The real estate industry can be somewhat overwhelming at first, partly due to the use of distinct phrases and words specific to the business. Before building the perfect real estate website you should spend some time learning this specific vocabulary. Below are the most popular real estate terms:
1. ARM or Adjustable Rate Mortgage – The ARM is a type of mortgage in which the interest rate is subjected to changes at certain intervals of time until the loan is paid in full. Adjustable Rate Mortgage changes are tied to different benchmarks or indexes which set the interest rate between lending institutions, banks and consumers.
2. Amortization – Amortization refers to the payment in full of a loan’s principal plus interest over a specific period of time.
3. APR or Annual Percentage Rate – This is a value expressed as a percentage which represents the true cost of a loan per year. By default, APR includes fees, rebates and mortgage rates.
4. Appraisal – An appraisal is an estimate of a specific property’s value on a certain date. Properties need to be inspected by a professional realtor before being properly appraised.
5. Appreciation – This term sounds delightful to anyone, but even more so for home owners. It represents the increase of a certain property’s value over a fixed period of time. Factors which can influence appreciation include inflation, improvements and the real estate market itself.
6. Assessment – This is the value set for a certain property in order to calculate property tax. Assessment is different from appraisal, since the latter refers to the market value of a property.
7. Bankruptcy – The procedure by which companies and individuals can be discharged completely from outstanding liabilities such as loans. The procedure is done through the courts system if an individual’s debts exceed their assets.
8. Buyer’s Market – A market where there are more properties for sale than buyers – high supply of available properties at low price and few buyers. The buyer’s market is tied to inflation APR.
9. Broker – A real estate broker is a highly trained professional which manages the selling and buying of homes or properties. Real estate brokers usually undergo years of training before getting their broker license.
10. Buyer Agent – This is an agent who represents the buyer in a transaction. The buyer agent negotiates directly with the listing agent on the buyer’s behalf.
11. Caveat Emptor – It stands for “let the buyer beware”. This Latin phrase states that the buyer makes the purchase at his own risk and without any sort of warranty written in the contract.
12. Contract of Sale – The contract of sale is the document that sets the terms and conditions of a real estate transaction. The contract of sale should include the date of settlement, inspection requirements, warranties, and payment terms as well as other assets which may be sold along with the property.
13. Closing – This term is the last step of a real estate transaction. After “closing”, ownership of the property is transferred to the new owner.
14. Debt-to-Income Ratio – It refers to the percentage of an individual’s income that is spent on paying back liabilities or debts. Debts or liabilities include child support, student loans, car loans, credit card bills and others. The Debt-to-Income Ratio determines if a potential buyer qualifies for a mortgage.
15. Earnest Money – Earnest Money is a deposit made by a buyer in order to prove commitment to purchasing a property. Earnest money usually ranges between 1% and 5% of the sale price of a property.
16. Equity – Equity refers to how much value a mortgage owner actually owns from a property. To calculate equity one must subtract the remaining of your mortgage from the fair market value of a property.
17. Escrow – A stage in the process of selling real estate when the buyer deposits items, documents or money to a third party until both seller and buyer fulfilled their parts of the contract.
18. Fair Market Value – The highest price that a buyer and seller can agree on for a specific property or home.
19. Fixed Rate Mortgage – A loan with a fixed interest rate throughout the entire term. Fixed Rate Mortgage is more common than Adjustable Rate Mortgage when buying property.
20. Foreclosure – It’s the procedure through which ownership of a certain property is taken from an owner who is unable to pay their mortgage. Most foreclosed properties are auctioned off and the money resulting from the transaction is used to cover the mortgage debt.
21. Freddie Mac & Fannie Mae – It’s a reference to the Federal Home Loan Mortgage and the Federal National Mortgage Association. These two entities buy mortgages from lenders and sell them to investors as securities.
22. Homeowner’s Insurance – This is a type of insurance that protects homeowners from damage to their property which can result in a decrease of the property’s value.
23. Listing Agent – A listing agent is a real estate specialist that represents the seller in a real estate transaction. The listing agent negotiates in the best interest of the seller and lists the property or properties on the MLS.
24. MLS or Multiple Listing Service – This is a list of properties available for sale in a specific region, town or city. Brokers provide the MLS entries while following a certain set of rules in doing so.
25. Mortgage – It’s a type of loan where the bought property serves as collateral for the loan. Mortgages are usually paid over several years, with interest. Failure to pay this type of loan will lead to foreclosure.
26. Open House – Homes put up for sale are made open during specific periods or hours. These homes are called “open houses”. Open houses allow potential buyers to examine a property and discuss with the listing agent.
27. Preapproval – This is a process where a bank evaluates a potential buyers borrowing capacity. Banks take into account the buyers income, employment history, credit report and down payment amount.
28. Pocket Listing – This is a type of listing that is not included in the MLS or Multiple Listing Service but is sold privately. Brokers may use pocket listings to advertise properties directly to potential buyers before posting the listing in the MLS. Anonymous sellers also use pocket listings.
29. Real Estate Agent – Real estate agents require a licence from the state they operate in. They can provide assistance with selling or buying a property. See how to create a page for real estate agent.
30. Realtor – A realtor is a real estate specialist that is also a member of the NAR – the National Association of Realtors. The NAR has its own Code of Ethics and realtors must abide by it.
31. Refinance – It refers to the process of paying off an older loan in order to get a new one, usually with a better interest rate.
32. Sellers Market – A city or region where there are lots of buyers and very few properties available. It means an advantage for sellers, rather than for buyers.
33. Subagent – A real estate specialist working under another agent. The assistant of a real estate agent.
34. Turnkey – A home or property that is in perfect order, move-ready.