September 22, 2023

Comprehensive Guide to Real Estate Terminology

Comprehensive Guide to Real Estate Terminology


Table Of Contents


The real estate industry has its own unique language full of industry-specific terms and jargon. Whether you’re in the market to buy or sell a home, some of these terms are certain to pop up throughout the process. Here are explanations of some frequently used real estate terms that home buyers and sellers should know:

  • 1

    Appraisal – An appraisal is an estimate of a property’s market value conducted by a licensed appraiser. Lenders require appraisals to ensure the property is worth at least the amount of the mortgage loan.

  • 2

    Assessed Value – The assessed value is the value placed on a property by the local tax assessor’s office for purposes of calculating property taxes. It may differ from appraised or market value.

  • 3

    Deed – A deed is a legal document that transfers ownership of real estate from the seller to the buyer. It contains information about the transaction and provides a guarantee of clear title.

  • 4

    Down Payment – A down payment is the amount a buyer pays upfront towards the purchase of a home. It is usually expressed as a percentage of the total purchase price.

  • 5

    Mortgage Down Payment – A mortgage down payment is the portion paid upfront when obtaining a mortgage loan to purchase a property. Common down payment amounts are 20% or 10% of the home’s value.

  • 6

    Down Payment Assistance Programs – Down payment assistance programs provide qualifying buyers with grants or loans to cover all or part of a home’s down payment. These programs make homeownership more accessible.

  • 7

    Equity – Equity is the portion of a home’s value that the owner has full ownership rights to. It’s calculated by subtracting the outstanding mortgage balance from the property’s market value.

  • 8

    Escrow – Escrow refers to the holding of documents and money during the time a real estate transaction is underway. It helps facilitate a smooth closing when the buyer and seller each deliver payments and paperwork to a neutral third party until all terms are met.

  • 9

    Foreclosure – Foreclosure is the legal process by which a lender seizes a property after the homeowner defaults on mortgage payments. The property is then sold to recover the unpaid debt.

  • 10

    FSBO (For Sale by Owner) – FSBO stands for “For Sale by Owner” and refers to a property that is being sold directly by the homeowner, without listing with a real estate agent. Selling FSBO can save on agent commissions, but may be more challenging for those unfamiliar with pricing, marketing, paperwork, and negotiations.

  • 11

    MLS (Multiple Listing Service) – A multiple listing service (MLS) is a database of properties listed for sale by real estate brokers who are members of the local MLS system. Agents use this service to list clients’ homes and search for homes on their clients’ behalf.

  • 12

    Mortgage – A mortgage is a loan used to finance the purchase of real estate. The property serves as collateral that the lender can seize if the borrower defaults on payments.

  • 13

    Fixed-Rate Mortgage – A fixed-rate mortgage keeps the same interest rate for the entire loan term. The monthly payment amount stays the same over the life of the loan.

  • 14

    Adjustable-Rate Mortgage – An adjustable-rate mortgage (ARM) has an interest rate that periodically changes based on an underlying index rate. Monthly payments can go up or down accordingly.

  • 15

    Property Taxes – Property taxes are taxes assessed locally on real estate owners based on the property’s value. They help fund services like public schools, police, infrastructure, etc.

  • 16

    Real Estate Agent vs. Broker – A real estate agent is licensed by the state to represent clients in real estate transactions. They are overseen by a managing real estate broker. An agent’s primary role is to help buyers and sellers navigate transactions.

  • 17

    Title Search – A title search examines the property’s title history to determine if there are any defects that could prevent a clean transfer of ownership. Title issues like liens or unpaid taxes must be resolved before closing.

Real Estate Buying and Selling Process

Navigating the real estate transaction process involves several important steps. Here are some key phases buyers and sellers encounter:

  • 1

    Making an Offer – Once a buyer finds a home they want to purchase, their real estate agent will draw up a purchase offer contract to submit to the seller. This will include their proposed price and any special contingencies.

  • 2

    Home Inspections – After an offer is accepted, the buyer will hire inspectors to thoroughly evaluate the home’s condition. They may request repairs or credits from the seller based on inspection findings.

  • 3

    Appraisal and Financing Contingencies – Most offers include an appraisal contingency allowing the buyer to back out if the home doesn’t appraise for the agreed purchase price. Financing contingencies give the buyer an out if they fail to secure a mortgage loan.

  • 4

    Closing Costs – In addition to the purchase price, buyers and sellers have to pay closing costs like lender origination fees, title insurance, recording fees, taxes, commissions, etc. Closing costs are typically 2-5% of the home price.

  • 5

    Closing and Possession – During closing, the deed is recorded, money changes hands, documents are signed, and keys are handed over. This is when ownership officially transfers and the buyer takes possession of the home.

Conclusion and FAQs

Real estate transactions involve many intricate processes and industry-specific terminology. Working with experienced real estate professionals that can explain unfamiliar terms is key for buyers and sellers. Don’t hesitate to ask your agent or lender any questions that come up as you navigate the real estate process.


What are points on a mortgage?2023-09-22T18:06:51+00:00

Points are a percentage of a loan amount paid up front to reduce the interest rate. Each point equals 1% of the mortgage loan. Paying points lowers the ongoing monthly payments.

What does APR mean?2023-09-22T18:06:27+00:00

APR stands for annual percentage rate. It represents the true annual cost of borrowing by including the interest rate plus certain fees and points.

What is amortization in home loans?2023-09-22T18:06:13+00:00

Amortization is the process of gradually paying down a mortgage loan over time through monthly payments. Each payment chips away at the principal and interest until the loan is fully paid off.

What is an escrow account?2023-09-22T18:05:54+00:00

An escrow account holds funds slated for property taxes and homeowner’s insurance. Lenders require escrow accounts to ensure these costs are paid on time. A portion of the monthly mortgage payment goes into escrow.

What is earnest money?2023-09-22T18:05:41+00:00

Earnest money refers to a deposit paid by the home buyer to show their serious intent to purchase the property. It is usually 1-5% of the sales price and goes toward the down payment if the deal closes.

What does PMI stand for?2023-09-22T18:05:29+00:00

PMI stands for private mortgage insurance. It protects the lender if the borrower defaults. PMI is usually required if you put down less than 20% on a home.

Meet Sarah Perrotti


Based in Litchfield County, Connecticut, Sarah is a distinguished full-time realtor specializing in luxury properties and concierge services tailored to discerning buyers and sellers.

With a Masters degree in Social Work, Sarah brings a unique perspective to real estate, ensuring confidentiality and seamless transactions.


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Meet Sarah Perrotti


Based in Litchfield County, Connecticut, Sarah is a distinguished full-time realtor specializing in luxury properties and concierge services tailored to discerning buyers and sellers.

With a Masters degree in Social Work, Sarah brings a unique perspective to real estate, ensuring confidentiality and seamless transactions.

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