer signs an offer to purchase a home, they provide a deposit called earnest money that reinforces their intention to purchase.

Escrow: Money held by a third party for a specific purpose; for example, a mortgage lender will hold advance property tax payments until taxes are due.

Fee: Any monies paid to parties in a real estate transaction.

Flat Fee: A method for paying real estate agents that are defined by a specific fee amount rather than a percentage of the sales price.

Franchise Fee: Money that a broker pays to own and operate a franchised real estate office.

Gross Commission: The total amount of the commission paid to the brokers involved in a real estate transaction. This is often split between the listing agency and the buyer’s agency. For example, if the purchase price were $200,000, a 6 percent gross commission would yield $12,000 in total, divided equally (or at another agreed-upon percentage) between the real estate professionals representing the buyer and seller. Commission percentages are negotiable and may be pegged to the number of days spent on the market. An agency might accept a lower commission percentage if a home is sold within 30 days, for instance, since listing expenses will be lower for the real estate company under those circumstances.

Home Warranty: A service contract that pays for repairs to home systems and appliances.

Net Commission: The total amount of commission paid to a real estate agent after the split of the gross commission between the brokerages involved, and the split between the agent and their broker.

Pay at Closing: Various fees paid by buyers and sellers at closing. There can be title search fees, transfer taxes and points– or a fixed percentage of the purchase price paid upfront to lower an interest rate.

Referral: When an individual recommends a real estate agent to another home buyer or seller.

Royalty Fee: Ongoing fees paid by a franchisee to a franchisor.

Split: Describes the terms of the distribution of commissions between brokers or between brokers and their agents. This could be a fifty-fifty arrangement or another percentage agreed upon between both parties.

Table Funding: A type of loan funding where a loan originator processes the loan and then transfers it to a lender at the closing table.

Essential Real Estate Compliance and Regulation Terms

Audit: A review of an individual’s or businesses’ financial statements.

Brokers Compliance Procedures: Real estate compliance is a critical part of managing a real estate company. A broker is mandated by law to oversee their real estate agents’ actions to ensure they comply with local, state, and federal rules and regulations.

Data Management: Organizing, protecting, and processing data related to a real estate transaction.

Due Diligence: In real estate, typically actions taken by the buyer of a property to confirm the condition of the property.

Ethical Practices: The best practices used by honorable real estate professionals. Real estate professionals are expected to be transparent in their dealings with buyers and sellers and abide by all local, state, and federal laws that govern transactions. Agents must serve their clients but must be fair and honest with all parties involved in the process while maintaining confidentiality and full disclosure.

Federal Regulation: Federal agencies generally regulate high-level laws regarding real property usage, natural disaster requirements, and discrimination.

Financing: Obtaining a mortgage or other funding to purchase a property.

Fines: If a real estate broker or agent participates in activities that violate state licensing requirements, their state real estate commission may fine them.

Insurance: Property must be covered by insurance before a close.

State Regulation: State agencies regulate real estate business, establish license laws, set qualification standards, and oversee the activities of licensees.

Liability Management: Protecting the rights of buyers and sellers, protecting buyers and sellers from the risks associated with a real estate transaction.

Local Regulation: Local government regulation, including county agencies that focus on land use control, control of improvements, and taxation.

Loss of Licensure: If a real estate broker or agent participates in activities that violate state licensing requirements, their state real estate commission may revoke their license.

Taxation: In real estate, most commonly refers to property taxes.

Time-Stamped Record: When recording real estate documents, they are stamped with the date and time of receipt.

Transfer: Real estate ownership transfers based on a purchase, sale, lease, assignment, inheritance, or exchange, often managed by a real estate professional.

Unalterable Record: Electronic documents stored in read-only or other formats that can’t be altered by the users of the electronic system.